Why are investors still piling into Russia?

Whilst relations between Russia and the West may be at the chilliest since the Cold War, economically they are hotter than ever. But Simon Nixon wonders if investors are perhaps a little too complacent.

Sometimes it really does seem as if the financial and political worlds inhabit parallel universes. "Relations between Russia and the West have hit a new post-cold war low," reported the FT this week. That's hardly a controversial statement. President Putin said as much himself in a speech in February. Since then, we've had riots over the removal of a Soviet era war memorial in Estonia, a row over the placing of US missile sites in Poland and the pressing of murder charges against a former KGB official accused of poisoning the Russian dissident Alexander Litvinenko in London. All that's missing is the Red Army parading nuclear warheads through Red Square and it will feel like old times.

But then consider this report on Bloomberg just a few days earlier: "Salaries for top bankers in Moscow are now twice as high as those of their counterparts in New York", it said. "Dealmakers like Edward Kaufman, who left UBS in March for Alfa Bank, and Nicholas Jordan, who will run Lehman Brothers' new office in Moscow, have been offered annual packages of $7m and more, industry recruiters say. Meanwhile, in New York, managing directors typically make $2m to $3m a year, according to headhunters." Politically, relations between Russia and the West may be close to freezing, but economically they are hot, hot, hot.

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Simon Nixon

Simon is the chief leader writer and columnist at The Times and previous to that, he was at The Wall Street Journal for 9 years as the chief European commentator. Simon also wrote for Reuters Breakingviews as the Executive Editor earlier in his career. Simon covers personal finance topics such as property, the economy and other areas for example stockmarkets and funds.