Business Insight Zone

Yesterday evening I had a long talk about this with one of my Hoover’s colleagues. My general answer was “No,” but then I’m a hopeless stick in the mud when it comes to financial risk. My thinking is that the Russian business environment offers too little transparency, and too much risk of surprise events, especially when you consider the apparent corruption and cronyism connected to various levels of government.

So I was interested to come across these two stories, presenting contradictory indicators for answering this question, in today’s news:

1. Rosneft buys Yukos assets won in auction by unknown party

Rosneft is state-controlled (like its main rival, Gazprom). In this perplexing auction process, it ended up with a bushel of assets owned by the once-dominant but now shambolic YUKOS — which Vladimir Putin opted to re-nationalize despite objections in 2004. Even though both Rosneft and Gazprom are controlled by the state and have highly placed backers, competition between the two continues.

2. Investors in Russia confident despite tensions

More than three-quarters of business executives active in Russia expect to increase their companies’ involvement there despite growing political tensions between Moscow and western nations, a survey published on Thursday reveals. [...]

Michael Cuthbert, Clifford Chance’s managing partner for Central and Eastern Europe, said it was significant that companies operating in Russia were more confident about its future than those “watching from the outside”. [...]

Enthusiasm was tempered by the costs of property and labour, although more than half of executives with direct knowledge said the operating environment in Russia was as good as or better than in China, India or Brazil.

I guess this is why these folks are doing business in Russia and I’m watching it from the outside. Any thoughts?