All quiet on the international front

27.06.2014 — Analysis

But there are prospects on the horizon. The actions of the US and EU have prompted Russia to come up with new legislative modifications to its foreign policy. In most regions of the country, no matter how far they may be from the Ukrainian border, foreign sanctions are having repercussions on manufacturing firms that are involved in international cooperation. The Sverdlovsk region is no exception. The government in the Central Urals is increasingly looking to Latin America and Africa, without of course losing sight of the traditional markets for products from the Urals. The fifth international industrial exhibition, INNOPROM 2014, for which over 20 foreign delegations have already registered, is now a credible barometer of our success doing business overseas. On the eve of the July forum, referred to as "Intelligent Industry," Andrei Sobolev, the minister of international and foreign economic relations for the Sverdlovsk Region, sat down for an exclusive interview with RusBusinessNews.

- Mr. Sobolev, tell us about the key partners and the foreign-policy priorities of the Central Urals. Is the focus shifting?

– We're currently trying to diversify our international ties. Our emphasis will not only be on preserving our collaboration with our traditional partners – the countries of Europe and Southeast Asia – but also on building relationships with entirely new sales markets as well as those where we've lost some ground, such as in Latin America, Africa, and the Middle East. This includes Iran, Algeria, the Republic of Congo, and many countries.

Without question, one of our priorities is to expand our cooperation with the countries of the Customs Union and the CIS. In 2013 the heads of state of Russia and Kazakhstan attended the Tenth Interregional Forum between those two countries, which was held in Ekaterinburg. A delegation from the Central Urals, led by Governor Evgeny Kuyvashev, recently had a very productive visit to Azerbaijan. Before the year ends there will be a meeting of the Council of Business Cooperation with Belarus, co-chaired by the first deputy prime minister of Belarus, Vladimir Semashko.

– In May a delegation from Sverdlovsk visited Iran. What benefits did that trip bring to the region?

– This is the third time manufacturers from the Urals have visited Tehran. This time the delegation was led by Alexandr Petrov, the deputy prime minister of the region, and they took part in the INOTEX 2014 International Innovation and Technology Exhibition. Manufacturers from the Sverdlovsk region managed to establish direct contacts with their Iranian counterparts. In particular, they discussed supplying equipment for the construction of railways and heavy engineering products. They also spoke about pursuing joint projects in health care. Interaction between the two countries' industrial parks and research/educational institutions also looks promising.

The visit helped lay the foundation for cooperation with the Iranian province of Hamadan. The intentions were sealed through an agreement between the respective chambers of commerce, which will undoubtedly help with business contacts.

– Currently almost all of our foreign policy revolves around Ukraine. Where does that country stand among the international partners of the Sverdlovsk region?

– The Sverdlovsk region has signed agreements with seven regions of Ukraine. Those include the Kiev, Donetsk, Kirovohrad, Dnepropetrovsk, Vinnytsia, Kherson, and Cherkasy regions. Unfortunately, our interaction is on hold because of the current situation, although some joint activities had been planned as far back as a year ago.

The frosty relationship between our countries has already affected the extent of our trade with Ukraine. Between January and March 2013, $114 million USD worth of goods were sold, but in the first quarter of this year that figure shrank to $95 million. We hope that once this crisis has been resolved at the governmental level our joint work will resume, because there's still interest within the business community.

– And how do things look with Europe? Is the mutual clampdown between the EU and Russia having an effect on business deals and investment projects?

– Any measure that restricts trade or economic cooperation will inevitably result in losses for both sides. It's very difficult right now to predict how much of a drop we'll see in the volume of business the Sverdlovsk region conducts with Ukraine. A significant number of businesses in the region are engaged in foreign trade, and thus the current state of affairs in global economics naturally affects them.

However, we don't expect to have to put any projects on ice. Any dispute will eventually end. Neither we, nor our European or North American counterparts, are interested in isolation - what we're interested in are the advantages and benefits that can be achieved together. I'm sure it will be possible to find a common language.

– What sort of backlash has been felt in the Central Urals from the general economic slump that has been exacerbated by all the political headaches? For example, the region's foreign trade decreased by 40% during the 2009 crisis ... Are we now seeing a hemorrhage of investment and trade?

