Renault paid 1 billion USD to acquire a 25 percent ownership stake in the Russian automaker AvtoVAZ in 2008.Just one year later,Russian Prime Minister Vladimir Putin threatened to dilute the Renault ownership stake unless it contributed more money to prop up AvtoVAZ,which was then experiencing a significant slide in sales.This is an example of ________ risk.

Question

Quizplus · Accepted Answer

Another source of political risk in many countries is the absence of the rule of law. In this case, Renault realized its ownership claim may not have held up in the corrupt Russian court system. Therefore, it was forced to negotiate and eventually agreed to transfer over 300 million USD in technology and expertise to the Russian firm to ensure its ownership stake would stay at 25 percent.

Renault Paid 1 Billion USD to Acquire a 25 Percent