BOFIT Viikkokatsaus / BOFIT Weekly 2017/48

The net flow of foreign direct investment into Russia from abroad in the first half of this year amounted to 17 billion dollars, which was clearly more than in the previous two years. Outward FDI flows from Russia increased slightly from 1H16, with a net outflow of 16 billion dollars. The total FDI stock in Russia was 405 billion dollars, while the Russian FDI stock abroad was 435 billion dollars (about 30 % of GDP).

While Russia's economic problems in recent years have reduced direct investment, the impacts have generally been limited. Most Russian FDI flows are, however, Russian capital that has been recycled through e.g. Cyprus or the Bahamas and invested back into Russia. The reasons for this recycling include e.g. Russia's own institutional weaknesses and a quest for more favourable tax treatment. The government has tried in recent years to diminish capital recycling and make Russian firms to repatriate their operations.

There are many challenges in compiling FDI figures in general and individual corporate acquisitions can cause huge swings in investment numbers over the short run. For example, at the end of 2016, there was a massive spike in Singaporean FDI flows into Russia after the sale of a stake in Rosneft to a Singapore-registered joint venture of the Qatar Investment Fund and the Swiss Glencore. On the other hand, this year the equity FDI flow from Russia to Singapore jumped.

Net flows of foreign direct investment to and from Russia

Source: Central Bank of Russia.                   *incl. Rosneft deal