It will be a test. And a big one at that, according to participants at a recent gathering of the Russian-American Business Council.
U.S. automotive giant General Motors’ plan to invest up to $330 million in Russian carmaker AvtoVAZ is being hailed as a highly positive sign for the Russian business community.
But it will also put the country under a microscope as investors watch how well a foreign business can perform here, according to participants at the recent business council meeting.
If things go well, these business leaders say, it can only bode well for Russia’s future.
"Everyone in America will be watching GM and thinking: ‘Those guys can’t be stupid. If they are investing in Russia, maybe we should, too,’" said Dmitry Afanasiyev, managing partner for Yegorov, Puginsky, Afanasiyev & Marks, LLC, a law firm that handles the interests of Russian businesses abroad and international businesses in Russia. "The days of babysitting Russia are over. There will be a new, pragmatic, commonsense approach to Russia," he said.
Many told The Russia Journal that GM’s massive investment into a domestic industrial enterprise shows that worries of political instability in the aftermath of the 1998 financial crisis are subsiding and that foreign investor confidence is back.
"I think it is a revolutionary step," said Ednan Agayev, vice president of the Russian-American Business Council, a nongovernmental organization that promotes the interests of Russian businesses in the United States. "The Americans are starting to consider the current political situation [in Russia] as stable and predictable."
James F. Collins, the U.S. ambassador to Russia, who spoke at the event in Moscow, said: "The economic relationships [between the United States and Russia] have very good prospects. There is a new interest. We are seeing some potentially very important business coming."
"I recently met with a number of our businesspeople here who represent major companies, and they are positive about their business over the past years," Collins added. "The critical thing here would be for the Russian business community to demonstrate to their American colleagues that this is a place you can effectively invest in."
But many present also said that the Americans have to show something to their Russian colleagues as well – mainly that Russian firms would get fair treatment in the United States. David Yakobashvili, chairman of Russia’s leading juice and dairy producer, Wimm-Bill-Dann, was one of those saying he hoped for a better approach from Americans toward Russian businesses.
"We just hope that there is an attitude, or at least a move toward an attitude, that Russian business has the right to exist," he said. "Of course, we have to do a lot of things, too – become more transparent, adopt the accounting practices of civilized business and so on."
Yakobashvili has reason to be concerned about the acceptance of Russian business in America, as his company has previously disclosed that it will seek a listing later this year on the New York Stock Exchange. Yakobashvili declined to comment on the move, however, saying that legal reasons barred him from making any statements on a potential listing.
Agayev of the Russian-American Business Council noted that, while there is a basis for good business relations between the countries, protectionism still exists in both. "Our producers suffer the most because American industry and the economy are by far much more advanced, strong and shrewd than ours," he said. "That’s why, regardless of our protectionism, they have better access to the Russian market, and that’s why we are asking them to give us a break and lift those barriers. Our producers, including metal producers, won’t hurt the American economy."
Collins stressed that any strains in U.S.-Russia business links were strictly due to normal trade relations, referring specifically to recent anti-dumping measures that the U.S. government took against Russian non-ferrous metal imports. "I don’t think it is a matter of negative attitude," he said. "It is a matter of trade relations in any given moment in any given commodity in the U.S. market."
He added that if there is a case in which "our industry believes it is facing an unfair competition in the American market, they have the ability to bring action to address that problem. Last year, we had about 300 anti-dumping cases, and only a few – about a half-dozen – were Russian."
Collins said that it was crucial for Russia to pursue a more determined policy to join the World Trade Organization. Any disputes, he added, would best be handled within the framework of the WTO.
"A lot of the issues that have arisen in the past over the specific commodities that were to be traded in the United States have arisen because the flows of these commodities, and not just from Russia, have disrupted the American market," Collins said. "No less than the Russian industry, our industry wants stability to its market. They are ready to compete, but they want to make sure there is a degree of stability and predictability in competition."
Wimm-Bill-Dann’s Yakobashvili said the future of U.S.-Russian business relations was largely in the hands of the governments. "If our governments could make an effort and elaborate intergovernmental agreements that would facilitate the arrival of American capital into Russia’s market and the export of Russian goods into the American market, that would be great," he said. "But there should be goodwill by both countries. I have a feeling that both countries are in the waiting state, and I don’t see that either side is willing to make the first step. I hope that there is a change. But I don’t see that happening in the next two or three years."
Collins, on the other hand, said it was mainly up to the business community to develop business relations. "The economic relationship today doesn’t really depend so much on government-to-government relations as it does on our two private sides and those who really have money to use and to trade in an investment business, working together to build something bigger," he said.
"And, to be very frank, that depends on people finding Russia to be an attractive place to do business, to be a profitable place. If you look into the comments of American businesses, everyone is hoping and waiting to see the kinds of steps that the [Russian] government has promised will be forthcoming. How long they will wait is something only they can tell you," he said.
(In his periodic Global View column, German Abayev takes a look at Russia’s business relations with the world.)