In light of the Cyprus banking fiasco and driven by the sale of an oil venture, Russian capital invested in the British Virgin Islands jumped 15-fold to $31.7 billion. To put that into perspective, offshore Russian capital globally in the first quarter amounted to $70 billion according to the Central Bank and RT. The largest chunk of the funds in the Virgin Islands is attributed to the sale of the joint oil venture TNK-BP to Rosneft which netted $28 billion for investors, of which about $13 billion stayed in the islands. The oil industry in the Virgin Islands has been interesting of late seeing a large refinery shuttering in the U.S.-owned island chain leading to a nearly 14% contraction in GDP.
With the Cyprus crisis still fresh in Russian investors’ minds, they have been looking for new places to offshore capital. As direct investment in Cyprus has fallen from $21 billion to $2 billion, Russian capital has flowed elsewhere including Luxembourg as a close second to the British Virgin Islands.
“This is a clear link to Cyprus. This could be explained by a change in offshore jurisdiction as Cyprus became less convenient for economic entities,” the WSJ quotes the chief economist of the Russian conglomerate Sistema Evgeny Nadorshin.