Analyst: Despite improved Moody's rating, political risks to investment remain

Political risks of investing continue to be high despite the latest positive investment rating by Moody's rating agency, said President of Expertise Fund Mark Urnov.

Strange things are happening in the country: Moody's raises our investment rating, but at the same time the Central Bank fixes the out-flow of capital abroad. This shows that more favourable conditions are emerging in the country for foreign investors than for Russian investors. We should be and need to be delighted by the improved rating, but this does not mean that we do not have political risks. They exist and in the next four years they will only increase.

Urnov is referring to the upcoming parliamentary elections and the presidential elections in 2006. 'There is little chance of revolutionary changes in economics, but more of a chance of turbulence with the participation of different political groups,' said Urnov.

The most negative consequences of high political risks in Russia comes from the negative influence on the development of small and medium-sized business, he says. Such business can not forecast and is afraid of political risks because it works in a system of 'grab and run.' Urnov said that big business, though it can forecast risks it can not control them. Urnov said that one does not have to look far for examples - just look at YUKOS. Big business looks at the style of the Public Prosecutor's Office and sends capital out of the country, which is now fixed by the Central Bank.

The prospering of gray and black economies, criminalization of business and backwardness of small and medium-sized business are themes which continue under a situation of high political risk,' said Urnov.