Crisis puts stop to Russia’s foreign expansion
In 2007, Russian companies bought foreign assets worth 90 billion USD. With the financial crisis, the international expansion might have come to a sudden stop.
Over the last few years, Russian companies have spent billions on the acquisition of stakes in foreign companies. Now, the international crisis might force the companies to sell assets
In three years, the 25 biggest Russian companies have increased investments abroad with 400 percent, a study from the Moscow Management School Skolkovo reads. In 2007 alone, the companies acquired foreign assets worth a total of 89,6 billion USD. The same year, the turnover of the foreign assets amounted to 220 billion USD, a 150 percent increase from the previous year. A total of 140,000 people now work for the Russian-owned companies.
The Moscow-based Skolkovo management school has for the second year in a row presented a rating on the Russian companies’ foreign engagement.
It is the Russian petroleum and metallurgy companies which are the most active in the international markets, with respectively 44 percent and 36 percent of the acquisitions. The three companies Lukoil, Gazprom and Norilsk Nickel alone accounted for 57 percent of last year’s deals.
At the same time, however, the dominance of petroleum companies in the internationalization process of the top 25 Russian companies is clearly decreasing: in 2004, they accounted for as much as 63 percent of aggregate foreign assets compared to 44 percent in 2007.
Most of the investment from Russia is being made by private companies: only four out of the Top 25 companies, accounting for about 30% of the aggregate foreign assets, are majority-owned by the state (Gazprom, Sovkomflot, InterRAO and Alrosa). While the foreign assets of Russia’s global players is still concentrated in Europe (52%), the move toward North America, Africa, Australia and South Pacific Asia is becoming more significant, the study confirms.
The growths in foreign acquisitions increased also in the first half of 2008. Foreign assets worth 12 billion USD were then placed on Russian hands.
After the breakout of the financial crisis, however, the Russian investments abroad have dried up. Only over the last couple of months, several major planned acquisitions have been cancelled, newspaper Vedomosti writes.
At the same, time the Skolkovo study shows that several of the big Russian companies, among them Lukoil and Gazprom, still push for expansion several places in the world.
