Studies Eastern European Markets
Eastern European Markets
the 30th of July 2004

Peeter Vahtra - Kari Liuhto:
EXPANSION OR EXODUS? – FOREIGN OPERATIONS OF THE RUSSIA’S LARGEST CORPORATIONS Electronic Publications of Pan-European Institute, 8/2004
The whole report as a pdf-dokument


Peeter Vahtra works as a Research Fellow at the Pan-European Institute at Turku School of Economics and Business Administration. The emphasis of his research is on the foreign expansion of Russian companies, the internationalisation of Russian energy sector and foreign direct investment flows from Russia.
Kari Liuhto holds a professorship in international business at the Turku School of Economics and Business Administration. Liuhto concentrates his research activities on the energy sector in Russia, Wider Europe-related economic affairs, foreign direct investment flows into/from transition economies, and enterprise restructuring in the ex-Soviet Union. Liuhto is the director of the Pan-European Institute.

Executive Summary

The Russian firms’ foreign investments are growing heavily and the capital flight, which has heavily burdened the Russian economy over the past few years, is decelerating, at least prior to the outcome of the ongoing crisis over the country’s leading oil major, Yukos.

The natural resource-based companies, and the oil and gas companies in particular, have traditionally been the pulling vehicles of Russia’s internationalisation. The high oil prices have boosted Russian economy for several years and the leading Russian companies in the sector have emerged as the world-class corporations. The improved financial situation of the companies has brought along the interest towards more demanding internationalisation modes, and more careful selection process of the foreign ventures. The recent internationalisation trend of the Russian oil majors includes preferring the majority ownership to the minority one in their strategic foreign ventures.

Despite the inevitable economic disturbances caused by high inflow of ‘oil dollars’ in Russia, the country’s manufacturing sectors are slowly reviving and many of the industries’ leading actors are already on their way to establish considerable foreign presence. Although the exports and foreign sales promotion currently remain the most common modes of internationalisation of the Russian companies, many of the firms are already engaged in more demanding foreign operational modes. Several of the companies other than the NRGs have already shown the way in employing competitive internationalisation practices.

The Russian companies play different games in different regions. The internationalisation of the Russian oil and gas majors are often marked by the political ambitions of the Russian government, pushing these Patriots to execute the Russian foreign policy through their foreign operations. On the other hand, many of the smaller manufacturing and retail companies act as Free marketers, led by economic rationality in their foreign operations.

Furthermore, the economic sphere of Russia has recently been marked by the stricter governmental policy towards the Fugitives actively engaged in transferring the money or company assets out of the country by the means not complying with the Russian law or governmental preferences. There is, however, only a thin line between the justice and discrimination, and the consequences of the Russian government crossing the line would be harmful for the investment outlook of the country. Above all, the individual companies run the Russia’s integration towards the world’s economy, and the discriminating governmental practices would considerably inhibit the essential company-level international co-operation. company-level international co-operation.

The whole report as a pdf-dokument


More information
Turku School of Economics and Business Administration
Pan-European Institute
Turku, Finland
Tel. + 358 2 481 481
Telefax + 358 2 4814 268
http://www.tukkk.fi/pei

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