The huge gas reserves, and still important oil fields in Western Siberia, appear to offer little attraction to foreign investment because of the need to rely on unpredictable government controls for production and transportation, and because of obscure conditions under which deals are made in the industry. In other words, foreign capital, for understandable reasons, aims at taking advantage of Russia's energy and natural resources, while being as little involved as possible in the Russian economy. On the other hand, Russian government and Russian companies strategy seems to be the attraction of foreign capital to prepackaged deals, without relinquishing control. The consequence of these conflicting strategies is the slowing down of the international connection of Russia's energy sector, in spite of its obvious potential both for Russia and for global energy supply. Russia is the cheapest emerging market.
Risks are high, but payoffs are potentially substantial.
The problem is that a substantial proportion of these profits is not reinvested in Russia, so the process is not self-sustaining. The only truly dynamic integration of Russia into the global economy is conducted through the intermediation between global investors, Russian devalued assets, and the recycling of profits in international financial markets and foreign bank accounts-and this process is largely connected to Russia's shadow economy that conditions and shapes Russian's linkage to the European economy. The international implications of Russia's shadow economy A 1994 report on organized crime by the Analytical Center for Social and Economic Policies of the Presidency of Russia estimated that pratically all small private firms were paying tribute to criminal groups. The collapse of the taxation system is directly related to the payment by business to extortion organizations to solve their problems, in the absence of a reliable state. The expansion of illegal business and criminal organizations in Russia is a direct consequence of the lack of political control that characterized the transition from statism to unfettered capitalism.