The Kremlin’s expectations that "friendly" nations would step in to replace Western investors have fallen flat.
According to the Central Bank of Russia, foreign direct investment (FDI) in the country continues to plummet, reaching its lowest level in 15 years by October 2024.
In the first three quarters of 2024, foreign investors withdrew $44 billion from Russia’s real economy, reducing total FDI to $235 billion. This follows a $138 billion exodus in 2022, the first year of the war in Ukraine, and an $80 billion drop in 2023. Altogether, Russia has lost $262 billion in investment since the invasion, cutting its pre-war $500 billion FDI pool in half.
Despite Russian President Vladimir Putin’s repeated assurances of “maximum openness” to BRICS nations and other non-Western investors, no significant capital inflows have materialized, signaling deepening economic isolation, according to Janis Kluge, a researcher at the German Institute for International Security Studies.
This was reported by The Moscow Times.
Even China, Russia’s largest trade partner, has been reluctant to invest in key sectors of the Russian economy.
Beijing has blocked its firms from investing in Russian oil and gas projects, including Power of Siberia 2, and forbidden automakers from building factories in Russia.
Other BRICS nations have contributed little to no investment:
China: $3.3 billion (0.66% of total FDI)
India: $613 million (0.012%)
Brazil & South Africa: Investments so small they don’t even appear in Russian Central Bank data
Leaving Russian Economy Struggling
Before the war, nearly 75% of all foreign investment in Russia came from Western countries, which have since halted investments due to sanctions and counter-sanctions. The impact has been particularly severe in key industries:
Energy & Manufacturing: Foreign investment made up 20% of all fixed assets
Trade: Foreign investment accounted for 80%
Finance: Nearly 70%
Science & Technology: About 40%
The retreat of Western capital is hitting Russia’s economy hard, with no major investor stepping in to fill the gap.
In response to Western sanctions and asset freezes, the Russian government is preparing a new law that would confiscate the remaining assets of Western investors still in the country.
According to Reuters, the draft law would allow Moscow to seize the private property of investors from sanctioning nations.
