Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Stephen Harper is cautioning Canadian businesses that Russia is a risky place for them to do business right now, given Canada's escalating opposition to Russia's involvement in Ukraine. While the Prime Minister's warnings are undeniably wise counsel, Russia was already a minefield of investment risk even without a Ukrainian crisis to fret about.

Yes, the current threat became a little more concrete Monday, as Russia levied travel bans on 13 senior Canadian public officials – mostly MPs and Privy Council members, generally with ties to foreign policy and/or an active interest in Ukrainian issues – in retaliation for asset freezes and travel bans that Canada imposed on 14 members of Russian President Vladimir Putin's inner circle. While the list of Canadians hit by the action is essentially symbolic, striking at no one who actually has meaningful dealings with the Russians, it may signal Russia's intent to fight back if and when Canada and other Western nations impose more serious sanctions aimed closer to the vital organs of the Russian economy.

The World Bank ranks Russia 92nd on its list of the best countries in which to do business. (Canada ranks 19th.) It is notorious for poor regulation, flimsy property rights, shoddy investor protections, and rampant corruption among government officials. Transparency International's annual Corruption Perceptions Index ranks Russia is 127th out of 177 countries – by far the worst for any major world economy. China ranks 47 spots higher. (Canada is 9th.)

Story continues below advertisement

In other words, despite the veneer of 21st-century European sophistication, this is no place like home.

Yet even if Russia was a more stable, well-governed market with effective regulations and strong legal institutions, this would still be a risky place to do business – simply because of the country's massive dependence on a single industry for its economic well-being. The energy sector accounts for more than 20 per cent of Russia's gross domestic product, and up to half of the government's budget revenue. That leaves both the public sector and the economy as a whole extremely vulnerable to gyrations in the price of commodities that have hardly proven themselves a pillar of stability in recent years.

Little wonder, then, that Russia's stock market has languished for years at price-to-earnings (P/E) multiples of around five times, less than one-third of the global norm, or that its stock-market volatility is considerably higher than average.

While Canadians have certainly increased their business and investment exposure to Russia as it has eased foreign barriers to entry in recent years, it has hardly grown to economically significant proportions. Russia accounted for just 0.4 per cent of Canada's exports and 0.7 per cent of Canadian foreign direct investment (FDI) in 2012. The hurdles remain too high, and the risks too onerous, for Russia to have become a prominent destination for Canadian business.

Still, it's worth noting that Canadian FDI in Russia has increased more than sixfold in recent years, and given the two countries' mutual interest in the natural resource sector, that relationship had the potential to change and grow. That was before Russia's heavy-handed move into Ukraine drove a wedge into it. Mr. Harper may put business interests at the top of his foreign-policy agenda, but even he has made it clear that the infringement on Ukraine's sovereignty takes precedence over those interests. Frankly, businesses are better off looking elsewhere – but that's really nothing new.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies