CNBC: From BRIC to BIC: What Happened to Russia?

March 2, 2010

For almost 10 years now, the BRIC nations (Brazil, Rus­sia, India and Chi­na) have been the poster chil­dren for growth in emerg­ing mar­kets and poten­tial­ly big prof­its for investors.

It start­ed back in 2001 when Gold­man Sachs came out with its now-famous report talk­ing about the eco­nom­ic poten­tial of those four coun­tries. The firm con­clud­ed that they could well be among the world’s biggest economies by the mid­dle of this century.

How­ev­er, in talk­ing with glob­al investors and in my recent trip to Davos for the World Eco­nom­ic Forum, I found that peo­ple are hard­ly even talk­ing about Rus­sia any­more. They’ve dropped the ”R“ to the point where it’s become the BIC nations.

If they do talk about Rus­sia, it’s often to refer to it as the “sick country.”

I’ve trav­eled to Rus­sia on sev­er­al occa­sions and have met with and inter­viewed top offi­cials there. ( Click here to read about my most recent trip, includ­ing my meet­ing with Pres­i­dent Dmit­ry Medvedev.) It was easy to see the oppor­tu­ni­ties there, espe­cial­ly because Rus­sia is so rich in nat­ur­al resources. It is the world’s largest exporter of nat­ur­al gas, and the sec­ond-largest exporter of oil.

Last year, the Russ­ian stock mar­ket had a spec­tac­u­lar year, up 233%. So what’s going on? The con­cern is that a lack of legal pro­tec­tion makes investors vul­ner­a­ble to los­ing their money.

One man who is active­ly try­ing to steer investors away from Rus­sia is Bill Brow­der, CEO of Her­mitage Cap­i­tal Man­age­ment. I’ve inter­viewed Bill before, and he was back on Clos­ing Bell again Fri­day. (You can watch the inter­view here .)

For a long time, Bill Brow­der was the sin­gle biggest out­side investor in Rus­sia to the tune of more than $4 bil­lion. In fact, he found­ed Her­mitage specif­i­cal­ly to invest there. He saw oppor­tu­ni­ty in the pri­va­ti­za­tion of firms tak­ing place. As he told me on CNBC last Octo­ber, he was a big activist investor “try­ing to fight cor­rup­tion at Gazprom and oth­er companies.”

He says he is no longer wel­come in Rus­sia. In 2005, his visa was can­celed while he was away on a trip. Two years lat­er, he says that Russ­ian author­i­ties raid­ed his offices and took his com­pa­nies away. Accord­ing to Brow­der, one of his lawyers was impris­oned, and that lawyer has since died while still in prison.

This pro­duced an awk­ward moment dur­ing my stay in Davos. I was stand­ing in the com­mis­sary at the Forum hav­ing a con­ver­sa­tion with a cou­ple of high lev­el offi­cials from Rus­sia when Brow­der approached us. I said hel­lo and asked him how he was doing. He said, “Not well, Maria. They killed my lawyer.”

I said, “Oh, I’m so sor­ry, Bill. That’s awful.” And we both looked at the Russ­ian offi­cials, one of whom turned his back and told me qui­et­ly that it was sad, but yes, unof­fi­cial­ly he was dead. I didn’t know what to say, but I did invite Brow­der back on Clos­ing Bell, which result­ed in his appear­ance on Friday.

Brow­der has tried to make his sto­ry known, even pro­duc­ing a video that he has post­ed on YouTube to try to make investors aware of what he believes are the risks of invest­ing in Rus­sia today. Eike Batista, Brazil’s rich­est man, recent­ly told me about sim­i­lar con­cerns .

I thought you would want to be aware of Bill’s sto­ry when mak­ing your own invest­ment deci­sions, and in the future we will talk more in Investor Briefabout the chal­lenges and oppor­tu­ni­ties in emerg­ing markets.

By: Maria Bar­tiro­mo / CNBC

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