Russia foreign investors unfazed by rows with West

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Saturday , May 10, 2008 at 0013 hrs Chechnya, which had almost no investor impact.For some investors, the risk of conflict with its neighbors is one of the factors that makes Russia less appealing than some other key emerging markets.“Conflict with its neighbors is a concern that makes it less appealing investment destination than, for example, Brazil where you have the growth story without the political risk,” said Jason Hepner, investment director for global strategy at Standard Life Investments. Reuters

“UNAPPEALING HEADLINES”

Standard Life does not break down investments publicly, but manages some $280 billion globally including in Russia.

The transition of power from the President Vladimir Putin to his anointed successor Dmitry Medvedev, sworn in this week, is seen making relatively little difference with Putin still in the background as Prime Minister.

Some investors say that after the arrest and imprisonment of Russia’s richest man Mikhail Khordorkovsky and dismantlement of his multibillion-dollar oil company YUKOS, they have become hardened to political risk and still see good potential profits.

But since then, most have steered clear of the oil and energy field, preferring to target investments on other sectors such as construction and retail to tap wider growth — seen less likely to attract state intervention.

They say any repeat of the YUKOS affair, perhaps in another sector, would worry foreign players — but they largely shrug off reported human rights worries..

Analysts say a political row between Russia and Britain over the radioactive poisoning of dissident Alexander Litvinenko — with Russia refusing to extradite the chief suspect and his family accusing the state of murder — had no impact on investment flows.

Britain-based investors continued to put money into a range of Russian assets, while Russian money including from the country’s rapidly growing oil-fuelled sovereign wealth fund continued to flow into the West.

Russia’s sovereign wealth fund is estimated to be the second largest in the world after China’s, while last month the number of Russian firms listed on the London stock exchange passed 100.

“They’re obviously not appealing headlines but at the same time they seem to be the continuation of a trend and they don’t change the overall picture as such,” said Standard Life ‘s Hepner. “Although obviously if they become more frequent that is a worry.”