EXPANSION OR EXODUS? – FOREIGN OPERATIONS OF RUSSIA’S LARGEST CORPORATIONS Peeter Vahtra & Kari Liuhto Electronic Publications of Pan-European Institute, 8/2004 http://www.tukkk.fi/pei The authors are grateful for the financial support of the Paulo Foundation (Paulon Säätiö), the Academy of Finland, and the Finnish Ministry of Education. 2 CONTENTS List of Tables and Figures..................................................................................... 3 1 Foreword .......................................................................................................... 5 2 Executive Summary ......................................................................................... 6 3 A Historical View on the Russian Business Expansion Abroad ..................... 8 4 Russia's Outward Foreign Direct Investment ................................................10 5 Russia’s 100 Largest Industrial Corporations Abroad...................................22 5.1 Oil and natural gas ...........................................................................22 5.2 Electricity ..........................................................................................47 5.3 Non-ferrous metallurgy and precious stones....................................51 5.4 Ferrous metallurgy............................................................................57 5.5 Coal mining.......................................................................................61 5.6 Wood processing ...............................................................................63 5.7 Automotive industry...........................................................................65 5.8 Heavy machinery...............................................................................70 5.9 Foodstuffs, beverages and tobacco...................................................72 5.10 Telecommunication............................................................................75 5.11 Military equipment ............................................................................82 5.12 Chemical and petrochemical industry...............................................77 6 Russian Corporations Abroad – What Does It Mean for the Rest of the World? .................................................................................................................84 References ...........................................................................................................98 Appendices ........................................................................................................101 Pan-European Institute (www.tukkk.fi/pei/e) 3 LIST OF TABLES AND FIGURES Table 1 Outward and Inward FDI Stocks in the Beginning of 2003............................................................... 11 Table 2 Russian FDI Outflow, Capital Flight and Exports ............................................................................. 13 Table 3 Russian FDI in EU25 ......................................................................................................................... 14 Table 4 Development of the Russian FDI Stock in Finland............................................................................ 15 Table 5 The Companies with Russian Ownership among the 500 Largest Corporations in Finland.............. 17 Table 6 Russian FDI in the New European Union.......................................................................................... 17 Table 7 Cypriot OFDI Stock in the New European Union and Selected CEEs .............................................. 21 Table 8 The Top 10 Non-Financial Transnational Corporations Based in Central and Eastern Europe......... 22 Table 9 Russia's Oil and Natural Gas.............................................................................................................. 23 Table 10 World’s Leading Oil Companies in 2003 .......................................................................................... 24 Table 11 Lukoil’s Performance......................................................................................................................... 25 Table 12 Lukoil's Stakes in Foreign Oil and Gas Projects................................................................................ 25 Table 13 Lukoil's Foreign Refineries in 2003................................................................................................... 27 Table 14 Yukos’ Performance .......................................................................................................................... 29 Table 15 Yukos’ Selected Foreign Ventures and Projects................................................................................ 31 Table 16 TNK-BP’s Performance..................................................................................................................... 32 Table 17 Surgutneftegaz’ Performance............................................................................................................. 34 Table 18 Sibneft’s Performance........................................................................................................................ 34 Table 19 Rosneft’s Performance....................................................................................................................... 35 Table 20 Rosneft’s Foreign Ventures and Projects........................................................................................... 36 Table 21 Slavneft’s Performance...................................................................................................................... 37 Table 22 Tatneft’s Performance........................................................................................................................ 37 Table 23 Some Foreign Operations of the Russia's Largest Oil Companies..................................................... 40 Table 24 Gazprom’s Performance .................................................................................................................... 42 Table 25 Gazprom’s Foreign Subsidiary Companies and Joint Ventures......................................................... 44 Table 26 Gazprom’s Major Transnational Pipeline Projects ............................................................................ 45 Table 27 Itera’s Performance............................................................................................................................ 46 Table 28 Itera’s Foreign Operations and Ventures ........................................................................................... 47 Table 29 UES’ Electricity Sales and Exports.................................................................................................... 48 Table 30 Some Foreign Ventures of UES......................................................................................................... 49 Table 31 Internationalisation of the Russian Energy-Related Companies........................................................ 50 Table 32 Some Foreign Operations of RusAl ................................................................................................... 51 Table 33 Some Foreign Units and Ventures of Norilsk Nickel......................................................................... 54 Table 34 Alrosa’s Foreign Ventures and Units................................................................................................. 56 Table 35 Some Foreign Operations of Russia’s Non-Ferrous Metallurgy Companies ..................................... 57 Table 36 The World’s Major Steel Producing Countries and Selected Companies in 2002............................. 57 Table 37 Russia’s Main Steel Producers........................................................................................................... 58 Table 38 A Comparison of Selected Ferrous Metal Producers in 2003 ............................................................ 60 Table 39 Internationalisation of the Russian Metallurgical Companies............................................................ 61 Table 40 Internationalisation of Russian Coal Producers ................................................................................. 63 Table 41 Russia’s Main Producers and Exporters in Wood Processing Industry in 2002 ................................ 63 Table 42 Internationalisation of Russian Wood Processing Companies........................................................... 65 Table 43 The Structure and Performance of Russian Automobile Industry in 2003......................................... 66 Table 44 Main Overseas Units of AvtoVaz ...................................................................................................... 67 Table 45 Some Foreign Operations and Ventures of Russian Automotive Manufacturers............................... 69 Table 46 Foreign Subsidiaries of OMZ ............................................................................................................ 71 Table 47 Foreign Units of Wimm-Bill-Dann.................................................................................................... 73 Table 48 Foreign Ventures of MTS .................................................................................................................. 76 Table 49 Internationalisation of Russian Non-Natural Resource Based Companies ........................................ 81 Table 50 Internationalisation of the Russian Military Industry......................................................................... 83 Table 51 The