Winston Churchill once described Russia as “riddle, wrapped in a mystery inside an enigma”. It is said that Russia has always been a difficult country to understand and this sometimes occurs as a problem for investors, most of whom agree with Churchill in this regard. However, investors can still generate large revenues from Russia, all they have to do is to take the perspective and try learning about the opportunities & risks of investments in Russia.

Economical Sound State:

Russia has really proven to be an economically sound state after its steep take off post its financial crisis in 1998. The growth has increased so much that it brought Russia in the league of emerging markets like Brazil, China, and India, etc. During 2005-10 the Russian stock exchanges has brought in large revenues at a steady rate and are expected to continue doing so in the future as well. The 150 million people population of Russia is calculated to have been growing wealthy at a gradual pace over time since the past decades. Approximately, $16,000 per capita GDP as of 2010 has put it in the higher levels of the upper middle-income countries. Per capita income is predicted to boom even more since Russia is trying to cash out its natural resource pool and its measures to reduce poverty and disparity among masses. Russia’s GDP growth rate averaged around 7% during the crisis of 1998 and 2008 making it not only a huge market but one that was stable and growing at the same time.

Resources:

Russia has a large amount of natural resources, which acts as a magnet for investors. Oil & gas are its major reserves and pay extremely for its internal and external export purposes playing also a major role in stabilizing Russian economy. Russia is at the crest of world rankings for natural gas and has nearly 80 million barrels of proven oil reserves as of 2010. Russia’s exposures to the energy sector have been maintained by various collaborations between Africa and some other energy efficient nations. However, Russia does not only have oil & gas. It has also got large reserves of precious & semi-precious metals, which are running a part of its economy. However, these energy & mineral factors could act as a curse as investors too. Because investors would have to keep in mind the fluctuations in commodity prices over time in the future. However, hydrocarbons and minerals are not the only components that define Russia’s richness. It has got an enormous man-power, talent & hard education that produce a lot of brainy minds and an astounding literacy rate of 99%.

Threat To Invest:

Politics could be a big threat to invest in Russia. Take the example of Yukos, which was once the most successful & biggest oil company of Russia. Its CEO Mikhail Khodorkovsky was sentenced to be 8-years in jail in 2003, when he got into trouble with the then-president Vladimir Puttin. Yukos went on to the road to bankruptcy, and was ultimately sold off at prices extremely lower to than the actual market value. Yukos shareholders actually had their clothes sold out too. Investments cannot remain free of political pressures in a state like Russia, where it has occurred a number of times in the past. For example, it has happened many times that shareholders have been forced to sell their stakes at prices they did not want to. However, it was all done under police & government influence, which wanted to keep all the hydrocarbon reserves under its hold.

Corruption:

Corruption is a very big problem for investors so is the weak corporate and governance systems. According to Corruption Perception Index, Russia has a number of hurdles towards its way to unbiased and fair business. It is having corruption rates even higher than countries such as Iran, Libya and Pakistan. There is no proper security provided to the investors interested in business in Russia, and it is even difficult for smaller firms with rather non-transparent accounts.

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