When a Moscow court tried the American investor Michael Calvey this summer, on what many considered a trumped-up charge of embezzlement, he told the judge straight-up that a conviction could halt “billions” in new foreign investment flows. So has Mr Calvey’s prophecy come to pass since the court convicted him in early August, and gave him a suspended sentence of five and a half years pending appeal? 

The answer is unknowable, but foreign direct investment (FDI) in Russia is lagging in the face of excellent fundamentals. “Russia’s macroeconomic foundation is as firm as anywhere; it has low debt, a stable currency and high reserves,” says Alexis Rodzianko, president of the American Chamber of Commerce in Moscow. “It would be a great investment climate if not for Russia arresting its top private equity investor for no reason at all.”


Russian inbound investment has been in the doldrums since 2014, when oil prices plunged, and the invasion of Crimea provoked a wave of sanctions. Over the following four years, the Institute of International Finance found that Russia placed last among 23 emerging economies in attracting true FDI. Since 2019, Russia has actively sought to attract diversified FDI, according to Chris Weafer of the investment boutique Macro-Advisory, but now it may take a few more years.

Private equity investors are especially deterred, because they’re more vulnerable to personal attack — and they’re astonished that even Mr Calvey’s firm, Baring Vostok, was vulnerable. Since 1994, the company has poured nearly $3bn into thriving Russian companies, such as the search engine Yandex and the e-commerce start-up Ozon. In convicting  Mr Calvey, the court spurned the advice of Russia’s sovereign wealth fund chief, as well as a personal intervention by US president Joe Biden with Russian president Vladimir Putin.

Businessmen who are kicking the tyres of Russia often ask Mr Weafer: “If it can happen to such a famous and successful investor, what’s to say it won’t happen to us?”

Mr Weafer’s advice is to do deep due diligence — and be wary of anybody with close political or prosecutorial contacts. On one account of the case, Mr Calvey’s mistake was to invest in a Russian bank with a politically connected partner. After the Russian partner accused Mr Calvey of forcing bank shareholders to take an overpriced stake in another company, Mr Calvey suddenly found himself in criminal court. And the criminal process wound on even after the commercial dispute settled.

Caution shown by foreign investors in Russia highlights how high-profile cases can impede a country’s investment climate and economic development policies. Foreign investors were able to shrug off the 2003 arrest of the Yukos oligarch Mikhail Khodorkovsky because they regarded it as a Russian family spat. They were able to rationalise the 2008 prosecution of Bill Browder’s Hermitage Capital — also the largest private foreign investor at the time — because Mr Browder had already left Moscow. What makes Mr Calvey’s case so scary is that he is an active foreign investor.

“We’re going to be asked about Mr Calvey every single time someone considers a Russian investment for years,” says Mr Weafer. “Barings Vostok is now an embedded part of the Russia investment story.”

Michael D Goldhaber has been tracking the world’s largest disputes since the turn of the millennium. Email: michael.goldhaber@gmail.com

This article was first published in the December 2021/January 2022 edition of fDi Intelligence magazine. Read the online edition here.