Volume Of Foreign Direct Investment Research Articles

Towards environmental impact of inward foreign direct investment: the moderating role of varieties of democracy

PurposeThis paper aims to clarify the relationship between foreign direct investment (FDI), democracy and carbon intensity. This study examines the influence of types of democracy on the relationship between inward FDI and carbon intensity. For this purpose, it uses five varieties of democracy, including a composite democracy indicator as moderating variables.Design/methodology/approachThis study applies the fixed-effects panel quantile regression approach that considers unobserved heterogeneity and distributional heterogeneity using panel data from 160 countries during 1990–2020. By taking into account sudden changes in the volume of inward FDI, an event study is conducted across various sub-samples of democracy to check the robustness of the results.FindingsThe results show that FDI has a significantly negative impact on carbon intensity of the host country in the upper quantiles. In general, different types of democracy have a significant positive impact on carbon intensity across different quantiles. After considering the other factors, including industry intensity, trade openness, green technology, fossil fuel dependency and International Environmental Agreements, there is evidence that all types of democracy moderate the relationship between FDI and carbon intensity, thereby supporting the halo effect hypothesis. In addition, the interaction effects have a significant negative impact on carbon intensity of low- and high-carbon-intensive countries.Originality/valueThis paper offers several contributions to the literature on the effect of FDI and democracy on carbon intensity. This study overcomes the limitations related to the conceptualization and measurement of democracy found in the literature. While prior research has predominately concentrated on how democracy promotes the selection of FDI host-country locations, this study seeks to answer the question of whether democracy type has any effect on inward FDI, thus contributing to improving carbon intensity. Furthermore, this paper analyses the interaction effect on carbon intensity in different countries with different carbon intensity levels separately.

Internalization of the Investment Environment in the International Tourism Industry

The article presents an adaptative-institutional approach to determining the investment environment in the international tourism industry. The amount of foreign direct investment flows from international corporations to the tourism industry is analyzed. An integral index of the investment of investment capital (assets) of international corporations in the economic system of the country according to the high and low level of development of the tourism industry is proposed and calculated. The article concludes upon the necessity to create a favorable investment environment to stimulate Internalization of the Investment Environment in the International Tourism Industry further growth of tourist flows and infrastructure development. The volume of foreign direct investment in the tourism industry showed that these investments are balanced through a system of countercyclical regulation, which considers the requirements of the global economic system.

Foreign Investments as a Factor Ensuring Economic Security of Ukraine

The article explores the theoretical foundations of the concepts of «security», «national security», «economic security», «investment security», and their interrelations within the components of a state's national security. The necessity of attracting foreign investments while considering economic security is emphasized. The authors propose their interpretation of the definition of «investment security in the sphere of foreign investment». Characteristics of national interests in the field of investment security are provided, and directions for forming a system to ensure it are identified. Sources of threats to attracting foreign investments for the domestic economy are identified. The dynamics of the balance of payments according to the financial account and the volumes of foreign direct investments for the years 2014-2023 are examined, providing insight into the country's investment climate. Attention is drawn to the significance of Ukraine's investment attractiveness index, which has been the lowest in the past decade since the onset of full-scale military aggression. This indicates that the investment climate in Ukraine does not contribute to an increase in foreign investment volumes. The analysis focuses on key indicators of investment security, including the investment attractiveness index and the ratio of net FDI inflows to GDP. It is elucidated that since 2016, there has predominantly been a deficit in the balance of payments, and the share of accumulation of foreign direct investment relative to GDP has not reached the threshold level of the indicator. It is highlighted that apart from state-level security factors, there are those that depend directly on the activities of economic entities, particularly the level of timeliness of accounting and analytical support for foreign investments. The main directions of ensuring economic security in the process of attracting foreign capital are determined.

The Impact of Foreign Direct Investment on Economic Growth: Empirical Evidence

Foreign direct investments are an instrument widely used by countries, both developed and emergent, to achieve their economic development. Among others benefits, discussed in the specialized literature, investment inflows accelerate production, improve productivity, facilitates the transfer of technology, raise the qualification oh human capital, contributes to create new jobs and to boost the economic growth of the host countries. The main purpose of the research is to examine the short and long runs relationships between foreign direct investment (FDI) and economic growth in Algeria. To carry out our investigation, the time series data of the two variables are used over the period 1990-2023. This period covers the span time in which data on the volume of foreign direct investments are available. To achieve the research purpose, an ARDL model is built based on the unit root methodology of the Augmented Dickey Fuller and Phillips  Perron tests. The findings of the study show that the foreign direct investment (FDI) and economic growth are cointegrated, indicating the existence of a long relationship among them. They establish also that foreign direct investment (FDI) has a positive impact on economic growth. Building on the research results, Algerian decision makers should take the required actions to improve the climate business, making it more attractive for foreign investors.

