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Investment By EU Countries In Russia Increasing Despite Sanctions

Investment By EU Countries In Russia Increasing Despite Sanctions

MOSCOW : European companies are investing in the Russian economy in ever-increasing numbers, despite Brussels continuing to impose sanctions on Moscow, Kirill Dmitriev, the head of the Russian Direct Investment Fund (RDIF), told Sputnik.

According to Dmitriev, foreign investment in the Russian economy has increased significantly during the course of the year.

“At the start of this year, I forecasted that foreign direct investments [FDI] to Russia will increase by over 50 percent this year; many had raised questions about this figure. Now we see that by the end of this year FDI will grow by around 70 percent. It is a very significant growth,” Dmitriev told Sputnik.

The RDIF head outlined that European states had played a significant role in driving this growth in foreign investment, highlighting individual projects that will have a major impact in all sectors of the economy. Russia has secured an agreement with French firm Orpea to reform private care for the elderly, while German investment firm KGAL will work with Moscow to create an aircraft leasing company.

For Dmitriev, European investment in the Russian economy demonstrates that economic sanctions imposed on Russia in the aftermath of the Crimean referendum in 2014 are not having their intended effect, and that EU political leaders cannot prevent businesses from conducting mutually beneficially agreements.

“Economic sanctions are an outdated instrument, which contradicts to the logic of the global economy’s development. Nevertheless, the global capital still needs opportunities for investment and the flow of global capital is impossible to stop,” Dmitriev remarked.

The RDIF head also stated that economic sanctions were having a negative impact on the European economy. In response to Brussels’ sanctions, Russia announced countermeasures, such as a food import embargo, which significantly impacted EU farmers and food producers.

“Sanctions can also be harmful for those who had initiated them,” Dmitriev stated, adding that “the European Union countries lost almost about 240 billion Dollars because of sanctions and are de-facto losing the Russian market.”

Dmitriev outlined that while greater investment will be necessary to trigger rapid economic growth in Russia, there are positive signs that the economy will grow faster than other European states.

“We believe that growth of Russian economy this year will exceed the official forecast to stand at 1.5-1.7 percent. It is not bad, compared with some other countries. Russia is catching up with Germany on its way to become the world’s fifth biggest economy. Germany will grow by only about 0.5 percent this year,” the RDIF head stated.

He also pointed to the fact that the ruble had appreciated in value by 12 percent compared to the US Dollar, and was being used in foreign transactions more frequently.

The EU imposed economic sanctions on Russia after what it considered to be Moscow’s interference in Ukraine’s domestic affairs. Crimea, a peninsula that Russia gave to Ukraine during the Soviet era, held a referendum in 2014 and voted by 97 percent to rejoin Russia. Moscow has repeatedly stated that the referendum was conducted in compliance with international law, but Kiev never recognized its legitimacy. According to Russian President Vladimir Putin, the issue of the peninsula’s territorial belonging is “historically closed.”

During his annual press conference in Moscow last week, Putin stated that any unilateral politically motivated economic restrictions hurt the entire global economy and international trade, so countries would be better off abandoning them altogether. The European Council renewed sanctions against Russia for a further six months at a summit held in Brussels on December 12.