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Russia Getting More Money From Asia as Sanctions Scare Europeans

Mind you China has by no means been able to make up for dwindling European investment

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Thank God for China.

The Chinese lead the roost of Asian companies that have been investing in the Russian economy since the Europeans have stepped back on account of Ukraine-inspired sanctions.  

At this weekend’s G-20 summit in Antalya, Turkey, Vladimir Putin gave the Europeans a little jab in the ribcage when he touted the fact that Asia is now 90% of the foreign direct investment in Russia.

“Cooperation with Asian partners in attracting funds gains special relevance in the current situation,” Putin told reporters on the sidelines of the G20 summit.

“Approximately 90 percent of investments in the Russian market came from Asia this year,” he said.

Russian banks and energy companies were sanctioned in July 2014. Many domestic companies have also been banned from obtaining euro credit from European banks, forcing them to take on Russian double digit yield instead, or abstain from credit. The sanctions were put in place due to Russian involvement in east Ukraine’s separatist movements.

Putin can tout Asia, and China, all he wants. FDI in Russia has collapsed over the last several years, based on external sector statistics published the Russian Central Bank.

Russian FDI, including equity, reinvestment, and foreign credit to Russian firms, went from $69.2 billion in 2013 to $22.8 billion in 2014.

According to the latest stats on the Bank’s website, Russian FDI was just $1.3 billion in the first quarter compared to $12.9 billion in the first quarter of 2014.

Russia’s biggest European trading partner, The Netherlands, has cut its investment in Russia four-fold. In 2013, FDI from there was $5.7 billion and fell in 2014 to $1.23 billion. In the first quarter of this year, The Netherlands took $526 million out of Russia compared to inflows of nearly a billion dollars in the first quarter of 2014.

Germany, Russia’s second biggest European partner, put just $335 million to work in Russia in 2014, rising minimally to $349 in 2014. This is down from over $2.2 billion in 2012. Germany has come back somewhat when comparing first quarter 2014 to first quarter 2015.

China’s FDI for the first quarter was just $159 million compared to Germany’s $585 million in inflows. China inflows into Russia was $1.27 billion last year, making it Russia’s biggest source of foreign capital. China’s FDI into Russia is nearly double that of the United States.

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