Russian business runs on different rules. News Corp.'s (NYSE: NWS) Rupert Murdoch, who has been doing business in China for years, is nervous about his Russian enterprises. This morning, the FBI announced it had rounded up a ring of data thieves, many from former Soviet Union countries. And then there's the little matter of BP-TNK, a joint venture between BP (NYSE: BP) and a Russian company, whose Russian shareholders are booting out its Western executives so they can take over the operation.
Here's what Silicon Alley insider reports Murdoch had to say about doing business in Russia: "We have great growing business there but just -- this is purely me, I'm sorry, I'm -- the more I read about investments in Russia, the less I like the feel of it. The more successful we'd be, the more vulnerable we'd be to have it stolen from us, so there we sell now."
In case you missed it, The Detroit Free Press reports that an international ring of data thieves used wardriving -- the practice of stealing data from unprotected Wi-Fi networks -- to take 40 million identities, use the information to print fake ATM cards, and steal millions of dollars. The corporate victims include customers of TJX (NYSE: TJX), Barnes & Noble (NYSE: BKS), and OfficeMax (NYSE: OMX). Five of the 11 defendants are from former Soviet Union countries -- "one is from Estonia, three are from Ukraine, and one is from Belarus."
Finally there's the matter of BP-TNK, whose western CEO has been denied a Russian visa and whose CFO just left the country, according to FT.com. My college roommate, Matthew Murray, was "the executive in charge of corruption risk analysis" and he has also left Russia. A group of Russian shareholders wants the BP side out now that the venture is profitable.
And someone in Russia is just letting this kleptocracy flourish. The amazing thing is that Western investors keep pouring money into this country. It's not clear how long it will take before they start clamoring to get out before their investment is expropriated. BBCNews reports that in 2001, President Bush looked into Vladimir Putin's soul and "found him to be very straight forward and trustworthy."
I question Bush's judgment.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
8-06-2008 @ 3:33PM
Tony said...
we do business with Russia because returns above 30% are perfectly normal there, averaging over last 6 years. Even federally insured CD's drawn in USD return over 11%. Even with the government risk factored in it's worth it. Outside of the oil sector the risks are a lot more manageable. As far as TNK-BP, what kind of idiots setup a JV with 50/50% split between parties with wildly heterogeneous interests; then allow one party to control all of executive positions, and not expect the other side to complain?
The recent anti-Russia media campaign smacks of sour-graping, and apparently managed to involve such ideologues as McCain and Murdoch... They are perfectly willing to give up their reputation and even some money as long as it hurts the other guy, great planning guys.
8-10-2008 @ 3:00PM
Tony said...
oh, yes, and great job disguising the fact that not a single credit card thief was Russian, hiding behind words like "former soviet". Why not say "from EU and EU prospect countries" ? complete disinformation.
8-06-2008 @ 4:30PM
Greg said...
And how long are people going to dredge up Bush's comment from his first meeting with Putin in 2001? Surely Peter Cohan can come up with something more current in 2008 than questioning Bush's judgment in 2001.
8-06-2008 @ 7:08PM
Tarun said...
...and China isn't known for it's hackers? Stop being so judgmental without doing proper comparisons.
8-07-2008 @ 1:06AM
Dan said...
Thinly veiled and badly conceived anti Russian Propoganda. There is a reason why companies from GM to Intel do business in Russia. They are making fortunes. RUSSIA HAS NEVER EXPROPRIATED ANY PROPERTY.
TNK-BP is a prime example of what happens when you deal in stolen goods, eventually the goods might be returned to the rightful owners(Russian people) TNK-BP is receiving exactly what they deserve.
Putin is simply the best leader any country has had in modern memory. No man has done more for his country and their people. A true democrat.
8-11-2008 @ 6:27AM
Jules Evans said...
So three Ukrainians, one Belarussian and an Estonian stole some credit card details. What does that have to do with the business environment in Russia exactly?
It's like saying 'don't do business in the US, a guy was arrested in Canada for shop-lifting'