Incoming and Outgoing Foreign Investments in the Economy of Present-day Russia

Abstract

This paper shows that the Bank of Russia and Eurostat statistics on foreign direct investment, based on the direct investor principle, provides little information about the countries actually investing in the Russian economy and actually invested by Russia. Such a gap is partially filled by the recently emerged and still incomplete UN and OECD statistics based on the final investor principle. It reveals that the largest final investing country for Russia is itself (meaning direct investments following the circle “Russia → the rest of the world → Russia”). It has been established that almost half of Russia’s foreign portfolio investments are placed in intermediary organizations in Ireland and Luxembourg, which are influenced by Russian direct investors and transfer most of the raised funds back to them. The arguments in favor of the assumption that part of the direct investment of Gazprom and Rosneft in oil and gas projects Sakhalin-1 and Sakhalin-2 passed in a circle “Russia → Cyprus → Bahamas and Bermuda → Russia (Sakhalin region)” are given. The Netherlands’ position in its negotiations with Russia on the revision of the agreement on the avoidance of double taxation and the consequences of its denunciation are also reviewed.