What is the level of foreign investment in Russia? Which industries receive foreign investment?

The level of foreign investment in Russia has remained low throughout the post-Soviet era mainly due to an unfavorable tax system, corruption, the lack of production sharing agreements in the fuel sector, and overall economic uncertainty. During 1991–2001, more than one-third of the total foreign investment was from the US. A significant development in the FDI arena was a $6.7 billion direct investment by British Petroleum in the Russian petroleum industry. In 2006, a new legislation on FDI was passed, under which foreign firms can obtain only minority ownership of any energy project deemed “strategic.” However, laws restricting foreign banks from opening branches in Russia were not reformed. As a result these restrictions still remained a significant hindrance to Russia’s accession to the World Trade Organization. The FDI inflows for 2004 were $28.75 billion, with consumer goods and services and construction receiving the largest shares among the economic sectors. In 2006 the inflow of FDI rose to $30.8 billion, with the largest investments coming from Luxembourg, Cyprus, the Netherlands, Germany, the UK, the US, and France. The most lucrative sectors for FDI are the extraction industries which accounted for more than 50% of total FDI in 2007. The other attractive sectors are manufacturing, retail industry and real estate services.

Source: Country Analysis Report- Russia, Aug 2008, Datamornitor