Parasitic Bureaucracy'

"The overall investment climate is extremely difficult," says Christopher Granville, managing director of Trusted Sources UK Ltd., a London-based emerging-markets research group. "The basic problem is of a parasitic bureaucracy preying on business, which affects domestic business as much as or possibly more than foreign investors."

The Sergei Magnitsky case shows just how dangerous things can get. Magnitsky, a lawyer for London-based Hermitage Capital Management Ltd. who alleged that Russian officials carried out a $230 million tax fraud, died in jail in November 2009.

After being denied medical care during almost a year in pre-trial detention on fabricated tax evasion charges, he was beaten to death, according to Russia's Presidential Council for the Development of Civil Society and Human Rights.

The only official to go on trial over Magnitsky's death, a prison doctor, was acquitted in December.

David Fuller's view I have friends and subscribers in Russia. I enjoy Russian culture and have been to several receptions at Russia's London Embassy with supporters from the superb London Philharmonic Orchestra. Mrs Fuller helped to train psychoanalysts in Russia a few years ago, on a voluntary basis, but fortunately no longer because government officials were wary and suspicious. I am also asked about investing in Russia from time to time.

The valuations are certainly attractive with an historic PER of 6 and a Yield of 3.65% on the RTSI$, so why is this Index underperforming?

We could say that it is performing like a commodity index, which is partly true. However, it is the 'Parasitic Bureaucracy' point that most concerns me. You can thank Vladimir Putin for that and he still holds most of the reins.