Russia’s foreign direct investment (FDI) has undergone significant changes over the past three decades. While in the early 2000s, Russian FDI was predominantly directed towards Western Europe and North America – in 2003, for example, $9.55 billion of capital flowed out, much of it to Germany, France and the United Kingdom –, after the events in Crimea in 2014, geopolitical tensions and EU sanctions have led to a shift in investment towards new destinations. By 2023, a significant share of Russian capital outflows was concentrated in countries such as the United Arab Emirates, China and Singapore, with total FDI outflows reaching $29.1 billion. Geopolitical changes, international sanctions and the specific structure of the Russian economy have combined to shape the eclectic pattern of Russian capital outflows today. But what factors have had the greatest influence on the direction of capital flows and what economic-logical patterns can be discerned in this seemingly chaotic process? The following analysis seeks to answer these questions.
Characteristics of Russian capital outflows until 2013
In the case of capital outflows from Russia, if we look at either the destination countries or the destination sectors, we do not see a consistent pattern. A significant proportion of capital outflows has been directed to offshore countries, where FDI has not been used as working capital, as it were, in an actual industry. In early periods, such as 1992-2003 and 2004-2013, the market-seeking motive and justification for parts of the springboard theory could still be detected. Subsequently, however, the pattern changed completely, mainly as a result of sanctions, and a certain eclecticism in Russian FDI outflows began to emerge.
For FDI flows from Russia to abroad, we can distinguish two major periods up to 2014. The first is the period from 1992 to 2003, following the 1990 wave of regime change, and the second is the period from 2004 to 2013.
The regime change in the first years of the 1990s and the break-up of the Soviet Union determined the opportunities for economic growth in Russia until the turn of the millennium. Alongside the Soviet Union, the Council for Mutual Economic Assistance (Comecon) was also dismantled, which had until then provided the bloc’s states with room for trade. The extent of industrial and economic underdevelopment was quickly exposed, and these years were also marked by a rapid and incredible rise in inflation, an increase in foreign indebtedness and a fall in incomes in Russia. The recovery was made more difficult by the outbreak of a financial crisis in 1998, deepening an already crisis-ridden period. In addition to consolidating political power, a new market-based economy had to emerge, in which the state, rather than market and economic actors, took the lead. This understandably had a strong impact on capital investment, both inflows and outflows.
The financial crisis of 1998 led to a lack of foreign investors and investment, and the collapse of the banking system and the 60% fall in the rouble exchange rate did not provide a predictable outlook for investors (Blahó – Kutasi, 2016). The crisis years also coincided with two periods of foreign policy orientation. Following the break-up of the Soviet Union, the now independent Russian foreign policy favoured a strongly pro-Western diplomacy between 1991 and 1995, and a multipolar diplomacy between 1996 and 2000 (Fenghua, 2022). It is no coincidence that Russia took these lines on the international stage. By 1995, it had to develop new partnerships and trade relations, and Western European and overseas states were indispensable for this. From 1996 onwards, it was able to broaden its foreign policy as well as its foreign economic spectrum by making this approach multipolar. This has been accompanied by the retention of the Western-friendly diplomatic achievements, which were also considered to be the primary relations.
Figure 1: Change in the value of FDI outflows from Russia between 1992 and 2003 (in million USD). Source of data: UNCTAD, 2025.
Russian capital outflows also show smaller FDI outflows until 2002. Understandably, most people were getting their money out of the country during the crises. In addition, it is important to note that the perception of Russian capital abroad deteriorated considerably as a result of the domestic economic situation. The change started when the World Bank removed Russia from its list of countries in crisis in 2001, and this had a stimulating effect on investors in a country that was still struggling economically. The economic changes were also largely influenced by the more radical changes introduced by Vladimir Putin in 1999, who succeeded former President Boris Yeltsin. The changes were mainly in the following areas: production became more competitive, consolidation of the banking system began, the state budget, institutions, public sector wages and pensions were stabilised, and the state’s control was increased (Blahó – Kutasi, 2016).
