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Foreign investment to Russia lowest since 1994

Published on January 20, 2021

The inflow of foreign investment to Russia last year slumped to the level of the mid-90s amid the coronavirus pandemic and low energy prices, the country’s Central Bank has said.

The Central Bank report published on Tuesday showed that Russia received $1.4 billion of foreign direct investment (FDI) in 2020, a 95 percent drop from the previous year’s figure of $29 billion.

Over the past several years Russia had seen a gradual reduction of foreign investment against the backdrop of Western sanctions.

The outbreak of the coronavirus pandemic and the sharp drop in oil prices, one of Russia’s key export products, put further pressure on the economy.

According to the Central Bank report, the last time the level of foreign investment was lower than last year was in 1994, three years after the dissolution of the Soviet Union when the newly-independent Russia went through years of economic hardship.

Economists say a rise in FDI in Russia this year was possible but it would unlikely return to the levels of 2019.

A large part of FDI into Russia is thought to be of Russian origin and can be Russian capital reinvested through offshore shell companies based, for example, in tax-friendly Cyprus.

According to a report by the United Nations Conference on Trade and Development, FDI fell by 49 percent globally in the first half of 2020 due to the economic fallout from the pandemic.

The UN projects that recovery is not expected until 2022.