Geopolitical Rupture and the Reversal of Foreign Direct Investment in Russia

This study examines whether the escalation of economic sanctions following Russia's February 2022 invasion of Ukraine was associated with an unusual reversal in foreign direct investment relative to Brazil, China, India, and South Africa. The analysis uses an annual country panel for 2013-2023 and combines a two-way fixed-effects difference-in-differences design, a descriptive event-time comparison, synthetic control, and in-space placebo tests. Russia's average FDI fell from 1.580 percent of GDP before 2022 to -1.114 percent in 2022-2023. The corresponding decline among the four comparison economies was 0.577 percentage points, producing a difference-in-differences estimate of -2.116 percentage points of GDP. The 2022 event-time contrast was -2.184 percentage points relative to the 2021 Russia-control gap, but the analogous 2023 contrast was close to zero because FDI also weakened among comparison economies. A synthetic Russia, weighted primarily toward China and India, implies gaps of -3.099 percentage points in 2022 and -1.049 points in 2023. Russia has the largest post/pre root mean squared prediction error ratio among the five countries, although the placebo p-value is 0.20, the smallest attainable value with this donor pool. The evidence therefore supports a large and unusual post-2022 FDI reversal, especially in 2022, but does not establish a precisely identified causal sanctions effect. The study contributes a transparent single-country counterfactual analysis and shows why economic magnitude, temporal concentration, pre-treatment fit, and finite-sample uncertainty must be reported together.