Deconstructing Putin
February 5, 2009
In the most recent issue of Mergers & Acquisitions, we asked the question of whether or not Russia still belongs with the rest of the BRIC economies. The country continues to emerge, but it's more often the case these days that it's emerging as a peculiar place to conduct business.
Take Vladimir Putin's chest-beating episode with Michael Dell in February at Davos. Much of the echo chamber in the days and weeks following focused on the Russian prime minister’s aggressive response to Dell’s query of how tech companies could help Russia. But the former KGB agent’s “tough, demeaning streak” or “caustic response” are not really newsworthy items. There’s so much more to the story than whether Putin’s outburst was uncalled for. The real story is the subtext of his response.
While the rest of the developing world has been busy rolling their sleeves up, generally attempting to develop into cooperative global partners, Russia has chosen instead to circle its wagons around several sectors that it considers to be “strategic industries.” Putin has stated in no uncertain terms that Russia will never give up control over what one deal pro calls the nation’s “crown jewels.”
Which industries are included among the “crown jewels” of the former superpower? Luckily, Russian Parliament has made it very clear for us. Last April, the State Duma passed the “Federal Law on Foreign Investment in Strategic Sectors,” a federal legislation that defined the nation’s strategic sectors, and pledged more stringent restrictions on foreign investments into these sectors.
Strategic sectors included oil and gas (anyone recall BP’s little soiree into Russia last year?) and – you guessed it! – tech and telecom.
It’s amazing that more businesses aren’t cluing in. Putin, apparently, is equally astonished. Despite his heavy-handed interference into business matters and a few instances of government expropriation in these strategic sectors, businesses leaders are still asking, “How can we help you?”
If Putin’s answer wasn’t clear enough, here’s my translation of his response: “You can help by moving away from Russia’s strategic industries. Step in, Mr. Dell, and you’re just asking for trouble.”
Although the prime minister is known for his aggressiveness, he is no loose cannon. You can bet this explosion was calculated.
Let’s just hope global investors’ response will be equally calculated.
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