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U.S. Department of State
Russia Country Commercial Guide
Office of the Coordinator for Business Affairs
COUNTRY COMMERCIAL GUIDE - RUSSIA
FY 1996
U.S. EMBASSY MOSCOW
JUNE 30, 1995
Table of Contents
I. Executive Summary
II. Economic Trends and Outlook
III. Political Environment
IV. Marketing U.S. Products and Services
V. Leading Sectors for U.S. Exports and Investment
VI. Trade Regulations and Standards
VII. Investment
VIII. Trade and Project Financing
IX. Business Travel
X. APPENDICES
A. Country Data
B. Domestic Economy
C. Trade
D. Investment Statistics
E. U.S. and Country Contacts
F. Market Research
G. Trade Event Schedule
This Country Commercial Guide (CCG) presents a comprehensive look at
Russia's commercial environment through economic, political and market
analyses.
The CCGs were established by recommendation of the Trade Promotion
Coordinating Committee (TPCC), a multi-agency task force, to consolidate
various reporting documents prepared for the U.S. business community.
Country Commercial Guides are prepared annually at U.S. Embassies
through the combined efforts of several U.S. government agencies.
I. EXECUTIVE SUMMARY
Overview of Import Market
A country of 150 million-plus people with tremendous natural and human
resources is not a market which U.S. business can afford to neglect for
long. Russian demand is present across the board from consumer goods to
capital equipment. Foreigners, foreign products, and foreign ideas are
now common in Russia today - a sharp contrast from a few years ago.
U.S.-Russian trade has increased significantly. Two-way merchandise
trade with Russia in 1994 was a record $5.9 billion and U.S. exports in
the first quarter of 1995 increased 9.3% over the same period in 1994.
U.S. imports from Russia increased 125% over the same period in 1994.
There are no significant legal barriers to the import market, but there
are a number of factors which discourage trade.
Brief Synopsis of Commercial Environment
The Russian Federation is currently a country in economic, political and
social transition of comparable scope and consequence to the fall of the
Tsarist regime in the early part of the 20th century. The duration and
final outcome of this process are unknown. As a result, uncertainty,
high risk, as well as great opportunity, characterize the commercial
environment in Russia today. Doing business in Russia is not for the
timid, but for the bold. Fees, import licenses, export licenses, and
other government regulations are subject to frequent change - often
without notice. Taxes are continually in flux and are often applied not
just to profits, but also to revenue, making business operations at
times uneconomical. A business legal system is lacking. Contract law,
commercial codes, and legal enforcement of private business agreements
are almost non-existent. An Executive-Parliament consensus seems to be
gelling to proceed with market reforms, the liberalization of foreign
trade rules and regulations and the reduction of some taxes. This
consensus will be essential for the commercial environment to stabilize
and improve.
Russian Business Attitude Toward the United States
Russian firms and customers admire U.S. technology and know-how and
generally want to do business with U.S. companies. In the Russian Far
East, a strong U.S. commercial presence is viewed as a positive
counterbalance to other regional economic powers.
Major Business Opportunities
There are few products or services which are not in demand in Russia. A
wide range of U.S. consumer goods manufacturers - Procter & Gamble,
Coca Cola, Mars - have already made Russia a major expansion market for
their companies. In many of the industrial sectors identified as
priority by the Russian Government, such as oil and gas,
telecommunications, aerospace, health care, mining and defense
conversion, there are numerous commercial opportunities for U.S.
exporters and investors. Trade finance is a key to success in this
market.
Major Roadblocks to Doing Business
U.S. and other foreign companies operating in this market encounter
major difficulties to both trade and investment, including the
following:
-- ownership and jurisdictional disputes;
-- financial illiquidity of a majority of Russian firms;
-- lack of a normal commercial market;
-- absence of a commercial legal framework;
-- high cost and general difficulty of doing business;
-- severe infrastructure problems (telecom, roads,
-- banking system, ports, etc.)
-- payments arrears and frozen accounts;
-- frequent changes in government and firm personnel;
-- high taxes which frequently change;
-- frequent changes in the import and export regime;
-- lack of systematic and accessible credit information;
-- mounting crime and corruption
Notwithstanding all of the above, business is being conducted. U.S.
firms are exporting and investing. Activity at the microeconomic level
is vibrant, with new goods and services appearing on the Russian market
almost daily. The number of U.S. firms opening in Russia is expanding
and those with the right product or service, the right local contacts,
business associates and street smarts are making money.
Nature of Local and Third-Country Competition
Western European firms, particularly those from Germany, Italy, Austria,
France and the United Kingdom offer U.S. business the most competition.
Direct flights by Lufthansa from Frankfurt to the Russian Urals
(Yekaterinburg) and to Siberia (Novosibirsk) have stimulated western
European business interest in these parts of Russia. Scandinavian firms
are particularly active in northwest Russia and Chinese, Korean and
Japanese firms are very aggressive in the Russian Far East. Better
credit terms often give the advantage to western European firms.
The opening of U.S. Consulates General in Vladivostok in the Russian Far
East and in Yekaterinburg in the Urals is facilitating U.S. firms'
ability to do business in other than the Moscow and St. Petersburg
regions and helps balance the growing Chinese, Japanese and Korean
commercial influence in the Far East and the German strength in central
Russia. American Business Centers operating in St. Petersburg,
Vladivostok, Khabarovsk, Novosibirsk, Yekaterinburg, Nizhnevartovsk,
Nizhny Novgorod, Volgograd, and Chelyabinsk (and shortly in Yuzhno-
Sakhalinsk) have been of significant assistance to U.S. companies
exploring the tremendous commercial opportunities in the Russian
hinterlands. Growing commercial air connections are making it easier to
reach the Russian Far East: Korean Airline and Alaska Airlines provide
weekly service to cities in the region.
Country Commercial Guides are available on the National Trade Data Bank
on CD-ROM or through the Internet. Please contact STAT-USA at 1-800-
STAT-USA for more information. To locate Country Commercial Guides via
the Internet, please use the following World Wide Web address:
WWW.STAT-USA.GOV. CCGs can also be ordered in hard copy or on diskette
from the National Technical Information Service (NTIS) at 1-800-553-
NTIS.
II. ECONOMIC TRENDS AND OUTLOOK
Major Trends and Outlook
On March 10, 1995, the Government and Central Bank of Russia announced a
bold economic stabilization program for 1995 -- a major breakthrough on
Russia's path to economic reform. Russia's economic team, headed by
First Deputy Prime Minister Chubays and supported by the President and
Prime Minister, worked for months with the IMF and the Parliament to put
together an economic policy agenda consisting of a tight budget,
restrictive monetary policy, and trade and energy sector liberalization.
The government's stabilization program formed the basis for a $6.5
billion standby credit from the IMF, scheduled for monthly disbursement
through 1995 and the early part of 1996.
After four years of large annual declines in Gross Domestic Product
(GDP) and industrial production, the Russian economy is showing signs of
stabilizing in 1995. Real GDP dropped 15 percent in 1994 over 1993, but
has slowed its decline considerably in the early part of 1995. Real
industrial output, while continuing to decline in annual average terms
(down 21 percent in 1994 over 1993), stopped falling from the summer of
1994, and certain sectors show signs of recovery for the first time
since the beginning of market reforms. Official statistics indicate
steady growth in trade and services, sectors that were admittedly
underdeveloped under the centrally planned economy of the former Soviet
Union. By mid-year 1995, services grew to comprise 50 percent of GDP,
while manufacturing shrunk in GDP terms to less than 44 percent.
Unemployment has risen steadily over the past few years, from nearly
zero to 7.5 percent of the workforce in June 1995. In certain depressed
regions and sectors, unemployment is much higher, in contrast to the
very low unemployment rate in Moscow. Experts estimate that another 7
percent of the workforce is currently underemployed -- on unlimited
unpaid furlough or working only part time. Studies indicate that many
of the underemployed are content to keep their wage positions in order
to receive the social benefits provided by the enterprise, while
supplementing their income by growing food at home or working in the
informal economy. Because most of Russia's large industrial enterprises
continue to employ too many workers, experts expect unemployment to
continue to increase steadily. Average wages reached 385,000 rubles per
month in April 1995 (about $75 a month at the end-April exchange rate).
Real average wages (adjusted for inflation) continued their general
decline in 1994 and early 1995. (In the first four months of 1995 real
average wages posted a 29 percent decline over the same period in 1994.)
In contrast, real average income increased significantly in 1994 --
another indication that many Russians earned extra income outside of
their regular jobs -- before falling off somewhat in early 1995. (In
the first four months of 1995, real average income declined 8 percent
over the same period in 1994.)
Inflation has been falling since the beginning of 1995, in line with the
government's commitment to non-inflationary financing of the federal
deficit. Annual inflation (CPI) ran at 303 percent in 1994, down
substantially from the almost 900 percent annual inflation registered in
1993. Average monthly inflation in 1995 has fallen from a peak of 18
percent in January to just under 8 percent in May, and experts expect
the trend to continue through the end of the year.
The ruble abruptly broke the predictable but slow decline which marked
the first eight months of 1994 with a 22 percent one-day drop against
the dollar on October 11, also called "Black Tuesday". Within 48 hours
the ruble regained its pre-fall level of approximately 3,000 rubles to
the dollar. Repercussions from Black Tuesday were harsh and Central
Bank Chairman Gerashchenko, Deputy Prime Minister Shokhin, Acting
Finance Minister Dubinin and the head of the Federal Service for
Currency and Export Control were all eventually removed from their
posts. Official inquiries found that lax credit policy, combined with
poor management of currency intervention by the Central Bank,
contributed to the ruble's fall. In 1995, after three months of steady
decline in line with inflation, the ruble stabilized in mid-April in a
narrow band around 5,000 rubles to the dollar and appreciated 10 percent
as of the print date of this publication in mid-June 1995.
Interest rates, both the Central Bank's official discount rate and 3-
month interbank market rates, fell for the first nine months of 1994,
but rose abruptly in response to the ruble's fall on Black Tuesday.
Respectively, these rates ended 1994 at 200 and 174 percent (in simple
annual terms). In April 1995, the Central Bank lowered the discount
rate five percentage points to 195 percent, while 3-month interbank
market rates have fallen dramatically, and as of mid-June they were just
under 95 percent.
Principal Growth Sectors
Overall Russian industrial production, after experiencing a free fall
for the past four years, is showing signs of having bottomed out.
Consensus data indicate that Russia's real seasonally adjusted
industrial production has enjoyed relative stabilization in the ten
months leading up to June 1995. At the sectoral level, clear winners
and losers are emerging, but the overall picture suggests that the
continuing downturn in the textile, consumer goods, and state defense
sectors is more than balanced by output increases in the chemical, non-
ferrous metal, machine building, construction and other sectors.
By far the largest growth area in 1994 came in the
chemical/petrochemical and non-ferrous metals industries, each of which
have benefited from strong global demand and relative price advantage.
Soda ash output grew by nearly 19 percent, mineral fertilizer output by
16 percent, sulfuric acid output by 12 percent, and synthetic ammonia
output by 2 percent in the fourth quarter of 1994 over 1993. Among non-
ferrous metals, magnesium and magnesium alloys posted modest gains in
1994, and nickel skyrocketed - up 46 percent in the fourth quarter of
1994 over the same period in 1993.
Between the big winners and big losers are a group of industries that
show some tentative signs of strengthening. The timber and wood
processing industry was hit hard by the transition to a market economy,
registering an initial drop (from January 1990 to June 1994) of 70
percent - but is showing signs of limited recovery, with commercial pulp
posting a 10 percent increase in output in the fourth quarter of 1994
over fourth quarter 1993. (The timber industry as a whole still suffers
from the high transportation costs associated with bringing product from
forest to market.) While the food processing industry as a whole is
still in decline, vegetable oil production posted a slight increase in
the fourth quarter of 1994 over the same period of 1993, mostly due to
strong domestic demand. It is possible as well that growth in the food
processing industry is taking place in smaller privatized businesses
(local bakeries, etc.,) which are more difficult for the official
statistics agency to capture. Ferrous metal production is still in
decline overall, but losses in the domestic market have been nearly
balanced by strong world demand. This is noticeable in pig iron, which
posted a 1.6 percent gain in the fourth quarter 1994 output over fourth
quarter 1993, and rolled metal, output of which largely stabilized in
the latter half of 1994 relative to 1993. Likewise, the machine
building sector showed early signs of recovery in the second half of
1994, with tractor production up slightly in the fourth quarter of 1994
over the same period in 1993.
However, trends in the industrial sector tell only part of the story in
Russia. The retail/wholesale trade and service sectors, which together
made up more than half of GDP in 1994 are thriving. Small independent
trading establishments have emerged (usually in the form of kiosks) all
over Russia's major cities, selling a variety of domestically produced
and imported goods. Likewise, the service sector, long underdeveloped
under the Soviet system, is burgeoning, especially in the major
metropolitan areas. Along with the introduction of major western
accounting and legal firms to Russia's corporate make up are small
service providers, who with informal traders make up the bulk of the
cash or "gray" economy.
