Good news for the Russian consumer and corporations in the consumer sector. Firstly, large supermarket chains from Finland and the U.K. will be opening branches throughout Russia in a vote of confidence concerning the spending power of Russians. Additionally, by August the government will finalize plans on reducing the VAT and other taxes, good news for Russian businesses and consumers.

Medvedev’s legal plans to reform the economy are already in the works. In a recent speech he talked about how limits on government agencies power’s to enter the property of small businesses must be limited and restricted without official government approval from prosecutors and other offices. He particularly mentioned the small percentage of technology businesses with others and stated they should be protected. In other news regarding a macro sized company, metals company Mechel is proposing to buy a U.K. metals company for over 1.5 billion dollars.

The plot thickens even more with the VAT reduction plan. As we reported before the Audit Chamber recommended the reduction in agreement with President-Elect Medvedev, yet Finance Minister Kudrin continues his opposition to the plan. He has long opposed this tax decrease and is stating it should not be enacted until at least 2010. Due to his disagreement with Medvedev, it is safe to assume he will probably not continue to be the Finance Minister in the next administration.

As it turns out, we were right-the Russian Audit Chamber has recommended the VAT be reduced from 18% to 12-13% as soon to be President Medvedev suggested. Undoubtedly this will have a positive impact on all economic growth and with federal surpluses at historic levels it is the right time to do it. Look for it to have a great impact upon the manufacturing and high technology sectors.

It seems like a Russian metals giant purchases an American metals company almost every week lately, actually with Severstal’s recent purchase of an American plant that makes two this week alone. Russian company’s are using their own strength combined with weakness in selected markets to enlarge their footprint and become true global powerhouses. In another area, there are rumors that the proposed VAT tax decrease may go down to 12-13%, not as much as some might have hoped, but still greater than some might have expected.

The Russian government announced it will be hiking oil export taxes again. Prices today are about 20% higher than they were the last time taxes were hiked, so the government will be flush with cash again for the foreseeable future.

Microsoft and Intel are going to promote Russian software development in a joint venture intended to tap the potential of its scientists and universities. In a related development, the government announced the IT and Communications sectors are on track for 500-600 million dollars in foreign investment by 2010, up from 70 million in 2007. President Putin announced continued economic cooperation with China in the fields of energy will continue into the next administration.

Inflation for the latest month stood at 1.2%, and that was with price controls on food and energy in effect. With price controls on the food sector in effect and energy taxes set to increase on the oil and natural gas industry, what’s a savvy investor to do? One option is the national pharmacy chain 36.6, its most recent earnings were up nearly 70% and looks to be a hedge against rising inflation while targeting the changing buying patterns of the Russian consumer.

2008 promises to be an interesting year, looking back at 2007, it was a good one fiscally speaking for Russia. The surplus reached over 70 billion USD on higher revenues and slightly decreased spending. This was not including foreign currency reserves of nearly 500 billion and a stabilization fund of over 150 billion U.S. Dollars.

Well, it is official now, Medvedev is the new President of Russia and the world will be watching what his policies will be, how closely will he be to his pre-election speeches and what key appointments will he be making to important positions. If the rest of the world reaches a bottom from credit market freeze-ups and other problems, and people like what they see coming out of the Russian government, expect a rapid rise in the Russian finance markets in the next several months, including the equity markets which have recently been hurt.