If you want ulcers with your profits, Russia is the place for you.
Russia offers great promise, but comes with great risk. The Russian consumer looks increasingly promising, but it’s difficult to find international companies right now that do significant business in Russia. Energy is booming, but beware: The rules may change in the middle of the game.
CNBC assembled panels of experts to discuss the risks and rewards of investing in Russia.
Tim Seymour, managing director at Red Star Asset Management, says risk has been priced into Russian energy stocks. He expects Russian companies to cut partnerships with Western companies on distribution, adding experienced management to the team.
Andrew Howell, emerging market strategist at Citigroup, warns that Russia’s energy stocks have underperformed and costs are rising. He says multinational companies are a good way to play the increasing disposable income of the Russian consumer, but it’s often difficult to get exposure to the Russian market.
David Satter, a senior research fellow at Stanford University’s Hoover Institution, says Russia is a massively corrupt nation with all power concentrated at the top. This creates an unstable environment for business.
But James Moore, a professor of international business at Georgetown University and a former Assistant Commerce Secretary, says it’s a mistake to cast Russian President Vladimir Putin as either a friend or a foe because he’s serving the last few months of his term and aggressive statements are intended to build his standing with the Russian people and cement his legacy as a tough leader. In any case, Russia is more stable than some oil-producing regions of the world and agreed to purchase 22 Boeing Dreamliners for about $3 billion.
Marshall Goldman, Kathryn Wasserman David Professor of Russian Economics (emeritus) at Wellesley College, says the rules of doing business in Russia sometimes change in midcourse. This creates a high-risk environment, but it can also produce big rewards.
Andrew Somers, president of the American Chamber of Commerce in Russia, says Russia has generated increasing growth for U.S. companies for the last seven years. Outside energy and metals, Putin has created a market economy.