Since the 1990s, Russian citizens have invested almost 300 million euros in Lithuania, with the largest share having gone into real estate. Liberal MP Raimundas Lopata has now proposed that Russian citizens be banned from investing in the country, while Lithuanian firms be barred from doing business in Russia.
Lopata, a representative of the Liberal Movement, proposes to adopt a law that would ban all business relations with a country that Lithuania has recognised as a terrorist state.
The Lithuanian parliament adopted a resolution saying that Russia was a terrorist state back in May.
Under Lopata’s proposal, Russian citizens – unless they are granted refuge in an EU country – would not be able to do business in Lithuania. Lithuanians would also be banned from investing in Russia, and businesses would be forced to leave Russia within three months.
“If we are making a political statement and adopting a resolution that Russia is a terrorist state, then we must follow through and there are the necessary mechanisms to do so. We cannot allow our businesses, even if they are making money in Russia, to feed a terrorist state,” Lopata said.
So far, his proposal has been submitted to the Committee on National Security and Defence for consideration. Deliberations will start in early August.
According to data from the open data platform Okredo, on January 1, 2022, there were 2,491 companies in Lithuania with at least one Russian shareholder. After the outbreak of the war, as of July 14, the number has inched down to 2,299.
However, many of these companies have been inactive for years and only about 300 of them show signs of life.
Some of them are highly profitable. For example, the 22 largest companies with Russian or Belarusian capital in Lithuania in 2021 generated over 1.2 billion euros in revenues, paid over 70 million in taxes and employed more than 2,000 people, according to data from the LRT Investigation Team.
The Centre of Registers estimates that there are currently 3,073 Russian citizens who hold at least one share in companies registered in Lithuania (3,270 in March). The number of Belarusian nationals holding at least one share in companies registered in Lithuania is 2,159 (2,206 in March).
According to economist Aleksandras Izgorodinas, Russians have invested only about 1% of the total FDI in Lithuania.
“Russia has invested 281 million euros in Lithuania since independence, while total foreign investment in Lithuania is 27 billion. More than 80% of investments in Lithuania are made by EU countries,” the economist says.
The most popular form of investment for Russian citizens in Lithuania is real estate. In total, they have invested 106 million euros in the country’s real estate market. Russians have invested another 55 million euros in manufacturing and trade in vehicles and their repair.
Lithuanians, in turn, have also invested just 1% of total direct investment abroad in Russia, or 102 million euros. The largest share of Lithuanian investments in Russia – 67 million – is in the vehicle trade and handling sector.
Andrius Romanovskis, head of the Lithuanian Business Confederation, is skeptical about Lopata’s proposal. He says politicians should not be telling businesses where to invest, while Russian cargo continues passing across Lithuania’s territory.
“First of all, a discussion should begin on what is our state’s relationship with a terrorist state. Once this is defined, business will follow,” according to Romanovskis.
Even without a law, most Lithuanian businesses are leaving Russia and Belarus, he notes.
“Some have left Russia, some are leaving. Conceptually, everyone understands that Belarus or Russia is not a market where one can work freely. After all, Russia itself has declared Lithuania an unfriendly country,” he says.
According to Romanovskis, moreover, it would be unfair to ban all Russians from doing business in Lithuania, irrespectively of their links to the Russian government.
“There is the Law on Enterprises of Strategic Importance to National Security, which allows us to restrict the participation of certain individuals in the activities of enterprises. And there may be Russian citizens who have left Russia and do not pose any threat to our security,” he says.
“I know Russians and Belarusians who emigrated to Lithuania back in 2014 and have permanent residence permits here. It would not be right to discriminate against them, because they cannot have a different passport,” he adds.
Danas Arlauskas, head of the Employers’ Confederation, thinks that the proposal to ban Lithuanians from setting up businesses in Russia and other “terrorist states” is too strict.
“This would be too tough a policy, because others would simply take over those markets and then we would lose out in terms of competitiveness. But there is also a moral aspect. If our people are prepared to sacrifice the economy for morality, then yes, we are taking that path and we all know it. But this needs to be communicated to the public so that it is not a whim of individual politicians,” he says.
Policymakers should look more specifically what impact Russian investors are making in Lithuania, Arlauskas argues.
“If the Russians in Lithuania are making money and are able to exert influence, that is one thing. But when we make money in Russia and bring it to Lithuania, that is a moral issue. If politicians interfere in these matters, they will only add fuel to the fire,” he says.
When it comes to barring investors from certain countries, the policy should be coordinated on the EU level, Arlauskas believes. And there are smarter ways to protect strategic sectors of the economy than blanket bans.
“Not all businesses are the same. The EU had a position towards China, which was to keep Chinese shareholders out of strategic facilities, so that they would not control those facilities. Lithuania could follow the same principle. It is important that our tough stance does not harm us more than it harms Russia. I do not believe that Lithuania should have a separate foreign policy on this issue,” says Arlauskas. (LRT/Business World Magazine)
