Russia is a solid economy led by a government implementing prudent policies, it offers “good returns and a high level of protection for portfolio investments,” said one of its deputy finance ministers, Alexey Moiseev, this week during a trip to London to court western investors.
Moiseev, 46, is a congenial man who doesn’t dodge questions and is straightforward on the reforms Moscow must keep pursuing in order to modernize its economy. But on the sidelines of an event organized by the Moscow Exchange, he was keen to talk only about the matters under his official remit, such as the transparency of financial markets or the state of the banking sector which, he observed, is now fully compliant with the Basel 3 regulatory requirements.
Moiseev clearly belongs to the wing of Russian officials that can be called reformers – the liberal elites, generally western-looking, that came of age after the fall of the Soviet Union, trained in the best Russian schools often complemented by studies abroad (Moiseev himself has an MBA from the University of Rochester, in the U.S.)
But until that camp of Russian policy-makers calls the shots in Moscow, there will be many reasons for western investors to tread carefully when investing in Russia.
They remain at the mercy of corrupt officials and inept judges who can suddenly decide to gang up on those foolish enough to have believed that Russia is a market like any other one, albeit a bit rough. The reformers have to face another wing of the Russian government profiting from the country’s shadiest business habits.
US citizen Michael Calvey, the head of investment fund Baring Vostok, was jailed earlier this year after a dispute with a Russian businessman with links to the security services, and he remains under house arrest in Moscow. This hasn’t done wonders for the investment climate. But Mr Moiseev, who seems to regret such developments, can only point out that “portfolio investments” in Russia – in bonds and stocks, the ones he monitors – have never been endangered by such unfortunate practices.
It is tempting to listen to the Russian reformers, and indeed the country’s economy is blessed with current account and government surpluses, and a highly professional, corruption-free central bank that does it job. But businesses are exposed. For as long as they are not protected by a serious rule of law, with impartial courts, any investor risks being looted any day by anyone with enough money and connections to hire police and judges in the pursuit of his predatory interests.