– By the end of 2013, foreign trade had fallen from the previous year's $13 billion USD to $11.1 billion. This was due to a general slowdown in global economic growth, as well as trade and currency wars. For the industries in the Sverdlovsk region, the risk they face is not so much the seasonal decline in demand for the main goods we export, but the issue of long-term stagnation and a downward trend in the price of exports. The Urals are tightly intertwined with the world economy, and we're very sensitive to all global trends.

And the government is taking serious steps to ensure the region's economic security. Last year special attention was paid to strengthening the development of clusters of industry in the Sverdlovsk region. Negotiations were held to get foreign partners involved in the chemical industrial park in Nizhny Tagil, the Urals pharmaceutical cluster, and the Titanium Valley special economic zone that focuses on aerospace.

We're continuing to work systematically to encourage the world's leading companies to bring machine-tool plants to the region, using an industrial-assembly system, and also to manufacture components on a cooperative basis and transfer machine-tool technology.

– The return to Ekaterinburg of the Bulgarian Consulate, which closed four years ago, was good news...

– It's true, the Bulgarian Foreign Ministry has announced the reopening of the diplomatic mission. Currently the technical and organizational procedures are underway to select a suitable location for the consulate, get it approved by the relevant agencies, and equip it. The official opening ceremony is scheduled for the second half of 2014.

By the way, the consulate will be headed by Plamen Petkov who directed it four years ago.

– Are there plans for any new diplomatic missions?

– Today there are 13 accredited foreign consulates in Ekaterinburg, plus a division of the embassy of the Republic of Belarus, 11 honorary consuls, and seven offices without diplomatic status that promote the advancement of business and culture.

Of course, the leadership of the Sverdlovsk region is interested in expanding the diplomatic corps. This really steps up the level of cooperation with any country that opens up a representative office. Right now we're looking into establishing offices for honorary consuls for a number of nations from Latin America and Southeast Asia. A decision has been made to create a consulate general for Israel. And consultations are in progress about opening a diplomatic mission for the Republic of Kazakhstan.

– What are the most noteworthy joint projects between the Central Urals and foreign businesses?

– Not only Russian companies, but also large international corporations are actively investing in our region. As you know, investment projects are successfully underway with the Swiss firm Omya, as well as Saint-Gobain of France, Boeing from the US, Siemens from Germany and Buzzi from Italy.

Last year saw the kickoff for a host of new projects. In Nizhny Tagil a joint Russian-Japanese venture, Mishima-Mashprom, was launched, producing contemporary mold plates for continuous-casting machines. The proposed level of investment is 7.5 billion rubles. The business's original plans included getting a toehold in the market of Russia and the CIS countries, and then getting into Europe.

Preparatory work is being done in the Nizhneserginsky district to build a plant located near limestone deposits that will process lime and related products. This is a project of ProLaym, LLC - a joint venture between the Belgian company Lhoist and TMK, OJSC. The production facility, worth more than five billion rubles, is scheduled to begin operations in 2015. The business has also shouldered the obligation to pay for substantial social benefits. In the near future that project will be added to the list of priorities.

Many more new developments are still being negotiated. In March 2014, the Sverdlovsk region was visited by a delegation from the Chinese carmaker Saic. In April, Prime Minister Denis Pasler held talks with one of the world's largest manufacturers of flat glass, Guardian. The prospects of cooperation to produce road-building equipment were discussed with the managers of JBC. And there is continued support for the project to manufacture horizontal borers through a Russian-Czech joint venture between TOS Varnsdorf and KR Group.

– How are the preparations going for INNOPROM 2014? Has that expo become an effective marketing tool for the Sverdlovsk region?

– The preparations are in full swing. We already have plans to receive approximately 20 foreign delegations, some of which will be represented by senior officials.

In five years INNOPROM has become the region's calling card and a handy venue for high-level meetings. This year the expo will get an additional boost from the cooperation agreement between the government of the Sverdlovsk region and Hannover Messe International GmbH.

We hope that soon we'll be able to turn INNOPROM into something huge that can rival the world's leading exhibitions. Any victory like that at the international level is a victory for the region and opens up new opportunities for getting business projects and innovative ideas off the ground. It's hard to believe that in the 90s the Sverdlovsk region was still off-limits for foreigners. In the last 20 years the Central Urals has taken a huge leap forward and become a real center for business communications.

This interview was conducted by Lyudmila SOLODKOVA and Alexandra GAZIZOVA