Country risk in Russia is moderate with an OECD country credit grade of 4. This is akin to a speculative grade sovereign rating, which indicates a moderate likelihood that Russia will be unable and/or unwilling to meet its external debt obligations. Prolonged economic difficulty within Russia over the last 5 years has impacted its current credit ratings. Despite the improvements in the economic outlook, political risk and the over reliance on energy exports will remain key risks to the rating.
Russia’s business climate comes in at 31 out of 190 economies on the World Bank’s ease of doing business scorecard—which measures regulation and red tape relevant to a domestic small to mid-sized firm. Protecting investors and trading across borders are very difficult in Russia. The state continues to play a large role in the economy. Private enterprises are technically allowed to compete with state corporations on the same terms and conditions, but things can be very different in practice.
The risk of expropriation is moderate to high. For instance, the Russian authorities seized assets of the Yukos Oil Company in 2003 that at the time produced 20% of Russia’s oil output.
Political risk remains a key concern for investors, particularly given Russia’s poor governance record. World Bank governance indicators show that Russia is below the emerging European average on all measures of governance.