Word: russian
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...years, agonizing over when and how to jump in. This month, the company finally took the plunge, announcing a $1.9 billion deal to acquire Eldorado, Russia's leading specialist retailer of consumer electronics and domestic appliances, with more than 600 stores. But Dixons is still nervous about the Russian investment climate, and its worries haven't been helped by recent problems at high-profile Western firms, including BP. So the firm agreed to start paying for Eldorado only in 2008. In essence, Dixons has given itself a three-year trial period to determine if it really wants...
...executives would describe Russia as "no risk," and the mixture of apprehension and opportunism with which Dixons is entering the market perfectly captures Western investors' feelings about the country's business climate. The Russian economy is powering ahead, propelled by the high price of oil, its key export. Growth exceeded 7% in each of the past two years and is expected to be about 6% this year, more than triple the euro-zone average. Many Russians are still poor and live in wretched conditions, but on the whole, household income is up and, especially in big cities like Moscow...
...Since President Vladimir Putin came to power, the Russian economy has staged a dramatic comeback after its near collapse in 1998. But along with red tape and corruption, companies face political and government meddling, primarily in the form of a highly unpredictable tax-enforcement policy. The most battered victim to date is Yukos, the former Russian oil giant that is currently in its death throes after being hit with multibillion-dollar back-tax claims that its erstwhile owners say were part of a Kremlin campaign against them. A Moscow court is expected to deliver its verdict this week on Mikhail...
...Foreign firms, too, are vulnerable. Russian tax authorities recently slapped BP's oil joint venture in Russia, TNK-BP, with a $1 billion back-tax bill for 2001. The move has caused dismay at BP in London and prompted Chief Executive John Browne to schedule a trip to Moscow last week, where he met personally with Putin. Meanwhile, the Japanese tobacco company JTI, which makes Winston and Camel brands at a $400 million state-of-the-art factory it built in St. Petersburg, is embroiled in a furious court battle with authorities over a more than $80 million tax demand...
...Coca-Cola invested $800 million in the 1990s to build 11 plants in Russia and an extensive distribution system. The company's fortunes took a severe knock in 1998, when Russia was hit by a debt crisis and massive devaluation of its currency. But since then Coca-Cola's Russian operations have grown back to profitability, Winterton says, and it currently has half of Russia's $1.9 billion carbonated soft-drink market. And thus, concludes Winterton, "the opportunity far outweighs the risk...