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15.10.08
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The Eyes On The Prize
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By Sergei Balashov
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Private Russian businesses appeared to be the one party most interested in joining the WTO, as membership in the organization would grant numerous advantages, primarily to the exporting industries such as metallurgy. But these aspirations have been swarmed by the government’s rising concern that a number of Russian industries, particularly agriculture and manufacturing, are not competitive enough, and would be rendered immobile should barriers for foreign-made products and a myriad of protectionist measures currently in place be torn down.
The negotiations between Russia and the WTO have been focused on ensuring that the country joins in on favorable terms, doing as little damage to its own economy as possible. Yet, for a long time now accession to the WTO has ceased to be a mere economic matter, instead becoming a tool of political leverage in numerous rifts between Russia and WTO members.
Recent events have only highlighted this trend. The U.S. Secretary of State Condoleezza Rice said that Russia’s WTO bid was in question, following its turn to “authoritarianism at home and aggression abroad.” It appeared that some in the Russian government were actually relieved, as not everyone was happy with the prospect of joining. The Russian Agriculture Minister Alexei Gordeyev earlier labeled the WTO as a hypocritical organization that is “harmful for the global economy.”
Despite Russia’s assurances that the negotiations haven’t actually been halted, it seems that they have indeed slowed down, and the future of Russia’s WTO bid is foggy at best. Yet the business interests of Russian companies wanting to enhance international partnerships and trade are still in place, and they are now left with no choice but to take action on their own and lead the way.
“From a business point of view, we don’t like to be caught in political friction,” said Andrew Somers, the president of the American Chamber of Commerce in Russia. “Business wants to move forward, as it sees enormous opportunities on both sides.”
It was business, and not the government, who initiated the formation of the “Russian-American WTO working group” at the St. Petersburg Economic Forum in 2007, in order to champion Russia’s getting the Permanent Normal Trade Relations Status, which the country has been stripped of by the Jackson-Vanik amendment. The Troika Dialog investment bank, LUKoil, IBS, Russia’s largest aircraft producer Sukhoi, Citigroup and the Russian Standard Bank were among those who joined the effort, led by Chevron’s CEO David O’Reilly and Severstal’s CEO and owner Alexei Mordashov.
“I think a lot of work can be done in the interim by businesses to clarify what their priorities are. Hopefully the political situation will improve, but we shouldn’t try to wait till that happens; we should work together more closely,” said Somers. “I think that if you take the Russian Union of Industrials and Entrepreneurs along with other Russian business organizations, the American Chamber, and perhaps the U.S. Chamber of Commerce in Washington, they could develop a format to raise specific, concrete issues that could be moved forward or resolved by a more structured approach.”
There could be other, more specific forms of cooperation that don’t necessarily deal with trade. Some partnerships aimed at attracting investments that could be boosted by Russia’s WTO membership are already in place or taking shape. Back in February, the Russian Union of Industries and Entrepreneurs set up the International Council on Cooperation and Investment, its main goal being to coordinate the activities of domestic and foreign players on the Russian market, as well as to improve the conditions for conducting business in the country. Membership is open to any Russian company with foreign capital.
The American Chamber of Commerce has also intensified its activity, primarily the regional programs, which can be the most effective way to get American companies in touch with partners in the regions. “In the last three weeks I led delegations to Vladimir, Ekaterinburg and Kazan, and I had 25 companies accompanying me,” said Somers. “We’re doing more than we did before, because of the political tensions.” Somers claimed that before the “political freeze” of the last eight months, visits from economic and development departments of individual U.S. states became more frequent, but these activities cooled in the wake of the bilateral crisis.
“We’re going to re-stimulate it next year,” said Somers, revealing that the American Chamber plans to develop its regional program further, targeting the regions with the best opportunities.
The financial crisis has left its mark on the economic landscape, and it could also impact the activities of the Russian businesses in the next year and a half. “The WTO is being brushed aside by the economic issues, maybe more so than by the political tensions, and it is possibly the least interesting issue for the economists right now,” said Anton Struchenevsky, the senior economist at the Troika Dialog investment bank. Mounting external debt, he claims, is going to take center stage in the coming year. “Russian companies and banks are going to have to pay off $160 billion by the end of 2009, and they’ll have to find some sources of funding. While not everyone can afford to borrow from the Central Bank, they’ll most likely have to turn to foreign banks, so that is where more engagement will be needed,” Struchenevsky noted. |
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