Taking a Look Back At a Difficult 2008

As the train wreck that was 2008 continues steaming off the tracks and market participants put finishing touches on out-of-office replies, it seems like as good a time as any to reflect on the year.

The Association of European Businesses has made learning from investors' mistakes even easier, releasing on Friday an opportunely timed manual, "How to Invest in Russia in 2009."

While the publication's authors could not have known the troubles ahead when they penned their articles in late October, their words of wisdom provide a lens for viewing the events of the year and their reverberations in a single week. And so, with the past five trading days and selections from the AEB booklet as guides, here is a look back on the week, and year, that was.

"One of the most interesting peculiarities of the Russian economy is that two-thirds of capitalization of the market depends on natural resources," wrote Philippe Delpal, global head of international retail services at BNP Paribas Group.

From its peak of $147 per barrel this summer, crude was trading at below $39 per barrel Friday, well shy of the $50 Russia needs to balance its 2009 budget.

This week OPEC agreed to cut oil production by another 2.2 million barrels per day and Deputy Prime Minister Igor Sechin said Russia could see a production decline of 320,000. Next year, analysts say, the state will have to play a careful balancing act between pleasing oil companies and covering the budget.

"It is important [one's] business remains resilient to exchange rate fluctuations, and projects that generate hard-currency cash flows should be preferred," wrote Denis Sokolov, head of research at Cushman & Wakefield.

The currency is down 12 percent since June against its trading basket of 55 cents and 45 euro cents. Last week, the Central Bank expanded the ruble's trading band three times in five days, allowing the ruble to fall the most against the euro in nine years. On Thursday, billionaire Vladimir Yevtushenkov's conglomerate Sistema and milk producer Wimm-Bill-Dann both announced third-quarter falls in profit on foreign exchange losses.

"Downsides [of investing in Russia] continue to include corruption, bureaucracy, administrative barriers, aging infrastructure, inadequate legislation and the inconsistent interpretation and application of laws," wrote Simon Foster, partner at KPMG's transaction services.

Transparency International said in September that corruption in Russia had reached its worst level in eight years. The Federal Anti-Monopoly Service has become a powerhouse since July, when Prime Minister Vladimir Putin suggested that the body "wake up" and "destroy the fuel monopoly at airports." Several prominent businessmen, including Mechel's Igor Zyuzin and Saturn's Yury Lastochkin, faced personal rebukes from top government officials.

Not a few investors predicted at the end of last year that the country's benchmark RTS Index would break 3,000 points. For those who think they have a more reliable forecast, the AEB welcomes new 2010 contributors.