Government Role in the Economy
Privatization has made great strides in Russia. According to the
government, as a result of small-scale, voucher and post-voucher (cash)
privatization, over 110,000 enterprises have been privatized in whole or
in part. More than 80 percent of Russia's industrial workers are now
working in privatized firms. The start of the central government's
portion of the (cash) privatization program, under which the government
will sell many of its retained holdings in privatized firms as well as
the most of the enterprises which have not yet been privatized, has been
delayed repeatedly. However, this program has made substantial progress
in some of Russia's regions, including sale of the land on which they
are situated to privatized firms, a major innovation President Yeltsin
included in his July 1994 decree on cash privatization.
In addition, the Federal Bankruptcy Agency (FBA) has begun to implement
President Yeltsin's decision of May 1994 to declare insolvent state
firms bankrupt. The FBA completed the first reorganization and sale of
an insolvent state firm in November 1994. The FBA is processing perhaps
300 administrative actions against insolvent state firms as well as
having initiated another 300 actions in Russia's commercial courts.
Although it is too soon to judge how sweeping the FBA's actions against
the over 2,000 state firms it has found to be insolvent, this process is
clearly gaining momentum.
Roughly 85 percent of wholesale and retail prices were liberalized by
the end of 1992. Together with a virtually unrestricted import regime,
price liberalization ended shortages of consumer goods through much of
Russia. A few prices remain regulated by the government, among them
rail transport and housing. Energy prices remained controlled at the
wholesale level, with domestic prices substantially below international
levels.
Balance of Payments Situation
Russia's current account (after rescheduling) registered a surplus for
the second year in a row in 1994, though the level was much lower at USD
1.4 billion. The 1994 surplus reflected a USD 12.3 billion merchandise
trade surplus, offset by a USD 10.9 billion deficit in non-merchandise
trade. Total trade expanded by 9 percent over 1993 to USD 83.7 billion,
after contracting slightly in 1993 over 1992. Russia's non-merchandise
trade deficit increased sharply in 1994 over 1993, led by an increase in
the net services deficit to USD 6.8 billion. In 1994, Russia sustained
a capital account deficit in excess of USD 20 billion for the second
year in a row, including USD 14 billion in principal payments. Net
international reserves (NIR) of the Russian monetary authorities ended
the year down USD 1.8 billion at USD 4 billion, having peaked in the
second quarter at USD 8 billion and then fallen as the ruble came under
pressure in the third and fourth quarters. Gold reserves also fell by
USD 500 million to USD 2.6 billion by year end.
Capital flight continues to plague the Russian economy, although
official data suggest that the rate of capital flight has slowed
somewhat since its peak in 1992. Opinions vary greatly, but a realistic
assessment would place capital flight at close to USD 17 billion in
1994, and would note that little of this is related to criminal
activity, but represents a legitimate desire for safe havens abroad for
foreign exchange earnings.
The U.S. and Russia signed a $900 million bilateral debt rescheduling
agreement on October 25, 1994, formally putting into effect the Paris
Club rescheduling accord reached the previous June with Russia's
official creditors. In it, the Paris Club agreed to reschedule 7
billion dollars in official debt owed by Russia in 1994, thus easing its
repayment burden. In June 1995, the Paris Club reached agreement with
the Russian government to reschedule 6.3 billion dollars in Russian debt
payments due this year and to hold talks with Moscow on rescheduling
Russian debts inherited from the former Soviet Union. The London Club
of commercial bank creditors is expected to reach agreement with the
Russian government in mid-1995, and $500 million in payments have been
already put into trust.
Infrastructure Situation
Although Russia boasts of an extensive transportation infrastructure
built during the Communist era, its communications infrastructure leaves
much to be desired. During the Communist era, Russia invested heavily
in building transportation infrastructure: roads, railways, airports,
and ports. During later years, the government had difficulty
maintaining many of those facilities. In the breakup of the Soviet
Union, Russia lost a number of key ports, which has led to overcrowding
at the St. Petersburg port. Some western companies are finding it
easier to ship goods to Helsinki and then transport them into Russia by
truck. In addition, SeaLand Service operates a container service out of
the Far East port of Vostochniy to Moscow, with onward links to Western
Europe. Russian Far East ports (Vladivostok, Vostochniy, Nakhodka, and
others) now handle more than a third of all cargo and are particularly
important for imports/exports to Siberia and the Russian Far East.
III. POLITICAL ENVIRONMENT
Nature of Bilateral Relationship with the United States
With the end of the Cold War and the reemergence of a Russian State,
U.S. relations with Moscow have evolved rapidly over the last two and a
half years. At meetings in Vancouver, Tokyo and Moscow, Presidents
Clinton and Yeltsin laid the basis for a U.S.-Russian partnership. Over
the last two and a half years we have made great strides forward in a
number of important fields -- particularly arms control. While
disagreements persist on individual issues, the U.S. and Russia now
consult closely on major issues of mutual and international interest.
The United States firmly supports Russia's development into a
democratic/market society, and Russia's further integration into the
international community. The United States has made available
substantial bilateral assistance -- and has led international aid
efforts. The United States has also taken steps to clear from the books
Cold War era legislation limiting contacts with Russia. On April 2,
COCOM ceased to exist, and we are currently working with our partners to
form a new international export regime which will not be directed
against Russia.
Major Political Issues Affecting Business Climate
One of the most pressing issues which defines the business climate in
Russia is the lack of legislation in most areas of economic activity.
This is due primarily to the fact that there is no political consensus
in the State Duma and the Government on how business activities should
be regulated, whether private business should be promoted, and the role
of foreign investment in Russian society. Not only does this make
taxation and business regulation an unpredictable prospect at best,
there is no judicial basis for resolution of disputes between
individuals and/or companies. In the absence of legislation, many
government decisions affecting business have been taken by executive
fiat -- diminishing the prospects for their legitimacy and
effectiveness, and often leading to inconsistent policy.
Even more telling of the business climate is the ever-increasing wave of
crime which has swept over Russia with the passing of Soviet control.
Police are underpaid, outnumbered and outgunned. Individual and
organized criminal elements flourish. Especially problematic is
racketeering, which raises costs for local and foreign businesses alike.
Protectionist elements in the Federal Assembly have raised the
possibility of retaining certain elements of Soviet policy towards
foreign investors. This might take the form of limits on foreign share
holdings, limitations on property ownership, or an increased tax burden
on foreign businesses. This pressure for greater protectionism reflects
the widespread perception that foreign business is taking advantage of
the current unstable situation to make quick money, and these proposals
could make foreign investors wary of further involvement.
Brief Synopsis of Political System, Schedule for Elections, and
Orientation of Major Political Parties
As outlined in the new constitution adopted in December 1993, the
Russian Federation is governed by a political system modeled after many
in the West. The federal system is composed of three branches:
executive, legislative and judicial. The Federation is composed of 89
"subjects," which include regions, ethnically-based autonomous
republics, territories and the cities of Moscow and St. Petersburg.
These "subjects" are granted some autonomy over internal economic and
political issues, but there is considerable disagreement over how much
authority they are to share with Moscow.
Executive Branch: Under the constitution, the executive branch is led
by the President, who is elected for a five-year term. President
Yeltsin's term expires in 1996. He has the right to choose the Prime
Minister (currently Viktor Chernomyrdin), with the approval of the
legislature. The Prime Minister in turn appoints ministers, who are
responsible for the execution of legislation and decrees in their
respective fields.
Judicial Branch: The judicial branch comprises the Constitutional
Court, which reviews the constitutionality of federal legislation; the
Supreme Court, which is the highest civil and criminal judiciary body;
and the Supreme Arbitration Court which resolves economic disputes
between subjects of the Federation. The Constitutional Court held its
first session in the spring of 1995.
Legislative Branch: The legislative branch is composed of a two-chamber
federal assembly, elected for the first time on December 12, 1993. The
Upper House, the Federation Council, consists of two representatives
from each subject of the Russian Federation. The Federation Council
passes decrees on federation disputes and reviews legislation passed by
the Lower House, including the federal budget. The Lower House, or
State Duma, is made up of 450 deputies, one-half selected on the basis
of geographic districts and one-half on the basis of party lists. The
Duma passes most federal laws. Duma members are elected to four-year
terms (after an initial two-year term which began in 1994). The next
legislative elections are scheduled for December 1995.
Political Parties: There are over twenty parties and fractions
represented in the Parliament. Pro-reform forces in the Federal
Assembly are represented most notably by Yegor Gaydar's "Russia's
Choice," generally considered the strongest advocate of market reform.
Grigoriy Yavlinskiy's "Yabloko" party also supports free markets, but is
more inclined to use government funds to ensure a strong social safety
net. Sergey Shakhray's "Party of Russian Unity and Concord" is quite
progressive but more reserved in its support of radical economic reform,
supporting a greater role for the local regions as well as a mixed
economy. "Centrist" groups pushing for a slower approach to reform
include the "New Regional Policy," a loose grouping of centrist
politicians; "Women of Russia;" and "The Liberal Democratic December 12
Union," as well as many independent deputies. There is also a wide
range of parties standing firmly in opposition to market reforms. The
"Russian Liberal Democratic Party" is a radical right-wing nationalist
party led by Vladimir Zhirinovskiy. Lapshin's "Agrarian Party"
represents Russia's agricultural establishment and favors continued
government support for the agricultural sector. The reconstituted
Communist Party is headed by Gennadiy Zyuganov. The anti-government
parties hold a majority on most issues. In the spring of 1995,
President Yeltsin established two "centrist" movements which he hopes
will be a broad-based coalition behind his policies. The "Russia is Our
Home" movement led by Prime Minister Chernomyrdin comprises center-right
political leaders and factions, leading commercial structures, and many
regional governors. The center-left movement led by Duma Speaker Ivan
Rybkin includes leading social democratic political leaders and
movements. Chernomyrdin's movement is far better organized and well-
financed than Rybkin's at this time.
IV. MARKETING U.S. PRODUCTS AND SERVICES
As Russia continues to make substantial progress toward becoming a
market economy, the process of selling goods and services in Russia is
becoming increasingly market-oriented. The stereotype of Russia as a
homogeneous seller's market dominated by state-owned stores and
unsophisticated customers is long gone. Factors such as finding the
proper sales channel and customer segment, coping with domestic and
import competition, responding to consumer preferences, and pricing
products to the market -- i.e. the same factors that U.S. companies deal
with at home and in "mature" export markets such as Canada and Western
Europe -- are rapidly coming to the fore. However, it must be noted
that the Russian market still displays unique characteristics that
require special approaches and methods by would-be foreign suppliers.
Distribution and Sales Channels
A key initial decision for a U.S. firm seeking to introduce its product
into the Russian market is the choice of a distribution/sales channel.
Increasingly, such channels in Russia are diversifying and becoming
product and customer-specific. The following illustrates possible
options for marketing and distributing U.S. goods and services in
Russia.
Direct sales to end-users is currently the most popular approach for
most U.S. suppliers of capital goods and industrial equipment. Russian
end-users of these types of products are predominately large state-owned
or recently privatized enterprises. Such enterprises are typically
located in and around major cities although many are in more remote,
sparsely populated areas throughout the country.
U.S. firms marketing products and services to large Russian enterprises
typically operate from a representative office located in a major
Russian city. The capital city of Moscow is by far the most popular
location for representative offices, although the number of U.S. firms
located in St. Petersburg and Vladivostok, for example, is growing. Due
to Russia's large size and the geographic dispersion of buyers in this
sector, frequent air travel by sales representatives to visit
prospective buyers is a necessity.
It is important to emphasize that while U.S. suppliers of capital goods
and industrial equipment can and do use Moscow as a base of operations,
the great majority of sales are negotiated and transacted "in the
field." The number of potential buyers in this sector that are located
in Moscow is very small compared to Russia's major industrial zones
(i.e. the Urals region, Siberia, the Northwest/St. Petersburg region and
the Far East). Moreover, Russian industrial enterprises are now largely
independent of central government control and usually do not have
permanent representatives in Moscow. Simply put, selling capital goods
and equipment in Russia without leaving Moscow is no longer a
possibility.
Some U.S. suppliers in this sector, especially small and medium-sized
firms seeking a cost-effective alternative to establishing a
representative office in Russia, utilize the services of intermediary
organizations such as commission agents, export management companies and
export trading companies. Such intermediaries, often possessing their
own in-country office and sales personnel, can perform a variety of
marketing services on behalf of U.S. equipment suppliers such as making
sales calls on prospective end-users, exhibiting the supplier's products
at trade exhibitions and negotiating sales contracts.
Use of Agents/Distributors; Finding a Partner
Although Russia still lags behind most western countries in terms of
well-developed distribution networks, U.S. suppliers of consumer goods
and services and smaller-ticket equipment items are increasingly able to
penetrate the Russian market through local distributors. The importance
of Russia's fledgling distribution networks is magnified by the ongoing
privatization of the Russian retail sector, which has resulted in a
rapid proliferation and diversification of retail outlets.
In a few product categories (i.e. apparel, packaged foods, alcoholic
beverages, office equipment and personal computers), foreign suppliers
can choose from a small but growing number of existing Russian
distributors. These Russian middlemen firms can help the foreign
supplier by placing its products on store shelves, handling customs and
transportation matters and even conducting advertising campaigns. Such
existing distributors can be contacted at trade exhibitions, through
trade publications and Commercial News USA, and through the Commerce
Department's Agent Distributor Search service. However, it should be
kept in mind that many of these recently-formed Russian distributors
have comparatively short track records in the distribution business, are
small-volume operations, and their experience is often limited to the
main cities of Moscow and St. Petersburg, or other regional centers.
