Russian foreign direct investment in Ukraine

Nataliya Blyakha                                                                                       PEI Electronic Publications 7/2009 

www.tse.fi/pei 

 

 

5  Russian investments in retail, construction and manufacturing 

In recent years the presence of Russian investments has become more visible. The 

Ukrainian markets become more open and their volumes increased to such extent that 

it stimulated investments from Russia. For a number of products prices in the world and 

in Russia (at least before the crisis) become more reasonable and individual 

companies started to buy Ukrainian firms for export or for the continuance of exports. 

Finally, the internal restrictions of doing business in Russia have become apparent for 

individual businesses and industries. Russian business is trying to differentiate is 

operations and now we can see in Ukrainian markets expansion and growth in various 

Russian companies. 

The Russian trading retail company Vester is one of the most successful Russian retail 

companies in Ukraine. 

Vester Retail Group

 was created in 2006 and the company 

operates in 22 regions of Russia, as well as in Kazakhstan and Ukraine. Vester 

operates over 50 outlets with areas totaling 160,000 square meters. In 2008 company 

intends to invest about USD 41 million in opening in Ukraine 13 trading objects with a 

total area of more than 45 thousand in sq.m. in Kharkov, Mariupol, Sevastopol, 

Khmelnitskiy, and also in the Lvov and Dnepropetrovsk regions. Until 2011 the 

company plans to open 50 hypermarkets and 24 supermarkets in 35 Ukrainian cities, 

with a total floor space of 307 thousand in sq.m.  

The Russian investor 

Volga Dnepr

 is contemplating a project to revive the 

manufacture of AN124 (Ruslan) airplanes with the factory "Antonova". Russia’s Volga-

Dnepr Group and Motor Sich of the Ukraine have formed a new joint venture company, 

Cargo Aircraft Managing Company, to manage the relaunch of serial production of the 

AN-124-100 freighter aircraft. Representatives of Volga-Dnepr and Motor Sich signed a 

Memorandum of Association in Kiev in 2006. The project to relaunch serial production 

of the AN-124 is part of the strategy of the Russian aviation industry and the Federal 

Targeted Programme: The development of civil aviation technology in Russia in 2002-

2010 and up to 2015. The partners are committed to making the AN-124 modification 

and production relaunch programme the most successful project in the history of 

Russian-Ukrainian aviation. The aim of this joint initiative is to develop and produce a 

new version of the aircraft, the AN-124-100M-150, and to increase the operating life of 

existing AN-124 aircraft. The cost of the project is approximately $ 200 million. (Volga 

Dnepr Group 2009) 

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Nataliya Blyakha                                                                                       PEI Electronic Publications 7/2009 

www.tse.fi/pei 

 

 

Promising projects are implemented by Russian construction companies. Major 

Russian constriction players are Social Initiative and Inteko. The financial corporation 

Social Initiative

 is considering building residential complexes in Donetsk. The cost of 

the project is approximately USD 226 million. Completion of a Russian-Ukrainian joint 

venture is planned in Ukraine for the repair, service and modernization of Ukrainian 

antiaircraft defense systems and installations in third countries is planned. The 

cofounders of the joint ventures are the Russian state enterprise "Defensive Systems" 

and the Ukrainian state company "Ukroboronservis". The building company 

JSC 

Inteko

 is participating in the building of residential and trading complexes in Kyiv. The 

cost of the projects is approximately $350 million.  

The company "

Metalloinvest

" has suggested creating a joint enterprise with a 

Ukrainian party for completion of the Krivorozhsky oxidized ore mining and 

concentrating industrial complex (Kirovograd region). In order to complete the building 

and commissioning of the first stage of the industrial complex, approximately USD 200 

million are required. (Volkov 2007)  

 

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Nataliya Blyakha                                                                                       PEI Electronic Publications 7/2009 

www.tse.fi/pei 

 

 

6  Conclusions 

Economic cooperation and partnership between Russia and Ukraine has an significant 

value for both countries. Ukraine and Russia are remaining to a great extent 

interdependent on the resources and the technological bases and have the extensive 

multilateral economic networks. Currently, Ukraine and Russia are mutual suppliers of 

the strategic resources and materials and both are interested in the preservation of the 

existing trade turnover.  

Russia’s foreign direct investment in Ukraine has lasting and expanding position. For 

long period Russian investments were typically concentrated on resource based 

industries. One can assume that it was caused by Russian large recourse based 

companies’ endeavor for the internationalization and expansion to the external 

markets. Furthermore, the assets in Ukraine were having more strategic importance in 

the restoring value chains disrupted by the USSR collapse. In addition, growth and 

concentration of the Russian investments in many cases depend on development of 

markets of both countries’ and ease of doing business for the Russian companies in 

Ukraine. Nowadays the Russian investments tend to inflow into various developing 

market segments of Ukraine such as financial sector, retail, construction and 

manufacturing. 

From the individual cases analyzed above, it emerges that Russian companies see 

their assets in Ukraine as part of global value chain in worldwide dimension. Ukraine, 

as well as other CIS countries, was the starting point of further expansion abroad of 

Russia’s multinational companies to industrialized countries. Through FDI in Ukraine, 

Russian conglomerates gained access to strategic assets and natural resources as 

well as obtained market to increase revenues. 

Despite destruction of production and cooperative chains after the collapse of the 

USSR, Russia’s and Ukraine’s economic relationships are continuing to develop. It is 

noticeable that expansion of trade and economic collaboration is beneficial for the both 

countries. Nevertheless, the situation now is hectic in view of the fact that Ukraine has 

become a member of WTO and is on the stage of deeper integration into global 

economy. This might open new opportunities for Ukraine and change the structure of 

economic relationships with Russia. First of all, the European Union is a very large 

trading partner for Ukraine and has the potential to be the biggest one. Second, WTO 

accession gives an opportunity for Ukraine to improve by far a business environment 

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