Large investors are pessimistic about the outlook for the Russian market, according to a report by Global Counsel, which shows that some are reducing their exposure.

Although some groups are holding their options open, and some are even seizing counter-cyclical opportunities, unless the business environment improves more groups will step back from the Russian market, the London-based strategic consultant said on October 19.

The report asks 46 of the biggest international investors on how they perceive the turbulent 18 months since the beginning of 2014, in which sanctions have been imposed, oil prices fallen and Russian policy has been volatile.

Six times as many correspondents view the Russian market negatively than those viewing it positively, making a “bleak assessment”, driven by both structural and cyclical factors.

Nevertheless, there are twice as many companies committed to expanding its presence in the Russian market as those planning to reduce it. Still, the largest group of respondents are either holding still or not reporting any changes.

Across sectors, healthcare had the most optimistic assessments of the market, while the financial and the energy sectors are the most pessimistic.

While the comments on Russian policy were hard to obtain, Global Counsel notes that those collected concerned mostly the food embargo and the policies affecting the financial sector.

At the same time a number of large players are “doubling down” and expanding their operations despite the pessimistic outlook, but the authors of the report are not sure whether such strategies will be sustained, given the uncertainty stemming from the external environment and internal policy.

“The next 18 months are likely to be critical in determining whether more international investors double down or pull back from the Russian market,” commented Gregor Irwing, chief economist of Global Counsel.

If the external environment does not improve then the number of foreign firms reducing their exposure to Russia is likely to increase.

While Russia has always been a tough place to do business, if often a profitable one, the combination of sanctions, low oil prices and volatile public policy is now testing the nerve of “even the most seasoned foreign investors", Irwing concludes.