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Russian FDI in Central and Eastern European countries: opportunities and threats

Author

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  • Csaba Weiner

    (Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)

Abstract

Russian outward foreign direct investment (OFDI) has been showing a very promising performance in recent years. The Central and Eastern European (CEE) countries have become a key destination, but this is often viewed with suspicion by host countries. The paper begins with the quantity and geographical distribution of Russian capital investment, pointing to differences between estimates and official OFDI data reported on a balance-of-payments basis by the Central Bank of Russia, which are frequently revised. In some years, OFDI has exceeded the FDI inflows into Russia, which is very unusual for an ex-communist transformation country. It is also paradoxical that FDI from relatively poor and less developed Russia should be supporting the economies of relatively more developed countries. When the destinations are examined, it emerges that some of the FDI is round-tripping and trans-shipping, as a significant proportion of the investment is conducted indirectly, through third economies. The paper investigates the companies behind the transactions and their various motives for expanding abroad. The bulk of the OFDI has been coming from natural resource- based companies, Russia’s largest exporters, earning well from high world market prices for energy sources and raw materials. Having presented the Russian FDI position in the CEE region through the statistics of the host countries, the paper sets out to describe the main Russian-origin investments and trends in selected CEE countries. Special attention is paid to the strategic investments in the gas and oil industries and the alarming dependence on Russian natural gas and crude oil. It is stressed that Russian FDI is managed by mature strategies. The paper also looks at the usually negative attitude taken in ex-socialist CEE countries to companies with Russian capital. The reasons for resistance include memories of earlier Soviet policies, fear of losing control over the commanding heights of the economy, and so-called oil and gas diplomacy, as well as cultural, productivity and efficiency issues. Five case studies are cited to shed light on the probable acquisition methods. Finally, attention is turned to the prospects for Russian FDI in the CEE countries and to some actual privatization opportunities.

Suggested Citation

  • Csaba Weiner, 2006. "Russian FDI in Central and Eastern European countries: opportunities and threats," IWE Working Papers 168, Institute for World Economics - Centre for Economic and Regional Studies.
    • Handle: RePEc:iwe:workpr:168
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    File URL: https://vgi.krtk.hu/publikacio/no-168-2006-04/
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    References listed on IDEAS

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    1. John Dunning, 1981. "Explaining the international direct investment position of countries: Towards a dynamic or developmental approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 117(1), pages 30-64, March.
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    Cited by:

    1. Éltető, Andrea & Sass, Magdolna & Kalotay, Kálmán & Weiner, Csaba, 2015. "Orosz befektetések a visegrádi országokban. Az elméletek temetője? [Russian investment in the Visegrád countries - a cemetery for extant theories?]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 565-586.
    2. Kalman Kalotay & Andrea Elteto & Magdolna Sass & Csaba Weiner, 2014. "Russian capital in the Visegrád countries," IWE Working Papers 210, Institute for World Economics - Centre for Economic and Regional Studies.

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