Russia: Terrorism threat grows in major urban centres

02 May 2017

A recent terrorist attack on the St Petersburg metro highlights the spread of the terrorist threat in Russia from the North Caucasus to urban centres. The Russian economy will return to growth in 2017, as oil prices trend higher. Whilst robust sovereign credit credentials will encourage investor interest, western companies will continue to face a challenging legal and regulatory environment.

Security Environment 

On 3 April 2017, an improvised explosive device (IED) attack on the St Petersburg metro killed 14 people. A further IED was discovered at a metro station and disarmed. The incident is believed to be linked to IS. Russia’s military operations in support of Syrian president Bashar al-Assad will make it a target for Islamist terrorism in the near term. 

Historically, the terrorist threat in Russia has been domestic and concentrated in the North Caucasus region. However, a number of militant commandos in the region have switched allegiance to IS since November 2014, meaning that attacks will increasingly reflect IS incidents elsewhere in Europe. Namely, mass casualty attacks by individuals or small cells using IEDs, knives, vehicles or small arms on soft targets in major urban centres. 

The terrorism threat will also be heightened prior to the March 2018 presidential election and football World Cup in July 2018. 

Regular anti-government protests are likely in the run-up to the 2018 election, although President Vladimir Putin remains popular among many Russians. Protests will be concentrated in urban centres, in particular Moscow and St Petersburg. 

In March 2017 opposition figure Alexei Navalny organised a series of anti-government protests, accusing prime minister and former president Dmitry Medvedev of corruption. Marches occurred in at least 80 cities, with 25,000 participating in Moscow. Over 1,000 people were detained, including Navalny. Protests are mostly peaceful, although the police may use tear gas or water cannons and detain protestors.

Trading Environment 

The Russian economy will experience a moderate recovery in 2017, as global oil prices trend higher and consumer demand rises. Real GDP growth is forecasted at 1.2% in 2017, following an estimated 0.7% contraction in 2016. Sovereign credit risks will remain low. Efforts at fiscal consolidation, including measures to reduce health and education spending to 2006 levels, will reduce the deficit from 3.5% of GDP in 2016 to 2.8% in 2017. 

Russia’s public debt load remains low, at 16.1% of GDP in 2016. International reserves are estimated at 14 months of import cover, which will allow Russia to meet its debt obligations. This will encourage increased foreign investment, with gross fixed capital formation forecasted to grow by 1.6% in 2017.

Despite this, the 2018 presidential election will limit progress on much-needed structural reforms, weighing on Russia’s longer-term growth potential. The state will maintain a significant presence in the economy, particularly in banking and energy, with a privatisation drive having only a modest impact on the development of non-oil sectors.

Investment Environment

Warmer engagement with the US, anticipated under Donald Trump’s presidency, now appears in doubt. US-Russia relations have deteriorated since Trump’s decision on 6 April 2017 to launch a military airstrike on a Syrian government airbase. This will make sanctions relief for Russia unlikely in 2017. As a result, the operating environment will still be challenging for western investors, who will need to maintain compliance when working in the country. In 2015 Exxon Mobil announced that the sanctions regime against Russia had cost it a potential USD 1 billion, after American companies were restricted from working with Russian oil firms. 

The risk of retaliatory measures against US and European Union domiciled companies is also heightened in the near term, particularly if Russian relations with western states continue to worsen. These would likely include efforts to indirectly pressure firms to exit the Russian market, including arbitrary tax claims, fines or further inspections. In addition, a law passed in December 2015 allows the Russian Constitutional Court to override decisions made by international courts, removing a layer of legal protection for international companies operating in Russia.

Pricing chart Russia

* There is a notable range in pricing due to the number of factors that must be considered when writing Russian risks. 

** A number of insurers are not currently writing Russian risks, and there is a notable range in pricing.

In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Nigeria, Trinidad and Tobago and Côte d’Ivoire, all of which have been the subject of recent enquiries from JLT's client base.

World Risk Review Ratings Chart

The monthly Risk Outlook is supported by JLT’s proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.

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For further information, please contact Eleanor Smith, Political Risk Analyst on +44 (0)121 626 7837 or email


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