Learned Helplessness of Russia’s Foreign Investors

Isn’t it amazing that no matter how many cases we see of political interference in the Russian economy, that nobody seems to learn their lesson? We’re disinclined to agree with Kliment in his view that the money will come running back so quickly as relations with the international community continue their willful deterioration. Lionel Laurent at Forbes.com:

Investor confidence in Russia is going nowhere fast. Following the conflict with Georgia, and a rapid unraveling of the price of oil to close to $90 a barrel, Russian stocks suffered a hammering on Tuesday as Wall Street’s woes added to investor jitters over Moscow. (…) While this proves that Russia is still a long way from turning the clock back to before the outbreak of hostilities with Georgia–which sparked a slump in Russian stocks and a decline in the rouble’s value–it may not be accurate to interpret this as a sign of fundamental weakness in the Russian economy. “It is still early to say that there are real structural problems with the Russian economy,” said Alexander Kliment, an analyst with Eurasia Group. He told Forbes.com that there had been crises in investor confidence before while Vladimir Putin was president, such as when the oligarch Mikhail Khodorkovsky was sent to jail or when control of the Sakhalin-II project was seized from Royal Dutch Shell. But each time investors had returned “with short memories and deep pockets.” (….) But although Eurasia Group’s Kliment admitted Russia had never been so vulnerable to systemic risk since that dark period in post-Soviet Russian history, he did not think we were there just yet. “I don’t think this is just a Russia story,” he said. “It’s a New York story, it’s a London story … globally, it’s not as surprising as it would otherwise be.”