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Financial Times: UK steps up alert on investing in Russia

By Daniel Dombey in London, Neil Buckley in Moscow and Jean Eaglesham in Heiligendamm

Published: June 7 2007 03:00 | Last updated: June 7 2007 03:00

The British government is stepping up its warnings to businesses about the risks of investing in Russia in the wake of Moscow’s moves to take control of energy assets from foreign companies.

The Foreign Office is telling companies looking to invest in Russia that there is now more evidence of risks faced by outside investors.

News of the move comes as Tony Blair is due tomorrow to hold “frank” talks with Vladimir Putin, Russian president, at the group of eight leading industrialised nations summit in Germany.

Officially, the British government warns companies seeking to do business in Russia that the “challenges of market entry should not be underestimated”. But a government source said: “There is more evidence now of the various different risks”, adding, “there are still massive rewards”.

The Kremlin’s most recent assaults on energy companies have involved UK interests – Royal Dutch Shell’s controlling stake in the $20bn (£10bn) Sakhalin-2 project in Russia’s far east and the licence held by BP’s Russian venture for the massive Kovykta gas field in Siberia. TNK-BP looks almost certain to lose its licence to develop the $18bn field, although it hopes to negotiate a deal with Gazprom.

One banker said the British government had recently urged caution about expanding in Russia because of tensions between Moscow and London.

Investment risks and deteriorating relations between Russia and the west have failed to damp overall business enthusiasm for Russia. A survey by the main foreign business lobby in Moscow last year found nearly a third of foreign investors reported that profits rose more than 30 per cent in 2005.

Additional reporting by Peter Thal Larsen

Copyright The Financial Times Limited 2007 and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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