ՀՀ ՏՆՏԵՍՈՒԹՅԱՆ ՀԱՄԱՐ «ՕՏԱՐԵՐԿՐՅԱ ՈՒՂՂԱԿԻ ՆԵՐԴՐՈՒՄՆԵՐ - ՏՆՏԵՍԱԿԱՆ ԱՃ» ԿԱՊԻ ՎԵՐԼՈՒԾՈՒԹՅՈՒՆԸ / ANALYSIS OF THE RELATIONSHIP «FOREIGN DIRECT INVESTMENTS - ECONOMIC GROWTH» FOR RA ECONOMY

The growth of foreign direct investment (FDI) as a component of GDP certainly contributes to economic growth. However, one should not forget that the relationship "economic growth - FDI" is "bi-directional", that is, in addition to the fact that FDI stimulates growth, it is also affected by economic growth. If there are many scientific and practical studies on the first, "traditional" direction of this "two-way" relationship, its other side - the impact of economic growth on FDI, has not been sufficiently studied. The goal of this article is to evaluate the impact of the growth of RA economy sectors on FDI using regression models. In the given article, the RA economy was regarded as an aggregate of the following sectors: industry, agriculture, construction, services and trade. Multi-factor regression models were built in order to identify and evaluate the connections between FDI and economy sectors in RA. An economic analysis of the results obtained by the models was also performed, and the impact on FDI was estimated for each of the considered factors. Particularly, the econometric analysis shows that, other conditions being equal: • 1% increase in the growth rate of industrial output leads to a 2.6% decrease in the volume of FDI. • 1% growth of the service sector contributes to the 5.5% growth of the volume of FDI. • 1% increase in agriculture leads to a 4.2% increase in the volume of FDI. • Increase in the trade sector leads to the increase of FDI volume, whereas the increase in the construction leads to the decrease of it.

MODERN ISSUES OF ATTRACTING FOREIGN DIRECT INVESTMENTS TO THE REGIONS

The article examines the views of foreign and domestic economists-scientists on the theoretical and practical aspects of attracting foreign investments to the economy. The total volume of foreign direct investments and fixed capital investments in the regions has been analyzed. Also, the problems of attracting foreign investments to our country were identified and proposals and recommendations were developed to solve the problems.

Економічні умови розвитку економіки вражень у країнах світу та в Україні

The article examines the main economic conditions for the use and development of the economy of impressions in the countries of the world on the basis of the dynamics of official values of statistical indicators for 2018–2022: GDP per capita, according to which clustering of countries is carried out and clusters with low (in which Ukraine has fallen), medium and high values of this indicator are identified; the ratio of trade volumes (the amount of exports and imports) to GDP; the volume of foreign direct investment, and the unemployment rate. Based on the results of the analysis, it is concluded that in developed countries the economy of impressions has more favorable conditions for its development, while in Ukraine it is a necessary model for the post-war reproduction of socioeconomic relations, though the conditions for its development are complicated. Taking into account the above trends, the aim of the article is to identify the main economic conditions for the development of the economy of impressions in the countries of the world and in Ukraine and to formulate proposals for its spread in order to increase the activity of enterprises in the formation of added value and profit to improve the quality of life of the population in the post-war period. The economy of impressions develops when there is a sufficient level of competition between producers to make decisions about the purchase of products in their favor. Therefore, the article analyzes the index of global competitiveness of countries for 2022 and 2023, identifying the low place of Ukraine in this indicator, which can be increased on the basis of the development of institutional measures to improve the competitiveness of producers. The features of the formation of positive impressions are considered and conclusions are made about the need to increase their value in the price of products. The main conclusions of the article are as follows. The current stage of development of the world economic system is characterized by the emergence of new models of economic relations, which is associated with the globalization of economic flows, easier entry into foreign markets. One of the perspective models of world economic relations is the economy of impressions. The developed countries of the world have a more powerful potential for the development of the economy of impressions, while they need its development more due to the intensification of competition between national producers. In Ukraine, the socioeconomic situation before the war was quite favorable for the development of the economy of impressions, but still it was inferior to the developed countries of the world. As a result of the ongoing war, the situation has deteriorated significantly, therefore, in the period of post-war recovery, one of the national priorities should be the development of the economy of impressions as the most attractive model for intensifying economic and social relations, innovative development, and improving the quality of life of the population.

