For key allies of former US President Donald Trump, Russia represents a land of immense natural wealth and untapped business potential. However, for American investors who have spent decades navigating its volatile markets, the country remains a perilous environment where the promise of profit is often overshadowed by the risk of losing everything.
The Allure and the Skepticism
Steve Witkoff and Jared Kushner, billionaire envoys working on a potential deal to end the Ukraine war, have publicly positioned Russia as a major opportunity. They argue that reintegrating Moscow into the global economy could benefit American investors and help stabilize its relations with Ukraine and Europe.
This vision, however, is met with deep skepticism from veterans of the Russian market. Russia's $2.5 trillion economy, roughly the size of Italy's, faces weak long-term growth, a shrinking population, and declining reserves of easily extractable oil. Beyond the energy sector, drivers for growth are scarce.
"Russia is not the Emerald City or El Dorado," said Charles Hecker, a geopolitical risk analyst with four decades of experience in the region. "The size of the prize is smaller than some people think." Hecker, author of "Zero Sum: The Arc of International Business in Russia," believes that even a Ukraine settlement would not end the underlying hostility toward the West, leaving foreign companies in a state of persistent geopolitical uncertainty.
A Treacherous Landscape for Foreign Capital
The risks extend far beyond poor economic indicators. Experienced US investors highlight the dangers of operating in an increasingly autocratic regime that lacks independent rule of law. Assets can be seized, deal terms rewritten, and business disputes can lead to imprisonment.
Michael Calvey, former chairman of Baring Vostok, knows this firsthand. A prominent financier who backed companies like Yandex, Calvey was arrested and jailed by Russia's FSB in 2019 after a dispute with Kremlin-connected investors. Although his conviction was later canceled, he left Russia after the 2022 invasion. "It also has systemic risks of the kind that I was a victim of," he noted, while acknowledging Russia's valuable resources and tech talent.
Since the war began, the Kremlin's grip has tightened. Approximately $49 billion in assets have been seized from foreign and domestic investors as of this summer, according to Moscow law firm Nektorov, Saveliev & Partners, with the pace of nationalizations accelerating.
Frozen Prospects and a History of False Hope
The current push for investment recalls earlier cycles of optimism. After the fall of Communism, US brands like McDonald's rushed in. However, Russia adopted capitalism without the supporting institutions—reliable regulations, property rights—leading to chaos.
Bill Browder, whose Hermitage Capital was once Russia's largest foreign investment fund, was expelled in 2005 after challenging corruption. His lawyer, Sergei Magnitsky, died in police custody, leading to US sanctions. "The predictability of Russia’s business environment went from bad back to horrible, and it’s been horrible ever since," Browder stated.
Today, even if sanctions are lifted, analysts doubt a flood of new investment. Alexandra Prokopenko, a former Russian central bank official, stated bluntly, "For any ordinary foreign investor, Russia is still uninvestable." Exporters might return, but they would face markets now dominated by Chinese goods. Large-scale, capital-intensive projects in the Arctic or rare-earth metals would require immense upfront costs and confidence in long-term Kremlin goodwill—a rare commodity.
Pavel Khodorkovsky, son of jailed oligarch Mikhail Khodorkovsky, warned that any deals approved by Putin might only be honored while Trump is in power. "Putin will honor his word only to the person he gives it to," he said.
While some, like Houston-based energy executive Alan Bigman, agree Russia should eventually be reintegrated, the timing is wrong. "Not at a time when they’re invading and threatening their neighbors," he said, noting that past trade helped Putin build his military—a pattern experts fear would repeat.
The fundamental question for investors remains one of risk versus reward in a midsized, slowing economy dominated by geopolitics and autocratic control. The El Dorado, veterans caution, may be a costly mirage.
