Shedding Some Light on Investing in Russia

August 28, 2004 – TheStreet.com: Street Insight Since I am the only contributor on the Street Insight that was born in Russia. I feel that I need to explain the Russian psyche that will shed some light on investing in Russia.  Russian people like the idea of democracy, they love the idea of being able…

August 28, 2004 – TheStreet.com: Street Insight
Since I am the only contributor on the Street Insight that was born in Russia. I feel that I need to explain the Russian psyche that will shed some light on investing in Russia. 

Russian people like the idea of democracy, they love the idea of being able to complain about their difficult life in public, but that is as far as it goes. Without realizing it, they want a totalitarian leader who will be their moral standard, a person who will protect them from “greedy, blood sucking” oligarchs, a “true leader” who will put ‘bread and butter on their table,” and in return they will worship that person as if he was God. The reason religion was prohibited in Russia during communist dictatorship is because it was in direct competition with a totalitarian regime. They wanted the exclusive right to that piece of real estate in people’s brain that worships God.

Aspiration to be the light of communism and spread the communism around the world may be over, however, Russia has been ruled by totalitarian regime for too long to let the need for a totalitarian regime go. It is very hard to say what kind of person Putin really is. He may truly be trying to be a democratic president. However, absolute power corrupts absolutely. The absence of true opposition, the constant reminder by Russian people that he is their god, will make a person act and think like a dictator without second guessing the rightness or the morality of decisions made. The reason the American president will never act or think as a dictator (at least not for long) is because a strong opposing party will remind him that he is mortal. That is not the case in Russia.

It is very likely the Kudorkovsky walked a very gray legal line in creation of his fortune. However, his biggest mistake was that he openly financed Putin’s opposition. Other oligarchs still have their fortunes though they have created and ran it in a similar manner. Yukos’ tax bill with huge penalties is not much different (at least in my mind) from the revolution of 1917; though it is done without the bloodshed, it is still a reverse distribution of wealth of one to many. Russian people look at the Yukos scandal with much satisfaction, because they feel the harm is done to one obscenely rich person with a benefit to many. My big concern is that the apparent success of Yukos’ repatriation by the state will create an environment where it will be an everyday thing.

Maybe the skepticism that comes with my Russian heritage got the better of me and Yukos received what it deserves, but I doubt it. There are plenty of fish in the sea (countries to invest in) and after the Yukos incident, I tend to think they don’t have to speak Russian.

Copyright TheStreet.com 2004

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