Удосконалення методики оцінки інвестиційної безпеки держави з урахуванням «кругових» інвестицій

The article discusses the features of «round tripping» investments that come to the country in the form of foreign direct investment (FDI), but in its essence is the return of previously withdrawn domestic capital abroad, mainly to offshore jurisdictions. The author suggests that there is a significant impact of «round tripping» investments on the investment security of the State, taking into account the motives of their formation and a significant illegal component, the absence of additional effects from attracting these investments into the economy. It is proposed to supplement the system of indicators of investment security of the State with the indicator «share of «round tripping» investments in the total volume of FDI (excluding reinvested capital)». To find out the directedness of the relationship between this indicator and the country’s economy, a regression analysis based on the data of 2010–2022 was applied. As a result of the analysis, a direct relationship between GDP in actual prices and GDP per capita, as dependent variables, and the share of «round tripping» investments in total FDI as an independent variable, has been identified. The article assesses the level of investment security of Ukraine in 2015–2021 taking into account the share of «round tripping» investments in the total volume of FDI (excluding reinvested income) based on the calculation of the integral indicator. The results of the calculation of the sensitivity coefficients of the integral indicator to changes in indicators testified to the largest impact of «round tripping» investments on the state of investment security of Ukraine in 2021. The carried out study confirmed the expediency of improving the methodology for assessing the investment security of the State by supplementing the system of indicators with the indicator of the share of «round tripping» investments in the total volume of FDI (excluding reinvested income).

FDI, FDI’s Impact on Economic Growth and the Investment Environment in Georgia

Georgia, with its open policy towards foreign investment flows, was one of the first countries in the Post-Soviet space. From the day of gaining independence, FDI has become the most important indicator of the country, and the assessment of the volume of foreign investment flows carried out in the country, statically or dynamically, has not lost its relevance to this day. Present article explores the volume of foreign direct investments made in Georgia, in dynamic; From the total indicators, in terms of geography, the largest investor countries are identified; In the period 2013-2022, the structure of FDI is expanded according to components and the percentage distribution of share capital, reinvestments and debt obligations from the total indicators is highlighted; The impact of FDI on economic growth indicators has been determined using correlation-regression analysis. The article also provides global figures for foreign direct investment, including countries receiving the largest FDI flows; In order to assess the investment environment, in dynamics, the sovereign credit ratings of Georgia evaluated by the leading rating companies are presented. Statistical observation, collection-grouping and analysis techniques and methods are used in the research process.

The impact of urban green business environment on FDI quality and its driving mechanism: Evidence from China

The world's leading recipient of foreign direct investment (FDI), China should pay attention to both the volume and quality of FDI as it seeks to integrate more fully into globalization. At this stage of development, establishing an environmentally friendly business environment has become a critical strategy for improving the quality of FDI. So, this paper constructs the index system of the urban green business environment and the measurement of FDI quality to test the driving mechanism of the urban green business environment on FDI quality. The study draws the following conclusions. Firstly, the green business environment can significantly enhance FDI quality, and this impact exhibits a positive spatial spillover effect overall. However, regionally, only the eastern region demonstrates a positive spillover effect. Secondly, the mechanism test results reveal that public services, financial services, market environment, ecological environment, human resources, and legal environment are the key driving factors of the urban green business environment on FDI quality. Moreover, the intermediary effect test establishes that the urban green business environment enhances FDI quality by mitigating risks. Thirdly, the heterogeneity test results indicate that the green business environment can enhance FDI quality for cities with varying income and pollution levels. The research results provide a new perspective for improving FDI quality and optimizing the green business environment. They hold significant implications for enlightening the coordinated development of the urban green business environment and FDI quality in different regions, as well as for maximizing the influence of the green business environment on FDI quality.

