26bd73ab-d16e-4b58-ba47-866772fb3563Rising markets and reviving economies have contributed to the most optimistic business climate in the west since the collapse of Lehman Brothers in September, 2008. But, just as economic risk has declined, so political risk is on the rise. The Ukrainian upheavals have created the worst crisis in relations between Russia and the west since the end of the cold war. The US and the European Union are talking about imposing economic sanctions on Russia. The initial measures involved are likely to be limited, but the risks of a tit-for-tat escalation are high – and will be making big western investors in Russia, such as BP, very nervous. Russia provides a good case-study of the two sorts of political risk that investors have to consider: the macro and the micro. Macro political risks involve large-scale changes – either in the form of internal upheaval or international conflict – which can seriously destabilise the business environment. Micro political risk takes in the sort of events that do not necessarily make world headlines – a change of ministers, a capricious presidential decision, an unexpected court ruling. MORE