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The phenomenon of Russian multinationals is closely connected with privatization processes,
that took place after the collapse of the Soviet Union.
The three industries in which Russian outward FDI is particularly important
- oil and gas, mining, and metallurgy - have been established through privatization.
In post-Soviet Russia, privatization was an efficient mechanism to transform the country,
from centrally-planned to a market economy.
By 1998, almost 50 per cent of former state property had been privatized by insiders,
compared to only three per cent in Hungary and five per cent in the Czech Republic.
Over the next decade, because of political and strategic considerations,
natural resources were seen as too sensitive to be controlled by foreigners,
and the government acquired a stake in many of these firms.
When large Russian resource exporters, such as Gazprom, LUKOIL, Norilsk Nickel, and Severstal
entered the global market, they acquired both new resource-based and industrial processing units,
and became important outward investors.
Despite the fact that technology-based companies such as Sukhoi, MTS, or Yandex have also shown
an interest in international markets,
the resource-driven Russian MNEs have remained the key players.
I will provide a few examples to better understand this.
Let's take Gazprom - this company inherited its gas monopoly from the Soviet Ministry of Oil and Gas
in 1989, it was partially privatized in 1993.
Until 2004, the government kept a stake of up to 40 per cent in the company.
Gazprom promotes exports via long-term delivery contracts, invests in natural gas processing
and distribution in Western Europe, and gains access to large industrial and gas-fired
power generation markets in Western and Central Europe.
It also establishes joint venture marketing companies in export countries.
Another example is LUKOIL, its resources abroad helped the company to maintain its growth,
even in the midst of the 1998 financial crisis.
LUKOIL invested in gas station chains across the globe, including the US,
South East Asia, and Nordic countries, and acquired refineries in Western Europe.
Let me also mention that other Russian firms controlling large oil reserves
operated mainly in the post-Soviet republics.
In metallurgy, Norilsk Nickel is the largest Russian multinational.
It was officially established as a state-owned conglomerate in 1989,
and was then privatized by Eximbank.
The company has been expanding abroad, through a series of investments in trading
and mining companies in the US, South Africa, and the UK,
it was particularly active in the UK, US, Swiss, Belgian, and South African markets.
Another large multinational in metallurgy is Severstal.
This was gradually privatized in 1993, and has opted for an internationalization strategy that
focuses on acquiring assets in developed countries.
It started the technological upgrade of production via a joint venture with a US-based partner in 2009.
These examples show how former state-based enterprises belonging to, or even being,
Ministries became multinationals via privatization, and their international success was possible
because the Russian state was behind them.