We’re not looking to overstate things here – anyone who’s ever done a deal in Russia knows what a wringer it can be. That said, there’s something to be said for the newfound strategy of the Krem’s men, who are finding ways to refurbish national companies so that they can flip them for a killing. Such as this one, for which France's Renault recently plunked down $1 billion.

For Renault SA, a $1 billion investment last month in a struggling Russian auto giant is a bet on one of the world's fastest-growing car markets. For Vladimir Putin, it's a validation of Kremlin capitalism.

Most foreign investors long steered clear of Russian car maker OAO Avtovaz, a behemoth whose outdated models, inefficient plant and mafia-infested finances embodied everything wrong with post-Soviet industry. But in 2005, President Putin sent an old KGB colleague to clean the place up. By last year, top auto companies were lining up for a chance to bid for a stake. Renault Chief Executive Carlos Ghosn flew in personally to snag the contract.

The Avtovaz deal is just the latest example of the Kremlin's strategy of re-nationalizing companies and sprucing them up, then selling minority stakes to foreigners at steep prices. In 2006, state oil giant OAO Rosneft, with assets taken from OAO Yukos, went public in a $10.7 billion offering in London. Gas monopoly OAO Gazprom has become a staple in Western investment portfolios even as the Kremlin has tightened control over the company.

The Kremlin, convinced it has hit on a winning formula, has plans to float stakes in a raft of companies it has taken over. That policy is set to continue under Mr. Putin's anointed successor, Dmitry Medvedev, who takes office in May.

Results like the deal with Renault help explain why Western lectures on the evils of nationalization ring hollow in the Kremlin. Before the state's takeover, "an investor would never have come to such a weak company" as Avtovaz (pronounced aft-OV-az), says Boris Alyoshin, its CEO and a former head of Russia's state industrial agency. "We had to turn it into a business."

In the 1990s, Western advisers pushed privatization as the key to fixing Russian industry; foreign investors stayed away. Today, foreigners are lining up to do deals with companies linked to the Kremlin's state-run giants.

"The inflow of private capital into Russia in the past year amounted to about $80 billion," Mr. Putin said last month. "Is this a reflection of the fact that investors are being deterred? Everyone wants to work with us."

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