The emergence of a more stable economic environment also favoured Russian capital outflows, with outward FDI flows rising steadily from 2001: Russian capital invested abroad amounted to USD 2,502 million in 2001, USD 3,484 million in 2002 and almost three times that amount in 2003, USD 9,550 million (UNCTAD, 2025). The direction of capital outflows was clearly Western: Austria, France, Germany, Canada, Hungary, the Czech Republic, Japan, Turkey, the United Kingdom and the United States were all high on the list of Russia’s capital outflows (OECD, 2002). For the post-Soviet states, we do not have sufficiently reliable statistics for this period, but it is highly likely that Russia also invested in these countries, especially in Ukraine and Belarus. FDI of Russian origin was mainly directed towards energy sectors and manufacturing and processing sectors in Western Europe and overseas.
2003 után folyamatosan egyre nagyobb összegeket helyeztek ki az orosz tőkéből. 2004 és 2013 között, tehát majdnem tíz év alatt, átlagosan évi 38 414 millió USD-nyi FDI-t fektettek be külföldön, ami átlagosan az orosz GDP 2,6%-át tette ki.
After 2003, ever-increasing amounts of Russian capital were invested abroad. Between 2004 and 2013, over almost ten years, an average of USD 38,414 million per year was invested abroad, which on average accounted for 2.6% of Russian GDP.
Figure 2: Change in the value of FDI outflows from Russia between 2004 and 2013 (in million USD). Source of data: UNCTAD, 2025.
This steadily and dynamically growing trend was set back by the global economic crisis of 2008, but not to the extent that was seen in other capital-exporting countries. The second wave of the crisis, which hit most European countries around 2012, caused a more significant decline in Russian outward FDI. The management of the economic crisis can be divided into three periods based on the measures taken by Moscow:
- Autumn 2008 – active monetary and limited fiscal intervention was used to protect the banking system and in refinancing the receivables of large industrial companies. In the early period, Russia initially sought to treat the situation as a credit market crisis, hoping that reserves would be sufficient and that the crisis would not affect the real economy.
- Late 2008 and winter 2009 – alongside the deterioration in real economic data, Moscow was increasingly concerned about the fall in world prices (including oil) and its consequences. This was when crisis management really began, and strategic decisions proved crucial for the future (Deák, 2011).
- From spring 2009 to the end of 2012 – the international situation eased somewhat and the outlook for commodity markets improved, but the real economy still had not recovered from the earlier shock. Moscow’s economic policy actions were then more tactical than strategic, with rising unemployment, falling real incomes and rising poverty rates posing serious problems for the country’s recovery from the crisis. As a result, GDP growth in 2013 was only 1.8%, compared to 4% in 2012 (IMF, 2025).
Since 2007, the Bank of Russia has been publishing the share and value of reinvested earnings in total capital outflows for FDI data. According to the data in the chart, on average, one third of total FDI outflows in the years 2007-2013 was reinvested earnings, with a significant share of these earnings being reinvested in offshore countries (CBR, 2025). In addition to reinvestments, debt-type instruments accounted for an average of 10-12% of total capital outflows, so the majority of FDI flows from Russia was made up of equity and new capital outflows (CBR, 2025).
Russia’s foreign economy policy changed its diplomatic and economic course again before the crisis. While a pro-Western and multipolar approach had dominated Russian foreign policy in the late 1990s, a great-power pragmatism had been its hallmark between 2001 and 2004, followed by neo-Slavism between 2005 and 2008, and finally a diplomacy of stability and cooperation between 2009 and 2013 (Fenghua, 2022). The years of crisis were marked by neo-Slavism, which was kind of a response by Moscow to the colour revolutions, and by the diplomacy of stability and cooperation, which sought to stabilise Russian-American and Russian-Western relations while maintaining Russia’s position as a great power (Fenghua, 2022). Both trends are reflected in the evolution of foreign economic relations, with, for example, higher levels of Russian FDI in the post-Soviet space between 2005 and 2008, with Belarus and Ukraine still taking the lead. Russian-US and Russian-European relations were negatively affected by Russian reactions to the colour revolutions, so Russian investment flows to the US, Spain and Germany stagnated during this period. There was a significant decline in Russian FDI outflows to Canada, Austria, the Czech Republic, Hungary, France and Japan.
