Americans Expect “Investment Reboot” From Russia

24.02.2010 — Analysis

- Mr Sandusky, the last year has been rather intense in terms of meetings at the inter-state level, for instance a visit exchange has taken place between the Russian and the U.S. Presidents. Has this active dialogue reflected in the livening up of the Russian-American relations and business contacts?

- Business is the most important component in the development of the Russian-American relations. Bilateral committees have been established during the July visit of the U.S. President Barack Obama to Russia; one of these is the Committee for the Development of Business Links and Trade and Economic Relations with the purpose of stimulation and coordination of trade.

The business forum has been held within the framework of the visit where American and Russian businessmen had an opportunity to discuss their future plans. Participating in the forum Barack Obama said that the diplomatic relations between Russia and the U.S. have been established more than 200 years back. The goods exchange began even before the countries exchanged their first ambassadors. Trade kept going even during the long "cold war" and in the few recent years the Russian-American trade relations have really begun picking up speed.

Barack Obama has also stressed that the reboot in the relations between Russia and the United States cannot be a question involving just the two Presidents. This process must go much further, peoples of both countries have to be involved. The "reboot" has to involve not just issues of security and disarmament but also general prosperity which means jobs creation, promoting innovative ideas, and establishment of new sectors of industry.

- Does the opening of the joint venture between VSMPO-Avisma and Boeing Corporation - Ural Boeing Manufacturing (UBM) - in Verkhnyaya Salda in July 2009 confirm that such cooperation is possible?

- Yes, this is the new production of stamped titanium parts for the ultramodern new generation Boeing Dreamliner 787. This is a multimillion long term investment which will affect the development of economies in both countries.

- Which sectors of industry exactly are the most attractive for the U.S. companies in the Urals and Siberia today?

- In reality many business projects were developed well before this so called transformation or "reboot" in business-relations. The long term cooperation between VSMPO-Avisma and Boeing Corporation is just one example of many.

In the neighbouring Chelyabinsk Oblast Emerson Electric, an American corporation, sets an example of successful cooperation by having organized production on the basis of a plant of Metran Industrial Group and established the high tech engineering centre using the high intellectual potential of young Russian scientists. 

Another U.S. company - Carbo Ceramics, whose Headquarters are in Texas - is running a successful plant in the Chelyabinsk Oblast. 

There are many more examples of commendable cooperation between Russian and American companies on the territory covered by the U.S. Consulate General in Ekaterinburg which includes 12 Russian regions. A John Deere agricultural machinery assembly plant is working in Orenburg and these machines are already quite popular amongst Russian farmers. American companies, for instance Halliburton and Baker Hughes, have been successfully working in Russian oil and gas sector for quite some time.

Leading brands of American food processing industry - Coca Cola, Pepsi, McDonald's and Subway - are also represented in the Russian market. These companies have brought with them the background of successful corporate culture that has taken root in Russia.

These examples of cooperation clearly demonstrate that Americans highly value the intellectual potential of Russian specialists, the well developed engineering thought, and industrial potential of the regions. This is why high tech companies, for instance Microsoft, Hewlett Packard, and IBM also work successfully in the region.

- In 2008 a delegation of U.S. businessmen came to the Sverdlovsk Oblast, this visit had been organised by the American Chamber of Commerce in Moscow. Has it given a momentum to the development of new links?

- The delegation mainly included companies which were already represented in Russia and had been working here for a long time. Many companies from that delegation, for instance 3M, Otis Elevators, Caterpillar and many others can tell you many a success story.

Americans planning to conduct business in Russia are well informed of importance of the establishment of personal links and try to get the support of local authorities. This is an important aspect of Russian business climate. 

- Has the financial crisis affected the Russian-American cooperation? Are there any cases of projects being frozen?

- There is no doubt that the crisis introduced changes into plans of all companies. Nevertheless I have not heard of a single company planning to close down the business because of the crisis. I am optimistic about countries finding their way out of the global crisis.

The United States remain one of the leading partners of the Sverdlovsk Oblast, among others. Nevertheless there is no doubt that there are spheres in the trade relations which we would like to improve. The President Barack Obama talking at the business-forum in Moscow stressed that the trade turnover between out countries amounts to just 36 billion dollars which is only 1% of the turnover between the U.S. and the rest of the world. The figure has not changed practically from the times of the "cold war".

The way to recovery may be long and difficult. We need to remember that the United States are interested in a strong and prosperous Russia as a partner. I think that thanks to our joint effort even more American companies will find partners in the Urals.

- Foreign diplomatic representations working in Ekaterinburg are observing a drop in the numbers of visas being issued...

- Our diplomatic mission is experiencing the same trend. We noticed a drop in the number of people applying for visas. The drop is recorded both amongst Russians planning a holiday and amongst those going to the U.S. on business. Nevertheless in the end of 2009 the number of visas started growing to match the level recorded previously.

- Mr Sandusky, quite often foreign entrepreneurs working in Russia complain about corruption and officials interfering in business relations. Russian-German Chamber of Foreign Trade made a statement to that effect in 2009. Do American businessmen share this opinion?

- I cannot comment on remarks made by German businessmen. I do, however, meet not only American but Russian entrepreneurs too. They all talk of similar problems in business. These include corruption, frequently changing tax and customs legislation requirements, the establishment and securing of property rights etc.

Foreign investors expects if not further preferences when coming to the local market but at least reliable consulting support. 
Foreign investors need transparency in relations and long term understanding of the state of political and economic concepts in Russia. Large investors always count on long term relationships while small and medium sized business are in no rush to invest into risky deals.

The President of the Russian Federation Dmitri Medvedev acknowledged these problems in one of his recent talks on improving the investment climate in Russia and we salute the efforts being made by the Russian Government to resolve this problem. He specifically pointed out the measures undertaken in the sphere of taxation and the support for small business. His long established position in regard to combating corruption is well known. Progress in these spheres will certainly improve the perception of business climate in Russia and result in growth of investment. 

The interview has been prepared by Valentina Mazharova