Foreign Direct Investment in Russia Hits Record Low
Foreign direct investment in Russia has plummeted to its lowest level in over two decades, with a mere $3.3 billion invested in 2024. This significant decline is according to new data published by the United Nations Conference on Trade and Development (UNCTAD). The data was released during Russia’s flagship St. Petersburg International Economic Forum, highlighting the country’s struggling economy.
A Steep Decline in Investment
The data shows a staggering 62.8% decline in investment between 2023 and 2024, and a 50% drop from the pre-war year of 2021, when Russia attracted $38.8 billion. This drastic decrease is a clear indication of the country’s deteriorating investment climate. Even if the war were to end immediately, experts believe that few serious businesses would consider Russia as an attractive investment destination due to the lingering political risks.
Unfavorable Business Environment
According to the Central Bank, foreign investment in Russia’s non-financial sectors has declined by 57% over the past three years. Total accumulated FDI fell from $497.7 billion at the start of 2022 to $216 billion as of January 2025, the lowest level since 2009. Analysts point to a rise in state seizures of private assets, including the recent nationalization of Domodedovo Airport, as a major deterrent to foreign investors. More than a dozen foreign-owned businesses have been expropriated since the start of the war, further eroding confidence in the Russian market.
Increased Hostility Towards Foreign Businesses
Last month, President Vladimir Putin stated that Western tech companies operating in Russia but acting against the country’s interests should be "strangled." This kind of rhetoric only serves to exacerbate the already unfavorable business environment. As Sergei Aleksashenko, a former deputy governor of the Russian Central Bank, noted, "Everyone can clearly see the situation with property rights is getting worse every day." This sentiment is echoed by many experts, who warn that the Russian government’s actions are having a chilling effect on foreign investment.
Contraction of Foreign Investment
UNCTAD’s report also highlights the sharp contraction in 2022, when foreign firms withdrew a net $15.2 billion, reflecting the urgent repatriation of capital following the invasion of Ukraine and the imposition of sweeping international sanctions. This mass exodus of foreign capital has left Russia’s economy reeling, and it remains to be seen how the country will recover from this significant loss of investment.
Conclusion
In conclusion, the sharp decline in foreign direct investment in Russia is a clear indication of the country’s deteriorating economic climate. The rise in state seizures of private assets, increased hostility towards foreign businesses, and lingering political risks have all contributed to a toxic investment environment. As Russia continues to struggle with the aftermath of the war and international sanctions, it remains to be seen how the country will attract new investment and stimulate economic growth. One thing is certain, however: the Russian government must take steps to address the concerns of foreign investors and create a more favorable business environment if it hopes to reverse the decline in foreign direct investment.
