Russia Attracts Record Levels Of Foreign Investment In 2003
by Tatiana Smolenska, Tax-News.com, Moscow
25 February 2004

Foreign investment into Russia jumped 50% last year compared with 2002 as the country attracted record amounts of foreign inflows, figures from the State Statistics Committee have revealed. $29.7 billion flowed into Russia last year, of which $22.2 billion was however accounted for by foreign loans.

Whilst interest is Russia is growing from foreign banks and corporations, the figures indicate that many Russians are pulling back money they transferred out of the country after the fall of the communist regime in the early nineties. As a result, significant amounts of the inflows originated from offshore jurisdictions - investors from Cyprus, the British Virgin Islands, Switzerland and Luxembourg accounted for 30% of all investments as Russians repatriated their assets.

The largest contributors of investment into Russia are based in Germany, Cyprus, Britain and the United States, accounting for over half of the $57 billion of foreign inflows from abroad since 1991.

Foreign Direct Investment rose 69% to $6.8 billion in 2003 according to the statistics. Nevertheless, it is still the case that Russia lags way behind its neighbours in the FDI stakes. The European Bank for Reconstruction and Development calculates that the country attracted just $52 in net FDI per capita between 1994 and 2003 – much lower than former Soviet republics Kazakhstan and Azerbaijan with FDI figures of $938 and $625 per capita respectively.

Tellingly, however, figures for the latter half of 2003 show that Russia attracted $17 billion in foreign investment, some 57% of the yearly total, showing that investors were not scared off by the arrest of the former Yukos chief executive, Mikhail Khodorkovsky, on charges of fraud and tax evasion last October.

.