Expansion or Exodus? Foreign Operations of Russia’s Largest Corporations [Archive.org URL]

The growth of Russian investment abroad and the emergence of Russian-based multinationals is a good thing, according to this working paper. The authors say the most efficient way to bring Russia closer to the world economy is to help integrate Russian companies into the global marketplace.

The authors have collected extensive data on the internationalisation of Russia’s 100 largest corporations and ask the following questions. Why do Russian firms go abroad? Which are the most transnational in terms of operations? Where do they operate, and in what activities do they engage? They note that Russian outward FDI totalled $18 billion at the beginning of 2003. Half of this money had gone into the EU, and a quarter to the USA. The list of important transnational industrial corporations contains some familiar names: Gazprom, Lukoil, RusAl, Norilsk Nickel, Itera, Yukos, OMZ, Rosneft, Alrosa and Severstal.

The paper concludes with a classification of Russian corporations on the basis of their outward business strategies. The international activities of Russian corporations can be divided into six categories, according to their transparency and conformity to Russia’s foreign policy: patriots, conformers, fugitives, balancers, outlaws and free marketers. Patriots refer to companies that are controlled by the Russian government and have political as well as economic goals, and conformers are firms that follow the official policy lines of the Russian government. Fugitives include companies established for money transfers abroad and round-tripping. Balancers are dependent on exports, and this forces them occasionally to balance between the business rationality and the governmental interests. Outlaws are engaged in money laundering and illegal activities, although the owners of these companies are not necessarily aware of the illegal practices employed. Finally, free marketers operate either in the non-strategic business sectors or are smaller, and therefore the Russian government is less interested in exploiting them as tools of its foreign policy.

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