Warren Buffet once famously claimed that he would never consider buying a business more expensive than seven times its annual earnings. And, he added, it had to be an enterprise he understood.

This made him a late arrival to high-tech: it took his investment officers a long time to persuade him to the merits of Google & Co. And it made him reluctant to sift through markets other than the US.

The way Bill Browder – a nerdy financial analyst who stumbled into Russia in the mid 1990s – advanced to the top of international investor league tables with his Russian investment house Hermitage Capital could not have been more different: he had scant knowledge of how the homo sovieticus ticked and how ex-communist enterprises morphed into self-serving outlets for the oligarchy; he couldn’t even speak Russian.

Yet he realised that all companies dragged to the newly established Russian stock exchange by Yeltsin’s reformers were grossly undervalued. Checking on capital stock and crunching profit and loss accounts he came to the conclusion that even when “90 per cent of all earnings were stolen by management” these enterprises were hugely undervalued.

From a first investment of $25 million, Browder’s business grew into the biggest foreign shareholder in Russia, skimming paper profits of many hundred percent. Until he was kicked out and defrauded. He was not the only one to be fooled. BP was tricked out of its investments quite a few times, and so were Shell, IKEA and George Soros, who exuberantly put $1.6 billion into Russian telecommunications. In the end it was only Russian oligarchs who drew the long straw, always, and finally only Putin’s cronies.

Browder was too young to have witnessed how it all started. Early stakeholders in the aluminium business arrived at ‘shareholder meetings’ with private armies of machinegun-wielding mercenaries, competitors trying to attend had to find out that airports were closed for ‘technical’ reasons, or they died in unexplained plane crashes, their nominated managers on the ground riddled with bullets or spectacularly beheaded. Heavyweight oligarchs had started to liaise tightly with Russia’s notorious crime gangs and the KGB, organisations which were increasingly difficult to tell apart.

Russia had certainly looked more civilised when Browder arrived. Bloody all-out wars for industrial wealth had become de rigueur, criminal violence was now directed not so much against competitors anymore, but towards obstructive civil servants, stubbornly honest accountants and small-scale, unauthorised corporate theft.

What had changed were not entrepreneurial antics but the functioning of law and law enforcement. When in the past, in the quagmire of Yeltsin’s chaos, government bodies like the Inland Revenue, police, special services or law courts were for hire to the best bidder, under Putin they became like the Duma and the media his exclusive domain, directed by him personally, or by his favourite men, until further notice.

Far-seeing investors have shunned the Russian big-cap market, hence its low evaluation

Browder is gone, yet many fund managers and investment advisors remain under the spell of Russia’s cheap stock evaluations. Figures are tempting, admittedly: Gasprom, the world’s biggest natural gas producer with revenues exceeding $120m and exercising a quasi monopoly in many European countries and in the former Soviet Union, has a market capitalisation of four months of sales. Russian heavyweights like Aeroflot, Lukoil, Rosneft, Sberbank, Russian Railways or Transneft have average price/earnings multiples of not much more than four. Is this the Buffet moment? Should we make a move?

Analysts brooding over balance sheets and marvelling over Russia’s modest indebtedness seem to think so. They lump Russia into the same promising investment idea about the rise of emerging markets, the good lore of the BRICS countries – Brazil, Russia, India, China and South Africa. And they pay little heed to the fact that those countries have absolutely nothing in common in what they produce, how successful they export or how well they are governed.

Russian shares are certainly dirt cheap, a clear buy-signal for contrarian investors. This has not much to do with recent sanctions imposed by the West as a punishment for the takeover of Crimea and the smouldering conflict in the Ukraine. Russia has coped remarkably well with those sanctions and seemed altogether to thrive under economic siege. Agriculture for instance never had it so good and large banks hardly wobbled. It has more to do with the fact that ownership in Russia, share ownership in particular, does signify little. How much a company can thrive, how much it is allowed to earn, how heavily it is taxed, what it is permitted to keep and what it is supposed to ‘donate’, is dictated by fiat, not by law.

Far-seeing investors have therefore shunned the Russian big-cap market, hence its low evaluation.

Markets are not only moved by sharp analysis though, or by qualified guessing: Quantum investors for instance calculate global developments by digesting big data; momentum investors jump on the stock-train racing into bull or bear territory; passive investors put their money into index tracker funds, like those lumping together all emerging markets, the BRICS countries, or the Moscow Exchange Index.

Russian stocks may therefore move sharply upwards if sanctions were ever lifted, or Trump is cleared from his damaging Moscow connections. The commodity-heavy MICEX will also be boosted by sudden price rises in energy and metals markets, or a surprising rapprochement of Xi and Putin (setting up a US-independent payment system?).

This will never alter the situation on the ground in corporate Russia though. Who is given the privilege to thrive is willed by the Tsar. Today’s winner may be tomorrow’s loser. But the winner will never, ever be a foreigner­­ like you and me.

Andreas Weitzer is an independent journalist based in Malta. He reports on the economy, politics and finance. The purpose of his column is to broaden readers’ general financial knowledge. It should not be interpreted as presenting investment advice or advice on the buying and selling of financial products.

Please send in any suggestions for discussion in this column to: editor@timesofmalta.com – Subject: Sunday Times Personal Finance.