In 2012, Russia ranked sixth in the international rating of investment inflows, and then moved up to the third position in 2013. Since introduction of the economic sanctions in 2014-2015, the inflow of foreign capital was significantly reduced. However foreign investors continue showing a strong interest in the Russian Federation. Many foreign companies preferred not to exit from the promising Russian market despite the economic restrictions. On the contrary, today the US and European businessmen are actively seeking cooperation with potential partners from Russia and hoping for the improvement of political climate in the near term.

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Why do foreign investors desire to deal with Russia?

There was no a single day after the collapse of the USSR that Russia would have lost its investment attractiveness for foreign businesses. The key driver provoking the interest in it on a part of experienced investors is its numerous extensive deposits of valuable natural resources. Russia is the world leader in terms of both scope and variety of domestic raw materials. It is packed with all known minerals and huge amounts of oil and gas, apatites, phosphorites, potassium salts, iron ores, wood, peat and coal deposited everywhere from Moscow to Vladivostok.

The Russian oil and gas industry remains a key sector of the national economy, although an enormous and diverse potential of its manufacturing sector is also recognized by the foreign companies who have had the experience of operating in Russia before the imposition of sanctions. The era of financial instability will come to its end soon or late, and the consumer markets will see the renewal of intensive growth trends, together with increased individual incomes and further rise of the middle class. Alongside with relatively cheap workforce, all these factors sufficiently explain why foreign investors continue targeting the Russian market.

The investment attractiveness of Russia still grows

According to expert and analytic opinions, immediately after the abolition of the sanctions Russia will be ready to renew the consistent implementation of infrastructure projects, the development of consumer goods manufacture, automotive and heavy industry sectors. In 2012, 128 large businesses with foreign investments were launched in Russia, with compatible number of projects having started in 2011. Due to the successful attraction of investments, in 2012 Russia was rated second in Europe for the amount of jobs created through the procurement of foreign capital.

The e-trade segment looks no less promising. The Internet has become accessible to almost a half of Russian citizens, with local market of e-services being among the European tops for several recent years. The majority of investments in sales and services offered through the global Web is still concentrated in Moscow in Saint-Petersburg.

The membership of the country in the World Trade Organization, its integration in the Common Economic Area with Kazakhstan and Belarus, as well as the establishment of the Eurasian Economic Union and many other similar factors provide a sound contribution to its attractiveness as a subject of fruitful investments. The Russian government continues to actively pursue the privatization goals and takes measures improving the demographic statistics which also contribute to the growth of the country’s investment potential.

Attitudes of potential investors

The overwhelming majority of Western companies currently operating in Russia strive to expand their presence in the country regardless of the sanctions and their implications. The regime of economic restrictions forces them to adopt certain adjustments of course, but many businessmen from the USA and Europe still maintain the far-reaching strategic plans for Russia.

However many potential investors show more reserved attitudes just due to deficiency of information. Such entrepreneurs usually target the Russian metropolitan cities but, after having obtained some experience, start actively enquiring about the opportunities to develop their businesses at regional levels.

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Measures to meet the needs of potential investors

In the financially unstable environment, the Russian government concentrates its efforts of facilitation and reforming of the key economic processes to attract more business people and companies interested in dealing with our country. Many of these efforts are directed against the obstacles which restrain economic growth and the development of regional enterprises. Notwithstanding the sanctions, the country regularly holds international conferences and meetings designed to keep the potential investors better informed.

Today, when the growth of many economic sectors has slowed down, Russia may use this time to reform the problem areas of its administrative system, legislative basis and to solve the key political issues related to the recruitment of foreign investors.

To overcome the high reliance of public well-being and the country in general on the oil exports, Russia strongly needs to promote other industries in order to achieve the balanced economic model which will support the stable development of the state in medium to long run.

Russian companies show a strong interest in cooperation with foreign partners in innovations sector, particularly by sharing the experience between industrial enterprises and educational institutions.

There are several state programs currently implemented in Russia with an aim to develop the Eastern and Western parts of the country to increase the investment potential of its constituent entities.

Also, the RF Government takes efforts to train staff for the companies involving the foreign capital. Within the segment of business education, an extended range of qualifications is currently developed for those students whose future careers will have direct or indirect relation to businesses.

How do investors come to Russia?

The tough restrictions adopted by the European Union and the USA with regard to Russia have instigated the investment inflow through offshore areas. Since the introduction of the sanctions, the financial flows from the British Virgin Islands have increased 5 times. The flow of funds through Cyprus has grown 13 times. These facts demonstrate not so much the increasing appeal of Russia for entrepreneurs from these island states as the way how the Western companies try to find the alternative channels for import of their investments.

To raise more foreign capital, both executive and legislative powers in Russia consistently work to reduce the tax burden of domestic and foreign companies. The national accounting system is currently being adjusted to conform as much as possible to the international principles and standards.

The insurance market represents further area of active reforming with a view to provide potential investors with additional guarantees of safe business in the Russian Federation.