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. Last Updated: 07/27/2016

Study Shows Cyprus as Russia's Biggest Investor

For the first time in Russia's history, more quarterly investment in the non-banking sector came from Cyprus than any other country.

Analysts say this means that the volume of funds repatriated by Russian companies through their favorite offshore haven is higher than the flow of funds coming from the United States, Germany and other economic giants.

The new data — compiled by the Unicon agency's macroeconomic research center and based on State Statistics Committee numbers — mean Russian companies are increasingly using offshore tax havens to reinvest their profits in Russia, rather than simply keeping their money like they did before the crisis, NIKoil analyst Aleksei Kazakov said.

Overall, foreign investment in Russia is on the upswing, with a total of $2.7 billion committed to the non-banking sector in the first quarter of the year, up from 11.1 percent over the same period last year.

Cyprus accounted for 17 percent of all foreign investments for the quarter, ahead of Holland — another famous haven for capital fleeing Russia — on 14.6 percent and former leader the United States with 14 percent.

Direct investments amounted to $962 million, or 35.4 percent of the total volume, a rise of 12.8 percent since last year. The main branches of industry that received the investments were, as before, the food industry, the metals industry and the oil industry, with 13.5 percent, 10.4 percent and 5 percent, respectively.

Russian companies are not the only ones using Cyprus, however. Foreign multinationals have also set up their own Cyprus "subsidiaries."

When George Soros invested in Svyazinvest through Mustcom, the funds formally came from Cyprus.

Even so, analysts polled said there is no doubt that most of the Cyprus money is Russian money coming back. To understand what kind of investments are being made with the money from Cyprus would require detailed knowledge of Russian companies' economic development, ownership rights and financial flows — things most foreigners do not understand, said Yelena Matrosova, director of Unicon's macroeconomic research center.

Unicon's report has one clause that seems illogical at first glance. Though new investment at the start of this year was higher than for the first three months of 2000, the volume of accumulated foreign investment in Russia's economy had actually fallen by 0.3 percent to $31.9 billion, and the volume of accumulated direct investment had fallen by 1.2 percent to $15.9 billion.

But even these figures can be used as evidence that the economic situation in Russia is improving: Long-term loans are factored in, so as they are repaid, the volume of accumulated investment falls.