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. Last Updated: 07/27/2016

Foreign Investment Slips Back by 30%

Total foreign investment in Russian sank more than 30 percent for the first nine months of the year, reflecting the country's overall economic decline and the loss of investor confidence, a report said Tuesday.

Russia is still struggling to overcome a painful financial collapse last year that scared away many investors. Also, Western firms have recently lost out in two high-profile disputes in Russia, further discouraging outside investment.

Foreign investment in Russia fell to $6.47 billion from January through September, down from $9.29 billion in the same period last year, the State Statistics Committee reported.

The report didn't distinguish between direct investment, which includes long-term projects such as factories, and portfolio investment, which involves stocks and other financial instruments that can move money in and out of the country quickly.

A sharp decline in foreign investment began in the wake of the financial crisis on Aug. 17, 1998, when the government defaulted on its domestic debt and devalued the ruble.

More recently, potential foreign investors have witnessed setbacks to foreign companies already operating in Russia.

Last month, a St. Petersburg court ordered foreign investors holding 54 percent of the Lomonosov Porcelain Factory to return their shares to the state.

The investors' group, which includes the U.S.-Russia Investment Fund and investment firm Kohlberg Kravis Roberts, vowed to appeal the ruling, but the precedent of renationalization cooled interest in Russia, analysts said.

And last week, multinational oil giant BP Amoco lost the bulk of its $484 million investment in Russian oil producer Sidanko. Part of the company was declared bankrupt and a production unit was auctioned off to the Tyumen Oil Co. over BP Amoco's objections.

Russia's economy was expected to contract by as much as 5 percent this year, but it now looks likely to remain flat, and may even manage growth of 1 percent or 2 percent, government officials say.

Rising oil prices have helped Russia, one of the world's leading oil exporters, and industrial production is up with Russians buying more inexpensive domestic products rather than pricey imports.

Production in five key sectors - industry, construction, agriculture, transport and retail sales - was up 2.9 percent for the first 10 months of the year, the statistics committee said.