#5
Invest Climate In Russia Improving, Uncertain - US
Official
June 26, 2002
DOW JONES NEWSWIRES
MOSCOW (AP)--Foreign investors will remain slightly wary of Russia until the country can guarantee the rule of law in all business transactions, the U.S. ambassador to Russia said Wednesday.
"I think they see a very positive climate but still with some uncertainties," Alexander Vershbow told a round-table discussion at Interfax news agency. "So they walk. They don't run" to invest, he said.
Investors largely abandoned Russia after its 1998 financial collapse, but two solid years of economic growth under Russian President Vladimir Putin have encouraged investors to give the country another look.
The U.S. is the single biggest foreign investor, U.S. officials said, pumping more than $1 billion into the Russian economy last year alone.
"Clearly the market indicates that the investment climate in Russia is a positive one," said William Lash, U.S. assistant secretary of commerce, who was in Russia to meet with government officials.
But economists have warned that the safety of investments in Russia is still largely dependent on the attitudes of powerful local officials and the vagaries of Russia's weak and underdeveloped court system.
"That is still what leads to less than perfect predictability and that is what investors are looking for," Vershbow said.
Among the stories that make investors nervous is the ongoing legal dispute between Sawyer Research Products, an Eastlake, Ohio-based company, and a Soviet-era quartz plant in Gus-Khrustalny, about 100 miles east of Moscow.
Sawyer bought a 23% stake in the factory when it was privatized in the mid-1990s. Later, when the plant was declared bankrupt, Sawyer agreed to pay off $1.5 million in factory debts and took out a 25-year lease on the main quartz workshop, outfitting it with new equipment.
But the deal turned sour and last year, a Russian court canceled Sawyer's lease and awarded control of the plant to two of its Russian creditors.
"Our belief is that the rights of American investors were violated," said Vershbow, who visited the plant Tuesday to try to help resolve the dispute by encouraging both sides to talk. He expressed optimism that a solution could be found, saying he found local officials very receptive to solving the problem.
But Vershbow warned that this and other cases like it "discourage American and foreign investors."
Lash urged Russia to work to improve its business transparency, further develop the rule of law, guarantee protection to minority shareholders and enforce intellectual property rights.
He expressed optimism that Russia was headed in this direction, saying the number of business disputes has dropped "and the disputes that we have are disputes that can be worked out among friends."
Washington earlier this month recognized Russia as a market economy, a designation that will help Putin's bid for the country to join the World Trade Organization.
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