Technological proximity of countries as a factor of inward foreign direct investment to developing economies

Over the past decades, incoming flows of foreign direct investment (FDI) to developing countries have increased significantly. However, the share of accumulated incoming direct investments of these countries in the global volume of incoming direct investments remains unchanged. This may indicate the shortterm nature of these investments due to the lack of investors’ motivation to make long-term investments in these countries. In our paper, we make an attempt to identify the most significant determinants of flows of inward foreign direct investment to developing countries based on statistics on bilateral flows of such investments for the period of 2009—2021. For this purpose, we have constructed a gravity model of foreign direct investment. In contrast to the previous studies we have focused on the factor of technological proximity between countries. Firstly, the estimation results allow us to conclude that technological proximity between a recipient country and an investor country has a significant impact on the volume of FDI inflows to developing countries. Secondly, this influence is heterogeneous. The proximity of the technological structure of exports between countries contributes to an increase in FDI inflows to a recipient country. At the same time, countries which are close to each other in terms of the level of technological development of exports have a smaller volume of mutual FDI, while a significant excess of the level of technological development of the investor country over that of the recipient one is a factor of additional FDI inflows driven by a resource-seeking motive. Thirdly, based on the obtained results, we have revealed a list of countries that are the most attractive for Russia in terms of increasing the volume of outward FDI.

The influence of foreign direct investments on the economic development of South Caucasus countries

A nation's pace of economic growth in the South Caucasus region is directly influenced by the volume of foreign direct investment (FDI) it gets. This research project examines the effects of foreign direct investment (FDI) on economic growth and stability, with a focus on the three nations of Armenia, Azerbaijan, and Georgia. This research seeks to understand three important aspects: the trends in FDI influx; the industries that draw the highest concentrations of FDI; and the societal consequences of FDI. Examining these three crucial facets of the whole is the aim of this study. The goal of this study is to look at the trends in foreign direct investment (FDI), with an emphasis on the South Caucasus region's growing prominence as a desirable destination for financial investments. To achieve the objectives of this study, we will. Numerous various elements, such as its advantageous geographic position, an abundance of natural resources, and the formation of prospective markets, may be ascribed to its preeminence. The industries with the largest amounts of foreign direct investment (FDI) are also examined in this research, with an emphasis on the manufacturing, infrastructure, and energy sectors' critical roles in promoting economic growth. In this last section of the study, the socioeconomic effects of foreign direct investment (FDI) are examined. The creation of new job possibilities, the diffusion of recently produced technology, and the diversification of exports are some of these outcomes. One of the main topics of this conversation is how these effects contribute to raising the local quality of life and lowering the incidence of poverty. The aim of this research is to examine the many aspects of foreign direct investment (FDI) and how it affects the economic development of countries in the South Caucasus area of the globe. The purpose of this project is to provide useful information on the opportunities and challenges these nations face in their efforts to draw in and use foreign investments in order to achieve sustainable growth and prosperity. The data that will be offered will come from a range of sources, such as focus groups, questionnaires, and interviews.

Does Foreign Direct Investment Affect Financial Stability in Developing Countries: The Nigerian Experience

The relationship between Foreign Direct Investment (FDI) and financial stability is of increasing concern among economies. The volume and structure of FDI can affect the financial system's stability. This study examines the effect of FDI on financial stability in Nigeria between 2003:1 and 2019:4. The data were subjected to a stationarity test using the Augmented Dickey-Fuller test, and the test result shows that all variables were integrated in the order of 1. The Johansen cointegration test result showed a long-run relationship between all the dependent and independent variables. The hypotheses were tested using Error Correction Mechanism (ECM). It was found that the short runs deviations will adjust to their long-run equilibrium by 17.3% quarterly. The findings show that FDI as a percentage of GDP positively affects Nigeria's financial stability. In contrast, FDI as a percentage of fixed investment and net FDI have a significant negative effect on Nigeria's financial stability. The study, therefore, concluded that inflows of FDI play a significant role in the Nigeria’s financial stability. Based on the findings, the study recommends that authorities such as Ministry responsible for trade, commerce, and investment create an enabling investment environment such as regulations for protecting investors interests to attract FDI into the system.