Because of these limitations, many U.S. suppliers have chosen to market
their products in Russia through authorized distributorships which they
create from scratch. While obviously this approach entails greater
expense than utilizing existing distribution networks, it can provide
valuable protection for the U.S. supplier's product quality and
corporate image. It also allows the supplier to establish a
distribution network capable of handling larger product volumes, which
lowers per unit costs and increases market coverage. Moreover, it is
worth noting that this approach has proven especially popular among
foreign service providers in Russia (e.g. insurance, long distance and
cellular telephone services, etc.).
The first step in creating a Russian distribution network is often for
the U.S. supplier to establish a representative office in Russia from
which it can acquaint itself with the domestic market as well as build
and supervise its local distribution network. The second step is to
identify Russian firms capable of acting as distributors for an American
product. Many U.S. firms seek out Russian companies with experience in
manufacturing, handling or servicing Russian products similar to those
of the U.S. firm -- for example, a Russian assembler of personal
computers that is interested in distributing American-made PCs. Such
contacts can be made at trade exhibitions, by working through a Commerce
Department-supported Consortium of American Businesses in the Newly
Independent States (CABNIS) and through the Commerce Department's Agent
Distributor Service and Gold Key Service.
The final step involves the provision by the U.S. firm of considerable
hands-on training for its distributor, as well as supervision of the
distributor thereafter, to ensure that the Russian distributor upholds
the quality standards of the supplier and the product and that it
effectively reaches the market segment targeted by the supplier. Often,
U.S. firms provide such training by bringing new distributors to their
American headquarters for "internships" in marketing and corporate
culture. The Commerce Department's Special American Business Internship
Training Program (SABIT) can help U.S. firms defray the cost of
providing such internships for Russian business partners.
Franchised Dealerships and Direct Marketing
Foreign firms in certain sectors (i.e. automobiles, home electronics and
fast food) have achieved success in the Russian market by setting up
franchised dealerships with Russian partners. Similarly, a handful of
foreign firms have established wholly-owned retail outlets in Russia.
This latter approach is often used by foreign suppliers of luxury or
high-value-added consumer items (e.g. cosmetics, perfumes, fine china)
as an initial market entry tactic which will be abandoned as soon as
Russian retail establishments suitable to the supplier's product appear.
While franchising and direct retailing are comparatively expensive and
time-consuming undertakings (involving, for example, the difficult
process of locating, leasing and renovating retail space in a major
Russian city), they provide the U.S. supplier with the highest possible
control over the marketing of its goods and services in Russia.
Joint Ventures/Licensing
A small but growing number of foreign firms have entered into joint
venture arrangements in Russia for the manufacture and sale of finished
goods in the domestic market. To date, examples of products produced
and distributed successfully by U.S.-Russian joint ventures include soft
drinks, ice cream, cigarettes, computer hardware and software, and
elevators.
Firms supplying the Russian market through joint ventures seek to take
advantage of lower domestic factor costs, make use of the Russian
partner's knowledge of the domestic market, and circumvent high import
tariffs on finished goods. Uncertainty regarding Russia's legal climate
for foreign investment is a key factor preventing faster development of
joint ventures as a form of market entry by U.S. suppliers.
Additionally, U.S. firms often have difficulty finding viable Russian
partners for joint venture manufacturing because few Russian enterprises
are experienced in producing and distributing Western-standard products.
For this latter reason, joint venture projects undertaken in Russia are
frequently developed in a multi-phased manner. For example, the initial
phase of the project is often limited to the packaging of imported
finished goods on the premises of the Russian partner and subsequent
distribution of the product. After a period of successful operation in
this mode, the project then moves on to assembly and packaging of
imported components. With continued success, the project may progress
to the final stage of utilizing a large percentage of locally-sourced
raw materials in the production process.
At present, production of U.S. products in Russia under license is
relatively rare.
Steps to Establishing an Office
As mentioned above, foreign firms often conduct marketing activities in
Russia through representative offices. Under Russian law, foreign
representative offices are not considered to be Russian legal entities;
they can conduct marketing activities and sign contracts, but cannot
engage in taxable commercial activities.
Representative offices can be in two forms: accredited or non-
accredited. Accreditation is the more time-consuming and expensive
approach, and it requires the foreign firm to have a Russian Government
sponsoring organization (usually the Ministry of Foreign Economic
Relations or an industry-specific ministry). However, accreditation
holds certain advantages in that the accrediting sponsor can issue
invitations to foreign personnel visiting the representative office
(which are necessary to obtain Russian business visas) and can assist
the office in making business contacts.
Because accreditation involves the submission of various legal and
financial documents to the Russian Government sponsor, most foreign
firms seeking accreditation in Russia retain a local attorney to handle
the application for them.
Both accredited and non-accredited offices must file a registration form
with the Russian Tax Inspectorate within one month of establishment of
the office.
Selling Factors/Techniques
Two related keys to success in supplying the Russian market are (1)
focusing on buyers with regular export earnings or good cash flow and
(2) not overlooking non-traditional customers.
U.S. suppliers of many types of products, including capital goods and
industrial equipment, achieve success by targeting Russian enterprises
that export a significant portion of their production for hard currency
or generate good cash flow as a result of domestic sales. A slightly
different but equally successful version of this approach is to target
regional Russian government authorities located in natural resource-rich
areas of the country, as these authorities often receive a share of the
export revenues generated by enterprises under their jurisdiction.
For example, U.S. firms frequently report successful sales of small to
medium-sized lots of personal computers, office equipment and consumer
goods (e.g. home appliances and white goods, sporting goods,
automobiles, furniture) to regional and local government administrations
or large Russian enterprises located in oil-producing Western Siberia
and Tatarstan and diamond-rich Yakutia. These agencies use these
products for a variety of purposes, including outfitting their own
offices, supplying population centers in remote areas of the country and
even distributing them to their employees as incentive awards.
Savvy U.S. firms also watch for announcements of major modernization or
expansion projects by Russian enterprises. Often, the Russian
Government helps the affected enterprise pay for the necessary equipment
imports by providing a special allotment of financing, by temporarily
waiving tariffs and quotas on the enterprise's exports, or by
temporarily exempting the enterprise from the legal requirement to
resell a portion of its hard currency export proceeds to the Russian
Central Bank.
Finally, development projects in Russia financed by the World Bank, the
European Bank for Reconstruction and Development and the U.S. Agency for
International Development frequently involve competitive tenders for the
procurement of imported goods and services.
U.S. firms also successfully sell for rubles. Some denominate their
sales contracts in dollars, but accept rubles as payment. The rubles
are then converted on the Moscow Interbank Currency Exchange or some
other currency exchange in Russia by the seller's bank, or through
interbank mechanisms, and then wired to the seller's offshore bank.
Because of the delay between contract signing and receipt of dollar
payment offshore, there is usually a slight difference between the
contract price and the payment received. The purchaser is notified of
the difference, the same bank transfer process occurs, or the seller
accepts the small amount of rubles for local costs and then the product
is shipped.
Advertising and Trade Promotion
As the Russian market grows more competitive and sophisticated, more and
more foreign firms are undertaking domestic advertising as an integral
component of their marketing strategy. Advertising through television,
radio, print and billboard media has become especially characteristic of
the consumer goods and financial services markets. As one would expect,
the number of western as well as Russian advertising agencies active in
Russia is growing rapidly.
At present, the legal/regulatory environment for advertising in Russia
is not well developed. The Russian parliament dissolved by President
Yeltsin in October 1993 had passed a law banning all tobacco and alcohol
advertising, but this law has never been enforced. Russia's first
comprehensive advertising law is now being formulated by the new Russian
Parliament's information committee, but relatively little has been
publicized about the content of this draft law or the timetable for its
completion. In response to several highly-publicized scandals involving
Russian investment firms which embezzled money from investors through
advertisements promising huge and quick returns, President Yeltsin
signed in June 1994 a decree calling for stricter standards of "truth in
advertising." However, an assessment of this decree's impact on the
local advertising market will be possible only after the publication of
implementing regulations.
Both foreign and domestic firms frequently advertise in commercially-
oriented newspapers and journals in Russia, with the following being the
most popular:
Deloviye Lyudi (monthly journal, Russian language)
Izvestiya (daily paper, Russian language)
Kommersant (daily paper, Russian language)
Delovoy Mir (daily paper, Russian language)
Ekonomika i Zhizn (weekly paper, Russian language)
Business MN (weekly paper, Russian language)
Moscow Times (daily paper, English language)
Moscow Tribune (daily paper, English language)
Moscow Business Guide (monthly business directory,
English language)
Delovoi Petersburg (daily paper, Russian language)
St. Petersburg Press (daily, English language)
Trade exhibitions in Russia are a useful mechanism for U.S. suppliers to
expand awareness of their product and meet potential buyers and
distributors. Moreover, U.S. consumer goods suppliers frequently make
substantial off-the-floor sales at Russian trade exhibitions. This
appears to result from the fact that representatives of regional
governments and state enterprises from remote, poorly-supplied areas of
Russia often visit trade exhibitions in major cities in order to
purchase stocks of consumer goods for their region or enterprises.
Pricing Product
It is difficult to generalize about the pricing of U.S. goods and
services in the Russian market. On the one hand, Russia's per capita
income is lower than most western countries which would argue for
pricing imported products toward the low end of the spectrum. This is
especially true for U.S. suppliers that seek to market their products to
a broad spectrum of Russian society (e.g. candy, disposable shavers,
cigarettes).
On the other hand, downward pricing may not be appropriate for products
(i.e. luxury automobiles) that target the fast-growing segment of
Russian consumers who, due to their involvement in private business and
entrepreneurial activities, possess significant discretionary incomes.
In some cases, the relative lack of competition in the Russian market
for certain products allows foreign suppliers to introduce new products
at higher-end prices. Moreover, Russia's relatively high import tariffs
and 23 percent value-added-tax (VAT) put upward pressure on the prices
of many imported goods. At any rate, it is worth noting that with
almost all prices in Russia now decontrolled and with inflation running
at 7-8 percent per month, Russian consumers have grown somewhat
accustomed, at least psychologically, to higher prices.
When developing their pricing strategies, U.S. suppliers should also
take note of the considerable regional segmentation of the Russian
market. While the market for a particular imported product in Moscow or
St. Petersburg may be characterized by the availability of several
competing import and domestic brands, heavy advertising, good consumer
awareness and widespread price competition, the market for the same
product in major regional cities such as Yekaterinburg or Novosibirsk
may be completely different.
Selling to the Government
Despite the nearly complete disintegration of the former Soviet Union's
centralized trading regime, Russian Government organizations (including
central, regional and local authorities) are still potential customers
for U.S. suppliers in certain instances. For example, the Russian
Ministry of Health and the country's more than 100 regional government
administrations frequently make direct purchases of pharmaceuticals and
medical equipment which they in turn distribute to hospitals, clinics
and institutes under their jurisdiction. Also, Russian Government
ministries (or ministry-designated trading organizations) often act as
purchasing agents for goods and services procured under official tenders
financed by international development agencies (e.g. the World Bank, the
European Bank for Reconstruction and Development). However since local
governments in general no longer receive substantial subsidies from the
federal government they make purchasing decisions based on local factors
and contacts. Once again to take advantage of opportunities at the
local and regional level companies must venture beyond Moscow.
Protecting Your Product from IPR Infringement
Russia has made progress in establishing the legal basis for protection
of intellectual property rights. Laws protecting patents, trademarks,
integrated circuits and computer databases in Russia were adopted in
late 1992, and a copyright law came into force in 1993. Russia also
subscribes to major international conventions and agreements on
intellectual property.
However, Russia's implementation and enforcement of laws protecting
intellectual property have not kept pace with legislative developments.
Piracy in computer software, motion pictures, videos, recorded music and
proprietary-label clothing is pervasive, and foreign firms have
experienced significant problems with patent infringement as well.
Moreover, U.S. attorneys operating in Russia report that adjudication of
IPR disputes in Russian courts is difficult due to the latter's lack of
experience with these issues.
Need for a Local Attorney
Russia has yet to develop a codified commercial or tax code. As a
result, the great majority of commercial regulations are contained in
thousands of individual presidential, governmental and ministerial
decrees. Often the relationship between these decrees and existing laws
is overlapping, conflicting or unclear.
While one of the key tasks before the newly-elected Russian Parliament
and the Government of President Yeltsin is to develop a modern, codified
body of business law, this will not be accomplished overnight.
Therefore, for the foreseeable future U.S. firms operating in Russia
should use the services of a local attorney for most legal transactions.
The Consular section of the Embassy maintains and will make available
upon request a list of local attorneys.
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
Best Prospects for Non-Agricultural Goods and Services
(figures are US$ millions, unless otherwise noted)
1. General Consumer Goods (GCG)
Russia has become a fabulous market for U.S. consumer goods. Russian
consumers, accustomed to Soviet era shoddy goods and shortages, have had
a long pent-up demand for Western luxuries. As Western consumer goods
reached Moscow and St. Petersburg markets, well-to-do and middle class
Russian consumers responded with non-stop purchasing. Now, U.S.
consumer goods companies can turn to supplying the 150 million plus
Russian consumers outside Russia's two leading cities, Moscow and St.
