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Country risk of Russia : Investment

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
•    The list of global sanctions on Russia for the war in Ukraine


Due to the COVID-19 pandemic, FDI flows to Russia have plummeted by 70% from USD 32 billion in 2019 to USD 10 billion in 2020, according to UNCTAD's World Investment Report 2021. In 2020, the stock of FDI was about USD 447 billion. In addition to the pandemic, weak international demand for crude oil and a price conflict drove prices to historically low levels and impacted investments in the sector. Yet, the Russian Federation remained the largest recipient of FDI in the region, accounting for more than 40% of inflows. According to OECD data, FDI flows rebounded in the first half of 2021, reaching USD 11.3 billion. However, Russia’s invasion of Ukraine in February 2022 is expected to deeply and lastingly deteriorate business climate. 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 decided to boycott the country, and French Total announced it would no longer bring capital to new projects in Russia. Norway’s sovereign wealth fund, the world’s largest, said it would divest itself of its Russian investments. With the aim of provoking the collapse of the economy, Western countries adopted an unprecedented range of sanctions against Russia, which triggered the flight of foreign capital. Russia’s central bank assets have been frozen, selected banks have been removed from the international communication tool SWIFT, the EU airspace has been closed to Russian aircraft, exports of high-tech components to Russia have been restricted, and the Nord Stream 2 certification was withhold, among other measures. In reaction, the government announced the preparation of a presidential decree aimed at preventing foreign investment exiting the country. Major investors in 2020 included some large economies such as France, Turkey, the UK and the US. The geographical proximity has also driven FDI within the territory of the Russian Federation, with ongoing Chinese cross-border investment in the Russian Far East and resilient investment from Finland. The main sectors receiving FDI are the extractive industry, manufacturing, financial and insurance activities, wholesale and retail trade, administrative and service activities, and real estate.
 
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 has undertaken economic reforms in recent years, but administrative problems, corruption and uncertainties regarding the stability of the region remained major challenges. Russia passed a law allowing it to seize the assets of foreign states on its own territory, in reaction to the confiscation of Russian property by European countries in the Yukos case. Russia ranks 28th (out of 190 countries) in the Doing Business 2020 ranking established by the World Bank (latest report), an increase of 3 places compared to the previous year. The main assets of Russia are its abundant natural resources (oil, gas and metals) and its large and skilled workforce.

 

Investment Opportunities

Tenders, Projects and Public Procurement
Globaltenders, Tenders & Projects from Russia
Tenders Info, Tenders in Russian Federation
DgMarket, Tenders Worldwide
Setting Up a Company
World Bank Group, Doing Business, provides information on procedures in order start a business in Russia.
Registration Chamber
Useful Resources
National Agency for Direct Investment
European Bank for Reconstruction and Development
The Federal Agency for Management of Special Economic Zones (RosOEZ)
Russia Trade Portal
 

Business Setup Procedures

Setting Up a Company Russia Eastern Europe & Central Asia
Procedures (number) 4.00 5.26
Time (days) 10.10 11.78

Source: Doing Business.

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Latest Update: June 2022