Foreign investors withdraw $36 billion from Russia

Over the past year, foreign investors have made about 200 transactions to sell business assets in Russia and withdrawn tens of billions of dollars from the country.

Analyzing data from the Russian Central Bank, RIA Novosti news agency estimated on May 29 that foreign investors withdrew $36 billion from the country, after selling business assets there in the period of March 2022 - March 2023.

This figure is equivalent to foreign direct investment (FDI) into Russia in 2021 - the time before the war in Ukraine broke out. According to the World Investment Report 2022 of the United Nations Conference on Trade and Development (UNCTAD), FDI poured into Russia in 2021 was 38.2 billion USD.

Last week, the Russian Central Bank said that in the year to March 2023, around 200 asset sales were completed. However, only 20% were large-scale (assets worth over $100 million).

“In terms of economic scale, the impact of foreign investors selling their Russian subsidiaries is not large,” the agency said in its report on the country’s financial stability. In April, when the ruble price plunged, it also spoke out to ease the impact on the foreign exchange market of Western companies withdrawing from Russia.

The logo of a McDonald's store in Moscow was removed in May 2022. Photo: Reuters

However, the Kremlin now plans to introduce a $1 billion monthly cap from June on the amount of foreign currency people can buy to make deals on Western assets.

"In the context of Russia's declining current account surplus, the large amount of foreign currency needed to buy Western assets could have a negative impact on the foreign exchange market. Therefore, buyers need to spread their purchases over a longer period," the Central Bank of Russia said.

Many major companies in the world have left or scaled back their operations in Russia after the country launched a military campaign in Ukraine early last year. McDonald's, Starbucks and Ford Motor have closed in Russia. The names that will be next are Volkswagen, UniCredit and Raiffeisen Bank International.

Under current rules, companies that want to leave Russia must seek government permission and sell assets at a 50% discount. Last year, the value of assets sold by foreign companies was about $15-20 billion.

Many of the companies are exiting with the option to buy back the assets later, the Russian Central Bank said, which will ensure business continuity.

Ha Thu (according to Reuters)

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