Don't say it too loudly but, despite the jailing of Yukos boss Mikhail Khodorkovsky, business for many investors in Russia is great. Foreign executives may have felt deep unease at the nine-year rap for fraud and tax evasion handed down last month against Russia's once-richest man. But they have drawn their lessons and are voting with their dollars.
Trade groups, PR advisers and business consultants -- on the front line between investors and Russia's Byzantine bureaucracy -- say that even after Yukos the rewards of investing in the world's largest country can outweigh the considerable risks.
Life may have got tougher in the natural resources sector as the Kremlin extends its control over areas it deems strategic, but for many consumer-facing businesses Russia's market of 145 million is delivering phenomenal growth.
"The facts compel me to say that the investment climate is excellent," says Andrew Somers, president of the American Chamber of Commerce in Russia.
Even as Khodorkovsky's epic trial dragged into 2005 deals were being struck, Somers said in an interview, naming Coca-Cola Co's $600 million take-over of juice maker Multon and Alcoa's $260 million purchase of two Siberian plants.
There's more in the pipeline: Toyota broke ground on a car plant in St Petersburg this month and DaimlerChrysler is looking for its own greenfield site.
Retail, financial services and light industry are all luring new entrants into an economy which, driven by record prices for its main export, oil, is enjoying its 6th year of strong growth.
That, despite concerns about the rule of law, corruption and a slew of copycat tax audits which have hit top firms after a punitive $27 billion back-tax bill destroyed the business empire of the politically ambitious Khodorkovsky.
"Was the way the Khodorkovsky thing was handled a phenomenal mistake? Yes. Has it hurt Russia? Yes," said Peter Necarsulmer, head of public relations firm PBN and a 15-year Moscow veteran.
"But what we can't do is point to every difficulty foreign investors face and tie everything together into a theory of investment climate doom and gloom.
"Policy has changed: The old policy was, stay out of politics and pretend to pay your taxes. The new policy is, stay out of politics and pay your taxes."
A recent survey of 158 foreign firms by PBN found 78 percent planned to expand in Russia in the next three years, 20 percent to stay at the same level and just 2 percent to cut back.
While established players are mostly bullish, prospective entrants may have been spooked by TV pictures of Khodorkovsky in a courtroom cage and the overwhelmingly critical coverage of the case in the Western media.
"I call it post-Yukos stress disorder," said Charles Hecker, who runs the Moscow operation of consultancy Control Risks.
Adding to the uncertainty is Russia's growing assertiveness over its perceived national interest, including plans to bar foreigners from controlling a yet-to-be-completed list of strategic natural resource deposits.
"If you are an investor in the oil industry you have every reason to be nervous," said Hecker. "But if you are a manufacturer of ladies' underwear, you don't need to worry about what's happened to Yukos."
Part of the problem is the tendency of Russia's leaders to resort to Cold War rhetoric when they face foreign criticism, reviving negative stereotypes long held in the West, says Max Gutbrod, a partner at law firm Baker & McKenzie in Moscow.
"Russians tend to express themselves very aggressively. There are a lot of understandable points which could be better articulated," said Gutbrod, who is also deputy chairman of the Association of German Business in Russia.
Despite the lousy PR job Russia is doing, membership of the German business group has risen by 150 to 500 over the past 18 months. "Things are going fantastically. Growth rates are gigantic," says Gutbrod.
Foreign direct investment in Russia was $9.4 billion last year, up 39 percent. But the absolute figure remains modest by comparison with the $60 billion sucked in by world leader China.
Despite those upbeat views, there is genuine concern in the business community that overzealous tax inspectors are perverting one of the most liberal tax regimes in the world.
"Russia has an investment-friendly climate based on the taxes that are in the books," said Mike Kubena, managing partner at PricewaterhouseCoopers, pointing to the 13 percent flat rate of personal income tax and 24 percent corporate rate.
Putin has told his tax inspectors to stop "terrorising" business and Russia hands hope he will prevail over his bureaucrats. "I don't think anyone will be satisfied until you see actions that reflect the intent of the law," said Kubena.
In the meantime, there are a few golden rules investors should follow: Check out your local partner, sign watertight contracts, be a good corporate citizen, stay out of politics. And be patient.
"You have to have seaworthy legs, and the mentality to go with it," said AmCham's Somers. "Why go through all this? You do this because the returns are so high."
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