The top German companies working in Russia plan to invest at least €395mn into Russia over the next 12 months, according to the Russian-German Chamber of Commerce, as cited by Tass on June 27.

The RGCC said 44 German companies from a total of 141 that are members of the chamber, reported investment plans worth €395mn over the next year.

"The readiness to invest among the interviewed companies rose by almost one quarter compared with December 2018. 39% of respondents plan to invest in Russia within the next 12 months against 30% in December. Meanwhile, 61% of respondents plan no investment within the next year against 70% in December. Out of 55 companies planning investment in Russia within the next 12 months, 44 unveiled its amount that totally stands at around €395mn, which is considerably lower than the amount specified by companies in December 2018 within one year — €628mn," the survey said.

Germany has ten times more companies registered in Russia than the other EU nations. However, due to devaluation, stagnant wages and slow economic growth that number has fallen in the last few years from a peak of 6,000 to around 4,500 now.

At the same time investments by German businesses into Russia reached their highest level in the last decade, topping €3bn, the RGCC reported in April.

Despite the slowdown and poor geopolitics, Russia remains a top investment destination for foreign companies according to a survey by EY released in June.

Russia remained one of the 10 most popular destinations for foreign investment in Europe in 2018, according to the rating by Ernst & Young cited by RBC business portal. Russia was ranked the ninth most attractive investment destination in Europe, despite the decline of foreign investment projects from 238 in 2017 to 211 in 2018.

The results are somewhat confusing as while the volume of foreign direct investment (FDI) in Russia is substantial in absolute terms, most of the investment is actually just reinvestment of profits by firms already operating in Russia. “Real” inbound FDI has fallen to next to nothing in recent years.

Russia has the lowest “real” FDI among emerging markets, according to the Institute of International Finance (IIF). Russia attracted the least “real” foreign direct investment (that is, FDI excluding reinvestment) among 23 major emerging markets in 2015-18. On average, “genuine” FDI during those four years amounted to 0.2% of GDP, IIF found.

German investors consider agriculture and the food industry (51%), IT and telecommunications (46%), machine building and machine tool building (28%) and energy and healthcare (26% each) as the most promising sectors of the Russian economy in terms of growth.

FDI in 2018 fell to its lowest level in a decade, but FDI in the non-banking sectors of Russia for the first quarter of 2019 increased more than eight-fold compared to the fourth quarter of last year, to $11.5bn, according to the bulletin of the central bank's research and forecasting department.

This improvement is partly due to the recovery of investments in debt instruments, noted the central bank. Bond traders are in “risk on” mode again after the US Federal Reserve bank indicated earlier this year it will halt its rate hikes and may start cutting rates again. Foreign bond investors have flooded into the Russian Ministry of Finance ruble-denominated OFZ treasury bills market as a result since the start of this year.

If one excludes these transactions, the dynamics of foreign investment in the Russian economy in the first quarter of 2019 improved slightly compared with the previous quarters, according to the central bank. At the same time, in the third and fourth quarters of last year, the dynamics of almost all foreign investments deteriorated.

In general, according to preliminary data, the flow of foreign direct investment in Russia in 2018 declined to $8.8bn from $28.6bn a year earlier – the lowest level in the last 10 years.