V. Zagashvili (firstname.lastname@example.org),
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation
Acknowledgements. The article has been supported by a grant of the Russian Science Foundation (project ¹ 14-28-00097 “The optimization of Russian foreign investment ties in the context of deteriorating relations with the EU”).
Abstract. The article analyzes political risks faced by the Russian companies in their foreign investment activities. The concept of political risks and their main types are considered. Since the bulk of the capital outflow from Russia goes to European countries, the main attention is paid to political risks, accompanying investments in the countries of this region. The peculiarity of the current situation is that the worsening of political relations with Western countries has led not only to an increase in external political risks that affect the foreign investment activity of Russian companies, but also weakened the investment attractiveness of the Russian economy itself. The Russian business is squeezed between the grips of high internal and external risks. The increase of political risks worsens access to the sources of raw materials and markets, restricts the receipt of new technologies, impedes the participation of Russian companies in the transnational production networks and slows down the economic growth. Analysis of investment risks leads to the conclusion that there is a need for institutional reforms within the country and normalization of political relations with developed countries. Among the political risks faced by Russian investors in Europe the most important are the risks associated with the course of European integration, sanctions and EC energy policy. The threat of the disintegration of the European economic space represents a significant investment risk. But an excessively rapid movement along the path of integration is also dangerous since it is accompanied by radical transformation of the regulatory framework and is fraught with the unbalancing of the integration process. Sanctions limited the sources of investment finance and spheres of capital application, increased the risks of discriminatory treatment of Russian companies abroad. Political investment risks for Russian companies are rising in the context of Brussels’ energy policy of diversifying gas sources. The construction of gas pipelines is especially highly sensitive to political risks. It is important for the investor not just to secure the guarantees of the buyer, but to attract financing from his side in order to share investment risks with him.
Keywords: political risks, foreign investment, Russia, EU, European integration, sanctions, energy policy
1. FDI in Figures. OECD. April 2017. 12 p. Available at: http://www.oecd.org/daf/inv/investment-policy/FDI-in-Figures-April-2017.pdf (accessed 18.07.2017).
2. Bulatov A., Kuznetsov A., Kvashnin Y., Maltseva A., Seniuk N. Russian MNCs: Empirical and Theoretical Aspects. Progress in International Business Research, 2016, vol. 11, pp. 395-421.
3. Business under the Criminal Press. Analytical Report to the President of the Russian Federation] 2017. 28 p. (In Russ) Available at: http://doklad.ombudsmanbiz.ru/2017/pdf/4.pdf (accessed 18.07.2017).
4. External Sector Statistics. The Central Bank of the Russian Federation (In Russ.) Available at: http://www.cbr.ru/statistics/? PrtId=svs (accessed 18.07.2017).
5. Sottilotta C. E. Political Risk: Concepts, Definitions, Challenges. LUISS School of Government. Working Paper Series. 2013. 21 p. Available at: http://sog.luiss.it/sites/sog.luiss.it/files/SOG%20Working%20Papers%20Sottilotta%20ISSN_0.pdf (accessed 18.07.2017).
6. Kobrin S. J. Political Risk: a Review and Reconsideration. Journal of International Business Studies. 1979, vol. 10, issue 1, pp. 67-80. Available at: https://link.springer.com/article/10.1057/palgrave.jibs.8490631 (accessed 18.07.2017).
7. World Investment and Political Risk 2013. Washington, MIGA (World Bank Group). Available at: https://www.miga.org/documents/WIPR13.pdf (accessed 18.07.2017).
8. Òýïìàí Ë. Í. Ðèñêè â ýêîíîìèêå. Ìîñêâà, ÞÍÈÒÈ-ÄÀÍÀ, 2002. 380 ñ. [Tepman L. N. Riski v ekonomike [Risks in the Economy]. Moscow, YuNITI-DANA, 2002. 380 p.]
9. Thomsen S., Mistur F. Is Investment Protectionism on the Rise? Evidence from the OECD FDI Regulatory Restrictiveness Index. March 6, 2017. Available at: http://www.oecd.org/investment/globalforum/2017-GFII-Background-Note-Is-investmentprotectionism-on-the-rise.pdf (accessed 18.07.2017).
