Abstract
Foreign direct investment (FDI) by entities controlled by foreign governments (especially state-owned enterprises) is a new global phenomenon that is most often linked to the rise of emerging markets such as China and Russia. Host governments have struggled to properly react to this type of investment activity especially in key strategic sectors and critical infrastructure that ultimately raise questions of national security. Academic research on sovereign investment as a factor contributing to the new global protectionist trend is very limited, and predominantly focused on sovereign investors from China. This study explores the specifics of Russian sovereign investment in the former Soviet Bloc countries, now members of the European Union, especially in strategic sectors such as energy. We use the case of Bulgaria’s nuclear energy sector and the involvement of Russia’s state-owned company Rosatom in the halted Belene nuclear power plant project to analyze the dynamics of policy and politics, political-economic ideologies and historical legacies in the formation of national stances towards Russia as a sovereign investor. Our research contributes to the emerging literature on FDI protectionism and sovereign investment by emphasizing the significance of political-ideological divides and the heritage of the past as determinants of sovereign investment protectionism.
Highlights
Marchick & Slaughter (2008), on the other hand, suggest that national security should not become a pretext for blocking foreign direct investment (FDI) transactions due to protectionist or other exterior concerns. ey further point out that with the increase in worldwide players in FDI, such as sovereign wealth funds (SWF) and state-owned enterprises (SOEs), it is inevitable that political pressures to protect against FDI will develop. ey conclude that a well-cra ed and well-implemented FDI regime that takes into consideration national security can increase investment rather than decrease it
With Russia as a potential strategic sovereign investor in the Belene Nuclear Power Plant (NPP) project, the protectionist knot against the Russian investment has centered around two bo omline questions: Does Bulgaria really need the plant; and, if it does, What price can the poorest member of the European Union (EU) a ord to pay for it? While these questions might not seem so di cult to answer from the perspective of a pure business logic, Belene has been an ono project for years, with no clear vision on both questions, as Kondov (2011) asserts
E key variable that complicates the answers to these two questions is the national identity of the strategic investor – Russian versus Western (European or American)
Summary
With the end of the Cold War, foreign direct investment (FDI) established itself as a principal engine of national and global economic growth. e industrialized countries took major steps to encourage FDI in previously highly restricted sectors such as. E FDI policy framework that has emerged across di erent Central and Eastern European (CEE) countries and the nal outcome of the FDI legislation are a speci c result of complex political processes involving international regimes (EU accession and membership requirements) as well as sectoral interests, coalition partners, inter-bureaucratic politics and last but not least – ideological orientations and historical & geopolitical legacies. Our research contributes to the emerging literature on FDI protectionism and sovereign investments in two ways It sheds an important light on complex situations involving Russian sovereign investments where national interests of the host country are internally contested along political-ideological divides and not clearly articulated. We proceed by outlining Bulgaria’s foreign direct investment policies and national security strategies, as well as the legacy of its economic relations with Russia in the energy sector. We conclude with a discussion about the broader implications of the halted project for the literature on FDI protectionism and sovereign investment
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