Despite the crisis, some countries saw an increase in the amount of capital coming from Russia: the Netherlands, the United Arab Emirates, Gibraltar, Cyprus, Switzerland and Luxembourg received significantly higher amounts than other Western European countries. Russian FDI is also prominent in offshore jurisdictions such as Bermuda, British Virgin Islands, Cayman Islands, but also in the aforementioned Cyprus, Luxembourg and Gibraltar. The increased Russian FDI presence in these states suggests two facts:
- One is that tax havens have continued to be a good place for Russian capital providers to outsource capital.
- Another fact is that Russian capital often uses transfer countries for actual capital outflows.
In other words, before the FDI arrives in the actual destination country, it will first flow to one of these countries and be outsourced from there, but its Russian origin will then be difficult to determine. This activity is typically necessary when the original investors want to make it difficult to establish the origin of the capital. As the perception of capital outflows from Russia has been and continues to be a source of doubt throughout Europe, this method has been and is still used by Russian investors to acquire stakes in large European or American companies.
Thus, while from the late 1990s until 2003, Russian capital flows were mainly directed towards Western European countries, between 2004 and 2013 they became more diversified towards Turkish, Arab and other, mainly offshore, countries. The amount of capital flowing from Russia to these countries was not yet significant, especially in the Emirates and Turkey, but it foreshadowed the direction in which Russia planned to develop its investment relations. All of this was significantly influenced by foreign policy and foreign economic trends, since a bilateral investment protection agreement was concluded with the United Arab Emirates in 2010, which has facilitated the flow of both Russian and Arab capital investment between the parties (UNCTAD, 2010).
The impact of sanctions on Russian capital outflows
Following the events in Crimea in 2014, the European Union adopted international sanctions against Russia. The restrictions that came into force covered a number of areas and their lifting was made conditional on the implementation of the Minsk agreements. As this was not fully implemented, the EU has been extending the sanctions every half a year continuously since the end of December 2015, thus permanently maintaining the measures previously agreed. After the Russia-Ukraine war of 2022, new, more far-reaching restrictions were imposed on Russia. The sanctions, covering the financial, trade, energy, transport, technology and defence sectors, were in effect an attempt to make it impossible for Russia to engage with Europe in these areas. All the areas on the list were equally important for the country, but the financial sanctions placed a greater burden on Russian decision-makers. According to the official statement, ten Russian banks were excluded from the SWIFT system, Russia’s access to EU capital and financial markets was restricted and the following were banned:
- establishing transactions with the Bank of Russia and the Russian Regional Development Bank,
- large deposits in EU banks by Russian citizens,
- investment in projects co-financed by the Russian Direct Investment Fund,
- making euro-denominated banknotes available to Russia,
- providing cryptoassets and asset management advice to Russian citizens,
- the use of the “financial messaging system” (SPFS) (Consilium Europa, 2024).
Although the sanctions do not directly mention restrictions on capital flows, the Russian market does not offer favourable opportunities for FDI from abroad, especially from Europe. Likewise, it has become more difficult for Russian entrepreneurs and companies to invest capital in the European Union if they wish to do so directly. In the case of Russia, there has long been a perception that in most cases it invests or buys shares in other countries through an intermediary, and the possibility of this happening has increased even more in the current situation.
