'New Cold War' Not Good for Business, Credit Stability

The U.S. and Russia have not developed the relationship that some had hoped for when the USSR collapsed.Russia has staked out diplomatic and military positions that are polar opposites of those adopted by the U.S., and the sides are in conflict over Syria, Iran, Venezuela, North Korea and other matters.

There have been accusations that Russia is manipulating energy markets and metal markets. And there is almost no pretense these days when it comes to the country’s oil and gas holdings.

The U.S. business community continues to be engaged in Russia, which will likely never cease despite the difficulties. This is too large a market to ignore, yet too complex to make sense of it. The experience of those who do business in Russia usually falls into one extreme or the other. It is either the best and most loyal customer one has ever had or the biggest nightmare imaginable. It all comes down to the relationship and knowing one's customer since it has essentially been established that Russian laws are not reliable. The legal system serves the state and, if one runs afoul of the modern Czar-like Vladimir Putin regime, there is no safety in the legal community for creditors. Remember: these are the same Russian courts that just convicted an attorney seen as a Putin enemy who has been dead for four years and died amid controversial circumstances while in the custody of Russian law enforcement.

All told, the U.S. government now routinely advises the American business community to exercise great caution when doing business in Russia, as it will not be able to help if there is trouble with a Russian customer. The symbolism of democracy has all but been abandoned. The secret police are as powerful and ubiquitous as they ever were, and those who cause trouble for the regime seem to routinely vanish. The level of corruption is very high and institutionalized. The state now controls and owns most of the major industry in the country, and the authorities routinely exploit the private sector. In short, the "Red Mafia" is alive and well and has become essentially part of the system.

Very few analysts see anything but further deterioration in the relationship. A “hot war” is not likely, but the war by proxy is on … and expanding.

-Armada Corporate Intelligence

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