Petersburg, who are still unable to purchase most Western consumer
goods. Best prospects include cosmetics, perfumes, cleaning products,
videotapes, books, pet supplies, and others.
Data Table
1994 1995 1996
A. Total Market Size 2000 3000 4000
B. Total Local Production 1200 1000 800
C. Total Exports 50 50 50
D. Total Imports 850 2050 3250
E. Total Imports from U.S. 30 34 100
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
2. Building Products (BLD)
Though the quality of Russian produced building products is
substantially lower than Western products, their price is just as high.
As a result, Russian firms generally prefer to buy Western products.
Building products are sold through wholesale and retail shops. European
suppliers are developing an increasing share of this market. Demand is
especially high in major industrial cities, where many offices, shops,
and hotels are being refurbished and built. The most promising
subsectors are building materials and products for interior finishing.
Data Table
1994 1995 1996
A. Total Market Size 620 600 650
B. Total Local Production 445 400 400
C. Total Exports 81 80 100
D. Total Imports 256 280 350
E. Total Imports from U.S. 27 24 104
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
3. Computers and Peripherals (CPT)
The computer market is one of the most dynamic in Russia. While other
industries are slowing down, computer production and trade continue to
gain momentum. Buyers are moving from mediocre computers produced in
Hong Kong, Taiwan, Singapore, and Russia to high quality computers and
peripherals from the U.S., Europe, and Japan. The March 1994 lifting of
COCOM restrictions on importing technology into Russia has greatly
expanded U.S. export potential in this market. While the demand for
286-based machines is lower, 386 and even 486 machines are winning the
market. Hundreds of computer trading companies have been established
recently, and most want to distribute U.S. products. The most promising
subsectors are 386 machines, local area network equipment, laser
printers, and scanners.
Data Table
1994 1995 1996
A. Total Market Size 1158 1140 1160
B. Total Local Production 821 800 800
C. Total Exports 3 10 10
D. Total Imports 340 350 370
E. Total Imports from U.S. 114 130 205
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
4. Telecommunications Equipment (TEL)
The present Russian telecommunications system has little capacity, low
penetration and call completion rates, and lack of modern communications
services. It has weak and erratic local, inter-city, and international
connections. Telecommunications is one of the most rapidly developing
sectors in Russia. Currently, Russia is developing several
telecommunications projects: international fiber optic and microwave
networks, nation-wide long distance networks, and mobile (cellular or
paging) networks. Most promising subsectors include: fiber optic cable,
switching equipment, telecommunications software, cellular phones.
Data Table
1994 1995 1996
A. Total Market Size 901 940 1040
B. Total Local Production 301 300 300
C. Total Exports 9 10 10
D. Total Imports 609 650 750
E. Total Imports from U.S. 55 88 158
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
5. Aircraft and Parts (AIR)
Russia's airline fleet is faced with massive obsolescence. More than
1,000 aircraft (four-fifths for domestic, the rest for international)
must be replaced by the end of the decade, and many older planes require
replacement parts and extensive maintenance. Russian aviation companies
seek U.S.-made jet engines and avionics to produce low-cost aircraft for
domestic markets. Dozens of independent regional and private airlines
seek to lease new or used U.S. aircraft in order to fly both
international and domestic routes. Russia's new rich, and its new
private companies, are beginning to U.S. light aircraft for recreation
and business transport. Most promising subsectors are large passenger
aircraft, light aircraft, and jet engines.
Data Table
1994 1995 1996
A. Total Market Size 960 805 660
B. Total Local Production 715 650 600
C. Total Exports 100 100 100
D. Total Imports 345 85 160
E. Total Imports from U.S. 343 80 150
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
6. Food Processing and Packaging (FPP)
Consumer demand for high quality, attractively packaged foodstuffs will
make this sector one of the top prospects for the next several years.
Major U.S. food companies (Pepsico, Coca-Cola, Baskin-Robbins, and
others) are investing heavily in Russia, and will require U.S. equipment
to establish new production sites. Also, the Russian government's
International Agroindustrial Fund and an OPIC food processing investment
fund will help Russian food processors to modernize with Western
equipment. Most promising subsectors are baby food making machinery,
ready-to-eat food production lines, soft drink and beer production
machinery, and dairy products packaging equipment.
Data Table
1994 1995 1996
A. Total Market 490 690 890
B. Total Local Production 422 400 400
C. Total Exports 5 10 10
D. Total Imports 288 300 500
E. Total Imports from U.S. 11 10 80
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
7. Forestry and Woodworking Machinery (FOR)
Timber is one of Russia's top potential exports, and the Russian
woodworking industry needs Western-made equipment to improve production
efficiency. This year, the Russian government plans to sell shares in
50 top timber holding companies to raise money for modernization. An
expected U.S. Export-Import Bank framework agreement on forestry and
wood processing will provide financial support for this modernization
effort. Last December, the Russian government established a U.S.
subsidiary, the Russian Timber Investment Corporation, to encourage U.S.
companies to invest in the Russian timber industry. Best prospects
include machinery to make both narrow and wide boards, conveyer belts,
and papermaking machinery.
Data Table
1994 1995 1996
A. Total Market Size 500 600 800
B. Total Local Production 400 350 300
C. Total Exports 20 20 20
D. Total Imports 120 270 520
E. Total Imports from U.S. 8 4 64
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
8. Information Services (INF)
Russian government agencies, financing organizations and banks, Western
companies with offices in Russia, and increasing numbers of private
Russian firms seek integrated information systems for their operations.
The Russian government holds numerous tenders to supply hardware,
software, and services to government agencies. Increasingly regional
authorities are also now installing information systems. Most often,
these organizations seek a reliable Western or Russian information
services firm/systems integrator to design and install an integrated
information system. The 1994 removal of COCOM restrictions on the
import of advanced computers into Russia has accelerated the growth of
this market. Most major U.S. computer companies are now active in the
Russian market. USAID, World Bank, and U.S. Export-Import Bank
financing supports many of these purchases. Best subsectors include
general management information consulting and systems integration.
Data Table
1994 1995 1996
A. Total Market Size 500 600 700
B. Total Local Production 200 400 500
C. Total Exports 10 30 60
D. Total Imports 310 230 260
E. Total Imports from U.S. 30 40 90
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
9. Business Equipment (BUS)
As new Russian firms and government agencies modernize their offices,
U.S. producers can expect continued demand for Western business
equipment. U.S. producers will face strong challenges from Japanese,
Taiwanese, and Korean producers, and weak competition from domestic
suppliers. Aggressive U.S. marketing, especially in major cities
outside Moscow, will lead to strong growth in sale. Best subsectors
include facsimile, copying, and answering machines.
Data Table
1994 1995 1996
A. Total Market Size 540 599 649
B. Total Local Production 300 300 300
C. Total Exports 1 1 1
D. Total Imports 241 300 350
E. Total Imports from U.S. 21 16 66
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
10. Architectural/Construction/Engineering Services (ACE)
Russia is a good market for U.S. construction and engineering services.
In Russia's major cities, old buildings are being renovated, and new
ones built. Outside Russia's major cities, the newly rich and even the
not-so-rich are building or renovating dachas. Many of Russia's large
factories are seeking foreign engineering firms to help them modernize.
For example, Hunter Engineering is close to a $185 million deal to
renovate one of Russia's largest aluminum plants. U.S. firms will need
to be aggressive to gain market share, since Turkish and other European
construction firms are also active in the market. The most promising
subsectors are civil design/architectural services, non-industrial
development services, and hotel/commercial construction and renovation.
Data Table
1994 1995 1996
A. Total Market Size 700 1100 1100
B. Total Local Production 410 710 710
C. Total Exports 10 10 10
D. Total Imports 300 400 400
E. Total Imports from U.S. 50 200 250
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
11. Apparel (APP)
Russian clothing production has plummeted in the last three years. By
the end of 1994, net output of apparel and knitwear was 40% of what it
was in 1991. Russian-made apparel retains its generally poor quality
and unattractive design, while producers increasing prices sharply.
While production of expensive goods remained at the same level, the
output of cheap knitwear, clothes, and underwear declined markedly. Up
to 80% of the population prefer foreign-made apparel. While inexpensive
Chinese, Turkish, and Korean products have much market share, better
quality European and American women's clothing is in demand. Most
promising subsectors are pants and jeans, jackets and suits, shirts,
coats, and skirts and dresses.
Data Table
1994 1995 1996
A. Total Market Size 780 850 950
B. Total Local Production 840 640 640
C. Total Exports 151 150 150
D. Total Imports 91 360 460
E. Total Imports from U.S. 27 12 52
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
12. Oil and Gas Field Machinery (OGM)
Oil and gas field machinery and services remains a promising sector in
Russia. The U.S. Export-Import Bank Oil and Gas Framework Agreement,
World Bank, and European Bank for Reconstruction and Development (EBRD)
loans have greatly improved the market potential. U.S. firms are active
in several large projects to develop oil and gas reserves in Timan
Pechora, Western Siberia, and Sakhalin Island. Gazprom plans
significant pipeline construction and renovation. These projects,
involving billions of dollars invested by Texaco, Exxon, Amoco, Conoco,
Marathon, and others, will require large procurements for oil and gas
field machinery and services. Promising subsectors include
hydrofracturing equipment, pumps, and design and construction management
services.
Data Table
1994 1995 1996
A. Total Market Size 646 650 660
B. Total Local Production 452 450 450
C. Total Exports 17 20 20
D. Total Imports 211 220 230
E. Total Imports from U.S. 131 98 128
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
13. Medical Equipment (MED)
Like other sectors in the economy, the medical equipment sector is
changing. The Russian government is moving from purchasing foreign
medical equipment to buying it from Russian manufacturers. Government
purchases of foreign equipment were usually linked to foreign loans,
foreign credit lines, and international development projects. The
Russian government is now more willing to buy industrial equipment to
manufacture medical equipment and pharmaceuticals. At the same time,
regional health officials and private hospitals are becoming medical
equipment buyers. Also, large industrial enterprises and associations
have become active buyers of medical equipment for their own hospitals,
clinics and medical units. The most promising subsectors are radiology
equipment, diagnostic equipment, dental equipment, and laboratory
equipment.
Data Table
1994 1995 1996
A. Total Market Size 920 960 1010
B. Total Local Production 75 70 70
C. Total Exports 7 10 10
D. Total Imports 852 900 950
E. Total Imports from U.S. 61 64 89
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
14. Electric Power Systems (ELP)
The Russian electric power sector is in disarray. Output of electricity
has been falling since 1991. In 1994, output was 8 percent lower than
in 1993. As a result, more and more demand for power is unsatisfied.
The industry requires equipment, technical assistance, and investment to
modernize its production facilities. More than one third of Russian
power plant capacity is badly outdated. Many foreign firms -- including
General Electric, Babcock and Wilcox, and others -- are involved in
joint ventures and projects with Russian power equipment and power
transmission companies. Best subsectors are gas turbines, steam
turbines, and boilers.
Data Table
1994 1995 1996
A. Total Market Size 117 130 140
B. Total Local Production 100 100 100
C. Total Exports 74 70 70
D. Total Imports 91 100 110
E. Total Imports from U.S. 10 13 28
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
15. Pollution Control Equipment (POL)
Most older Russian industrial enterprises lack adequate pollution
control equipment. Lack of money still prevents Russian enterprises
from purchasing necessary pollution control equipment on a major scale.
A good approach to the market is for U.S. producers to participate in
major Russian industrial modernization projects with secured financing.
Russian end-users have little experience or familiarity with state-of-
the-art Western pollution control equipment, yet should be receptive to
U.S.-made equipment. Most promising subsectors are gas, water and air
emission control equipment and filters, emission control equipment, and
water sanitation and treatment equipment.
Data Table
1994 1995 1996
A. Total Market Size 75 85 995
B. Total Local Production 75 75 75
C. Total Exports 50 50 50
D. Total Imports 50 60 70
E. Total Imports from U.S. 8 10 15
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
Note: Data on 1994 exports and imports come from the Russian
government, and should be considered relatively reliable. Definitions
of products and data gathering techniques may differ slightly. In
general, because of data collection problems, Russian estimates of
imports and exports will underestimate actual figures. Data on imports
from the United States come from the U.S. Department of Commerce, and
are considered to be reliable. We have also checked this data against
Russian data, and find basic confirmation. We were unable to secure
reliable data about total market size or total local production.
Best Agricultural Prospects
Note: Data for agriculture "best prospects", especially PS&D data, are
scarce. For some of the best products, value data have been used. U.S.
agricultural export data for CY1994 come from USDOC's Bureau of Census.
Russian data sources (i.e., the Russian State Statistical Committee and
the Russian Customs Committee) are unreliable, and underestimate actual
trade flows.
RED MEATS, FRESH/CHILLED/FROZEN
(Data in 1,000 metric tons except for imports from U.S.)
1994 1995 1996
Total Market Size - 5980 5880 5700
Total Production - 5510 5370 5250
Total Exports - 0 0 0
Total Imports - 470 510 450
Imports from the U.S. - 30.9 32 28
(USD$1 million)
The above statistics, except for 1994 imports from U.S., are unofficial
estimates.
