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Russian FDI abroad
© Prof. Kari Liuhto University of Turku, Finland
Hämeenlinna, 16.9.2016Email: [email protected]
0
100000
200000
300000
400000
500000
600000
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Russia's outward and inward FDI stocks develop hand in hand ($ million)
Russia's OFDI stock Russia's IFDI stock
Source: World Investment Reports, United Nations Conference on Trade and Development (UNCTAD)
FDI = foreign direct investmentOFDI = outward FDIIFDI = inward FDIStock = accumulated total FDIFlow = annual FDI development
OFDI stock of Armenia $ 0.5 billion, Bulgaria $ 3 billion,
the Czech Republic $ 18 billion, Finland $ 95 billion, Georgia $ 2 billion, Israel $ 89 billion, and
Luxembourg $ 170 billion at the end of 2015.
-50%
Russian capital carousel via offshores= a great part of Russian OFDI returns back to Russia
Sources: Bank of Russia, Bank of Cyprus and UNCTAD
0
10
20
30
40
50
60
70
80
90
100
2009 2010 2011 2012 2013 2014 2015
Share of the Bahamas, Bermuda, the British Virgin Islands and Cyprus in Russia's FDI stocks (%)
Russia's inward FDI stock Russia's outward FDI stock
11
30
24
35
IFDI stock of Cyprus in 2014 (%)
EU, excl.Luxemburg
Luxemburg
Russia
Others
General rule: OFDI flows follow export flows- Russia obeys the general rule to some extent
Sources: Bank of Finland, British Petroleum, UNCTAD and UNCTADstat
-60
-40
-20
0
20
40
60
80
100
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annual change in Russia’s OFDI flow, exports, oil price and the Rouble exchange rate (%)
Change in Russia's OFDI flow (%)
Change in Russia's exports (%)
Change in oil price (Brent - %)
Change in RUB exchange rate vs USD (%)
Sources: Bank of Finland, UNCTAD, UNCTADstat and World Bank
Russia’s OFDI flows do not follow obediently Russia’s own GDP development
Real GDP forecast (%)
Increasing global GDP growth lifts rawmaterial prices, which in turn promotes
Russian exports and OFDI flowin the future.
-60
-40
-20
0
20
40
60
80
100
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annual change in Russia's OFDI flow and real GDP (%)
Change in Russia's OFDI flow (%) Change in Russia's real GDP (%)
Outward FDI internationalisation of Russia and China advanced at the same tempo until 2008
Sources: UNCTAD and UNCTADstat
0
20000
40000
60000
80000
100000
120000
140000
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
2010
2011
2012
2013
2014
2015
Annual OFDI flow from Russia and China ($ million)
Russia's OFDI flow China's OFDI flow, excl. Hong Kong
Rosneft’s acquisition of TNK-BP worth $ 55 billion was executed
in March 2013.
In 2015, China was the world’s 3rd largest outward FDI exporter
($ 128 bn) after the USA ($ 300 bn) and Japan ($ 129 bn). The
value of China’s OFDI stock was some $ 1,000 billion at the end of 2015, excl. Hong Kong. The OFDI stock of Hong
Kong was $ 1,500 billion.
The OFDI stock of the EU is nearly $ 10,000 billion (Germany almost
$ 2,000 bn), the USA $ 6,000 billion and Japan $ 1,200 billion.
The total OFDI stock of the world was $ 25,000 billion at the end of 2015.
2006 level
A dramatic drop occurred in the annual FDI inflow to Russia in 2014
Sources: UNCTAD, UNCTADstat, Bank of Russia and British Petroleum
0
20000
40000
60000
80000
100000
120000
140000
160000
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
2010
2011
2012
2013
2014
2015
Annual inward FDI flow to Russia and China($ million)
China's IFDI flow, excl. Hong Kong Russia's IFDI flow
Decline of $ 50 billion in FDI inflow to Russia in 2014.
Decline of $ 40 billion in FDI inflow to Russia in 2009
in the aftermath of the global financial crisis.
FDI inflow to Russia wasslightly negative (-$ 0.3 bn)
in 1Q/2016.
In the year 2000, the oil barrel (Brent) was valued at $ 29. In
2008, its price was $ 97, in 2013 $ 109 and in 2015 $ 52.
2003 level
Russia as an investor in the world
Sources: UNCTAD and UNCTADstat
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
2010
2011
2012
2013
2014
2015
Russia’s share in the global OFDI stock and annualOFDI flow (%)
Russia's share in global OFDI stock (position)
Russia's share in global OFDI flow (development)
In 2013, Russia was the world’s 5th largest FDI exporter after the USA, China, Japan and the
British Virgin Islands.
In other words, in 2013 Russia regained the place, it used to
have prior to the October Revolution in 1917. The
annexation of Crimea in 2014 ended this positive trend.
27 26 30 31 3038 38
39 41 35 37 3427 27
0
10
20
30
40
50
60
70
80
90
100
2009 2010 2011 2012 2013 2014 2015
Geographical division of Russia's outward FDI stock (%)
Others
USA
China, excl. Hong Kong
Cyprus
EU, excl. Cyprus
Sources: Bank of Russia, British Petroleum and Customs Russia
The EU is the main recipient of the Russian OFDI and its share has not changed significantly in this decade
China is marginal investment target for Russia (0.1% of Russia’s OFDI stock). Some
10% of Russia’s crude oil and oil product export volumes ended in China in 2015.
