Russia is now entering its longest economic downturn since the fall of the Soviet Union. Post-Soviet Russia has been characterised by frequent highs and lows, but those shifts in sentiment have always swung back swiftly. For foreign investors in Russia this meant riding out a short storm, cutting their cloth accordingly and waiting for the upturn that was just around the corner as the laws of commodity driven supply and demand righted the ship. Times have changed, and in February the crisis has entered its third year, by comparison that’s half the length of the Second World War.

As Russia enters these unchartered waters most would have assumed that foreign investors are taking a different course to that which they pursued in 1998 and 2008 when they were rewarded for their commitment to Russia with a rapid bounceback. The crisis of 2014 – 16 has an added dimension: geo-politics. In previous crises the interests of capital were aligned with those of politics. This is no longer the case. Russia is now taking a very different course, sparked by the accession of Crimea but pre-dated by historic tensions with the West and now with traditional allies to the south in Turkey and Egypt.

This geo-political tension has been consolidated by sanctions which are viewed on a scale from cosmetic, like various travel bans for people who do not travel; to damaging, like the important ban on foodstuffs into Russia from the EU; and to catastrophic, like the closing of global capital markets to Russian banks.

Not only are these political tensions very real but they are reflected by an even more hyperbolic media. The influence of Russia state-backed media has only become stronger in recent years. While the Western press finds it difficult to view Russian issues through anything but an entirely conspiratorial prism. This is compounded by vitriolic social media campaigns which amplify the most hostile messages and target participants on both sides in equal measure.

This landscape would suggest that international investors pursuing a stable and reliable return on their capital are withdrawing at speed from the Russian market. And in some cases they are, with the more flexible industries like investment banks being in the lead. While others, including the oil majors faced the triple bind of sanctions prohibiting the import of necessary technology, financing costs escalating as international banks grew more wary of Russia risk and the collapse the price of oil slashed capital expenditure programmes. But, in many other industries business is sitting tight and weathering a storm that no one could have predicted in the weeks before the annexation of Crimea when President Putin welcomed the world to Sochi and projected an, albeit short-lived, genuinely positive global image of Russia at the 2014 Sochi Winter Olympics.

This picture is one which we have not only seen with our own eyes, for example in guiding business leaders who remain committed to Russia, if very anxious about the situation. But it has also been validated by substantial research. As the recession deepened in Russia last year the Global Counsel team was struck by a number of businesses who sought insights on how to grow in Russia at a time when rushing to a Moscow airport would seem the only logical step. Following this trend through anecdotes and the media was proving unsatisfactory. Our approach was to ignore the noise coming out of Moscow, Washington and Brussels and instead focus on what businesses were saying in their own words. Taking as our core sample the members of the Foreign Investors Advisory Council and a handful of other major corporates we sought to understand what these businesses were actually telling their shareholders about their level of comfort when looking at the state of the Russian economy. Just as the team at Global Counsel appeared to have identified an important, if modest, counter-cyclical trend in our own market there appeared to be a much bigger trend.

The report “Multinationals in Russia in their own words” that was published last October showed that foreign businesses in Russia have come to a classic Russian three-way crossroads with some of them stepping back, others doubling down and some continuing business as usual.

The most striking aspect of our research was that most investors, by a ratio of 6:1 viewed the Russian market as negatively rather than positively. Yet, of by a ratio of 2:1 these businesses were committed to staying in Russia. In short, their macro outlook was grim, and their micro instincts were to stay.

What accounted for this somewhat contradictory view? For some clearly there was a sunkcost in Russia that meant that a withdrawal would not have justified decades of investment and relationship building combined with a significant revenues albeit in roubles not dollars and not necessarily generating a positive margin. While for others, especially those who had more recently entered the market, the prospects of leaving, especially when major capital projects were underway was simply not tenable from a financial or a legal perspective. Yet, for some, there was an emerging counter-cyclical strategy that was as intriguing as it was surprising.

Those businesses appear to be driven by three core trends. The first is the strength of brands, especially foreign brands, at a time of domestic strife. The best example of this is in healthcare, the only sector where businesses both saw positive future trends for their industry as a whole and at the same time as their own company was planning to deepen their exposure to the market. Despite the straightened economic times Russian consumers remained committed to buying foreign drugs to meet their healthcare needs.

The second was the ongoing efforts by the Russian state to boost infrastructure and deliver prestige projects. This is reflected in businesses as diverse as power where energy efficiency targets and heat sector reform have encouraged businesses like utility firm Fortum to deepen their commitment. But it also ranges to travel and leisure where some of the largest international hotel groups, and the associated businesses that service them, want to boost the number of available rooms in advance of the FIFA World Cup in 2018 and surge in domestic travel.

The third reflected the demand for Russian consumers to access the latest technology and services, regardless of their country of origin. Whether in accessing content, goods and services, or using new app-based platforms like AliExpress and Airbnb the Russian market provides a rich seam for global businesses with relatively low cost structures serving local consumers with minimal local friction.

Whether the Kremlin views these trends as a blessing or a curse is difficult to assess. Efforts to boost the localisation of production has certainly impacted on some sectors, most notably those who provide what is viewed as national critical infrastructure, like internatio­nal payment systems. Equally, the government has had to recognise the collateral damage of some of these plans, like the unintended impact on Aeroflot of some of the localisation agenda which led to the government watering down their plans. Equally, more typical bureaucratic changes, like limiting visas and work permit is clearly having an impact, especially on firms from countries like Turkey who previously found the Russian market to be reasonably welcoming.

Most international firms refrain from commenting on Russian public policy in their financial reports or public statements. Those that do venture into this area range from being very negative to rather concerned. Comments in the past two years have been most common in three areas of policy: the Russian embargo on food imports from selected countries, fiscal or monetary  policy, and measures that impact on specific sectors. Cargill noted that wheat export restrictions have created problems while TetraPak was concerned about the dairy imports ban. Raiffeisen Bank has criticised the inability of the Russian central bank to stabilise the exchange rate, while UniCredit reported that aggressive monetary tightening by the central bank contributed to the slowdown in the economy. Even the relatively buoyant healthcare sector voiced concerns with Sanofi alarmed about shortage of vaccines created by new procurement rules favouring local sup­pliers.

As we can observe, many foreign firms are currently reassessing their Russia strategies and we conclude this is a critical moment for foreign companies in Russia. We do not yet know whether the commitment to the Russian market in the face of widespread pessimism about market conditions will be sustained. The international businesses have largely adapted to the structural problems of the Russian economy but whether they are prepared to sustain new risks which appear to be prolonged rather than temporary — sanctions, low oil prices and intensifying economic nationalism — is still an open question.

Any foreign investor now committed to Russia knows they are in for the long haul. The collapse in the price of oil means that Russia will pay a heavy price for failing to introduce structural reforms when oil was over $100 a barrel. Equally, the very fact that the good times are over means that foreign businesses may be able both to operate on a more level playing field and have more leverage when they do. Whether they can exploit this will come down to the quality of their product and their appetite for risk. This has always been the way in Russia but perhaps now as the tide turns the scales are not tilted so much in the favour of people looking for the quick buck that the commodity super-cycle provided.