Blog: Dave LeggettRussia's investment paradox

Dave Leggett | 30 January 2004

I gather that some of the Russian 'oligarchs' have got the attention of the Kremlin. Rightly so. Some of these guys have - via somewhat dodgy utilities privatisations under Boris Yeltsin - ended up with humungous wealth. Mr Roman Abramovich is one of them and he's been able to virtually transform English soccer in one season through his purchase of Chelsea football club and his cheque-book. He's out of order! - and I say that as an Arsenal supporter (a rival team in the English Premiership - but, don't worry, we'll still win the league this year).

To be serious for a moment, there are plenty of investment opportunities in Russia - including the auto industry of course - so, if I was a Russian, it's fair to say I'd be pretty miffed with the way things have gone over the last few years. The oligarchs have invested heavily overseas and some are now in virtual exile. Surely these guys should put more of their money into Russian enterprises, where it would make a big difference. If they don't, they risk the Russian government going for them with - trumped up or not - extra tax demands and corruption charges. They'll only have themselves to blame.

The Russian auto industry is a good example of an industrial sector that has been starved of investment for decades and is now in decline as a result. As the market opens up, local makers will certainly be under increasing pressure as buyers opt for better quality Western brand products - which will be, increasingly, assembled in Russia. It's a tough situation for the Russian government to manage - opening up the economy whilst not allowing local enterprises to go to the wall. And seeing some of the country's wealth flow overseas into things like football clubs must be frustrating.

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