Csaba Weiner

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

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.

Russian Capital in the Visegrád Countries

This working paper analyses investment by Russian firms in the four Visegrad countries, their motivations and ownership advantages, based mostly on the eclectic paradigm. Beside statistical data, we rely on case studies to present the profile of the most important Russian investors in each host country. The Visegrad countries have attracted less Russian investment than their economic importance would warrant, due to various factors, most notably the joint effects of reticence in host countries and firm strategies that do not necessarily see the subregion as a major priority. Most of the Russian investment examined is market, and to a lesser extent, resource seeking, concentrated in the hydrocarbons, steel and nuclear energy industries, often dominated by state-owned firms. Some innovative private Russian companies, with features similar to developed-country multinationals, can also be identified with marketas well as efficiency-seeking investment. Extant investment theories with the exception of the eclectic paradigm fall short of explaining Russian investment. This paper suggests that further analysis is needed on the role of the home country in stimulating outward investment and directing it to specific locations.

Central and East European diversification under new gas market conditions

The Russo–Ukrainian gas crisis of January 2009 encouraged Central and Eastern Europe (CEE) to diversify away from Russian gas supplies and new gas market conditions have afforded some opportunities for doing so. This paper assesses these achievements, as well as factors preventing CEE countries from benefiting therefrom. The paper addresses four main areas of CEE diversification: (1) gas demand, (2) domestic gas production, (3) transit, as well as (4) gas supply and physical infrastructure for source diversification. There is great variation in the degree of dependence on gas, gas imports, Russian gas and transit countries, across the CEE states. Some progress has been made in diversifying, but the degree of progress and the patterns vary significantly from country to country. Due to long-term gas import commitments and the lack of available import capacity, CEE countries can take only limited advantage of changed gas market conditions. But some countries have genuinely benefited from ongoing developments. Transit-avoidance pipelines can also increase security of supply for CEE consumers by providing the opportunity to arbitrage across gas transit corridors. Despite many criticisms, the EU has taken steps that may help mitigate Russian influence.

The Contest for Gas Resources and Markets in Post-Soviet Space: Dependence and Diversification

Multiple gas dependencies have evolved in terms of imports (sources), exports (markets) and transit of gas, both among the post-Soviet countries as well as between the post-Soviet countries and countries outside the post-Soviet space. To a significant extent, these dependencies are based on the infrastructure legacy left behind by the Soviet Union. This paper deals with source and market dependencies and identifies which diversification options have been considered and realised both recently and within the past five to six years, i.e. under the new global gas market conditions. Among the post-Soviet states, Belarus, Ukraine, Moldova, Georgia, Armenia and Kyrgyzstan (and Tajikistan, see more below) are net gas importers, while net gas exporters include Russia, Turkmenistan, Uzbekistan, Kazakhstan and Azerbaijan. Azerbaijan has only been a net gas exporter since 2007.