Capitalist Interlude: The Rise and Fall of Russian MNCs

• In Event: Autocratic Challenges in the Post Soviet States

Abstract

During the period of economic recovery in the 2000s, Russia developed a powerful, concentrated and highly internationalized corporate sector. Russian corporations invested all over the world, seeking to expand their resource base, enter new consumer markets and acquire advanced technologies. However, since 2014, their international activities have been sharply curtailed. Using the database Capital IQ provided by the company Standard & Poor as well as government statistics, we retrace the trajectory of international expansion and subsequent fall in international activities of Russian MNCs. By comparing Russia with other major emerging economies, we identify Western economic sanctions, first introduced in 2014, as a significant independent cause of the partial de-internationalization of the Russian corporate sector. We reveal the mechanisms leading to such a result, including the direct effect of sanctions on specific companies as well as the indirect consequences of Russia’s economic semi-isolation since 2014, such as the lack of access to global financial markets. Using the global MNC rankings, we demonstrate that the partial de-internationalization hurt the overall business performance of the top Russian companies, making them less competitive compared to their counterparts in other emerging economies. The paper contributes to the understanding of the effect of geopolitical tensions on business development and presents additional evidence on the impact of sanctions on the Russian economy. While economic sanctions before 2022 are often claimed to have only a modest effect on Russia’s economic trajectory, their indirect consequences run deeper than it is usually acknowledged.

Authors

• Ilya Matveev, UC Berkeley

• Anna Mishura, Higher School of Economics