Investors looking for a pure-play on rising commodity prices have long turned to Russia to go long on oil and gas. Americans still have at least $3 billion invested in the country. But after Vladimir Putin’s lastest Georgia moves, some investors are waking up to the fact that Russia’s not the safest bet around.
The signs were there long before Russia’s adventure in Georgia, of course. Russia is fraught with corruption and cronyism. And as Putin moves to expand his control over the country’s natural resources (along with its neighbours’), the risks are growing.
Just ask British Petroleum. Its $8 billion investment in a joint-venture to develop a field in Eastern Russia has been subject to one melodrama after another after its Russian “partners” decided they would take control of the company. BP’s staff have been harassed and bullied, and have even had their visas denied.
None of this is news to those who have followed Russia over the past few years, but with soaring commodity prices, many investors have happily rationalized away the risks. The events in Georgia, however, appear to have woken some investors up. We imagine others will follow.
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