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. Last Updated: 07/27/2016

UN Names LUKoil Region's Top Investor

LUKoil, the largest oil company in Russia, won a new distinction Tuesday when a United Nations study named it the top nonfinancial company in Central and Eastern Europe last year to invest more money abroad than at home.

The study also found that Russia last year was the third-largest recipient of foreign direct investment in the region, which includes 19 countries.

The 354-page World Investment Report 2001 is an annual study that tracks foreign direct investment flows around the world. It found that companies invested a record $1.3 trillion overseas last year. The United States remained the largest recipient of foreign investment, with $281 billion, and Britain the largest investor with $250 billion spent, according to the report compiled by the UN Conference on Trade and Development.

Leading transnational corporations in Central and Eastern Europe "are about to establish themselves as prominent players" in global investment, the study said.

Those companies were led by LUKoil with $3.2 billion in direct investments abroad, far more than runner-up Latvian Shipping Co. with $459 million in foreign assets.

LUKoil in recent years has been aggressively snapping up oil refineries in Bulgaria, Romania, Ukraine the Baltic states and other former Soviet countries. LUKoil bought U.S. gas retail chain Getty Petroleum Marketing Inc. for $71 million last year. It also owns chains of gas stations in several East European countries.

"There are no oil refineries left on Russian soil, while the acquisition of oil refinery assets and petrochemical plants are the strategy of the company," a LUKoil spokesman said Tuesday.

The top sectors for FDI in Central and Eastern Europe are transportation, oil and natural gas and pharmaceuticals, according to the report.

The top 100 list of investor-companies globally was dominated by electronics and electrical equipment; automobiles; oil exploration and distribution; and food and beverages. More than half of the companies invested in the first three areas.

FDI outflows of $4 billion from Central and Eastern Europe grew at a faster pace than inflows, despite the fact that official data on outward FDI are likely to underestimate the actual outflows, according to the study.

"Some of the transactions carried out by firms in the Russian Federation, for example, with the intention of establishing control over companies abroad go unreported or are reported under other items in the balance of payment," the report said.

When these outflows are included in the estimates, Russia becomes a major exporter, the study said.

Economists have estimated that about $29 billion fled Russia last year.

FDI into the Central and East European region increased 7 percent to a record $27 billion last year, the bulk of which came from West European countries.

The report noted that the region gets just 2 percent of all global inflows.

While inflows remained uneven, Poland, Czech Republic and Russia absorbed two-thirds of the total invested in the region. Russia received $2.7 billion in 2000, a drop from $3.3 billion the previous year.

"Last year was contradictory from foreign investors' point of view -- the hunt on oligarchs and talks about renationalization," said Alexei Moiseyev, an economist at Renaissance Capital.

Overall, FDI was dominated largely by privatization-related transactions, which will lead regional inflows at least through 2002, the study said, noting that there have been no large-scale privatizations involving foreign investors yet in much of the Commonwealth of Independent States.

The study was based on information for 51 countries as of Sept. 3, 2001, and does not take into account any backlash from the terrorist attacks in the United States last week.

Still, the study estimated that FDI flows would likely fall 40 percent this year to $760 billion due to a projected decline in cross-border mergers and acquisitions. FDI has not dropped since 1991.

FDI inflows in Central and Eastern Europe are expected to remain stable in 2001 at $27 billion.

Highs seen last year and in 1999 came as a result of a series of mega-deals, such as the $200 billion acquisition of Mannesmann (Germany) by Vodafone AirTouch.