February 2nd, 2010

ANALYSIS: Davos Conversations on Doing Business in Russia

At World Economic Forum this year, Russian officials headed by Finance Minister Alexei Kudrin were no where to be seen. Ian Bremmer, head of the foreign policy think tank Eurasia Group blogged that

Russia as a topic generally comes across as a negative in global circles–revisionist geopolitics, resource nationalism, and strongly authoritarian (albeit charismatic, in a fashion) domestic leadership.

Those negative sentiments were backed up by 75% of Russian businessmen attending Davos and predicting another year of stagnation or further economic decline.  This mood was backed up by dismal economic numbers in 2009. The Russian economy shrank 7.9%, the most in 15 years and analysts forecast the economy to shrink by 8.5% in 2010.

Although President Dmitry Medvedev keeps up the positive drumbeat on foreign investment in Russia, business leaders are more circumspect, expressing concerns over instiutional corruption stifling economic development and entrepreneurial spirit. German Gref, CEO of Russia’s largest bank Sberbank talked about

…the mood of fear gripping the private sector since the state take over oil major YUKOS several years ago.

Former YUKOS CEO Mikhail Khodorkovsky wrote in last week’s New York Times op-ed piece that Russia only exports gas and corruption and its refusal to see the limits of a state-controlled petro-economy is taking Russia down the path to becoming

a classic third-world style, raw materials-based economy, where corruption is the norm rather than the exception and there is no working system of democratic and social institutions.

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