…AS IS RUSSIAN CAPITAL INVESTED ABROAD…

In contrast to most other transition economies, Russia has accumulated a significant amount of FDI abroad. According to CBR data, Russian companies had recorded US$7.1 billion in FDI abroad by the end of 1999, with US$2.1 billion of this coming in 1999 alone. Thus, every US$3 of FDI in Russia has been offset by US$1 of FDI by Russian companies abroad. The Statistical Office data show a much smaller figure for Russia’s outward FDI (only US$1.4 billion), suggesting that the CBR is catching capital outflows which are evading the detection of the Statistical Office.

According to the Statistical Office data, the largest share (36 percent) of Russia’s outward FDI has gone to Belarus, thanks largely to Gazprom’s spending on the portion of the Yamal gas pipeline that runs through Belarus. The Netherlands was the second largest site of Russian FDI abroad (with 19 percent), thanks to Gazprom’s investment in the Interconnector gas pipeline that links the UK to continental Europe. Although CIS countries altogether accounted for 41 percent of Russia’s outward FDI, after Belarus only Moldova and Ukraine account for more than 1 percent of this total.

These data also show that American companies are the largest source of FDI in Russia, with 36 percent of total through 1999. Cyprus is listed as Russia’s second-largest foreign direct investor, with 19 percent. However, many Cypriot investments are proxies for “round-tripping” Russian companies. For example, one of the leading partners in the Cyprus-registered Mustcom company that won the mid-1997 tender for a 24 percent plus one stake in Svyazinvest telecommunications holding company was Oneksimbank, which at the time was one of Russia’s largest financial institutions. Germany was the third-largest foreign direct investor in Russia, with some 8 percent of these assets, followed by France, with 6 percent. CIS countries accounted for less than 1 percent of FDI in Russia.

…BUT CAPITAL OUTFLOWS SLOW.