Some Firms Cold on Investing in Russia

I wish I could say that DSG’s prudent estimation of political risk in Russia were indicative of a wider trend, one in which businesses began to recognize the true extent of the threat of state corporatism and began investing elsewhere, thereby motivating rule of law reforms – but the truth is we are still pretty far from a tipping point. However I’ll bet that the upcoming non-democratic transfer of power has many people thinking twice as to whether or not Putin’s successor can keep such a steady hand over competing powers. From the FT:

DSG, Britain’s biggest electrical retailer, yesterday said it was abandoning a planned acquisition in Russia, blaming “corporate, economic and political risks”. The decision not to acquire Eldorado, the country’s leading electrical retailer, comes as the British government intensifies warnings to businesses about the risks of investing in Russia and just days after Tony Blair warned Vladimir Putin that the West was becoming “worried and fearful” about what was happening in his country. “Political risks can change,” said John Clare, DSG chief executive. “An assessment of the political risks today, I have to tell you, might be rather different than two years ago.” The board decided not to proceed after almost two years of due diligence on the group, which has more than 600 stores and operates across eight time zones. … One person who has met Mr [Igor] Yakovlev described him as “pretty ruthless” in business. “He is a very hard negotiator, very protective in terms of information. If DSG had taken 10 per cent they would have been treated as a minority shareholder and nothing more.” The Financial Times revealed this month that the British government was intensifying warnings to businesses about the risks of investing in Russia. The harder line follows Moscow’s moves to take control of energy assets from foreign companies.