The sanctions adopted in February-March 2014 did not have the impact to significantly disrupt capital outflows, with significant capital flowing in and out of the country again in the second quarter of the year. More significant was the package of sanctions jointly adopted and implemented by the EU and the US in July 2014. At the core of this was the targeting of sectors rather than activities, such as making it more difficult for Russian state-owned banks and oil companies to obtain foreign financing, or restricting access to advanced mining technologies (Serzhena – Magda, 2023). The newer restrictions were able to reduce capital outflows, while inflation increased, the ruble depreciated, and the overall growth prospects for the Russian economy as a whole were worse than before (Nelson, 2017). Sectoral sanctions were more effective than the previously adopted restrictions because, after their entry into force, in Q3 2014 the amount of foreign capital flowing into Russia already turned spectacularly negative. This change, coupled with the sanctions, was accompanied by both restrictions on borrowing by Russian issuers and growing economic uncertainty. Prilepskiy, writing on the subject, highlights the fact that some companies had to sell their foreign currency assets in order to pay off their external debt (Prilepskiy, 2019). Over the following two years, there was a steady decline in FDI flows to Russia until 2016, after which the trend changed and confidence in investment in Russia started to rise again, albeit cautiously. As a result of aggressive anti-Russian financial and economic policies adopted and implemented by some countries, Russian investors have seen protectionist measures in a growing number of European countries. These have been clearly aimed at disrupting, minimising or completely stopping FDI outward from Russia to their own economies.
Capital outflows from Russia appeared to stabilise until 2020, after which the data has reflected the economic downturn caused by the coronavirus pandemic and the impact of the Russian-Ukrainian war from 2022 onwards. Although capital outflows from Russia were relatively high again in 2023, at USD 29,110 million, the inflows were far from recovering. Assessing the impact of sanctions remains difficult, as while the restrictions appear to have been effective in some areas, they have clearly had little effect in others. It is also important to monitor Russia’s changing foreign policy stance in the meantime, as these new relations are rich in bilateral negotiations, including capital outflows. In what follows, we will also look at the types and characteristics of Russian capital outflows and how Western companies have reacted to the possibility of leaving the Russian market in the wake of sanctions.
Buying property as capital investment
One important feature of FDI from Russia is that it is divided into three groups of roughly equal value. One of these groups is FDI into companies and investment funds, another is capital outflows to off-shore countries and other transfer countries, while the third group includes investments by Russian citizens in the form of international real estate purchases. The latter is discussed in more detail below.
Estimating the proportion of foreign property purchased by Russian citizens is hampered by a number of obstacles. Firstly, in many cases the property purchased is not registered under their own name, but is recorded as belonging to a citizen of that country. On the other hand, Russian citizens who buy property abroad often also hold citizenship of another country (sometimes the country of destination), so they are recorded in the property register under the other citizenship. However, the real estate offices of the destination countries keep some kind of statistics on the orders, so there is information about which countries are the most popular for Russian property purchases.
Table 1: Most popular destinations for Russian citizens to buy property in certain periods. Source of data: Kellen, 2023.
The data in the table show how Russians’ property buying behaviour has changed in each period for each destination. There are classically favoured regions such as Spain, Greece and Bulgaria. There are also periods when new areas become popular, such as the US between 2008 and 2012, Montenegro between 2012 and 2015 or Portugal in 2021. From 2022, a new country has also been added to the list of preferred destinations for property purchases: the United Arab Emirates. It is also worth looking at whether there is a link between the countries chosen and the political events of the period. The US, for example, was on the property buying map until there was a change in Russian-US foreign relations, after which, for example, it ceased to be a preferred destination after 2014. Germany is also a case in point: as the European Union gradually started to impose more and more sanctions on Russia from 2014 onwards, the European country lost popularity. Looking at the countries of 2022, we can also draw some conclusions: Turkey and the United Arab Emirates did not apply international sanctions against Russia after the outbreak of the Russian-Ukrainian war, so understandably this is also the reason behind the property purchases.
Figure 3: Favourite destinations for Russian citizens buying property abroad in 2023. Source of data: RMAA, 2024.
The 2023 figures show a slightly larger change compared to previous years. There are several Asian destinations, and Georgia as well as Germany (re-)entered the real estate buying scene. Among Asian countries, Thailand stands out, with 9,300 properties bought by Russian citizens between January and March 2024 (Gustova, 2024). Vietnam is not yet on the 2023 real estate interest map, but the number of applications from Russian buyers for buying property in the country increased by 43% during 2024 (RMAA, 2024). The interest in Asia is boosted by the fact that property prices there are much more affordable than in the Emirates or Turkey, for example. The increased interest in Asian countries is also reflected in the fact that Russia has made direct flights to Bali possible from the end of 2024 (RMAA, 2024).
