The second annual survey of Russian multinational enterprises by the Moscow School of Management SKOLKOVO reveals a continuing global expansion of Russian firms. This study provides a starting point to evaluate the future change to that trend from the current economic downturn.
Russia’s top 25 multinationals – ranked by foreign assets – had, at the end of 2007, US$90bn assets abroad and about US$220bn in foreign sales (including exports), and employed nearly 140,000 persons in other countries. Foreign assets have increased four times since 2004, and employment abroad has tripled.
Russian multinationals are comparable to their counterparts in other BRIC countries by their foreign assets and growth rates. They lag way behind the world’s biggest multinationals – those from developed countries – but they grow much faster.
While the foreign assets of Russia’s global players are still concentrated in Europe ( 52%), the move toward North America, Africa, and Australasia is becoming more significant.
Reflecting the country’s resource endowments, the biggest Russian multinationals are in extractive industries. Three oil/gas firms – Lukoil, Gazprom, TN K-BP, – and nine metals and mining firms, led by Norilsk Nickel, together account for 80% of the total foreign assets of the top 25. However, the dominance of oil/gas conglomerates in the transnationalization process is clearly decreasing: in 2004, they accounted for as much as 63% of aggregate foreign assets, compared to 44% in 2007. New multinationals are emerging in industries as diverse as food production, software development, engineering, and gaming.
The current financial crisis and the probability of a global economic downturn have already adversely affected the internationalization of Russian businesses. However, most large multinationals have confirmed their intention to move on with large investment projects abroad.
The possible developments can be summarized in three scenarios. Under a worst-case scenario, many Russian multinationals could be forced to sell part of their overseas units to pay their creditors. In an optimistic scenario of liquidity becoming readily available again soon to large Russian groups, they could benefit from low asset prices abroad. The third scenario, possibly the most realistic one, involves a period of cost-cutting and regrouping, followed by renewed expansion.
The SKOLKOVO ranking is part of a global effort to rank multinationals from fast-growth economies, coordinated by the Vale Columbia Center on Sustainable International Investment at Columbia University, in New York.