By Jason White
Despite ongoing sanctions towards Russia and a highly complex business environment and culture, Russia still retains massive potential for companies seeking to gain a foothold and therefore traction inside the country. However, it is also important to note that it is not just the potential of Russia that is of interest, but the emergence after initiation in 2013 of the Euro Asia Economic market place, an economic business community with a total size of 188 million people. Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan are members of this vast market place.
It is also relevant to make note that up until quite recently, Russia was the UK’s fastest growing export market. However due to the recession and the global sanctions imposed on Russia, this momentum stuttered. Be this as it may, whilst the West and Europe looked to evaluate the damage to Russia’s economy, the country quietly got on with realigning its economy and in putting in place a strategic ten-year plan that would dilute the damage that the devaluation of the rouble, falling oil prices, and the effect of sanctions would have on the economy.
There is no doubt that the Russian economy has encountered difficult and challenging times both politically and economically since mid 2014. However, the country has quietly gone about its business in reinventing itself. This has been done by a new focus on four key sectors of the economy, namely Agriculture, Agrofisheries, and the Automative and Pharmaceutical industries. These are key areas where there are still opportunities for investment. Failure to not only understand the opportunities, but to grasp them will leave European countries and the West left behind in Russia’s resurgence.
The Effect of Sanctions
In general terms, the impact on trade due to sanctions within Russia has been limited. This is because they only apply to a small number of goods, services and individuals. Most companies are free to conduct business and have been doing so. It is only Russian businesses which are owned by specific individuals on the ‘sanctions list,’ and western firms selling military, technology, offshore oil consultancy services or specific food products that are affected. For the most part, companies are free to continue to conduct business.
Therefore, the case for doing business with Russia should not be as difficult as it is often imagined to be. Political preoccupations, however, have participated in clouding business decision making in recent years. There is still a strong demand for UK produced goods (and other European branded and blue chip goods) and services to Russia where profits can be significant due to the size of the market place here.
Products and Services
Certain sectors appear to hold particularly high potential for British companies. Hi-tech British-manufactured products for use in the Russian natural resources sector – measuring equipment or pipeline technology, for example, are strongly in demand.
There is a substantial amount of onshore exploration and extraction taking place in Russia, which can compensate for potential losses that may be experienced by British exporters in sanctioned offshore oil production.
Anything to do with Russian railways also provides opportunities for British exporters. Several huge modernization projects are currently under way. 2017 alone will see the renovation of 3,700 miles of track involving all types of repair, according to the official network website.
The 2018 World Cup in Russia also offers potentially rich pickings. Three of the European regional sponsorship slots are still up for grabs, and the event requires massive hotel and transport infrastructure redevelopment in the 12 host cities. Ticketing systems and crowd control models are also areas where British expertise would be welcomed. Britain has a fantastic reputation for organizing large-scale events, as the London Olympics showed. Russians in particular think that the British are great at this. Now is the time to push for British businesses to get involved.
The British luxury goods market remains strong. Brands such as Range Rover and Bentley have a real cachet in Russia, as do the names of British boarding schools and universities.
Accepting sanctions as a minimal constraint, and embracing Brexit as an opportunity for expanded horizons, it is time for British companies to look beyond stereotypes about Russia to the wealth of opportunities that lies beyond.