Would you dare to trade with The Bear?
As David Cameron settled down next to President Putin to watch the judo yesterday, any locking of horns with the Russian premier over his stance on Syria will no doubt have been tempered by his country's potential to be a significant trading partner to Britain.
Mr Putin's reluctance to take a tougher line on Syria and his enthusiasm for clamping down on opponents, such the critical punk band Pussy Riot and opposition leader Alexei Navainy, have drawn widespread international criticism. And Mr Cameron made sure to bring the subject up with Mr Putin before they departed for the judo.
But business is business – especially in the case of natural resources, where Russia is unrivalled – and you can't be too fussy where you trade. So, while Mr Cameron may have offended the notoriously prickly Mr Putin enough to ensure they travelled to the Olympic site in separate cars, it's likely the British prime minister pulled his punches.
"I look forward to taking the president to the judo but note that we will be spectators, not participants," Mr Cameron told reporters after a 45-minute meeting with Mr Putin.
He said the talks had also focused on bilateral trade issues and hailed the "steady growth" in UK-Russia relations. British exports to Russia soared by 39 per cent to £4.8bn last year, making it the UK's fastest growing export market and representing an acceleration in sales to the country, which have been increasing by an average of 21 per cent a year over the past decade.
Manufactured goods represent Britain's biggest market for Russian exports, with UK car sales to the country soaring by 60 per cent last year. Medical and pharmaceutical products were the next biggest market, followed by specialised industrial machinery.
Bilateral trade jumped by nearly half to £12bn last year, as Russia increasingly turned its business attention to Britain. BP, Shell, Rolls-Royce, Kingfisher (through its Castorama DIY chain), Marks & Spencer, the WPP marketing giant and British Airways are among the 600 British companies that have piled into Russia as they seek to tap its large, increasingly affluent population of 150m and abundant natural resources.
The business lure of Russia was underlined this week when BP chief executive Bob Dudley pledged his allegiance to the country – despite being in talks to sell its 50 per cent stake in its TNK-BP joint venture in Russia.
"We have been working in Russia for more than 20 years, it's the largest hydrocarbon country on the planet and we have a lot to bring," he said. "I just want to state again our commitment to being part of that in the future."
Mr Dudley's comments may not sound so strange until you consider that his experience in Russia – through the TNK-BP joint venture, which he previously headed – has been fraught with hassle and dispute. BP has been involved in numerous court cases with the AAR consortium of billionaires that owns the other half of TNK-BP and has had its offices raided by Russian special forces.
During his time running TNK-BP Mr Dudley was forced to exit the country in 2008, claiming to be the victim of harassment. But he remains committed to Russia because the TNK-BP business has been a good earner.
However, BP has had enough of its partnership with the AAR consortium, and so it is negotiating to sell its stake in TNK-BP. Under the terms of the shareholder agreement, AAR has first dibs on BP's stake and is in negotiations to buy it. However, there is no guarantee AAR will be the eventual purchaser. Rosneft, a rival suitor, could secure the stake, or Rosneft may buy AAR's holding and partner with BP in the venture. But BP is determined to stay in Russia – just without AAR.
The long-held international scepticism towards Russia has intensified in recent months, as the punk band Pussy Riot face up to seven years in prison after staging a performance in a Moscow cathedral calling on the Virgin Mary to remove Mr Putin from power. Last month's arrest of Mr Navainy and 500 others at an anti-Putin protest following the election has also increased concerns.
CBI international director Rhian Chilcott said: "The picture [of Russia] has changed in that the Pussy Riot prosecution has got so much press coverage that people have become very aware of the danger of doing business in Russia. But doing business in Russia has always been tricky. The country provides great opportunities but you need to do your due diligence. You shouldn't be under any illusions. Russia is bureaucratic and not always fully respectful of the rule of law, while taxes are open to negotiation. But it remains a priority market for the UK."
Russia's decision last month to join the World Trade Organisation will give potential investors some comfort, because it will make the country part of a mechanism where certain disputes can be resolved, and will temper its ability to intervene in business matters, analysts said.
Neil Shearing, chief emerging markets economist at Capital Economics, added: "For now, businesses will be largely brushing it [Putin's interventions] off. Most of the foreign direct investment into Russian is in natural resources and the risks are well known – as BP's experience has shown."
"If you're an energy company like BP, you have to go where the resources are. But if you work in retail or the industrial areas, you're potentially going to be more scared."
But working in Russia is not all doom and gloom. Peter Hambro, chief executive of Petropavlovsk, the London-listed, Russia-based miner that used to bear his name, speaks highly of his experience in the country.
"You do get aberrations and there will always be fights and disagreements, but touching the wood under my desk, I've been doing business in Russia for more than 30 years and the Russians have always done everything they said they would do."
"It is bound to be different. It's gone from being a command economy to a conventional capitalist system very quickly after being cut off from the West for decades. But business has become much more normal than it was in 1998."
Even after last year's surge in exports to Russia, the country is still only the 15th-biggest destination for British goods. But it is such a big and fast-growing market that Mr Cameron is understandably walking the tightrope of political condemnation and corporate cosying.
Beside, Mr Putin has a black belt in judo and a reputation for being manly, so Mr Cameron may believe it wise to tread carefully. For his part, Mr Putin is mindful of keeping up relations with Britain, which has the expertise to help Russia exploit its natural resources and structure.
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