In Russia, getting arrested isn’t personal. It’s just business.
Late last month, Russia’s largest private equity firm took the extremely unusual step of publishing an open letter to President Vladimir Putin.
Even more remarkable was its message: an appeal that Mr. Putin “take control” over the criminal case against the company’s founder, US citizen Michael Calvey, who was arrested in Moscow along with several of his associates Feb. 14 on charges of embezzlement.
The case has triggered international shock waves, with many suspecting Mr. Calvey’s arrest and ongoing detention are somehow connected to the escalating geopolitical acrimony between the US and Russia. But most experts consulted say the problem is more fundamental and worrisome.
They say Calvey’s citizenship was probably incidental to his arrest. Rather, he has become a victim of Russia’s vicious business environment – a reality that Putin has described and railed against repeatedly, most recently a few weeks ago in his State of the Nation address. Calvey is facing
the same treatment suffered by thousands of Russian businesspeople who are charged, often speciously, with “economic crimes”: long periods of detention, seizure of assets, and permanent disgrace at the hands of predatory police and officials.
“The only unique thing about the Calvey case is that it has happened to an American, [with Russian authorities] crossing that line for the first time,” says Alexis Rodzianko, president of the American Chamber of Commerce in Russia. “Calvey has been a long-term investor here, someone who has stood up for and looked for positive solutions for Russia, even when the geopolitics got very bad. It appears to be a very serious abuse of police and judicial power in Russia.”
Experts say the case highlights one of the most serious causes of Russia’s continuing anemic economic growth and failure to attract major foreign investment.
Though comprehensive Western sanctions continue to be a drag on growth, smart Kremlin policies have substantially blunted their impact. Russia’s place on the World Bank’s ease-of-doing-business rankings has been steadily improving in recent years. Yet what remains largely unaddressed, despite Putin’s frequent speechmaking, are the underlying rule-of-law issues such as reliable property rights, the curtailment of arbitrary police powers, and the establishment of an independent judiciary.
“The potential for growth of investment in Russia continues to be far from realized,” says Mr. Rodzianko. “Some of that is geopolitics.
But a big part is Russia’s internal investment climate. How much are you going to invest in a place where you might get arrested and thrown in jail?”
Rodzianko’s organization represents about 500 US companies, including many household names, that continue to be very active in the Russian market. Although official US statistics suggest there is almost no US investment in Russia, Rodzianko says companies bring capital from other places to invest in Russia, so that the actual total is probably around $80 billion. According to a survey conducted among its members by the organization last year, most remain committed to their Russia operations despite sanctions and international tensions, while 65 percent view Russia as a “strategic market” for their company with serious potential for growth.
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