Ben Aris in Moscow -

VimpelCom's latest deal to expand further in Asia is another example of a Russian company looking to invest overseas as insurance against political risk. But analysts warn that if Russian companies continue to expand abroad rather than at home, it will be increasingly difficult to persuade foreign companies to invest in the modernisation of Russia's economy.

The Amsterdam-based holding company VimpelCom Ltd, which owns Russia's largest mobile phone company, said in late April it had signed a deal to increase its stake in Vietnamese joint venture GTel Mobile to 49% from 40%. VimpelCom is due to invest a total of $500m in the development of the joint venture by 2013 before further increasing its stake to 65%.

Similarly, Moscow TeleSystems (MTS), VimpelCom's biggest rival, has a successful subsidiary in India's telecoms market, Sistema Shyam TeleServices (SSTL), that currently services over 10m customers and is expected to swing to a positive cash flow in 2013.

Headline figures suggest foreign investors have been returning to Russia: foreign direct investment (FDI) rose to $41.2bn in 2010, still down from a peak of over $80bn in 2008. But only $9bn of this money was new foreign inbound investment - the rest was largely multinationals reinvesting profits - and was equal to less than half of Russia's $19.4bn outbound direct investment. "The huge difference between the two figures suggests that Russia has to focus on improving its investment climate, as it will be hard to attract more foreign investment while Russian business is actively investing abroad despite the huge need for domestic investment," says Natalia Orlova, chief economist at Alfa Bank.

After years of accumulating billions of dollars in reserves, the capital flight that plagued Russia in the 1990s has returned: $35.3bn left in 2010, with $22.7bn leaving in the last quarter of 2010 alone, despite the clearly improving macroeconomic situation. That was followed by another $21.3bn in the first quarter of this year.

The government is putting on a brave face and expects zero capital outflow over the whole year, Andrei Klepach, deputy economic development minister, said in April. But clearly Russia's businessmen are nervous.

Insurance scheme

Investing abroad often makes good business sense. But since the state increased its share of the economy during the crisis and state-owned companies and banks have become more aggressive, holding assets overseas has also become an attractive form of insurance.

There have been too many cases of Russian entrepreneurs losing their companies to powerful officials or well-connected oligarchs. The most famous example is the de facto nationalization of oil company Yukos and the jailing of its owner Mikhail Khodorkovsky. But Khodorkovsky is by no means along in falling foul of the authorities.

Mikhail Gutseriev, owner of smaller oil company Russneft, fled to London in 2007 claiming he was the victim of "unprecedented bullying from the state." In a carbon copy of the Yukos saga, the authorities launched a tax investigation into the company after Gutseriev allegedly interfered in presidential elections in the autonomous republic of Ingushetia in southern Russia.

Russneft was expected to be sold to Oleg Deripaska, RusAl's owner and oligarch primus inter pares, but it seems Gutseriev made his peace with the state and returned to Russia to retake control of his company in May 2010. The fact that he didn't make a stink in the international press probably played a role in his rehabilitation.

Yevgeny Chichvarkin, the flamboyant owner of Evroset, the leading retailer of mobile phone handsets, has been less lucky. The company was revving up for a $1bn IPO when Chichvarkin was hit with kidnapping allegations and also fled to London in 2009. Perhaps unwisely he attended a protest rally outside the Russian embassy in September last year alongside exiled tycoon Boris Berezovsky, who once described himself as "the most hated man in Russia."

Evroset was subsequently bought by financier Alexander Mamut, who says he plans to IPO the company in London this year.

More recently, leading search engine Yandex, the "Russian Google", went out of its way to say in its IPO prospectus that investors should be aware of the high political risk the company faces. "High-profile businesses in Russia, such as ours, can be particularly vulnerable to politically motivated actions," Yandex said in the prospectus. "Other parties" may perceive Yandex's news service "as reflecting a political viewpoint or agenda, which could subject us to politically motivated actions," the document said.

The point was forcefully emphasised when Russia's Federal Securities Service demanded that the company's online bank Yandex.Dengi give up data on fund transfers on May 2, specifically funds transferred to anti-corruption blogger Alexei Navalny, who found himself under investigation by Russia's top graft buster, the Investigative Committee, a week later.