Cyprus is a more specialised case, with a significant proportion of property buyers looking for a home due to the financial offshore nature of the country. Two types of buyers are reported: those buying luxury homes, typically in areas with high commodity and other features (Dubai, Bali, Oman), and those willing to pay up to USD 100,000 for a property (RMAA, 2024). The motivation for owning property abroad can be based on several reasons (investment, the benefits of having a residential address abroad, preparing for a future move), but the most common factor is the simplification of obtaining a residence permit. In Turkey, which has one of the highest proportions of Russian property owners, the purchase of property is one of the eligibility conditions for obtaining a permanent residence permit, which in turn allows applicants to apply for citizenship (RMAA, 2024).
Buying property abroad is therefore one of the most accessible and long-established ways for Russian citizens to invest capital abroad. Many people decided to leave Russia after the outbreak of the Russian-Ukrainian war, but also before that, in the aftermath of the events in Crimea in 2014, so in their case the move’s motivation was political rather than investing capital abroad.
Characteristics of the period from 2014 to 2023
Following the events in Crimea in 2014, international sanctions and the geopolitical situation have changed Russia’s economic relations. Its relatively good relations with Europe and the US have been transformed, bringing to the fore the differences that were not so much in the foreground until the events in Ukraine. The sanctions were clearly designed to put pressure on Moscow through the Russian economy to end its operations in Ukraine. At the same time, looking at the list of restrictions, it is also clear that no regulations were adopted until July 2014 that could have had a meaningful impact on the Russian economy or foreign policy decisions. The sanctions that were then put in place were somewhat more robust, and managed to be extended to areas that were crucial for growth. Many believed, following the adoption of sanctions in 2014, that FDI would follow the pattern that was evident in other economic relationships: namely, that Russian capital flows would shift towards Asian and Middle Eastern countries, rather than Europe and the US. However, this has only partially materialised, as we will see below. This also demonstrates that Russian capital flows are eclectic, neither adapting to particular models nor to economic laws.
Figure 4: Change in the value of FDI outflows from Russia between 2014 and 2023 (in million USD). Source of data: UNCTAD, 2025.
Both inward and outward FDI show a significant decline between 2014 and 2016. While in 2014 the capital outflow from Russia amounted to USD 64,203 million, a year later this figure had fallen to USD 27,090 million. The fall in FDI by almost a third was clearly due to the impact of sanctions and a contraction in economic performance. However, as with the Russian economy as a whole, the restrictions covering many areas have only temporarily disrupted outward FDI. Russian real GDP grew by 1.8% in 2017 compared to the previous year, and by 2.8% in 2018. While these figures are below those prior to 2014, considering the impact that the restrictions adopted should have had on the Russian economy, it is clear that only 2014 and 2015 can be considered as a low point. Most analyses confirm all these facts, and also that from 2016, although the situation between Russia and Ukraine did not improve significantly, the Russian economy has been on an upward trajectory.
The change in the share of reinvested earnings in total capital investment also provides interesting information. While in the previous period under review, this type of capital flow accounted on average for 30% of total outward FDI, it accounted on average for almost 50% of total investment between 2014 and 2021 (CBR, 2025). Two conclusions can be drawn from this.
- One is that investors did not dare to take risks after the sanctions came into force and therefore reinvested the withdrawn proceeds in the given company.
- The other is that the war, sanctions and the deterioration in the performance of the Russian economy have reduced the amount of capital available for investment to such an extent that they have sought to re-invest instead, within a tighter framework.
It is also no coincidence that the highest proportion of reinvested earnings continues to be located in offshore countries (CBR, 2025).
