In this page: FDI in Figures | What to consider if you invest in Russia | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information
On February 24th 2022, Russia initiated a military conflict on the Ukrainian territory, which profoundly upsets the current political and economic context in both countries and will have substantial ramifications on the investment climate. For the ongoing updates on the developments of Russia-Ukraine conflict please consult the dedicated pages on BBC News.
The latest specific information on economic sanctions against Russia in response to the conflict in Ukraine is available below:
• What sanctions are being imposed on Russia
According to UNCTAD's World Investment Report 2023, FDI flows to the Russian Federation were negative by USD -18.6 billion in 2022 compared to USD 38.6 billion in 2021, as following the invasion of Ukraine in February 2022, various Western companies have decided to stop or limit their activity in Russia. For example, major oil and gas groups such as BP, Shell and Exxon withdrew from the country, and amid international pressure, French TotalEnergies announced it would gradually withdraw from its Russian investments. Norway’s sovereign wealth fund, the world’s largest, also decided to divest itself of its Russian investments. In the same year, the total stock of FDI stood at USD 379.1 billion, around 17.1% of the country’s GDP. Major investors in the country include Cyprus (mostly due to Russian activities domiciled on the island), Bermuda the Netherlands, and the UK. In terms of sectors, the extractive industry is the main FDI recipient, followed by manufacturing, wholesale and retail trade, and financial and insurance activities. According to the latest OECD data, in the first half of 2023 negative FDI flows to Russia reached USD 4.5 billion.
Before the war, the share of FDI in GDP remained relatively low given the country's growth and economic potential, and working capital investments represented a significant share of total FDI. Russia had undertaken economic reforms in recent years, but administrative problems, corruption and uncertainties regarding the stability of the region remained major challenges. The Ministry of Economic Development (MED) is responsible for overseeing investment policy in Russia. Russian legislation imposes two key limitations on foreign land ownership: firstly, it prohibits foreigners from owning land in border regions or other sensitive territories; secondly, it restricts foreign ownership of agricultural land, encompassing individuals, companies, stateless persons, and agricultural firms with over 50% foreign ownership. However, they can access agricultural land through leaseholds. Typically, foreign companies opt to lease land for a maximum of 49 years, the legal limit for such arrangements. Moreover, the Russian Federation recently broadened the range of activities deemed critical for national security and thus subject to FDI scrutiny. This expansion encompasses assessments of the vulnerability of fuel and energy complex installations, ensuring their physical protection, managing sea and inland water transportation of goods, as well as related information technology services. Russia ranks 51st among the 132 economies on the Global Innovation Index 2023 and 131st out of 177 countries on the 2023 Index of Economic Freedom.
Foreign Direct Investment | 2020 | 2021 | 2022 |
---|---|---|---|
FDI Inward Flow (million USD) | 10,410 | 38,639 | -18,681 |
FDI Stock (million USD) | 449,050 | 497,690 | 379,127 |
Number of Greenfield Investments* | 178 | 156 | 15 |
Value of Greenfield Investments (million USD) | 8,062 | 14,921 | 296 |
Source: UNCTAD, Latest data available.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Main Investing Countries | 2021, in % |
---|---|
Cyprus | 29.9 |
Bermuda | 10.2 |
United Kingdom | 8.8 |
Netherlands | 6.0 |
Ireland | 5.6 |
Luxembourg | 5.0 |
Germany | 4.2 |
Bahamas | 4.1 |
Main Invested Sectors | 2021, in % |
---|---|
Mining and quarrying | 26.1 |
Manufacturing industry | 18.4 |
Financial and insurance activities | 16.9 |
Wholesale and retail trade, repair of motor vehicles | 16.5 |
Professional, scientific and technical activities | 7.7 |
Real estate | 5.0 |
Transportation and storage | 2.7 |
Source: Central Bank of Russia, Latest data available.
Many investors see Russia as still under-exploited. The key advantages for FDI in Russia include:
Russia has an investment climate that is complicated to control and generally unstable. The major disadvantages for FDI in Russia include:
For more information, please visit the website Invest in Russia.
Country Comparison For the Protection of Investors | Russia | Eastern Europe & Central Asia | United States | Germany |
---|---|---|---|---|
Index of Transaction Transparency* | 6.0 | 7.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 2.0 | 5.0 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 7.0 | 6.8 | 9.0 | 5.0 |
Source: The World Bank - Doing Business, Latest data available.
Russia’s basic legal framework governing investment includes
The Federal Law on Special Economic Zones in the Russian Federation dated 22 July 2005 No. 116-FZ created a platform for the strengthening of economic growth of the regions and specific areas in Russia. The main aims of SEZs are the development of: manufacturing, tourism, and recreation industries, port and transport infrastructures, technologies and new product production. The Law on SEZs distinguishes four types of SEZs:
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Latest Update: July 2024