The state's ferocious legal onslaught on oil giant Yukos may have alarmed investors but foreigners are lining up to buy Russian businesses as never before.
This week alone, Dutch brewer Heineken said it had bought two Russian breweries in separate deals which analysts believe could be worth some 70 million euros ($86 million).
The purchase followed hot on the heels of Monday's announcement by Franco-Spanish tobacco firm Altadis that it was spending 147 million euros to buy control of Balkan Star, the leading independent cigarette maker in Russia.
For foreigners with their eyes on a Russian business, the Yukos affair has caused less of a stir than for stock market investors who accuse authorities of trampling on minority shareholder interests.
"Our view is that Yukos does not give any indication of how foreign investors are going to be treated in Russia," said Richard Cowie, senior associate at Baker & McKenzie in Moscow.
"There is a skilled workforce, low employment costs and a wealth of technical expertise in Russia that would benefit from investment from a Western partner," Cowie added.
Portfolio investors, such as investment funds, have been on tenterhooks as a judicial assault escalates on Yukos. But many European companies find the allure of an oil-based economy growing at a furious pace and fueled by sky-high crude prices is proving irresistible.
"Although people ask me about Yukos, I get the sense there is pent-up demand to be in Russia," said the head of a foreign financial services concern in Moscow who requested anonymity.
FDI inflows in the first six months of the year jumped to $8.6 billion from $6.4 billion in the same period last year, according to Central Bank data.
The sheer size of Russia makes the case for investing compelling for many companies despite widespread corruption and stifling bureaucracy.
"There is little rule of law in Russia and this has always been a big problem. It's a question of what value you buy in at. With high enough returns the risks are justifiable," said William Browder of Hermitage Capital Management.
Russia is, for example, the fourth largest cigarette market and the fifth largest market for beer, making the country attractive for investors like Altadis and Heineken.
Business practices, renowned in the 1990s for their thuggery, are being transformed by professional management.
"There are always risks involved in investing in Russia, but we are seeing more financial reporting along lines of Western standards ... and that is giving investors more confidence that Russia is a market where you can invest," Cowie said.
This week's deals follow a string of recent investments. France's BNP Paribas said in July it was buying an indirect stake in Russia Standard Bank in a deal valuing the bank at $600 million.
Germany's Siemens also unveiled a plan to buy a stake in turbine maker Power Machines. U.S. oil firm ConocoPhillips is a hot favorite to buy the government's remaining 7.6 percent stake in oil giant LUKoil, worth some $1.7 billion.
Business travel between Western European capitals and Russia is booming. British Airways recently added two weekly flights from London to Moscow, bringing the weekly total to 16 flights.
This week alone, Dutch brewer Heineken said it had bought two Russian breweries in separate deals which analysts believe could be worth some 70 million euros ($86 million).
The purchase followed hot on the heels of Monday's announcement by Franco-Spanish tobacco firm Altadis that it was spending 147 million euros to buy control of Balkan Star, the leading independent cigarette maker in Russia.
For foreigners with their eyes on a Russian business, the Yukos affair has caused less of a stir than for stock market investors who accuse authorities of trampling on minority shareholder interests.
"Our view is that Yukos does not give any indication of how foreign investors are going to be treated in Russia," said Richard Cowie, senior associate at Baker & McKenzie in Moscow.
"There is a skilled workforce, low employment costs and a wealth of technical expertise in Russia that would benefit from investment from a Western partner," Cowie added.
Portfolio investors, such as investment funds, have been on tenterhooks as a judicial assault escalates on Yukos. But many European companies find the allure of an oil-based economy growing at a furious pace and fueled by sky-high crude prices is proving irresistible.
"Although people ask me about Yukos, I get the sense there is pent-up demand to be in Russia," said the head of a foreign financial services concern in Moscow who requested anonymity.
FDI inflows in the first six months of the year jumped to $8.6 billion from $6.4 billion in the same period last year, according to Central Bank data.
The sheer size of Russia makes the case for investing compelling for many companies despite widespread corruption and stifling bureaucracy.
"There is little rule of law in Russia and this has always been a big problem. It's a question of what value you buy in at. With high enough returns the risks are justifiable," said William Browder of Hermitage Capital Management.
Russia is, for example, the fourth largest cigarette market and the fifth largest market for beer, making the country attractive for investors like Altadis and Heineken.
Business practices, renowned in the 1990s for their thuggery, are being transformed by professional management.
"There are always risks involved in investing in Russia, but we are seeing more financial reporting along lines of Western standards ... and that is giving investors more confidence that Russia is a market where you can invest," Cowie said.
This week's deals follow a string of recent investments. France's BNP Paribas said in July it was buying an indirect stake in Russia Standard Bank in a deal valuing the bank at $600 million.
Germany's Siemens also unveiled a plan to buy a stake in turbine maker Power Machines. U.S. oil firm ConocoPhillips is a hot favorite to buy the government's remaining 7.6 percent stake in oil giant LUKoil, worth some $1.7 billion.
Business travel between Western European capitals and Russia is booming. British Airways recently added two weekly flights from London to Moscow, bringing the weekly total to 16 flights.