Regulation of Political Investment Risks

DOI: 10.20542/0131-2227-2018-62-7-48-56

V. Zagashvili (,
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow 117997, Russian Federation

Acknowledgments. The article was prepared at the Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences and supported by a grant from the Russian Science Foundation (project no. 14-28-00097 “The optimization of Russian external investment ties in the conditions of deteriorating relations with the EU”).

Abstract. The article examines the main methods of managing political investment risks at the corporate level, as well as the role of the assistance from the state and international agreements aimed at protecting foreign investments and ensuring investors’ rights. Corporations use various instruments of risk management. The state, which itself is one of the sources of political risks, at the same time takes a number of measures aimed at reducing them for the national business entities. By concluding multilateral and bilateral agreements the governments provide a legal basis for protecting investments from political risks. Of great importance is the system of insurance of risks, in which the role of the state is also great. Finally, by taking measures for maintaining good overall political relationships with other countries, the government creates prerequisites for reducing the political risks of the national companies’ foreign investment activities. In Russia, the state pays certain attention to reducing political investment risks. At the same time, one can not help but see that the deterioration in political relations with Western countries that occurred in recent years has sharply increased investment risks for the Russian companies’ foreign activities. It is possible that some support for Russian investors could be provided by state programs aimed at improving the perception of Russian business abroad. Nevertheless, it seems obvious that the actual reduction of political risks in the foreign investment activities of Russian companies would be facilitated not by certain programs, but by the normalization of political relations with the leading developed countries. Russia’s participation in international agreements aimed at reducing investment risks seems insufficient. Being outside of the process of drafting new agreements, Russia is deprived of the opportunity to influence the outcomes. In the future, the need for multilateral regulation of political investment risks will further increase. Russia’s long-term economic interests will be met by expanding its participation in the development of a legal framework for regulating political investment risks at the global and regional levels.

Keywords: political risks, risk management, foreign investment, sanctions, investment protection, investment insurance, Russia, EU


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For citation:
Zagashvili V. Regulation of Political Investment Risks. World Eonomy and International Relations, 2018, vol. 62, no. 7, pp. 48-56.

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