Deputy Prime Minister Igor Sechin, Russia’s top energy official and one of Prime Minister Vladimir Putin’s closest political allies, offered valuable insight into the nation’s investment climate during a rare interview with the Wall Street Journal. Sechin portrayed the risks that fueled an estimated 25 percent decline in direct foreign investment last year as strengths. Remarkably, Sechin asserted that the controversies involving Yukos, Hermitage Capital Management and the troubled BP/OAO Rosneft deal prove Russia is a safe bet for investors. Hermitage CEO William Browder responded that Sechin’s assessment will further erode investor confidence.
The risk of losing one’s business in Russia today is real. But it is not the greatest risk investors face. Investors in Russia risk losing their lives.
US Congress began steps to battle corruption in Russia. Senator Benjamin L. Cardin (D-MD), Chairman of the Commission on Security and Cooperation in Europe (Helsinki Commission), and U.S. Representative James P. McGovern (D-MA), Chairman of the Tom Lantos Human Rights Commission, yesterday introduced bills that would freeze assets of and block visas to individuals responsible for the 2009 death of Russian anti-corruption lawyer Sergei Magnitsky, related to a $234 million tax fraud scheme against Hermitage Capital.
This bill would bar all individuals connected to the 2009 death of Sergei Magnitsky from receiving U.S. visas and accessing U.S. financial markets.
As the US Congress tries to fight corruption from abroad, Russian authorities continue to tighten their grip on political discourse. This week Russia President Dmitry Medvedev fired Moscow mayor Yuri M. Luzhkov. In early September Luzhkov criticized Medvedev on his management of a highway between Moscow and St. Petersburg and seemed to call for Putin’s return to power. Some say this crack in Kremlin leadership left Medvedev no choice but to let Luzhkov go, but he needed affirmation by Putin, the real power in the Kremlin.
As authoritarianism calcifies in Russia, financial markets and public discourse suffers. Despite Medvedev’s grand tour of Silicon Valley and his musing on legal nihilism, the status quo in Russia remains strong.
Recently Bill Browder, CEO of Hermitage Capital Management was on CNBC with Maria Bartiromo discussing the risks and rewards of investing in Russia. In this segment he describes the reality of investing in Russia and lengths authorities there go to expropriate private property for personal gain.
At the September 2009 Committee for Russian Economic Freedome event, Jamison Firestone spoke about the need for greater respect and adherence to the rule of law in Russia and how institutional corruption worked to seize Hermitage Capital’s assets.