Business still eager to invest in Russia

Heads of the world’s largest companies this weekend said they would step up investment in Russia, despite warnings from political leaders that faltering relations with the west could harm Russia’s investment prospects.

At a closed-door meeting with President Vladimir Putin in St Petersburg on Saturday, more than 100 corporate chiefs refrained from challenging him on democratic concerns or Russia’s sometimes brutal treatment of foreign energy companies.

The meeting came just days after Tony Blair, UK prime minister, warned that western companies might shun Russia unless it developed more harmonious relations with the west.

Mr Putin told executives Russia was committed to creating an attractive investment environment, and said foreign investment in the first quarter of this year was two-and-a-half times as high as the same period in 2006.

Cumulative foreign investment in Russia had reached $150bn, he added, while Russia’s accumulated outward investment into other countries was now $140bn. Participants said executives confined questions largely to “rules of the road” for investing in Russia.

Among participants were Jeroen van der Veer, chief executive of Royal Dutch-Shell, which was forced after legal pressure to sell a controlling stake in the $22bn Sakhalin-2 energy project in Russia’s Far East to the state-controlled Gazprom.

One participant said Mr Van der Veer stood up and thanked Mr Putin for helping Shell reach a satisfactory deal. Another participant confirmed this, but said the meeting was an “unusually frank discussion about all topics and didn’t dodge any questions”.

Mr Van der Veer declined to confirm what he told Mr Putin in “a private meeting”. But he said the Sakhalin-2 deal was a “satisfactory outcome at an acceptable price”. “It was at a time of utmost importance to get the project to go forward,” Mr Van der Veer said.

Tony Hayward, new chief executive of BP, whose Russian venture TNK-BP may lose its licence for the Kovy-kta gas field in eastern Siberia, was also at the meeting but declined to comment on the state of negotiations.

Alexander Medvedev, deputy chief of Gazprom, told reporters yesterday the gas monopoly was in talks with TNK-BP over possibly taking a stake in the field. Dmitry Medvedev, Gazprom chairman and Russia’s first deputy prime minister, earlier told reporters a decision had to be taken “soon” on resolving the Kovykta issue and said it was possible Gazprom could take a stake. Gazprom recently denied it was still in talks with TNK-BP over Kovykta.

Companies outside the energy sector continue to say they see minimal risks in Russia.

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