Red meat exports to the Russian Federation have been stimulated by the
continuing decline in livestock inventories and stagnation in processed
meat production. U.S. meat products are especially competitive given
their price and quality. Niches exist for meat products which run the
gamut from variety meats to prime, USDA portion-controlled cuts.
Recently announced duty changes (the import duties on red meat are
reportedly scheduled to increase from 8 to 15 percent on July 1, 1995),
and the rescission of value-added tax (VAT) exemptions on imported foods
(as of April 1995, the VAT amounts to 10 percent of landed value plus
import duty) will make meat products more costly to Russians, and weaken
demand. Nonetheless, because of the decline in the domestic industry,
Russians will need to continue to source meat from overseas, and U.S.
meats enjoy an excellent reputation. Competition for the Russian market
comes chiefly from the European Union.
U.S. exporters should note that all raw pork shipped to Russia must go
immediately into processing. Additionally, all U.S. exporters should
ensure that they secure all necessary documentation demanded by the
Russian Government, especially the bilingual veterinary protocol.
POULTRY
(All data in 1,000 metric tons except imports from the U.S.)
1994 1995 1996
Total Market Size 1595 1590 1550
Total Production 1235 1215 1200
Total Imports 360 375 350
Total Exports 0 0 0
Imports from the U.S. 310 280 270
(USD$1 million)
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
U.S. poultry exports boomed in 1994, turning the Russian Federation into
the number one export market for U.S. poultry. Russians expressed
special preference for U.S. chicken leg quarters, which were
competitively priced. Market niches exist for other products such as
chicken breasts, turkey, and processed poultry products. The Russian
poultry industry continues to decline, and thus far, poultry has been a
relatively cheap source of protein. Recently announced duty increases
(from 20 to 25 percent, reportedly to take effect on July 1) and the
rescission of VAT exemptions (10 percent of landed value and import duty
as of April 1995) will reduce consumption. Competition is principally
from the European Union.
APPLES
(Data are in 1,000 metric tons)
1994 1995 1996
Total Market Size - 1864 1580 1530
Total Production - 1544 1230 1200
Total Exports - 0 0 0
Total Imports - 320 350 330
Imports from the U.S
(Data unavailable)
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
Given the inadequacies of the distribution system in Russian and the
generally poor quality of Russian apples, Russia will continue to be
obliged to import a significant quantity of apples. Opportunities for
U.S. exporters exist in major cities of European Russia (e.g., Moscow,
St. Petersburg, Nizhniy Novgorod), Eastern Siberia, and the Russian Far
East (RFE). Washington State apples are already making some headway in
the RFE, although New Zealand is also vying for this market. New duties
for apples have not been announced yet. The old duty structure is .2
ECU per kilo except for the period of January 1-July 31, when apples can
be imported into Russia duty-free. A VAT of 10 percent on customs value
and import duties is currently in effect.
TREE NUTS
1994 1995 1996
Total Market Size (no data)
Total Production (no data)
Total Exports (no data)
Total Imports (no data)
Imports from the U.S. 4.39 4.6 4.9
(USD$1 million)
The above statistics, except for 1994 imports from the U.S., are
unofficial estimates.
U.S. tree nut exports to the Russian Federation have been growing
rapidly since 1993. The new import duty for tree nuts has not been
announced (the current duty is 20 percent). A VAT of 10 percent of
customs value and import duties is currently in effect. Markets exist
for tree nuts as inputs (for confectionery and baked goods) and for
direct consumption. Competition comes mainly from the European Union.
VI. TRADE REGULATIONS AND STANDARDS
Trade Barriers
Introduction of new import tariff schedules is, apparently, becoming an
annual event in Russia. Along with this trend is the fact that import
tariffs are being raised. In July 1995, Russia introduced a new import
tariff schedule. The mean 1995 import tariff went up from 11.4% to
12.5%. Although a number of products received lower tariffs, higher
tariffs were imposed on imported goods in most demand, especially food
products. With these changes, the Russian government has raised the
minimum duty to 5%, except for a reduced number of duty-free goods, and
lowered the maximum duty to 30%, except for a few luxury goods.
Besides import tariffs, there are two other types of duties applied to
imported goods: excise tax and value-added-tax (VAT). Excise tax
applies to a number of luxury goods, such as alcohol, cigarettes, cars,
etc. It varies from 10% to 250%. The VAT rate of 23 percent (which is
in reality a 20 percent VAT plus a three percent "special tax" ) is
applied to the import price plus tariff plus excise tax.
Customs Valuation
Customs duties are payable on the customs value of goods in hard
currency or rubles at the current exchange rate. The customs value is
generally considered to be the CIF price of the goods imported. A
customs processing fee of 0.15% of the actual cost of the goods is also
levied. The fee for temporary imports is rubles 1,000. According to
customs regulations, customs processing should take not longer than one
month. If acceptance of goods is refused by Russian Customs,
regulations call for the goods to be returned to the country of origin.
Import Licenses
Import licenses are required for importation of various goods including
combat and sporting weapons, self-defense articles, explosives, military
and ciphering equipment, radioactive materials and waste including
uranium, strong poisons and narcotics, and precious metals, alloys and
stones. Most import licenses are issued by the Russian Ministry of
Foreign Economic Relations or its regional branches, and controlled by
the State Customs Committee. Import licenses for sporting weapons and
self-defense articles are issued by the Ministry of Internal Affairs.
Export Controls
Before 1995, exports of "strategically important raw materials" such as
oil and gas, non-ferrous metals, fertilizers, cellulose, grain, fish
products, rough diamonds and electric power required special export
licenses issued by the Russian Ministry of Foreign Economic Relations
(MINFER) to a limited number of exporters. A presidential decree,
number 245 (article 2) of March 6, 1995 lifted this restriction,
allowing the export of "strategically important raw materials" from
Russia without special permission of MINFER. The decree also abolished
the list of "special exporters." However, export of weapons, military
equipment and dual-use materials and technology continues to require an
export license. Exports of "strategically important raw materials"
still require registration with MINFER.
Import/Export Documentation
Importers are required to complete a customs freight declaration for
every item imported. The declaration form consists of 54 paragraphs and
should be completed in the Russian language for presentation to customs
authorities. Certificates of origin and conformity (see "Standards"
below) should also be presented at customs. Similarly, exporters are
required to complete an export declaration and, if necessary, present
the appropriate export license at customs.
Temporary Entry
Temporary imports by foreign companies which are accredited with Russian
government authorities are exempt from customs duties. This applies to
goods imported only for company use and for one year only. Companies
not accredited with Russian government authorities are charged 3 percent
of the total cost of the product on a monthly basis. In this case,
total cost equals original product price plus all import taxes.
Labeling, Marking Requirements
No special labeling or marking requirements are in effect.
Prohibited Imports
The customs code lists no products which are prohibited from import
under any circumstance.
Standards
Many products imported for sale into the Russian Federation are required
to have a certificate of conformity issued by the Russian State
Committee on Standards (Gosstandart). Gosstandart tests and certifies
products according to Russian Government standards, rather than other
widely-accepted international standards (i.e. the ISO-9000 system).
Gosstandart and its authorized agents are the sole sources for
certification in Russia.
Testing protocols from the IECEE (electrical equipment) and the IECQ
(electrical components), both of which fall under the International
Electrotechnical Commission, from Underwriters Laboratories, and other
bodies are accepted by Gosstandart and help to expedite certification by
the Russian agency. The certificate of conformity is valid for 3 years
and must accompany every shipment. Copies of the certificate are
acceptable if original seals of the U.S. company holding the original
certificate accompany the copy. Russian retailers are obliged to have
on hand certificates for all imported products sold in their stores;
violation of this requirement can bring penalties of up to the
equivalent $10,000.
Free Trade Zones/Warehouses
There are no actual free trade zones in Russia. There are some free
economic zones designed to encourage investments in specific areas, as
well as free customs zones and free warehouses. Customs duties do not
apply in free customs zones and free warehouses. Some production and
commercial transactions can take place within these zones, but not
retail sales. The storage period is not limited. Free customs zones
and free warehouses are located in customs areas (airports, seaports,
railway, and truck terminals).
Special Import Provisions
No special import provisions apply.
Membership in Free Trade Arrangements
Russia does not participate in any free trade arrangements. Russia has
an association agreement with the European Union, proposes to join the
GATT/WTO, and benefits currently from GSP and MFN status in the United
States.
VII. INVESTMENT CLIMATE
Openness to Foreign Investment
While the policy of the Russian government is to encourage foreign
investment, it has had difficulties in creating a stable and attractive
investment climate. Economic and political uncertainty serve as
disincentives to companies looking for investment opportunities.
Although there are no significant legal barriers to doing business in
Russia, the absence of sufficiently developed civil, commercial and
criminal codes is a major constraint. In addition, a confusing tax
system, and a rise in violent "mafia" instigated crime have become a
problem for foreign (and Russian) business. Bureaucratic requirements
can be confusing and burdensome to investors and bureaucratic discretion
may be capricious in awarding tenders or development rights to
companies. Ownership of real property is still being legislated, and
violations of intellectual property are serious and on the rise. A
deteriorated infrastructure adds to the difficulties of doing business -
- telephones, roads and transport are all of poor quality. Corruption
in commercial transactions has become a major issue in the last several
years.
Despite the problems detailed in this report, most U.S. companies in
Russia believe that opportunities justify the risks, uncertainties and
considerable bureaucratic obstacles. Few established foreign companies
are leaving and many continue to demonstrate an interest in Russia's
rich geological and human resources, world-class high-technology and
vast potential market.
Russia enacted an investment law in 1991 which defines the permissible
forms of foreign investments as well as the rights and obligations of
the government and investors. Also in force are laws on enterprises, on
joint stock companies and on the privatization of national assets, as
well as various presidential decrees. In 1994 the government was
preparing for review by the legislature draft laws on concessions, free
enterprise zones, production sharing (for oil exploitation) and a
revision of the 1991 investment code.
The 1991 Investment Code defines foreign investors as foreign legal
entities, citizens, states or international bodies. Foreign investments
may be made in all kinds of property (including intellectual), or placed
in entrepreneurial projects and other activities to derive profit.
Investments may be in the form of wholly-owned companies, joint
ventures, portfolio investment or in (limited) rights to use land or
other natural resources.
Russian foreign investment regulations regarding permissible activities,
prior authorization and notification requirements are confusing and
contradictory. The Ministry of Finance, local authorities and/or
various central government bodies all register foreign investments.
Prior approval is required for investment in new enterprises using
assets of existing Russian enterprises, foreign investment in defense
industries (which may be prohibited in some cases), investment in the
exploitation of natural resources, all investments over 50 million
rubles, investment ventures in which the foreign share exceeds 50
percent, or investment to take over incomplete housing and construction
projects. Additional registration requirements exist for investments
exceeding 100 million rubles. Projects of foreign enterprises may also
be subject to expert examination for ecological considerations or where
a large-scale construction or modernization is envisaged.
The 1991 Investment Code guarantees foreign investors rights not less
favorable than those of Russian investors.
The Russian post voucher (cash) privatization program adopted by
presidential decree in July of 1994 explicitly grants foreign investors
the right to participate in auctions and tenders and to purchase shares
in privatized firms, although the Ministry of Finance must be informed
of such action. Some restrictions do apply. For example, the federal
government can limit foreign access to enterprises in strategic sectors
such as defense, the energy sector, mining and minerals, transportation
and communications. However, the federal government plans to exempt
entirely a list of firms engaged in the sale or production of "strategic
commodities and products" from further privatization at least for the
remainder of 1995. Federal State Property Committee (GKI) Chairman
Belyayev has repeatedly stated that foreign investors will play a key
role in cash privatization and that they will be given national
treatment. Belyayev recently said that foreigners purchased 10 percent
of all shares offered during the first (voucher) phase of privatization
in Russia and that a higher level of foreign participation is desirable
in the cash phase. GKI reports that although Russian law does not yet
allow foreigners to own land, foreign investors can take majority
ownership in enterprises which own land. The first such example has
recently taken place in St. Petersburg. As to municipal and oblast
level enterprises, the local state property committees and
administrations have substantial autonomy and foreign investors will
need to work closely with such authorities.
Traditionally, all research and development in Russia was financed by
the government and occurred in government-owned or controlled institutes
and organizations. The entire system is now in a state of transition.
The government is providing considerably less funding for research that
in the past and individual institutions are actively soliciting
international participation in research projects (although some of the
projects in which American firms have begun active cooperation still
receive significant Russian government funding). The legal basis for
such cooperation is not yet firmly established, however, and the rights
and obligations of all private parties (foreign or Russian)
participating in government sponsored or subsidized research and
development are spelled out in the specific contract and agreements
reached by the parties involved.
Russian law offers few incentives to foreign investors. Those set out
in the 1991 investment law, including certain tax benefits, have never
been implemented, or have been largely eliminated or superseded by
subsequent laws and decrees.
Russia is well along in reforming its foreign trade regime in line with
market standards. Very few non-tariff elements remain. The country has
applied for accession to the World Trade Organization (WTO), has
submitted a memorandum of foreign trade regime, and is preparing for the
first meeting of its working group scheduled in 1995.