МІЖНАРОДНА ІНВЕСТИЦІЙНА ПОЗИЦІЯ УКРАЇНИ В КРИЗОВИХ УМОВАХ

The article is devoted to the study of the impact of crisis phenomena on the volume of foreign direct investment (FDI) in Ukraine. In the context of global economic dynamics and the interconnection of international markets, the role of FDI in ensuring sustainable economic growth is analyzed and their importance for the country's development is revealed (based on the GDP indicator). Variants are given that reflect the dependence between crisis phenomena and the volume of foreign direct investments. The indicators published on the World Bank's website and used at the international level to assess net inflows and net outflows of foreign direct investments are described. The correlation of the dynamics of changes in the analyzed indicators of Ukraine against the background of changes in similar indicators of the EU countries and the world is visually presented for the studied period of 1994-2022, which made it possible to conclude the nature of crisis phenomena that influenced the change in the trend. The results of the study provided a general idea of the negative impact of crisis phenomena on the dynamics of foreign direct investment. The analysis made it possible to single out external (international, global) and internal crisis phenomena. External crisis phenomena (the global financial crisis of 2008-2009; the spread of the COVID-19 pandemic in 2020-2021) took place in many countries of the world and the European Union and caused a decrease in FDI due to economic recession, financial uncertainty, reduced availability of capital, uncertainty in business environments. Internal crisis phenomena were related to the economy and politics conducted in Ukraine, as well as caused by the military conflict with Russia (the Russian annexation of Crimea, the military conflict in the East of Ukraine, the full-scale Russian invasion of Ukraine on February 24, 2022, the Russian-Ukrainian war), which created uncertainty, risks and negative conditions for investing in Ukraine. The conclusions of the article are aimed at emphasizing the importance of understanding the mechanisms of the impact of crisis phenomena on FDI and the need to develop strategies to ensure stability and sustainable growth of FDI in conditions of uncertainty and the negative impact of external and internal factors.

(Asymmetric) tariff‐driven foreign direct investment: Evidence from Korean firm‐level data

This study examines the effects of identified industry tariff shocks on firms' outward foreign direct investment (FDI) into their destinations. Using rich Korean firm‐level data for 2010–18, the study decomposes FDI outflows from multinational enterprises (MNEs) into the number of subsidiaries (extensive margin) and average FDI for individual subsidiaries (intensive margin) in the destination. New evidence of tariff‐driven FDI reveals that the tariff decrease shocks (TDS) (significant tariff decreases) lower the number of existing subsidiaries rather than the average FDI volume for the existing subsidiaries. In addition, more productive firms investing in developing countries lower the number of existing subsidiaries to a greater extent in response to TDS, implying that productive MNEs reallocate resources into selective core subsidiaries when a significant tariff decrease occurs.

Effects of inflation on foreign direct investment in Nigeria

Inflation's effects on the volume of foreign direct investment (FDI) in Nigeria from 1995 to 2020 are examined in this study. In order to establish the relationship between the dependent variable (foreign direct investment) and the independent variables (inflation, real interest rate, and exchange rate), secondary data were gathered from the CBN Statistical Bulletin, Nigeria Bureau of Statistics and the World Bank Database. Johansen cointegration test was used to ascertain the long-term relationship between FDI and the independent variables, while the enhanced Dicker-Fuller test (ADF) was used to examine the data's time series property. It was decided to use the Vector Error Correction Model (VECM), and the error coefficient, which is correctly signed and significant, shows that the independent variables and FDI have a long-term relationship. The model's explanatory variables' effects on FDI were statistically insignificant. But as indicated by the probability of the F-statistic at the 5% level of significance, the overall regression was significant. The study suggests that efforts be made to use additional macroeconomic policies as a way to boost foreign direct investment in the economy and that the government and monetary authorities should not solely rely on the tool and model for controlling inflation.

Foreign Direct Investment in the Sub-Saharan Africa: Unveiling the Pains and Gains of Domestic Firms

This study aimed at unveiling the pains and gains of domestic firms towards Foreign Direct Investment in the Sub-Saharan Africa. The objectives of the study were to ascertain the effect of inward Foreign Direct Investment on Domestic Firms, and to establish gulfs between gains and pains of Domestic Firms in Sub-Saharan Africa relative to technology spillover, competition, environmental degradation and Global Value Chains. The study used a systematic review. This enables the drawing of experience, ideas, and similar situations of others. Search strategy was incorporated to enable the searching of literature in database of reputable journals. It was discovered that the volume of Foreign Direct Investment is high in Sub-Saharan Africa, and that it has greater positive effect on Domestic Firms. It was established that Foreign Direct Investment presents gains as well as pains to Domestic Firms in Sub-Saharan Africa relative to technology spillover, competition, environmental degradation and Global Value Chains. The study concluded that Foreign Direct Investment is not totally inimical to Domestic Firms in SSA. Thus, the study suggested that government of various countries in Sub-Saharan Africa should revisit and review their policies, where necessary, to protect their infant firms or Domestic Firms, and should intervene in the drain experienced by Domestic Firms, and cushion the negative impact of technology spillover by providing capital support and enhancing strong institutional quality.

