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From BRIC to BIC: What Happened to Russia?

Monday, 1 Mar 2010 | 11:11 AM ET

For almost 10 years now, the BRIC nations (Brazil, Russia, India and China) have been the poster children for growth in emerging markets and potentially big profits for investors.

It started back in 2001 when Goldman Sachs came out with its now-famous report talking about the economic potential of those four countries. The firm concluded that they could well be among the world’s biggest economies by the middle of this century.

However, in talking with global investors and in my recent trip to Davos for the World Economic Forum, I found that people are hardly even talking about Russia anymore. They’ve dropped the ”R“ to the point where it’s become the BIC nations.

If they do talk about Russia, it’s often to refer to it as the “sick country.”

I’ve traveled to Russia on several occasions and have met with and interviewed top officials there. ( Click hereto read about my most recent trip, including my meeting with President Dmitry Medvedev.) It was easy to see the opportunities there, especially because Russia is so rich in natural resources. It is the world’s largest exporter of natural gas, and the second-largest exporter of oil.

Last year, the Russian stock market had a spectacular year, up 233%. So what’s going on? The concern is that a lack of legal protection makes investors vulnerable to losing their money.

One man who is actively trying to steer investors away from Russia is Bill Browder, CEO of Hermitage Capital Management. I’ve interviewed Bill before, and he was back on Closing Bellagain Friday. (You can watch the interview here.)

For a long time, Bill Browder was the single biggest outside investor in Russia to the tune of more than $4 billion. In fact, he founded Hermitage specifically to invest there. He saw opportunity in the privatization of firms taking place. As he told me on CNBC last October, he was a big activist investor “trying to fight corruption at Gazprom and other companies.”

He says he is no longer welcome in Russia. In 2005, his visa was canceled while he was away on a trip. Two years later, he says that Russian authorities raided his offices and took his companies away. According to Browder, one of his lawyers was imprisoned, and that lawyer has since died while still in prison.

This produced an awkward moment during my stay in Davos. I was standing in the commissary at the Forum having a conversation with a couple of high level officials from Russia when Browder approached us. I said hello and asked him how he was doing. He said, “Not well, Maria. They killed my lawyer.”

I said, “Oh, I’m so sorry, Bill. That’s awful.” And we both looked at the Russian officials, one of whom turned his back and told me quietly that it was sad, but yes, unofficially he was dead. I didn’t know what to say, but I did invite Browder back on Closing Bell, which resulted in his appearance on Friday.

Browder has tried to make his story known, even producing a video that he has posted on YouTubeto try to make investors aware of what he believes are the risks of investing in Russia today. Eike Batista, Brazil’s richest man, recently told me about similar concerns.

I thought you would want to be aware of Bill’s story when making your own investment decisions, and in the future we will talk more in Investor Briefabout the challenges and opportunities in emerging markets.

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Questions? Comments? Write toinvestoragenda@cnbc.com