On the slab: Russia

Russia's economy shrank by 10.1% in the first half of 2009.

by
Last Updated: 31 Aug 2010

A combination of the credit crunch, falling oil and other commodity prices and the collapse of the rouble have made Russia look like the sick man of BRIC (the grouping that also includes Brazil, China and India.) The Russians blame the global malaise, but the unhappy state of their own back yard doesn't help.

Paranoid delusions The country's economic problems are closely tied to its politics. Russia is increasingly obstreperous, paranoid and authoritarian in its dealings with the wider world. Schoolbooks teach its kids that the West has always been hostile to it and so Russia has a deep inferiority complex that Vladimir Putin consistently exploits. Outsiders feel it deals with foreign investors in a high-handed, chauvinistic fashion. The rule of law is weak, and individuals who criticise the regime can wind up with a bullet in the back of the head. The foreign firms that have come a cropper are now legion: it's not just BP that has been left licking its wounds. None of this softens the nation's reputation as the global HQ of oligarch-controlled gangster capitalism. Those in search of a safe return on their money will not take these wild risks.

Prognosis Nowhere have the pitfalls of investing in Russia been made clearer recently than with Ikea, whose local operation grew quickly after it opened a store near Moscow in 2000. In June, the retailer said it would suspend its investment in Russia, citing the 'unpredictable character of administrative procedures' - polite Swedish code expressing its refusal to line the pockets of officials. Russia is mired in corruption: the World Bank surveyed 181 countries for ease of doing business, and Russia stole 120th place, out-grafting Nigeria. Transparency International gives Russia 2.1 points out of 10 - its worst performance in 10 years, putting it on a par with Kenya. 'Must do better' is a minimum requirement if it seeks to play in the international capitalist arena as more than a stroppy exporter of oil, gas and aluminium.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Subscribe

Get your essential reading delivered. Subscribe to Management Today