By on November 16, 2009

Russia and VAZ are tight like that...

Renault may be about to learn the folly of buying into a Russian company with close ties to the Russian government instead of establishing a presence of their own. Renault recently took a 25% stake in Avtovaz and things have gone from bad to worse. Avtovaz cut its staff by 25% and is now teetering on the brink of bankruptcy. Which is why Russia’s deputy prime minister, Igor Shuvalov, on Sunday said “If the Renault-Nissan alliance wishes to increase its participation to the point where it takes control, Russia will not be against it,”. He then went on to say “we will have to go to other potential partners and investors,”. These are the words which Renault should pay close attention to.

There is a general rules of thumb if you want to do business in Russia, the Kremlin always gets its way. Want proof? Look at Yukos and TNK-BP. Both are cases where the Kremlin got involved and got its way. In the case TNK-BP, they forced a change of management so that it was Russian tilted and in the case of Yukos, well, the CEO is now in a Siberian prison. But despite this, Renault is feeling brave by saying they will take part in restructuring but not increase their stake. Renault can’t value the Russian market too much because if they annoy the Kremlin too much, life could be made very hard for them in the land of Vodka and cossack dancing. Just ask Mikhail Khodorkovsky.

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