The Analytical Center of Baikal Lobridge has prepared a report examining the emergence of a dual-track model for regulating foreign investment in Russia, where protective barriers are combined with targeted incentives. Against the backdrop of slowing business activity, the report explores the measures the government is taking to stimulate investment, how these efforts are reshaping the geography of investment flows, and what businesses expect from the regulatory environment.
The findings of the report formed the basis of an article published in Vedomosti and authored by Eduard Voitenko, CEO and Managing Partner of Baikal Lobridge. The full study is available via the link below.
Below is a summary of the report’s key findings.
The findings of the report formed the basis of an article published in Vedomosti and authored by Eduard Voitenko, CEO and Managing Partner of Baikal Lobridge. The full study is available via the link below.
Below is a summary of the report’s key findings.
The Emergence of a Dual-Track Foreign Investment Regulation Model
Russian policymakers are seeking to achieve two objectives simultaneously: maintaining control over strategically important sectors of the economy while preserving opportunities to attract foreign capital. As a result, a dual-track model of foreign investment regulation is gradually taking shape.
The first track includes measures aimed at strengthening oversight of foreign participation in sensitive industries, financial restrictions, as well as policies promoting technological sovereignty and import substitution. The second track focuses on developing targeted investment incentives for investors prepared to operate under current market conditions.
At this stage, the balance remains tilted toward protective measures. At the same time, the government's ability to ensure regulatory predictability will be a key factor in determining the effectiveness of its capital attraction mechanisms.
The first track includes measures aimed at strengthening oversight of foreign participation in sensitive industries, financial restrictions, as well as policies promoting technological sovereignty and import substitution. The second track focuses on developing targeted investment incentives for investors prepared to operate under current market conditions.
At this stage, the balance remains tilted toward protective measures. At the same time, the government's ability to ensure regulatory predictability will be a key factor in determining the effectiveness of its capital attraction mechanisms.
Slowing Investment Activity and the Search for Additional Sources of Capital
Following a period of robust growth, fixed capital investment has shown signs of slowing since 2024–2025. Among the main contributing factors are the high cost of borrowing, increased business caution toward launching new projects, and the continued uncertainty of the economic environment.
Under these circumstances, the government is seeking to complement domestic sources of financing with external capital. This largely explains the development of incentive mechanisms designed to support investment activity.
Under these circumstances, the government is seeking to complement domestic sources of financing with external capital. This largely explains the development of incentive mechanisms designed to support investment activity.
The Protective Track: Control Over Strategic Sectors
Strengthening control over foreign participation in strategically important sectors remains one of the central directions of Russia’s investment policy.
In recent years, the list of industries and transactions subject to special approval procedures has expanded. Restrictions on investors from so-called “unfriendly” countries remain in place, while temporary asset management mechanisms, as well as financial and tariff-related restrictions, continue to operate.
At the same time, the policy of technological sovereignty is being pursued through import substitution initiatives, stricter localization requirements, and tighter customs and tariff measures.
In recent years, the list of industries and transactions subject to special approval procedures has expanded. Restrictions on investors from so-called “unfriendly” countries remain in place, while temporary asset management mechanisms, as well as financial and tariff-related restrictions, continue to operate.
At the same time, the policy of technological sovereignty is being pursued through import substitution initiatives, stricter localization requirements, and tighter customs and tariff measures.
Targeted Incentives for Investors
Alongside protective measures, the government continues to develop instruments aimed at attracting investment.
These include special “In” accounts, simplified business redomiciliation procedures within Special Administrative Regions (SARs), International Priority Development Areas (IPDAs), and Special Economic Zones (SEZs).
A common feature of these mechanisms is their targeted nature. Rather than seeking to attract investment on a broad scale, they are designed to appeal to specific categories of investors, particularly those from friendly and neutral countries.
These include special “In” accounts, simplified business redomiciliation procedures within Special Administrative Regions (SARs), International Priority Development Areas (IPDAs), and Special Economic Zones (SEZs).
A common feature of these mechanisms is their targeted nature. Rather than seeking to attract investment on a broad scale, they are designed to appeal to specific categories of investors, particularly those from friendly and neutral countries.
A Shift in Investment Geography
The analysis points to a significant transformation in the structure of foreign investment in Russia. As investment from unfriendly countries has declined, investment activity from Asia, the Middle East, and several post-Soviet states has increased.
China, in particular, has emerged as one of the most prominent sources of new investment and business activity. At the same time, the number of companies with foreign participation established by entrepreneurs from friendly countries continues to grow.
A new model of external financing is taking shape, with partners from Asia and the Middle East gradually replacing traditional Western investors.
China, in particular, has emerged as one of the most prominent sources of new investment and business activity. At the same time, the number of companies with foreign participation established by entrepreneurs from friendly countries continues to grow.
A new model of external financing is taking shape, with partners from Asia and the Middle East gradually replacing traditional Western investors.
Regulatory Predictability as a Key Factor of Investment Attractiveness
The analysis shows that incentive mechanisms alone are unlikely to ensure a stable inflow of capital without investor confidence.
For foreign companies, the predictability of the regulatory environment, protection of property rights, stable business conditions, and transparent dispute resolution mechanisms are of fundamental importance. In this context, the government’s ability to maintain a consistent and meaningful dialogue with the business community becomes a competitive advantage in its own right.
According to the Baikal Lobridge Analytical Center, businesses also increasingly view engagement with government institutions as an important strategic capability, investing in the development of government relations (GR) functions and professional mechanisms for dialogue with public authorities.
For foreign companies, the predictability of the regulatory environment, protection of property rights, stable business conditions, and transparent dispute resolution mechanisms are of fundamental importance. In this context, the government’s ability to maintain a consistent and meaningful dialogue with the business community becomes a competitive advantage in its own right.
According to the Baikal Lobridge Analytical Center, businesses also increasingly view engagement with government institutions as an important strategic capability, investing in the development of government relations (GR) functions and professional mechanisms for dialogue with public authorities.
Conclusion
Russia’s current model of foreign investment regulation combines tighter control in sensitive sectors with targeted incentives designed to attract capital. At the same time, investment flows are gradually being redirected toward friendly and neutral countries.
In the long term, the effectiveness of this model will depend not only on the mix of incentives and restrictions, but also on the government’s ability to ensure regulatory predictability, protect investments, and maintain a constructive dialogue with the business community.
In the long term, the effectiveness of this model will depend not only on the mix of incentives and restrictions, but also on the government’s ability to ensure regulatory predictability, protect investments, and maintain a constructive dialogue with the business community.