Geo-economic factors of foreign direct investment movement and strengthening of national security of Ukraine

Methods. The methods used as the methodological basis of the study were: logical – when describing the cause-and-effect relationships between internal and external factors that contribute to the improvement of the investment environment and the growth of foreign direct investment in Ukraine, or, on the contrary, create significant risks and prevent the attraction of such investments in the country; general and specific – when assessing the influence of the dynamics of macroeconomic indicators of the development of the national economy on the attraction of international investments by companies; analysis and synthesis – in the study of the main risks for foreign investors and the development of recommendations to reduce their negative impact on investors, aimed at increasing the investment attractiveness of Ukraine in the medium and long term. Results. The prospects of Ukraine in attracting foreign direct investments were considered, the dynamics of the volume of foreign direct investments were analyzed. The possibility of improving the geo-economic situation of Ukraine in the post-war economy is indicated, provided that significant amounts of foreign direct investments are attracted. Novelty. The geo-economic factors that can affect the movement of direct foreign investment in Ukraine were studied, and a SWOT analysis of these geo-economic factors of the movement of direct foreign investment for Ukraine was conducted. Weaknesses and strengths of Ukraine's investment attractiveness have been identified. Directions for adjusting investment risks are proposed. Practical value. The conducted analysis gives us an understanding of the state of the state's investment climate and directions for improving the investment attractiveness of the national economy.

FDI and Economic Growth – Perspective of Southeast European Countries

Abstract Emergence of new economic entities, through either integration or disintegration, always creates system inefficiencies resulting in temporary economic setbacks. At the macroeconomic level, this brings about slowdown in economic growth and delayed catching up with more advanced economies. In Europe, the turn of the century brought along political and economic disintegration, on one hand, and economic integration, on the other. Demise of planned economies across Eastern Europe caused serious economic turmoil due to market fragmentation. Meanwhile, creation of new economic architecture in the European Union (EU) has created additional challenges of economic restructuring. Therefore, achieving sustainable economic growth and high income has become the ultimate economic policy objective. Equity investment in form of foreign direct investment (FDI) has proven to be the right choice, because influx of fresh capital and know-how enabled strong economic growth and restructuring through increasing labor productivity and economic efficiency. Stronger competitive pressure through FDI contributed to dynamic restructuring, resembling in increasing exports and stronger integration into global economy. Yet, growth rates across countries were not always proportional to the volume of inward FDI, which indicates a certain level of underperformance for some countries. The aim of the paper is to closer investigate the FDI-growth nexus by differentiating between two types of FDI – mergers and acquisition (M&A) and greenfield investment. Thus, the analysis will take account of the characteristics of the FDI host economy, and those of the investing company, because we find it reasonable to assume that different forms of FDI incorporate different business dynamics and the time horizon of the investor’s expectations. In order to find out the effects of different forms of FDI on economic growth we apply panel data analysis with fixed effects and Prais-Winsten estimator on the sample of European reform countries whereby FDI, M&A and greenfield investment are considered the key variables. Analysis also includes a set of control variables, which combine standard neoclassical growth variables. Results indicate that, with reference to the level of innovativeness, different types of FDI indeed produce different effects on host countries’ economic growth.

Interbudgetary transfers: variety of approaches and international practice

In the current geopolitical situation, Russia is faced with the adoption by foreign partners of a number of politicized decisions in the monetary and financial sphere. European institutions cease their activities with Russia. The "political guidance" applied by the European Bank for Reconstruction and Development is a politically promoted, economically unsound decision dictated by the leadership of the European Region. Despite the visible damage and the appeals provided by the Russian side, the European side continues to follow the planned credit and financial policy. The development of relations on the world stage and the failure of the current global monetary and financial system put Russia in a crisis situation. Events, including political ones, which are currently taking place at the global level, leave a significant imprint on the financial and economic condition of the country. In the context of sanctions and instability, economic relations with the leading counterparty, the European Union, are suffering. The prolongation of the conflict leads to aggravation of contradictions, further cooling and colossal losses. The volume of foreign direct investment from the sector of the Russian economy has been affected to some extent by the sanctions, but the investment attractiveness of the Russian market for FDI is still significant and has every chance to enter the top three rating among developing countries. Despite the unsatisfactory state of relations between Russia and the European Union, conflict with a close neighbor hurt both sides. In order to avoid large losses and increase the distance from each other, counterparties need to find a balance to continue constructive economic cooperation.