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Motivations of Russian firms to invest abroad: how do sanctions affect Russia’s outward foreign direct investment?

Российские внешние инвестиции: влияние санкций на объем внешних прямых иностранных инвестиций из России
[journal article]

Liuhto, Kari

Abstract

In 2013, Russia’s outward foreign direct investment (OFDI) soared and the OFDI stock exceeded $ 500 billion. However, a year later, Russia’s OFDI dropped by nearly 15 per cent. Rapid upward and downward swings make it necessary to analyze the motivation of Russian firms to invest abroad as well as t... view more

In 2013, Russia’s outward foreign direct investment (OFDI) soared and the OFDI stock exceeded $ 500 billion. However, a year later, Russia’s OFDI dropped by nearly 15 per cent. Rapid upward and downward swings make it necessary to analyze the motivation of Russian firms to invest abroad as well as to assess the impact of sanctions on Russian OFDI. The author points out that a significant part of Russia’s outward FDI stock is accounted for by the operations of Russian corporations in their home market. It is concluded that although Western sanctions target a relatively small number of Russian citizens and companies, they nevertheless affect some of Russia’s key people, largest banks, and hydrocarbon producers. Therefore, their direct impact could be substantial. Alongside the direct impact, one should consider their indirect impact, such as the tumbling rouble exchange rate and Russian banks’ increasing interest rates, which decrease Russian firms’ capability to invest abroad. Moreover, a less amicable politic al atmosphere in the West may push some Russian corporations out of the Western markets and diminish the enthusiasm of new ones to enter them. Today, Russia’s counter-sanctions do not directly restrict the country’s OFDI, but Russian state-owned enterprises may reach a decision to hold foreign investments to support Russia’s sanction policy.... view less

Keywords
Russia; direct investment; foreign investment; EU; investment; disposition; sanction

Classification
National Economy

Free Keywords
motivations for foreign direct investment; Dunning’s taxonomy on FDI motivations; Russia’s outward foreign direct investment; impact of sanctions on EU-Russia economic relations

Document language
English

Publication Year
2015

Page/Pages
p. 4-19

Journal
Baltic Region (2015) 4

DOI
https://doi.org/10.5922/2079-8555-2015-4-1

ISSN
2079-8555

Status
Published Version; peer reviewed

Licence
Free Digital Peer Publishing Licence


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© 2007 - 2025 Social Science Open Access Repository (SSOAR).
Based on DSpace, Copyright (c) 2002-2022, DuraSpace. All rights reserved.