Between 2016 and 2019, an average of USD 29,737 million was transferred out of Russia each year. This figure is significantly lower than in the previous period, and the type of destination countries has also changed. Some offshore areas have continued to receive high levels of capital of Russian origin, but FDI flows from Russia to Western European countries have decreased and some countries (the Netherlands, Luxembourg) have experienced high levels of capital withdrawal. The latter can be explained by the entry into force of sanctions, as the freezing of Russian assets abroad was already considered in relation to the post-2014 restrictions. There has also been a significant increase in Russian FDI flows to the Emirates and Singapore. There has been a significant increase in the value of Russian capital invested in Ireland, while Russian FDI flows to Japan have effectively ceased. Among the former Soviet Republics, Russian FDI flows to Belarus and Kazakhstan increased between 2017 and 2019. Despite the conflict, Russian capital flows to Ukraine have not stopped, but rather slowed down and have been smaller. The Russian FDI that has flowed in has most likely been directed to the occupied territories, financing Russian restructuring and potential development that has started here.
Figure 5: Change in the number of greenfield investments of Russian origin in each country and region over two-year periods. Source of data: Irwin-Hunt, fDi Markets, 2025.
A shift in orientation is also noticeable in greenfield projects of outward capital investment from Russia, as was the case for outward FDI too. There was a clear increase in the number of Russian greenfield projects in CIS (Commonwealth of Independent States) countries between 2022 and 2024, rising from 22 in 2021 to almost double to 41 at the end of 2024 (Irwin-Hunt, 2025). Similarly, the volume of new greenfield investment in the UAE and China also increased. In the case of China, the increase is surprising because, although diplomatic relations between the two countries have been steadily strengthening in recent years, FDI from Russia does not represent a significant figure in official statistics. According to FDI statistics published by the Chinese Ministry of Commerce for the year 2022, the amount of FDI from Russia to China was USD 1.1 billion (Statistical Bulletin of China, 2023). While Russia is not among the largest Chinese investors, there is a significant inflow of FDI from the Cayman Islands, making it the eighth largest investor in the Asian country (Statistical Bulletin of China, 2023). Given that Russia continues to invest heavily in the offshore island, it is possible that it is also the source of the capital that has been invested in China.
Greenfield investments of Russian origin in Europe and America have almost come to a virtual standstill as a result of the sanctions. The decline in Russian FDI flows to these countries has been accompanied by the disappearance of new projects, for example, between 2022 and 2024, no new Russian greenfield investments were announced in the US and the UK, with only one project in Germany (Irwin-Hunt, 2024).
For the period beyond 2014, we can draw several important conclusions. One is that, due to international sanctions and the deterioration in the performance of the Russian economy, new FDI outflows have fallen significantly, leading to an increase in reinvested earnings indicators. The second is that despite the deoffshorisation programme launched in the country, the volume of Russian capital outflows to tax havens remains dominant. This is the way Russia currently moves the capital it wishes to inject into the international capital market in some way, and this is how its investments are made. The change in foreign policy orientation is now putting states such as China, the UAE and some CIS states at the forefront of Russian foreign policy, which tend to adopt a non-aligned rhetoric on the issue of the Russia-Ukraine war. This diplomatic closeness also seems to have had an impact on changes in the destination countries of capital investment, with OECD countries no longer relevant for Russian FDI and Arab and East Asian countries gaining in importance.
Summary
Russian foreign policy and foreign economic trends have become even more prominent in international relations and politics in recent years. Before the introduction of international sanctions, pro-Western diplomacy, followed shortly after by neo-Slavism, and after 2014 by an increasingly pronounced distancing from Europe and the US, have characterised both Russian diplomacy and capital outflows. The Russian-Ukrainian war that erupted in 2022 further deepened Russia’s engagement with China, the UAE and other Asian and Arab states. For Russian FDI outflows, the conclusion is simple: after 2014, there was a cautious shift in the target countries in terms of investment, but from 2022 onwards there was a marked change in the direction of investment. In addition to its foreign policy, Russia also envisages its foreign economy outside the OECD. But the US presidential election raises the question: can the old order between the two powers still be restored, or will Russia continue to steer its partnerships along the current lines?
