Foreign Investment

Highlights: Investment flows into and out of Russia have been rather limited compared with the flows of other major economies of the world. Foreign investment to and from Russia has been sensitive to the inter- national political environment, which improved at the beginning of transition but deteriorated significantly in the aftermath of the Crimean crisis in 2014, and especially after the 2022 Russia–Ukraine conflict. The two main modes of entry of foreign direct investment—greenfield investment and cross-border mergers and acquisitions (M&As)—have fluctuated largely over the past three decades. Natural resource-based activities have played a major role in the foreign investment flows of Russia. Foreign investment data reflect real economic activities imperfectly, ‘through a glass darkly’. The three main forms of ‘indirect FDI’—round-tripping, transhipping, and corporate inversion—all play a major role in Russia, usually transiting through offshore centres such as Cyprus. The largest Russian multi-national enterprises are based in natural resources and have close links with the Russian government; some of them are state-owned, others state-influenced. The COVID-19 pandemic has sped up major transformations in global investment flows due to the acceleration of digitalisation, adjustment to environmental issues, and climate change, and to increasing economic nationalism, affecting the flows of Russia deeply