January 21, 2011
BP's Russian GambitBy Kim Zigfeld
Oil major BP has announced another foray into the Russian market despite being burned many times in the past by Russia's fundamental corruption. It should reconsider. Both the empirical facts and basic morality dictate disengagement from the Russian market.
A look at Russia's most recent national report card ought to be more than enough proof for any investor that Russia is no-man's land.
From the Heritage Foundation emerges Russia's score in economic freedom: an F. Russia is ranked #143 out of 183 countries reviewed, roughly the bottom quartile of the planet. The instructor opines that the student (Russia's judicial system) is "unpredictable, corrupt and unable to handle technically sophisticated cases." Did somebody say "dunce cap"?
But Russia aced economic freedom compared to its other subjects this term.
From Freedom House, for instance, comes Russia's grade in political liberty, another F. Russia is "not free" -- one of less than four dozen world nations so identified, the bottom fifth of the planet. The teacher's comments? The student (Russia's political system) is "relentlessly grim" and its promises to improve "not fulfilled." In other words, a scary, brooding liar.
Then Transparency International delivers Russia's evaluation in business ethics. You guessed it, a third F. Russia is ranked #154 out of 178 states scrutinized for economic corruption, placing it alongside Tajikistan and Kenya in the bottom 15% of all world nations, even worse than Russia's performance in political liberty in a country governed by a proud KGB spy.
From Maplecroft arrives Russia's final mark, in political risk to economic interests. One more F to throw on the pile. Russia is ranked a stunning #186 of 196 countries surveyed, well into the bottom decile of the world. Teacher remarks: "heightened activity of militant Islamic separatists" and "devastating terrorist attacks." Yikes. If you have assets in Russia, get them out quick.
Think Russia can't do worse than that? You're mistaken.
On the financial field, the Russian team faced off against China on the question of which nightmare country presented the most horrible risks to global investors. Once again, Russia came out on the bottom. The teacher notes that the student has "really awful bones beneath its fairly unattractive surface" and is "hazardous" and hostile to Western standards of corporate governance.
"Really awful bones." Ouch. Now that's the bottom of the barrel.
Russians are the world's most diabolical cigarette smokers. Despite laying claim to G-8 and UN Security Council membership, they have the same human development index score as the Albanians and the Kazakhs. Their economic bedrock is "not sustainable" according to the Wall Street Journal and they spend more time waiting in lines than anybody else in Europe. They are despised by the people of other countries because they are in the top 10% of warlike nations, and they pay more for IKEA's goods than almost anybody else.
No matter how you slice the Russian onion, in other words, it makes you weep.
What is saddest of all, though, is Russia's response to all this impeccably documented failure.
For instance, another area where Russia lags behind the globe is murder rate. Only a tiny handful of states have a higher incidence of intentional killing than Russia, and the country's rate is three times that of the United States. But that didn't stop the Washington correspondent for Russia's version of Reuters from proclaiming that the Loughner murders in Arizona prove that Americans have too much freedom, and that Russians are right to restrict it in their country.
In other words, as in Soviet times Russians choose to simply ignore the data, or to accuse those who publish it of doing so out of anti-Russian bias -- regardless of how many studies come out, heedless of the variety of sources.
Sadder still, though, is the craven reaction of the Western democracies. Despite pleas to act, they have ignored for instance the brutal persecution of former first deputy prime minister Boris Nemtsov and Russia's Bill Gates, Mikhail Khodorkovsky, for no other reason than their public criticism of the Kremlin.
There is one ray of hope, however, one area in which Russia unquestionably dominates the globe. When it comes to shearing its citizens like sheep to sell off their flaxen tresses for quick cash, nobody but nobody can hold a candle to Putin's Russia. If you need a wig, make a beeline.
Otherwise, steer well clear.
This is the partner, friends and neighbors, whose friendship President Barack Obama has identified as a crucial centerpiece of American foreign policy. He urges us to trust Russia, to work with Russia, to help the Kremlin, disregarding the basic facts about the country just as recklessly as do the Russian rulers themselves. Instead of standing up for American values and helping hapless Russians to avoid the abyss, he is doing all he can to hasten the day when, once again, America must pick up the pieces.
And investment from companies like BP is not helping. BP is, no matter how they may spin it, seeking to make a profit from dealing with a burgeoning neo-Soviet dictatorship, and they cannot do so without giving aid and comfort to that dictatorship.