Reference no: EM133093106

Refer to the following excerpt to answer the questions below.

Given the Russian government's history of interfering with private business and targeting political dissidents, would you make as large of an investment in Russia if you were a tech company like Apple?

What are the pros and cons of investing in Russia?

Does the fact that Russia's economy remains so heavily dependent on fossil fuel sales impact your decision to invest?

Straddling the European and Asian continents, Russia stretches from Belarus in the west to the Pacific Ocean in the east. Russia is rich in various natural resources, including oil, natural gas, coal, strategic minerals, reserves of rare earth elements, and timber. For the last 20 years, the Russian economy has been disproportionately dependent on oil and natural gas.

Russia's population is currently estimated at over 142 million people. Over three-quarters of the residents are of Russian descent, though there are sizable populations of Tatars, Ukrainians, and Bashkirs as well. Russia's population growth is fairly stable. Organized religion is not heavily practiced, with just 15 to 20 percent identifying as Russian Orthodox, 10 to 15 percent identifying as Muslim, and approximately 2 percent identifying as Christian. The population is concentrated in the age group of 25-54 years old, representing slightly less than half of the total population.

Russia's estimated GDP in 2018 was US$1.720 trillion. The Russian economy, which is highly dependent on gas and oil revenue, has experienced periods of deep recession over the past decade as fossil fuel supply has outpaced global demand. Consistently strong economic growth is not predicted to return until energy prices increase. Russia's economic issues go beyond just the decline in oil prices. The government is one of the biggest barriers to any sustainable growth of the Russian economy. Russia's legal system is largely inefficient and difficult to maneuver, and the government itself becomes intertwined in the private sector through its closely managed state-owned enterprises and varying levels of corruption. Worsening its already sluggish economy, Russia made a large and costly financial commitment to its annexation of Crimea in 2014, controversially supported the Assad government during the Syrian Civil War, and meddled in the 2016 Brexit referendum and the U.S. presidential election. These actions resulted in a further worsening of already strained relations with the West, including the United States and the European Union. In 2018, nearly 150 Russian diplomats were expelled by Western governments.

Russia's government is a federation. Vladimir Putin has held most executive power since his first presidential election in 2000. While Russia has certainly evolved from its days as a purely communist society, the state is still deeply intertwined with all aspects of the economy. Following a series of controversial actions by the Russian government, including the poisoning of former Russian military intelligence officer Sergei Skripal in 2018, the United States and EU levied a variety of sanctions on Russian business leaders and government-controlled companies. These sanctions have added to the already deteriorating consumer confidence and have prompted Russia to redirect its efforts to Asia to attract foreign investment.

International Management Consultant

A few years ago, the Russian government passed a law that required tech companies, such as Apple, to store their user data on local servers. Apple encrypts its stored sensitive user information, which includes contacts, photos, messages, and other personal data, to protect it from being illegally compromised; however, the new law still requires this protected information to be physically held within Russia's jurisdiction. Based on past actions and human rights violations, many fear that the Russian government could eventually order Apple to decrypt and turn over data on specific citizens for political purposes. Companies like Apple have to face a choice: follow the local Russian law, which could lead to the persecution of Russian dissidents, or withdraw from the lucrative market.