Cyprus losing its attraction. The Cyprus financial crisis occurred in 2012-2013.
48
83
41
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
90 %
100 %
Geographical division of Russia’s exports in 2015 (%)
Others
USA
China, excl.Hong Kong
Cyprus
EU, excl.Cyprus
The EU is the main FDI contributor to Russia and its share has grown recently
= EU companies committed to the Russian market
29 30 34 3541
47 48
3437 30
3534
30 28
0
10
20
30
40
50
60
70
80
90
100
2009 2010 2011 2012 2013 2014 2015
Geographical division of Russia's inward FDI stock (%)
Others
USA
China, excl. Hong Kong
Cyprus
EU, excl. Cyprus
Source: Bank of Russia
China’s share was 0.5% of the Russian IFDI stock at the end of 2015 (0.8% in 2013).
Due to notable indirect investment, China’s real share is several times larger.
On the other hand, one cannot find Chinese citizens in the boards of directors (BoD) of Russia’s 25 largest corporations yet.
If the ownership transformation really happens, it should be reflected in the board composition of Russia’s largest corporations as well.
Now, there are some 270 BoD places in Russia’s 25 largest firms. 60 of these places belong to the Westerners.
Russia’s FDI stock in the EU and vice versaat the end of 2015
$ 221 billion($ 128 without Cyprus)
Sources: Bank of Russia, Eurostat and European Commission
EU-Russia FDI integration far below potential:
Russia represented 3% of the EU’s outward FDI stock and 1% of the inward FDI stock of the EU in 2012. The aforementioned shares for the USA were 28% and 15%, respectively.
Russia represented 4% of the EU’s exports and 8% of the imports in 2015. The shares for the USA were 21% and 14%, respectively.
$ 258 billion($ 164 billion without Cyprus)
Decline in Russia’s annual FDI flow to the EU and vice versa (2013 versus 2015)
Decline of $ 66 billion
($ 51 billion without Cyprus)
Source: Bank of Russia
Decline of $ 8 billion
($ 5 billion without Cyprus)
Russia’s largest non-financial corporationsby foreign assets in 2014
None of the Russian firms managed to climb to the world’s top 100 companies with the largest foreign assets in 2015. RD Shell topped the aforementioned list with its foreign assets valuing nearly $ 300 billion. Sources: UNCTAD and Alexey Kuznetsov, Russian Academy of Sciences, 2016.
Russian FDI in Finland
1995 2000 2005 2010 2011 2012 2013 2014Finland’s
share in
Russia’s
OFDI stock, % n.a. n.a. n.a. 0.32 0.26 0.32 0.29 0.32
Russia’s FDI
stock
in Finland,
€ million
241 240 378 503 634 583 887 1,138
Russia’s share
in Finland’s
IFDI stock, %3.88 0.92 0.81 0.78 0.92 0.80 1.38 1.47
Sources: Bank of Russia, Bank of Finland and Statistics Finland
Rosatom’s nuclear power plant investment would nearly triple the Russian investment stock in Finland. The plant is scheduled to be in operation in 2024.
Russia’s indirect investment to Finland is still a relatively unexplored field of research (an example, investment of Yandex via the Netherlands to Finland).
In the Baltic States, both Russia’s direct and indirect investment are substantial. Russia covered 5-7% of the IFDI stock of Estonia and Latvia at the end of 2015. Indirect investment flows may double Russia’s real investment share.
Finland joins the EU = Western FDI inflow increases
Largest Russian-owned corporations in Finland in 2014Rank
on the basis
of turnover
Name
(owner; ownership share)
Entry
of
Russian
capital
Industry Turnover,
€ million
Change
from
2013, %
Profit,
€ million
Gross
investments,
€ million
Staff
32. Teboil(Lukoil; 100%)
1948 Oil
business
2,132 -7 28 12 232
62. Gasum(Gazprom; 25% until
December 2015, when
Gazprom sold its stake to
the Finnish Government)
1994 Gas
business
1,079 -6 -10 38 319
79. Norilsk Nickel
Harjavalta(Norilsk Nickel, 100%)
2007 Metal
business
768 1 n.a. n.a. 254
162. RAO Nordic(Inter RAO; 100%)
2002 Electricity
trading
347 -15 6 0 55
406. Nizhex Scandinavia(Nizhnekamskeneftekhim;
100%)
1997 Chemicals
trading
122 -37 0 n.a. 10
Sources: Talouselämä 2015 and Liuhto et al., Routledge, 2017.
Enlightened engineers needed to open the contemporary Gordian knot in a different way Alexander the Great did
Email: [email protected]
A book related to the theme will be published
next year:
The Russian Economy andForeign Direct Investment
Edited by
Kari Liuhto, Sergei Sutyrin, and
Jean-Marc F. Blanchard
© Prof. Kari Liuhto University of Turku, Finland
Hämeenlinna, 16.9.2016Email: [email protected]