Russia has raised import tariffs in several stages beginning from zero
when the Soviet Union collapsed. In July 1994 import duties were raised
across the board, increasing the average weighted tariff to 11 percent
from 7-8 percent, with some duties reaching 50 percent. In March 1995,
by presidential decree, these rates were revised to raise the floor
(except for a reduced list of zero-duty goods) to five percent and lower
the ceiling (except for a few luxury goods) to 30 percent; this raised
the average weighted tariff further to 15-16 percent. A 1995
presidential decree provided for reducing or waiving import duties for
investment projects of USD 100 million or more of which at least USD 10
million is direct foreign investment.
Inherited Soviet-era qualitative restrictions on imports were initially
limited to security and health requirements, but Russia's July 1993
customer protection law stipulated official certification (by
GOSSTANDART) of imported products for conformity to Russian technical,
safety, health and quality standards. Requirements are still evolving,
and are based on a combination of international (mostly European Union)
and Russian standards. U.S. companies have complained of costly
procedures and arbitrary certification requirements. A joint Russian-
U.S. communique of December 1993 pledges cooperation on improving and
simplifying certification, testing and quality assurance. Russia is
establishing reciprocal standardization with the U.S. and with other
countries and is reciprocally accepting foreign certification by
accredited institutions. Import licenses are required on the normal
range of dangerous and harmful materials and goods.
The U.S. Government has imposed antidumping duties on Russian
ferrosilicon (June 1993), titanium sponge (August 1992), and urea (June
1992). Investigations are underway concerning alleged dumping of
Russian pure magnesium, ferrovanadium and nitrided vanadium.
Antidumping duties imposed on Russian uranium in 1992 were suspended in
1993 in exchange for a matched sales agreement.
Banking operations in Russia by foreigners, though improved, remain
problematic. A November 1993 presidential decree imposed a two-year
moratorium on foreign bank operations with Russian residents. This
decree conflicted with a September 1993 decree sheltering foreign
investors from adverse legal changes for three years and violated the
principle of nonretroactivity of law since it applied to foreign banks
licensed in October 1993. A June 1994 decree eased the November 1993
restrictions for existing European banks and an April 1995 decree lifted
the restrictions on the two existing American banks. A pending Duma
bill "On Banks and Banking Activity" contains a statute that extends
until January 1, 1996, a moratorium on foreign banks' dealing with
Russian residents, and introduces the policy of reciprocity for any
foreign bank seeking to obtain an operating license.
The banking bill also allows Russian authorities to set limits on the
total amount of foreign banking capital as a percentage of overall
banking capital. Currently, that limit stands at 12 percent, and the
capital of all operating foreign banks is considerably below this
figure. The Russian insurance industry is also lobbying for protection.
Increasingly, foreign insurance companies may follow the example of a
major American insurance firm, which entered the market via a 50/50
joint venture with a large Russian bank. Measures to limit foreign
attorneys not licensed in Russia from providing legal counsel on Russian
laws have had little effect on the foreign law firms, which continue to
rely largely on foreign lawyers.
Major changes have occurred in the oil and gas sector during the past 12
months. In October 1994, seven foreign joint ventures obtained oil
export tax exemptions for three years for the purpose of capital
recoupment. An additional seven joint ventures received exemptions in
February 1995 on similar terms, while another group of companies hopes
to have its request approved by the end of June 1995. The benefit to
the companies, however, may prove ephemeral, as the government has
announced that it will eliminate the export tax altogether by the end of
1995, replacing it with an excise tax on production to which exemptions
may not apply. In the meantime, the export tax has been reduced from 30
to 23 ecus, with another decrease to 20 ecus expected in June 1995.
In February 1995 President Yeltsin signed into law a bill amending the
1992 sub-surface resources law. The amendments make it easier to obtain
and transfer oil and gas production and exploration licenses, and
substitute more modest royalties for the 10 percent mineral replacement
tax. In June 1995, the Duma passed legislation which would allow
foreign oil companies to enter into production sharing contracts rather
than rely exclusively on existing joint venture provisions in the
foreign investment law; this legislation awaited the approval of the
Federation Council and the President at the time this report was
written.
Another important development was the elimination of oil export quotas
in January 1995. Producers are now allowed to export their oil without
prior approval from the Ministry of Foreign Relations. Nevertheless,
their ability to do so remains subject to their allocation of access
rights to the oil pipeline system by the Ministry of Fuel and Energy and
the state-owned pipeline company Transneft. Under current rules, this
means that roughly one-third of a company's production is given access
to pipelines serving hard currency export markets. Those established
joint ventures which qualified for oil export tax exemptions have been
given priority access to the pipeline system for the entirety of their
production.
Conversion and Transfer Policies
Russia has a unified exchange rate which floats, based on a daily Moscow
Interbank Currency Exchange auction where the Central Bank intervenes to
smooth fluctuations. In practice the Central Bank exerts considerable
influence on the rate as it collects and resells most of Russia's export
earnings.
The ruble is fully convertible within Russia and CIS countries which
remain in the ruble zone. There are currently no restrictions on profit
repatriation. In January 1994 commercial banks became responsible for
monitoring the repatriation of export earnings.
Foreign and domestic companies may acquire, hold and sell foreign
exchange freely, though hard currency cash transactions for goods and
services within Russia are prohibited. Russian enterprises are required
to convert 50 percent of foreign currency earnings into rubles by
selling such currency on either the currency market or to the Central
Bank of Russia.
Without special permission it is illegal for Russian companies or
citizens to maintain a bank account outside of Russia for purposes other
than operating expenses. Licenses are required for offshore accounts
and can be difficult to obtain. Non-residents can open individual and
commercial ruble accounts for servicing import/export operations
(referred to as "T-accounts") and for investment (referred to as "I-
accounts"). However, ruble balances in T-accounts many not be converted
back to U.S. dollars.
Expropriation and Compensation
The 1991 Investment Code prohibits the nationalization of foreign
investments except following legislative action and where deemed to be
in the national interest. Such nationalizations may be appealed to the
courts of the Russian federation, and are to be paid with prompt,
adequate and effective compensation.
While the domestic political situation remains ambiguous, the current
central leadership is unlikely to nationalize foreign investment or
engage in expropriation. However, local government interference in
several cases appears tantamount to expropriation; arbitration or legal
proceedings are pending in some of these cases.
Dispute Settlement
Russia has a body of conflicting, overlapping and rapidly changing laws,
decrees and regulations which has resulted in an ad hoc and
unpredictable approach to doing business. Independent dispute
resolution in Russia is difficult to obtain; the judicial system is
poorly developed. Regional and local courts are not accustomed to
adjudicating either commercial or international matters, and they (as
well as courts in Moscow) are often subject to political pressure.
Most western attorneys still refer their western clients who have
investment or trade disputes in Russia to international arbitration in
Stockholm or to courts abroad. However, a foreign arbitration award can
only be enforced in Russia if there is a reciprocal treaty between
Russia and the country where the order was made, or, if no such treaty
exists, if a Russian court reviews the procedures which led to the
granting of the award and agrees that it was properly made and can be
enforced.
It is therefore worth considering the alternatives available in Russia.
One choice is the Arbitration Court of the Russian Federation, which is
part of the court system. It has special procedures for seizure of
property before trial, so property cannot be disposed of before the
court has heard the claim, as well as for the enforcement of financial
awards through the banks. Additionally, the International Commercial
Arbitration Court at the Russian Chamber of Commerce and Industry will
hear claims if both parties agree to refer disputes there. Applications
can be made by parties to foreign trade agreements and by companies with
foreign investments.
The weakness in the system is the lack of differentiation in outcomes.
All awards and orders are enforced by the officials of the district
court whose procedures have not been modernized to take account of
changes in business. There is hope that a draft law on enforcement will
result in more effective litigation.
Russia is a member of the International Center for the Settlement of
Investment Disputes and accepts binding international arbitration.
Performance Requirements
Performance requirements are not imposed by Russian law, and are not
widely included as part of private contracts. However, they have
appeared in the agreements of large multinational companies investing in
natural resources.
Investors are not required to disclose proprietary information to the
Russian government as part of the regulatory process.
Right to Private Ownership and Establishment
Both foreign and domestic legal entities may establish, purchase and
dispose of businesses in Russia. Investment in those sectors, affecting
the national security (insurance, banking, natural resources) may be
limited.
Protection of Property Rights
The constitution and a presidential decree issued in 1993 give Russian
citizens general rights to own, inherit, lease, mortgage, and sell real
property; however, legislative gaps and ambiguities impede the general
exercise of these rights. Russia does not yet have a land code to
regulate land use and ownership. Thus far, Russian law and practice
appear to restrict or prohibit foreigners from owning real estate. The
presidential decree of 1993 gave joint ventures with foreign
participants the right to own real property, and a privatization decree
issued last summer permitted foreign owners of privatized companies to
receive title to enterprise land; however, such rights have not been
codified and legislation regulating land use currently being considered
by the Duma would likely prohibit foreigners from owning land. The
rights of Russian citizens to own and sell residential, recreational,
and garden plots is clearly established with over 40 million properties
of this type under private ownership. However, uncertainty about more
general rights to land title and mineral rights will persist until the
Duma adopts clear and comprehensive legislation to regulate land use and
ownership.
In 1992-93 Russia enacted laws strengthening the protection of patents,
trademarks and appellations of origins, and copyright of semiconductors,
computer programs, literary, artistic and scientific works, and
audio/visual recordings.
The Patent Law, which accords with the norms of the World Intellectual
Property Organization, includes a grace period, procedures for deferred
examination, protection for chemical and pharmaceutical products, and
national treatment for foreign patent holders. Inventions are protected
for 20 years, industrial designs for 10 years, and utility models for
five years. One must wait four years before applying for a compulsory
license. The Law on Trademarks and Appellation of Origins introduces
for the first time in Russia protection of appellation of origins and
provides for automatic recognition of Soviet trademarks upon
presentation of the Soviet certificate of registration.
The Law on Copyright and Neighboring Rights, enacted in August 1993,
protects all forms of artistic creation, including audio/visual
recordings and computer programs as literary works for the lifetime of
the author plus 50 years and is compatible with the Bern Convention.
The September 1992 Law on Topography of Integrated Microcircuits, which
also protects computer programs, protects semiconductor topographies for
10 years from the date of registration.
Russia has acceded to the Universal Copyright Convention, the Paris
Convention, the Bern Convention, the Patent Cooperation Treaty, the
Geneva Phonogram Convention, and the Madrid Agreement. Under the U.S.-
Russian Bilateral Investment Treaty (not yet ratified by the Russian
side) Russia has undertaken to protect investors' intellectual property
rights. The U.S.-Russia Bilateral Trade Agreement mandates protection
of the normal range of literary, scientific and artistic works through
legislation and enforcement.
While the Russian government has successfully passed good laws on
protection of intellectual property, enforcement of those laws has been
a low priority. Russian authorities are engaged in a comprehensive
revision of the Russian criminal and civil codes, including sections
pertaining to intellectual property rights which would provide
strengthened penalties, the establishment of specialized courts,
particularly a patent court, with trained and experienced judges and
attorneys, and trained police and customs officers. Until these
measures become reality, however, there is widespread marketing of
pirated U.S. (and other) video-cassettes, recordings, books, computer
software, clothes and toys. Losses to manufacturers, authors and others
are estimated to be in the hundreds of millions of dollars.
The Russian Intellectual Property Agency, established in 1992 with
direct accountability to the Russian president, was given responsibility
to develop and coordinate state intellectual property policy, promote
copyright protection, and collect and distribute royalties. It was
replaced in October 1993 by the revived Russian Authors Organization
(RAO), a semi-official agency combining supervisory functions with
advocacy of authors' commercial interests. Rospatent is the official
body responsible for registration and protection of patents and
trademarks.
Regulatory System: Laws and Procedures
The legal system in Russia is in a state of flux, with various parts of
government struggling to create new laws on a broad array of topics. In
this environment negotiations and contracts for commercial transactions
are complex and protracted. Russia has implemented only part of its new
commercial code and investors must carefully research all aspects of
Russian law to ensure that each contract conforms with Russian law and
embodies the basic provisions of the new, and where still valid, old
codes. Contracts must likewise seek to protect the foreign partner
against contingencies which often arise. Keeping up with legislative
changes and presidential decrees is a daunting task. Uneven
implementation of laws creates further complications; various officials,
branches of government and jurisdictions interpret and apply regulations
with little consistency and the decisions of one may be overruled or
contested by another. In addition, while a foreign investor may win a
favorable decision from a Russian court, enforcement of judgments is
problematic.
Legal requirements may be less burdensome than reaching final agreement
with local political and economic authorities; registration can be a
lengthy, bureaucratic process, particularly where natural resources or
defense production are involved. Corruption is widespread and the fears
of some Russian officials that foreigners will purchase Russian assets
at below-market rates can impede bureaucratic approval.
The Russian government is in the process of establishing a procurement
regime. So far that regime consists of a single law passed in December
1994 and several implementing regulations currently in preparation.
Russian officials have sought to make the law compatible with WTO
standards and note that it does not prevent market access by foreign
enterprises. However, it also gives preference to domestic suppliers
and allows the federal government to dictate supply in certain cases.
Officials also say that Russia is considering signing the WTO
procurement code as part of WTO accession.
