×

Russia isolation won’t stop investment: Sistema

Despite economic sanctions, political isolation and business risks in a rocky regulatory environment, the chief executive of Russian industrial investment giant Sistema told CNBC its home country was still their key market.

"We continue to focus on Russia as a market because we do see lots of opportunity here," Mikhail Shamolin, board director and chief executive of Sistema, an investment company holding majority stakes in a number of Russian telecommunications, media, utility and retail businesses, told CNBC.

"If you look at many assets in Russia you will often see assets which are undermanaged," Shamolin said.

"Sometimes the owners of the business don't see a future for themselves or for the business. They're not developing the business but rather milking it for cash and we can be a much more efficient owner who believes in the future. By reinvesting in growth and managing business strategically we can create a much stronger value."

Russia has spent over a year in the economic and political wilderness due to international sanctions imposed on the country for its annexation of Crimea and role in the pro-Russian uprising in east Ukraine, which it denies.

As a result, Russia's economic outlook looks poor this year. In April, for example, the economy shrank 4.2 percent from the same period in the previous year, according to Russia's economy ministry.

Mikhail Shamolin, chief executive of Sistema
Victor J. Blue | Bloomberg | Getty Images
Mikhail Shamolin, chief executive of Sistema

Despite the negative backdrop however, Shamolin said Russia continued to be the company's prime territory for investment rather than looking abroad for opportunities.

"Our key market and focus continues to be Russia because that's where we have our expertise and that's where we have our competitive advantages, because we understand the market and the business and know how to create value," he said.

"When you go to another market, you immediately face hundreds of competitors who have been in this market for tens if not hundreds of years, if you talk about western European/United States firms, and they know this market much better than you do…what chances do we have to find a good deal which was missed by 10 other competitors that are looking at deals every single day?" he said.

Read MoreRussia warns of 'new military confrontation' in Europe

Bashneft affair over

The Sistema conglomerate might be a leader in Russia's investment sphere, with first-quarter earnings reported last week showing a net profit of 32.1 billion rubles ($592 million) – almost three times the amount seen in the same period of 2014 – but that doesn't mean the company has been immune to trials and tribulations in the investment sphere.

Sistema bought a controlling stake in the Bashneft oil company in 2009 for around $2.5 billion, however, a court ruled last October that Sistema's stake in the company should be returned to the Russian state.

The decision to retake Sistema's stake came after a Moscow court put Sistema Chairman, Vladimir Yevtushenkov, under house arrest as part of a money-laundering probe into the acquisition of Bashneft.

In March, Sistema announced it had reached an "amicable" out-of-court settlement with Ural Invest, the company from whom it initially acquired Bashneft, winning $781 million in damages.

Shamolin told CNBC he "most certainly" considered the Bashneft affair closed, telling CNBC "what happened has happened" although he conceded that he was "very difficult" for him to discuss "whatever the political intentions behind Bashneft's situation."

Despite Shamolin's sanguine attitude towards the situation, the move by the Russian state to seize a privatized company raised concerns about a wider revision of Russia's privatization program of state assets, although Russian President Vladimir Putin rebuffed those fears.

Shamolin told CNBC that "things like that happen in any country, in any economy" and that the company bore no scars from the experience.

"You have risk all over the place and as far as we're concerned, our policy is to be very transparent, very honest in the way we do business. We comply with all the regulations and we try to do things the right way. And if sometimes circumstances work against us, we deal with this as any business would."

He defended Russia as a place to invest, stating that " you cannot say that things like that only happen in Russia and they don't happen anywhere else in the world. If you go to Russia things are going to be bad for you, if you stay in Western Europe or the U.S. things will never happen to you – this is not true."

Read MorePope urges Putin to find peace with Ukraine