Private equity firm The Blackstone Group L.P. (NYSE:BX) has decided to pull the plug on trying to make investment in Russia. The New York-based buyout group has had no luck in making deals in Russia since Blackstone co-founder Stephen Schwarzman became a member of the international advisory board of the Russian Direct Investment Fund, a $10 billion Russian government-backed fund, over three years ago.

Blackstone had no comment when contacted by the Financial Times regarding this story.

Blackstone Giving Up On Russia

Blackstone had hired well-connected Russian advisers

The Blackstone Group L.P. (NYSE:BX) had hired Dmitri Kushaev, the former head of investment banking at ING Groep NV (ADR) (NYSE:ING) in Russia and PE exec, as a senior adviser to help identify and make deals.

However, sources say that Blackstone will not renew the contracts of Kushaev and the other consultants it employs in Russia.

The sources also not this will be the end Blackstone’s attempt to break into Russian PE markets.

Tightening Western sanctions the last straw

Analysts agree that Western sanctions against Russians close to President Putin, as well as state-backed firms, are leading to a virtual freeze on new Western investments in the country.

It boiled down to Blackstone simply couldn’t find any good deals. The source said. “In the good times, Blackstone couldn’t find anything to do and in the bad times, Blackstone can’t imagine doing anything.”

DMC Partners, a PR firm founded by three former Goldman Sachs execs including the bank’s former Moscow chief, also recently closed after failing to raise the capital for a $2 billion fund.

The European Bank for Reconstruction and Development, which been a partner in many of Russia’s most successful private equity groups over the last 30 years, has also suspended new investments in the country.

Analysts note many international financiers were leery of Russia even before the ongoing Ukrainian crisis, citing concerns about corruption, political interference and an unpredictable judicial system.

TPG Capital, managed by U.S. financier David Bonderman, is the only large international buyout group to carve out a niche in a market dominated by local players, well-connected oligarchs and government-owned bank VTB.