A major complaint of foreign business is the tax system, in particular
the number of taxes, the stability of the system, transparency and due
process. Russia imposes numerous taxes including profits, excess wage,
dividend, withholding, payroll, road use, property, VAT, import and
export tariffs, excise and local taxes. These taxes may total more than
a company's profit - proving a very real disincentive to both Russian
and foreign businesses. In addition to high rates, taxes have been
changed frequently and radically, often with no warning and sometimes
with retroactive effect. Businesses are unable to rely on a particular
tax regime and may suddenly find themselves unable to make a profit.
Finally, businesses complain about the lack of due process -tax
penalties are high and do not distinguish between inadvertent and
criminal errors and the appeals process is cumbersome. The Duma is
beginning to address these problems. It passed a new profits bill,
signed into law, which repeals the excess wage tax beginning January 1,
1996. In mid-1995 the Duma was deliberating changes to the basic tax
law to address the due process, stability and transparency problems.
Finally, the Finance Ministry in 1995 was drafting a basic tax code
which should be introduced into the Duma in the fall of 1995 and take
effect in 1997.
Efficient Capital Markets and Portfolio Investment
Although undervalued Russian companies are attractive for outside and
domestic investors, significant problems currently inhibit the full
development of the market. Barriers to portfolio investment include an
uncertain tax structure, licensing requirements for investment by non-
residents, and the uncertain shape of the political landscape in the
next year. In the spring of 1995, a little-known federal service for
currency and export control revived an obscure 1992 measure requiring
licenses for hard currency foreign portfolio investment. Another major
problem area is undeveloped market infrastructure, which complicates the
settlement and clearing of trades. Shareholder rights violations also
negatively affect the investment climate and depress the market for
shares of Russia's privatized enterprises. Corporate governance in
general is a major issue, as enterprise directors regularly disregard
the rights and interests of outside investors. A joint-stock companies
bill was drafted in 1994 and the Duma approved it in the first reading
in June 1995.
Nevertheless, major portfolio investors are eyeing the Russian market
with anticipation. A Federal Commission on Securities and Capital
Markets was created in November 1994 to oversee market regulation. In
May 1995, the Duma passed a long-awaited bill on the securities market;
the bill may be signed into law by President Yeltsin by mid-summer 1995.
Investors are also encouraged by the recent establishment of western-
style registrars and custody services, and the entry into the Russian
market of major western market players.
Political Violence
The political climate in Moscow is currently stable but unpredictable
over the medium to long term. After the violent political confrontation
of late 1993, politics have returned to the floor of the legislature and
the offices of government. Political demonstrations remain modest in
size and generally peaceful. Although the February 1994 amnesty of the
leaders of the October 1993 violence in Moscow reintroduced into the
political system a number of forceful individuals, for the most part
they have sought to achieve their agendas through peaceful means. The
war in Chechnya, which began in December 1994, raised fears of terrorism
by the Chechen diaspora, especially in Moscow. By mid-1995 there had
been one such incident, the taking of a thousand Russian hostages in the
southern town of Budyonnovsk.
Crime has become one of the most frequently cited concerns of foreign
(and Russian) business, particularly those involved with large amounts
of cash and goods. While organized crime is not new to Russia, recent
years have seen an increase in the range and frequency of criminal
activity. Unfortunately, legal and judicial reforms have not kept pace
with criminal advances. Much crime is tied to commercial activity, with
one half of all entrepreneurs in a recent survey reporting that they
must pay kickbacks and protection to stay in business. Failure to make
these payments can be fatal and may generally prove a disincentive to
the creation of new businesses. President Yeltsin and his government
acknowledge that crime and corruption are major problems and have asked
the Duma to speed adoption of needed legislation. Meanwhile, Prime
Minister Chernomyrdin announced that the government will spend two
trillion rubles to fight crime in 1994-95, and adopt tougher measures
against official corruption.
BITs
Russia inherited from the Soviet Union Bilateral Investment Treaties
(BITs) with Austria, Belgium and Luxembourg, Great Britain, Germany,
Italy, Spain, Canada, the People's Republic of China, Korea, the
Netherlands, Finland, France, and Switzerland. In 1995 Russia itself
was in various stages of negotiation with Bulgaria, Greece, Denmark,
Cuba, Poland, Romania, the Czech Republic, Slovakia and the United
States. The U.S.-Russia BIT has been ratified by the U.S. Senate but
still awaits Russian Duma ratification to enter into force.
OPIC and Other Investment Insurance Programs
In an agreement ratified at the June 1992 Summit, the U.S. Overseas
Private Investment Corporation (OPIC) was authorized to provide loans,
loan guarantees and investment insurance against political risks to U.S.
companies investing in Russia. OPIC generally insures against three
political risks: expropriation, political violence and currency
inconvertibility. In 1994 OPIC did not provide inconvertibility
insurance in Russia, although in mid-1995 it announced that it was
beginning to offer such coverage on a limited basis. In 1994, to meet
the demands of larger projects in Russia (and worldwide), OPIC doubled
the amount of insurance and quadrupled the amount of finance support -
to USD 200 million in each case - it can commit to an individual
project. Through March 1995, OPIC had committed over USD 2.2 billion in
finance and insurance to 41 projects in Russia. Total investment into
these projects should reach USD 3.4 billion. In December 1994, OPIC
also committed to provide up to USD 500 million to support defense
conversion projects.
Russia is a member of the Multilateral Investment Guarantee Agency
(MIGA).
Labor
The Russian labor market continues to undergo a slow and painful
transition. The majority of Russia's workforce is suited to the needs
of the Soviet-era command economy and ill-suited to needs of an emerging
market economy. Unemployment continues to grow steadily, reaching 7.7
percent of the workforce in early 1995. In addition, another five
percent of the workforce are underemployed, forced to work short weeks,
or on extended furloughs. There is a large supply of skilled workers in
most Russian industries, but the demand for their skills is falling
rapidly. Employment is growing rapidly in banking, insurance and other
business services.
Labor-management relations in Russia are strained. Economic
restructuring has caused rising anxiety and unrest among Russian
workers, and trade unions are generally weak and ineffective. Most of
the "official" labor unions, formerly the Communist trade unions,
operate in a subservient role to enterprise management, in much the same
way they did in Soviet times. Workers have little confidence in trade
unions and most feel powerless to challenge management. The independent
unions are much more effective at the enterprise level, but because they
represent a small percentage of total workers their national clout is
very small.
The Russian government generally adheres to ILO conventions protecting
worker rights, but enforcement is inadequate. Perhaps the most
troubling worker issue in present day Russia is the abysmal state of
worker safety. Employers have generally reduced spending on safety
equipment and government enforcement of safety regulations is very poor.
Foreign Trade Zones/Free Ports
Russia has legislation from both the Soviet era and since 1991 creating
foreign economic zones. Unfortunately, the laws and their
implementation have led to a disorganized and poorly functioning regime,
with only two zones officially created - in Kaliningrad and Nakhodka.
The Russian government and the Duma have been working for some time on
new legislation to regularize and regulate free economic zones; it is
not clear when the new law will be passed.
Capital Outflow Policy
Without permission it is illegal for a Russian legal entity or citizen
to maintain a bank account outside of Russia for more than operating
expenses; licenses are required for offshore accounts and can be
difficult to obtain. Little legitimate outward investment is occurring;
most capital outflow is the result of simple capital flight rather than
a growth in criminal transactions.
Capital flight is a significant problem, with an estimated USD 40-50
billion having left the country in recent years; including some USD 17
billion in 1994. The only true method to curb capital flight will be to
stabilize the Russian economy, reduce inflation and make it a more
attractive environment in which to invest.
VIII. TRADE AND PROJECT FINANCING
Brief Description of Banking System
The Russian commercial banking system is only five years old, but it has
advanced rapidly since its inception. There are currently over 2500
banks making up the banking system, with the majority concentrated
disproportionately in Moscow, St. Petersburg and other large cities.
About one-third of the banks in Russia derive from the old state banking
system, while the rest were newly created, most as late as 1991. The
20-30 largest banks are approaching Western standards and offering more
sophisticated banking services. However, the vast majority of banks are
small and only 10 percent has a capital base exceeding $1 million. Many
banks were founded in 1991-92 by enterprises as an expedient way to
funnel directed government credits and still have the enterprise or
person which founded them as the main depositor and borrower.
More than 1000 Russian banks are authorized to deal with foreign
currency accounts, and close to 300 of these banks have general licenses
allowing them to conduct an entire range of banking transactions with
foreign currency in both domestic and foreign markets. Foreign exchange
operations account for a large part of the business of these banks. The
official Central Bank payments, settlements and clearance system is
still in the process of development, although transactions in Moscow can
now clear in as short as several days.
Cross-border, international financial transactions are now feasible as
well. More than 150 Russian banks are members of the Society for
Worldwide Interbank Financial Telecommunication (SWIFT), and others have
correspondent relationships with U.S. and other foreign banks that allow
for electronic fund transfers between Russia and other countries.
In October 1993, Citibank and Chase Manhattan Bank became the first U.S.
banks to receive general licenses to open subsidiaries in Russia.
Other Western banks operating in Russia include Credit Lyonnais (St.
Petersburg), BNP/Dresdner (St. Petersburg), and Bank of Austria
(Moscow). A November 1993 Presidential decree imposed a two-year
moratorium on the operations of foreign banks in Russia, but further
decrees issued in June 1994 and April 1995 have now confirmed that the
originally-licensed foreign banks have full banking powers. A
commercial banking bill currently awaiting approval in the Duma will
introduce a reciprocity requirement prohibiting a new foreign bank from
receiving a license until a Russian bank is allowed to enter the country
from which the foreign bank originates.
Currency inconvertibility, which used to be a major concern for Western
traders and investors, has largely been overcome by the opening of a
number of currency exchanges and direct interbank trading throughout
Russia. The largest of these is the Moscow Interbank Currency Exchange
(MICEX), which operates daily. The introduction of a Moscow City
turnover tax on MICEX operations has driven away at least one-third of
MICEX business operations, primarily to the off-exchange currency
market. U.S. companies are reporting that currency convertibility can
be easily arranged through commercial banks in Russia.
Nonresidents, including foreign individuals and foreign companies that
do not have a local subsidiary or joint venture, can open foreign
currency accounts with authorized banks in Russia. Funds in these
accounts can be transferred abroad without restriction or exchanged for
rubles on the Moscow Interbank Currency Exchange (MICEX) or through
interbank mechanisms. Foreign currency held in these accounts may be
obtained from various sources, including resources transferred from
abroad; payments from residents and non-residents for goods and services
sold in Russia; repayment of liabilities to account holder; interest
paid by authorized banks; return on investment on Russian territory; and
income from other nonresident accounts with authorized banks. In a new
development, nonresidents can also now open ruble accounts for
maintenance of domestic operations and servicing of export-import
activities and for investment activities, including purchasing of
privatization vouchers or shares of stock. However, rubles deposited in
the current operations accounts (so-called "T" accounts) may not be
converted back into dollars.
The main Russian Government bank involved in trade and investment issues
is the Bank for Foreign Trade (Vneshtorgbank, or VTB). Although VTB is
97 percent owned by the Russian government, the bank does have
commercial functions. VTB is the agent of the Russian Government for
drawing foreign credits for fulfillment of investment projects. In
addition, another foreign trade bank, Vneshekonombank (VEB), which was
declared legally bankrupt at end-1991, still acts as an agent for the
Russian Government in international banking and to service the foreign
debt of the former Soviet Union.
Currency Control & Regulation Issues
In the fall of 1993, the Russian Central Bank issued regulations that
went into effect on January 1, 1994 banning the use of hard currency in
cash transactions. Under these regulations, businesses in Russia are no
longer permitted to accept cash payments in dollars or other hard
currency, a practice which had become widespread in major cities as
consumers and storekeepers sought the convenience and security offered
by a more stable and trusted currency. Non-cash transactions (e.g.
credit and debit cards and checks) are not affected by the new
regulations, so establishments that previously accepted payment via
credit cards can continue to do so. Stores that sell imported goods are
still allowed to mark prices in dollars. At the time of purchase clerks
convert the dollar price into rubles. Through the exchange rate they
employ, merchants pass on the additional costs they will incur when they
convert the rubles back into hard currency to restock inventories.
Russian resident entities are still required to convert 50 percent of
their foreign-currency revenues from exports of goods and services. The
foreign currency must be sold through MICEX or any authorized foreign
exchange dealer. There has long been discussion in Russian government
circles of increasing the mandatory exchange obligation from 50 to 100
percent to further strengthen the ruble, but no such measures have been
enacted.
The Moscow City Government enacted a 0.1 percent tax on all foreign
exchange transactions on the Moscow Interbank Currency Exchange (MICEX)
effective March 1, 1994. The result has been that a number of banks
have shifted their exchange activity from MICEX to the off exchange
market. Currently, the entire exchange-based market in Russia accounts
for anywhere from ten to 30 percent of the average daily exchange
volumes, depending on volatility. Just as on the MICEX, the CBR now
intervenes in the off-exchange market to narrow the spread between the
two markets exchange rates. In an effort to limit the outflow of
capital, the Central Bank introduced a computerized export control
system to monitor the flow of goods out of the country and the flow of
hard currency bank in. The system, which unites for the first time
banking and export controls, requires exporters to obtain a special
"passport" from a commercial bank, which enters the trade in a computer
database. Customs agents register the actual export of the goods in the
database and the commercial bank completes the cycle by entering
receipt of the payment. Strategic exports, including energy and several
types of metals, were subject to the new regime as of January 1, 1994.
