2008 – Russia’s Legal and Political Climate

The Russian Federation has their capital located in Moscow, one of the world’s most corrupt cities. Although the chief of state is President Dimitri Mendeleev, many people believe that the real power lies with former president and head of government Premier Vladimir Putin. Presidential elections are held every four years and there is no VP. Instead if the President dies or becomes unable to do the job, then the Premier steps up and takes control until there is another presidential election which must occur within 3 months. optimusgeneral

Russia finds itself embroiled in a great many political uncertainties, chiefly stemming from this year’s power transition, corruption at all levels of the government and a general lack of trust in institutions that continue to make investors, both foreign and domestic skeptical of investing in Russia. At the same time Putin has been known to put power in the hands of people who wish to reassert state control over private industry. All of this has done little to establish the rule of law in Russia which is the cornerstone of any successful economy. Russia has promised in the past additional legislation guarantying the safeguards of intellectual property protection but enforcement remains precarious at best.

Legal attributes:

Russia’s legal environment on paper is business friendly but in reality there are a number of problems that foreigners have when trying to do business inside Russia today. First off, Russia has, in the past stated that they are doing everything that they can to protect foreign intellectual property rights. In practice they have had less than a stellar track record. Putin has made it clear that he believes that people close to him in high places of government should have power over private industry whether it is foreign or domestic. One very publicized example is when Putin went after the Russian oil giant, Yukos. Putin felt that the state should have more control over private industry. Without getting into too much detail as to how Putin went about consolidating state power it is worth noting that the former head of the company, Mikhail Khodorkovsky now sits in a Russian jail while Putin still holds much of the power he did as president from the position of Premier. Two other high profile business scandals have given foreigners much cause for concern in recent years. Recently, Putin leveled accusations accusations of tax evasison and price gouging at one of the nations largest steel producers, Mechel. Within days, their New York based stock shares went plummeting. This came on the heels of a long drawn out battle between BP and the Russian billionaire oil partners. BP blames Russia for unlawfully adding regulations to their business practices designed to discourage them from continuing operating in Russia. The Russians claim that BP has not lived up to their contractual obligations. Either way; sound advice when doing business over there: “Tread with caution”. optimusgeneral

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