The economic downturn and sanctions war that followed from Russia’s involvement in the conflict in Eastern Ukraine have had their consequences on both business leaders and average citizens in Russia. While the citizens of the country suffered from high inflation and a weakening ruble, some foreign investors fled the country leaving their businesses behind.

Others stayed and are taking active steps to adapt to the crisis and reap the benefits presented by the unique economic situation. Some companies choose to continue working in Russia as a result of several reasons: the country’s vast natural resources and the size of the economy, a higher level of urbanization with people being better educated and more affluent in comparison with other developing countries, strong demand for consumer goods and huge transit potential.

The crisis also pushed the Kremlin to give an extra incentive to improving the investment climate in the country, establishing a number of special economic zones and, most importantly, making the legal infrastructure for business more reasonable and adequate. On the other hand, the problem with how the laws for investment are implemented still remains and it continues to raise doubts in the minds of businessmen whether investing in Russia is worth the risk.

Video by Vladimir Stakheev

Written by Stanislav Tkachenko of St. Petersburg State University, Oleg Buklemishev of Moscow State University and Michael Newcity of Duke University, the report also contains an analysis of Russia's regions and their special economic zones by Alexander Tsybulskiy, Deputy Minister of Economic Development of the Russian Federation, and an interview with Andrei Yakovlev, director of the Institute for Industrial and Market Studies at the Higher School of Economics, on why some foreign companies are leaving Russia while others are staying; and which sectors of the economy are most promising for foreign investment in 2016.

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