10. Busse M., Hefeker C. Political Risk, Institutions and Foreign Direct Investment. Hamburg Institute of International Economics. Discussion Paper no. 315. April 2005. 42 p. Available at: http://ageconsearch.umn.edu/bitstream/26388/1/dp050315.pdf (accessed 18.07.2017).
11. Topal M. H., Gul O. S. The Effect of Country Risk on Foreign Direct Investment: a Dynamic Panel Data Analysis for Developing Countries. Journal of Economics Library, Vol. 3, no. 1 (2016), pp. 141-155. Available at: http://kspjournals.org/index.php/JEL/article/view/771 (accessed 18.07.2017).
12. Baek K., Qian X. An Analysis on Political Risks and the Flow of Foreign Direct Investment in Developing and Industrialized Economies. Economics, Management and Financial Markets, no. 6 (4), 2011, pp. 60-91. Available at: https://www.addletonacademicpublishers.com/contents-emfm/131-volume-6-4-2011/1538-an-analysis-on-political-risks-and-the-flowof-foreign-direct-investment-in-developing-and-industrialized-economies (accessed 18.07.2017).
13. Holburn G., Zelner B. Political Capabilities, Policy Risk, and International Investment Strategy: Evidence from the Global Electric Power Generation Industry. Strategic Management Journal, Dec. 2010, vol. 31, issue 12, pp. 1290-1315. Available at: http://onlinelibrary.wiley.com/doi/10.1002/smj.860/full (accessed 18.07.2017).
14. Kuznetsov A. et al. EAEU and Eurasia: Monitoring and Analysis of Direct Investments 2016. Saint Petersburg, EDB Centre for Integration Studies, 2016. 70 p. Available at: https://eabr.org/en/analytics/integration-research/cii-reports/eaeu-and-eurasiamonitoring-and-analysis-of-direct-investments-2016/ (accessed 18.07.2017).
15. Bremmer I., Zakaria F. Hedging Political Risk in China. Harvard Business Review, November 2006. Available at: https://hbr.org/2006/11/hedging-political-risk-in-china (accessed 18.07.2017).
16. Tett G. Political Risk Means All 2017 Investment Bets Are off. Financial Times, 30.12.2016.
17. OECD Business and Finance Outlook 2017. Paris, OECD Publishing, 172 p. Available at: http://dx.doi.org/10.1787/9789264274891-en (accessed 18.07.2017).
18. British CEOs Consider Relocation after Brexit, KPMG Survey Shows. The Wall Street Journal, 26.09.2016. Available at: https://www.wsj.com/articles/british-ceos-consider-relocation-after-brexit-kpmg-survey‑1474879279 (accessed 18.07.2017).
19. Reflection Paper on the Deepening of the Economic and Monetary Union. Brussels, European Commission, May 31, 2017. Available at: https://ec.europa.eu/commission/sites/beta-political/files/reflection-paper-emu_en.pdf (accessed 18.07.2017).
20. Duma Committee on Property Will Consider the Situation with Russian Investors in Poland from the Ombudsman’s Office in Poland (In Russ.) Available at: http://ombudsmanbiz.ru/2012/11/dumskij-komitet-po-sobstvennosti-s-po/#1 (accessed 18.07.2017).
21. A Mechanism for Protecting Business Abroad Is Needed (In Russ.) Available at: http://ombudsmanbiz.ru/2012/12/a-lejrix-neobxodim-mexanizm-zashhity-bi/#1 (accessed 18.07.2017).
22. Shepelev S. V. Investitsionnaya deyatel’nost’ rossiiskogo biznesa v SShA [Investment Activity of Russian Business in the US]. Mirovoe i natsional’noe khozyaistvo, 2008, ¹ 3. Available at: http://www.mirec.ru/2008–03/investicionnaya-deyatelnostrossijskogo-biznesa-v-ssha (accessed 18.07.2017).
23. Belyi A. Posle buma [After the Oil Boom]. Russia in Global Affairs, 2009, ¹ 1. Available at: http://www.globalaffairs.ru/number/n_12457 (accessed 18.07.2017).
24. Forecast of the Development of the European Gas Market. The Timing, Opportunities and Consequences for Russia of Liberalizing the Gas Market in Europe (In Russ.) Available at: http://gasforum.ru/zarubezhnyj-opyt/497/ (accessed 18.07.2017).
Registered in System SCIENCE INDEX