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Hambro Hampered by Russian Corruption and Interference

Today the Financial Times is running an interesting article about how Peter Hambro Mining lost £100m in market value overnight because of threats from the Russian government to revoke mining licenses. The environmental claims, like the Sakhalin gambit, appear to be totally bogus, and representatives from Hambro are telling the press they have broken no rules. hambro.jpg At what point will the authorities realize that these kinds of assaults on both foreign and domestic companies are bad for business, and that this elevated political risk will eventually scare away foreign investment? Not any time soon, because Western banks and corporations are sending the message that there is no consequence for this kind of economic gangsterism – investment has shot up to $35.3bn in the first nine months of this year. From the FT:

The biggest political risks are in natural resources as Russia pushes to retake state control over strategic assets. That drive seems to be spreading from oil and gas into areas such as metals and mining. At the same time, Russian authorities are systematically reviewing licences to exploit natural resource assets and penalising those not sticking to the agreed development timetables. … “Peter Hambro Mining is rather high profile, which has served them well but this has also made them a target,” he says. PHM may have become a victim of its visibility and the crackdown on companies the government feels are not developing fields quickly enough. If foreign companies are seen to be sitting on projects, the government prefers to have someone else – preferably Russian – take over, speeding up job creation and tax generation. Even Russian companies, such as Lukoil, have suffered similar threats to withdraw licences. … Outside natural resources, the biggest difficulties businesses face are red tape and corruption. Labyrinthine requirements for permits and licences create plenty of opportunities for officials to demand bribes. “Corruption is probably the most immediate threat and difficulty that any business faces in Russia – and the trend is increasing,” says Carlo Gallo, Russia analyst at Control Risks, the business risks consultancy.