Updated 11/30/2010. I published my section of the research paper on Risk Analysis Study of FDI in Russia: Political Climate in Russia and FDI.
Spent all day today digging up the material for my group research paper on FDI in Russia. There is a lot of information available on the internet, arguably of various levels of credebility. Seems that our preliminary assessment of the situation, i.e. advise the company against doing any business in Russia through FDI, was on a darker side of the spectrum of opinions by various practitioners and experts on Russia.
This advice was mostly preconditioned by the fact that our imaginary client was in the natural resources, namely oil extraction and processing industry. Turns out that this, being categorized as having strategic economic and security impact, is one of the most guarded sectors of Russian economy, along with the defense industry, and essentially no strangers are tolerated there
Therefore the example of Royal Shell being robbed of their stake in Sakhalin-2 project is primarily demonstrating that Russia had not yet identified their strategic interests at the time of Shell’s entry into the project. Though it does not diminish the highway robbery manner of the Russian government in takeover of Shell’s stake, at least now there is a 2008 Law on Foreign Investment which very clearly outlines the sectors of economy where the foreigners are basically restricted to the point that they would not be interested in FDI in that sector altogether.
Other than strategic sectors of economy, it seems like FDI in Russia is, though not as straightforward as in developed countries, still rather manageble. That is, if you do not mind dealing with general government corruption, inefficient bueracratic mechanisms, payoffs to organized crime (or maintainence of extensive security department), lack of transperancy in legislation, underdeveloped or deteriorating infrastructure, (relatively) harsh climate in most parts of the country, and the last, but not the least – the mysterious Russian soul.
