Russia, Too Risky For the World's Most Politically Connected Venture Fund

http://www.mosnews.com/money/2005/05/13/carlyle.shtml

The Carlyle Group said on Thursday, May 12, that it abandoned efforts to raise a $300 million fund dedicated to Russian investments, its second failed foray into the market.The U.S.-based buy-out group [...] said the investment climate in Russia did not warrant a dedicated team.
Its failure to attract investor support is a blow to Russia’s fledgling private equity industry and is significant because Carlyle is regarded as one of the industry’s most sophisticated fundraising groups.An investor, who initially expressed interest in the Russia fund, said: “For western investors, Russia’s risk profile currently lacks the predictability to give us confidence in returns. The investment market [in Russia] is very volatile at the moment.”Carlyle yesterday said it had not given up and might make investments in Russia out of its European and U.S. buy-out funds. [...]

Carlyle’s decision will be seen as a setback for Russia, a market where few of the world’s large buy-out groups have so far invested. Many regard it as a high-risk destination...
It is the second time Carlyle has had to rethink its strategy for Russia. The group first set up an office in Moscow in 1998 but closed it in 2000.

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Ouch.
Combine this with projections that the population of Russia will shrink by 10,000,000 people by 2015, and it seems that the best that Russia can hope for is to settle into semi-prosperous 2d world status, with the economy kept afloat through selling natural resources, chief among them oil.