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The Gluttonous Appetite for Risk in Russia

Yesterday at the National Conference of Editorial Writers US Secretary of State Condoleezza Rice spoke at length about Russia and other international issues.

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Among her comments was the following statement:

There is then another layer, which is the issue of internal issues in Russia. And here, if I were to divide it into the two parts that you asked, on investor relations, the use of the oil card, the consolidation of Kremlin control over oil and gas, you know, I think it’s something that bears watching because it is somewhat troubling and — but it’s going to be incumbent on Russia to demonstrate that rule of law actually does govern and — or Russia is not going to, I think, get the kind of investment that it needs. It won’t be because the United States tells people not to invest; it will be because boards of directors are concerned about whether or not their investment is safe.

Does Condi really believe that? Lately it seems that thanks to a liquidity glut and the delusional belief that high oil prices will be permanent, that the boards of directors of energy firms have developed a gluttonous appetite for politically risky exposure, especially in Russia. Nobody understands this better than the new energy czars in the Kremlin, who have learned how to rob and extort the foreign investors in broad daylight with no fear of consequences. Now it seems that the only people who are looking out for the future solvency of these companies are a few concerned shareholders and CSR advocates, faced with the task of wrestling away the keys from their intoxicated executives.