Political Uncertainty Hurting Russian Business

Not that I needed to add one more article to the growing pile of opinions separating Russia from Brazil, China, and India, but the logic in this one was a little hard to follow:

“It was incredibly surprising to us how quickly people had abandoned Russia,” said Alex Turkeltaub, Frontier Strategy Group’s chairman. (…)

Frontier Strategy disagrees. It says Russia’s failure to diversify its economy away from oil and gas meant it didn’t grow between commodity cycles. Unlike Brazil and China, there was little evidence that a broad middle class was emerging in Russia with bulging wallets and the confidence to spend. And with its declining population, Russia’s demographics were less attractive than, say, those of Mexico.

But perhaps the biggest turn-off for investors was political uncertainty. People are still unsure who’s really running the country – prime minister and former president Vladimir Putin, or his successor, Dmitry Medvedev. “In Russia, we don’t know who’s really in power and there’s no consistency about policy,” says Mr. Turkeltaub.

Turkeltaub is not exactly wrong here – the pattern of expropriations, clan infighting, and near total lack of rule of law demonstrated by the political prisoner cases make the country a risky bet.  But doesn’t this imply somehow that China’s authoritarian model is preferable to business?  Or in other words, if Vladimir Putin were to step back in with full force, retire Medvedev and the attempt to fake democracy, the investment dollars would start flowing again at least because policy would be perceived to be consistent?  Well, I suppose nobody ever said that foreign investment was necessarily encouraging of democracy.