How can I Invest In Russian Stocks?

I’ve been trying to find out about a huge Russian oil and gas company called “Gazprom”. According to my broker, this companie’s shares do not trade as american ADRs. Yet, this company is huge-it employs 200,000 people, and has proven reserves far in excess of Chevron.
Is this the time to invest in Russian shares? The economy is a disaster, most companys shares are dirt cheap.
Somebody once said of investing “buy when there is blood in the streets”-is this applicable in the case of Russia?

here ya go!

:wiping tears of laughter away:

Okay, you know what they say about the stock market - “don’t play with money that you absolutely need to see again”? That holds triply true for investing in Russian companies.

Of course, it makes total sense on the surface - rising oil prices, discovery of new reserves in Central Asia, Russia’s depressed economy - If your investment persona can be described as “swashbuckling risk-taker”, then by all means, proceed - you’ll probably make a killing.

However:

I’m not an expert on Gazprom, but I spent 4-5 years managing privatization efforts in the NIS, so here is some advice I can give you when you research the company:

  1. Is it fully privatized, or did the state hold a 51% stake, as is common in the region? Gazprom would be considered one of the crown jewels of state-owned-enterprises, and of serious strategic interest to the Russian government - they would retain some stake. This adds a whole layer of graft and bureaucratic shite to the process.

  2. Who are Gazprom’s customers? IIRC, from working on energy sector in Ukraine, many of Russia’s neighbors are in staggering arrears to Gazprom. It’s a huge source of regional friction - countries such as Ukraine, Moldova, and Belarus resent being dependent on Mother Russia to such an extent. Without some IMF intervention, those debts might never be paid off.

  3. What are the rights of investors, especially foreign investors, especially in a company of strategic interest to the Russian government? How well is the company positioned to respect those rights and fulfill its obligations? What contracts and legal mechanisms exist to ensure these obligations are enforced?

  4. How will you collect the return on your investment? Dividend checks in dollars or rubles? If you are not investing through a capital market mechanism, you are paying directly into the company. Corporate governance, shareholder rights, proper documentation, etc. - all this is a new and often haphazardly put together construct in this region. It’s part of Jeffrey Sachs big privatization science project of the early 1990’s, and far from the traditional way of doing business. Be very sure about how things are going to work.

  5. Financial statements and other documentation might be extremely misleading. To avoid paying crushing corporate taxes, it’s standard practice for companies to keep several sets of books. Which set are you seeing, and who cooked them?

  6. Is Gazprom getting its reserves from sites in Russia or from neighboring countries? How politically stable are those countries? Could they decide to stop dealing with Gazprom? Nationalize?

Sorry to be the voice of darkness and doom - I hope you make lots and lots of money. But be very, very sure what you are getting into.

If you flush your money down the toilet, you’ll save on brokerage fees…