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Germany ($33.2bn), followed by the United Kingdom ($31.3bn). According to UNCTAD estimates, these three countries accounted for more than $100bn of total FDI stock in Russia. This compares to just $40bn reported by Central Bank.
By contrast, the share of the Netherlands in FDI stock shrinks from about $41bn to $29bn. This is plausible given that, for instance, the investments into AvtoVAZ, the biggest Russian car manufacturer, were made by the Dutch-incorporated Russian-French joint venture of Rostec and Renault. A joint venture between Russia’s Yandex.Taxi and US’ Uber has been registered in the Netherlands too.
Curiously, according to UNCTAD data, 6.5% of investments (or $28.9bn) turned out to be of Russian origin, not foreign. Russian investors traditionally shift money abroad, to countries with favourable tax regimes and unconditional respect for property rights, and repatriate investments from there back home. This is clearly reflected in the Central Bank’s statistics: the stock of foreign direct investments from Russia to Cyprus totals$172bn, but a significant share of this money has been brought back (FDI stock from Cyprus to Russia is $125bn as of 1 January 2019).
Currently, only 16 countries report their FDI statistics on the Ultimate Investing Country basis. Among them are the US, France, Germany, Japan. Comparing the Bank of Russia’s data on investments made from these countries with the respective data from those countries, one can see that Russian investments as reported by the US, Germany and others turn out to be higher. It’s natural since the latter data series include not only investments flowing directly from the US, Germany etc., but also investments by these countries’ corporations via third countries.
For instance, according to the US Department of Commerce, cumulative investments of American businesses into Russia amounted to $13.9bn at the end of 2017 (based on the historical cost of the investments made). This is significantly more than the Central Bank of Russia’s estimate ($3.1bn). According to the Deutsche Bundesbank, the stock of investments from Germany into Russia totalled €21.3bn at the end of 2017 ($25.6bn at the then exchange rate) while the Central Bank of Russia’s estimate is $18.1bn.
Also consider the investments made domestically by Russian subsidiaries of foreign companies, and you will get an even greater share of ‘classic’ investing countries. “Official statistics understates the genuine extent of the economic ties between Russia and the United States,” the joint study by the American Chamber of Commerce in Russia and EY said in May. They estimated the total amount of direct investments made by US companies in Russia over the entire period at $85bn. This is multiple times greater than the figures provided by Russia’s Central Bank.
The same is true with Chinese investments in Russia. Estimates by the Skolkovo’s Institute for Emerging Markets Research show that the total volume of Chinese investments in Russia reached $36bn at the end of 2017. China’s investors are no different from others and they too have been extensively using Cypriot or BVI jurisdictions when structuring their investment projects, Oleg Remyga who heads the China section at Skolkovo notes.
9 RUSSIA Country Report September 2019 www.intellinews.com