The system took effect for all other types of goods on March 1, 1994.
Availability of Financing
The financing environment in Russia remains problematic as the economy
continues to experience great difficulties, and the Russian government
and banking system are able to provide little trade and investment
financing either to Russian companies or foreign firms. However, a
number of bilateral and multilateral financing programs, outlined below,
are open for Russia which could provide more opportunities for traders
and investors.
How to Finance Exports/Methods of Payment
The fact that the Russian Government has been unable to date to resolve
the issue of outstanding commercial arrears to western companies
continues to have a negative impact on the environment for trade
financing. Beginning in 1989, Soviet foreign trade organizations began
have difficulty making payments for goods they had purchased under
contract from U.S. and other Western companies. These cases all
involved imports under open accounts, which had been the standard way of
doing business in the Soviet Union for decades. When pressed for
explanation, the foreign trade organizations claimed sufficient hard
currency had been deposited in their accounts at the Bank for Foreign
Economic Relations (Vneshekonombank, or VEB, then the only Soviet bank
authorized to deal in hard currency), while VEB claimed the FTOs did not
have sufficient funds to cover the contracts. The U.S. Government began
advising U.S. companies only to sign contracts in the Soviet Union, and
then Russia, on the basis of letters of credit or prepayment.
Since 1990 when U.S. companies first began reporting payments delays,
the Department of Commerce and other U.S. Government agencies have
interceded on behalf of more than 70 companies collectively owed more
than $350 million. At the end of 1991 the situation grew worse with the
effective collapse of Vneshekonombank. In addition to the arrears
problem, VEB stopped payment on its letters of credit and froze all hard
currency accounts. Currently, according to VEB officials, commercial
arrears stand at $5 billion, frozen accounts at $10 billion, and unpaid
letters of credit at over $1 billion.
In December 1992 President Yeltsin signed a decree announcing that hard
currency-denominated bonds with a maturity of three to 15 years and an
interest rate of three percent would be issued to account holders. The
Russian Government began issuing bonds in 1993, and the first tranche
came due in mid-May 1994 and were paid according to schedule. Joint
ventures whose funds were frozen will receive payment in three tranches
over six years from the date of issuance, and foreign trade
organizations (who owe U.S. and other Western companies) will receive
their bond payouts in two tranches over fifteen years. Estimates are
that bonds have been issued for sixty percent of the accounts.
Bankers in Russia and the West are actively trading billions of dollars
of VEB bonds. Reports indicate that of the sixty percent of VEB bonds
which have been issued, about $1 billion have been sold on the market.
If the market for VEB bonds does grow, it may provide a mechanism for
Western suppliers pursuing repayment of their commercial arrears.
However, many suppliers are reluctant to accept the VEB bonds as
repayment for outstanding commercial debt.
In November 1993 then-Deputy Prime Minister Shokhin announced that the
Ministry of Foreign Economic Relations had been given the authority to
negotiate the rescheduling of private commercial debts on a country-by-
country basis. Negotiations would cover unpaid transactions, but not
frozen accounts or unpaid VEB letters of credit. More recent reports
suggest that the Ministry of Finance may be taking the lead on repayment
of private trade debts with plans to negotiate a single arrangement for
all foreign companies.
The result of this payments quagmire is that foreign companies now
generally trade with Russian companies only on the basis of prepayment.
Letters of credit are issued by Russian banks only in those cases where
the Russian customer can deposit the requisite funds in its account
ahead of time, and Western banks generally will only confirm letters of
credit on that basis as well.
The financing opportunities that do exist primarily are through Western
government trade and investment programs or new programs under
international financial institutions.
Types of Available Export Financing and Insurance
U.S. Export-Import Bank
There are several U.S. Government trade financing programs in place
which can be of assistance to U.S. companies exporting to and investment
in Russia. The U.S. Export-Import Bank provides short- and medium-term
insurance, loan and guarantee support for transactions involving VTB and
VEB, acting on behalf of the Russian Federation. Before processing
applications for sovereign risk transactions, Eximbank requires
clearance from one of these banks. A confirmation from the Ministry of
Finance is needed for medium-term transactions. As of June 1995,
Eximbank's overall sovereign risk exposure was approximately $700
million. In addition to sovereign risk transactions, Eximbank has
extended guarantees on a $15 million credit line to Tokobank.
OPIC
In an agreement ratified at the June 1992 Summit, the U.S. Overseas
Private Investment Corporation (OPIC) is authorized to provide loans,
loan guarantees, and investment insurance against political risk to
American companies investing in Russia. OPIC generally insures against
three political risks: expropriation, political violence and currency
inconvertibility. In June 1995 OPIC announced that it would begin
offering currency inconvertibility insurance on a limited basis.
In 1994, to meet the demands of larger projects in Russia (and
worldwide), OPIC doubled the amount of insurance and quadrupled the
amount of finance support -- to $200 million in each case -- it can
commit to an individual project. Through the midpoint of fiscal year
1995 (March, 1995), OPIC had committed over $2.2 billion in finance and
insurance to 41 projects in Russia. Total investment into these
projects should reach $3.4 billion. In December 1994, OPIC also
committed to provide up to $500 million to support defense conversion
projects.
In addition to its support for 36 individual projects, OPIC is providing
support for 5 investment funds, 4 of which can invest throughout the NIS
as well as in Russia. In Russia itself, OPIC has committed to providing
loan guarantees for more than 70 percent of the $155 million
capitalization of the Russia Partners Fund, a direct investment fund for
Russia organized and managed by a subsidiary of Paine Webber. The State
Investment Corporation of Russia also contributed $5 million of the
total capitalization. The fund will be able to invest between $2 and 15
million in Russian companies that are hard-currency generators or
involved in export production businesses across a broad spectrum of
industries. The fund will also provide capital for expansions of
successful projects.
For more information on OPIC programs, call 1-800-424-OPIC or (202) 336-
8799, or fax (202) 408-9859.
MIGA
The Multilateral Investment Guarantee Agency, which is part of the World
Bank group, seeks to promote international private investment by
providing political risk insurance for eligible foreign investors. Its
guarantee program insures investors against losses from currency
transfer, expropriation, war and civil disturbance and investment-
related breach of contract by host governments of developing countries.
MIGA cooperates closely with OPIC and other national investment
insurance agencies as well as with private insurers to co-insure or
reinsure eligible foreign investments.
Russia became a member of MIGA in December 1992. MIGA cooperates with
the IFC and IBRD in supporting the World Bank Group's Foreign Investment
Advisory Service, which has been providing assistance to the Russian
Agency for International Cooperation and Development.
TDA
In addition, the U.S. Trade and Development Agency (TDA) offers funding
for Russia. TDA provides funding for U.S. firms to carry out
feasibility studies, consultancies and other planning services related
to major projects. While historically TDA projects have been public
sector projects, planned by government ministries or agencies,
increasingly TDA now considers both public and private sector projects.
Where appropriate, TDA may provide funding for training programs,
technical seminars, conferences, or orientation visits to the United
States. Since it began operating in Russia in early 1992, TDA has
funded about 85 feasibility studies and other activities totaling more
than $28 million. For more information on TDA programs, please contact
Daniel Stein, Regional Director, at (703) 875-4357 or by fax at (703)
875-4009.
USDA
The U.S. Department of Agriculture specializes in financing agricultural
exports and has nearly $6 billion in annual authorizations, the bulk of
which is provided through the Commodity Credit Corporation (CCC).
Historically, the CCC has financed large amounts of wheat and other
agricultural commodities to the NIS. CCC operates an export credit
guarantee programs known as GSM-102 which guarantees market-rate
financing based on irrevocable letters of credit from an eligible
foreign bank. USDA also operates a number of food aid programs
including the Food for Progress Program that comprises mostly medium-
term concessional credit sales of agricultural commodities. Since 1991,
the CCC has guaranteed over $5 billion in private U.S. bank loans to the
NIS, which have helped facilitate purchases of over 33 million tons of
agricultural commodities.
Project Financing
EXIMBANK
In addition to its export financing activities, Eximbank will also
consider transactions with security based on production payments or hard
currency export sales by Russian industries, as well as applications
involving limited recourse project financing in the Russian Federation.
Integral to Eximbank's project finance is a Project Incentive Agreement
(PIA) signed in December 1993 which calls for the Russian Government to
recognize Eximbank's interests in specific projects and to pledge non-
interference with project operations.
In July 1993 Eximbank signed an Oil and Gas Framework Agreement under
which Eximbank may provide financing for $2 billion or more for U.S.
exports of oil and gas production equipment and services to rehabilitate
and revitalize the Russian energy sector. Under the Framework
Agreement, Eximbank will finance equipment and services for Russian oil
and gas production facilities which are now closed or producing below
capacity; no new facilities will be eligible. Repayment security will
be provided by hard currency receipts from oil export contracts
deposited in escrow accounts outside Russia and dedicated to service
debt owed to Eximbank. Repayment terms are five years (or possibly
longer if appropriate) and the minimum amount of financing for each
transaction is $25 million. As of June 1995 Eximbank's exposure under
the Oil and Gas Framework Agreement was $1.3 billion. For more
information on Eximbank programs please contact (202) 566-8990.
USAID
The U.S. Agency for International Development (USAID) receives funding
for assistance activities in the Newly Independent States (NIS) under
the Freedom Support Act. Working in conjunction with other U.S.
Government agencies, USAID provides financial and human resources to
Russia in support of three strategic goals:
-- Economic Restructuring -- Fostering the emergence of a competitive,
market-oriented economy in which the majority of economic resources are
privately owned and managed;
-- Democracy -- Supporting the transition to transparent and
accountable governance and the empowerment of citizens through
democratic political processes; and
-- Social sector restructuring -- Strengthening the capacity to manage
the human dimension of the transition to democracy and a market economy
and helping to sustain the neediest sectors of the population during the
transition period.
By the end of 1994, USAID had contributed nearly $1.3 billion in
technical and project assistance overall, with more than half targeted
on the first goal, the emergence of a market economy. An additional
$250 million is being programmed in 1995 to continue key activities.
Economic restructuring support seeks: the transfer of state-owned
assets to the private sector; the establishment of a policy, legal and
regulatory framework conducive to competitive, private sector growth;
the development of private sector enterprises; the establishment of a
fiscal regime appropriate to a market economy; a competitive, efficient
private financial sector; and the sustainable use of natural resources,
a principle source of Russia's wealth. Mass privatization of more than
14,000 medium to large scale enterprises has opened the door for new
investment in businesses with some experience and track records.
Business service centers and other business service firms established in
several cities under USAID auspices have catalyzed the start-up of
hundreds of new businesses as well, provided training, consulting
services and support in the form of business incubators, leasing
programs, etc. A Commodity Import Program, intended to familiarize
Russian industries with technology for energy and environmental
conservatism, is just getting rolling in mid-1995 but should open up new
opportunities for U.S. exporters.
For general information on the NIS programs and other USAID initiatives,
contact USAID's Program Office at (202) 647-8094 or USAID's Center for
Trade and Investment Service at 1-800-USAID-4-U or (202) 663-2660, by
fax at (202) 663-2670. USAID also has a fully staffed office in Moscow
and can be reached at by phone at 7-095-956-4281 or 956-7092 or by fax
at 7-095-956-7093.
EBRD
The European Bank for Reconstruction and Development is a multilateral
financial institution that lends and invests exclusively in the
countries of central and Eastern Europe and the NIS. EBRD supports
projects that help develop the private sector, foster privatization,
increase direct foreign investment, create and strengthen financial
institutions, restructure the industrial base, build a modern
infrastructure, promote small and medium-sized businesses, and improve
the environment. EBRD's charter mandates at least sixty percent of its
lending for the private sector and for privatization of state-owned
enterprises. The remaining resources will fund public infrastructure
and environmental projects that promote private sector development.
The EBRD began its operations in the Russian Federation in September
1991. Within the rapidly growing private sector of the country, the
Bank's strategy concentrates on key areas where it can have the greatest
impact using limited resources. The total cost of a typical project is
more than $15 million, with the EBRD funding up to 35 percent. As of
May 31, 1995 the Bank had approved $1.4 billion of financing for 43
projects in Russia. Nearly 40 percent of these funds were for oil and
gas projects. The remaining projects were spread out over a variety of
sectors, including energy, agribusiness, telecommunications, banks,
aerospace and transport.
A key component of the EBRD's strategy is to help develop local banking
and financial institutions. By channeling financing through Russian
banks, small and medium-sized enterprises (SMEs) are able to obtain
financing at rates and maturities not available before. Together with
the World Bank, the EBRD is developing the Financial Institutions
Development Program, which will involve up to 40 Russian on-lending to
recently privatized enterprises.
Strengthening private sector development has meant increasing post-
privatization efforts, continuing support for the implementation of
privatization and expanding the support of SMEs. To implement this
strategy, the Bank has developed indirect financing methods, using local
financial institutions as intermediaries for Bank financing. For
example, 5 Regional Venture Funds are in place (with 6 more in the
planning stages) to provide new capital to help restructure privatized
enterprises, with parallel technical assistance for project preparation,
implementation and monitoring.
Firms seeking involvement in EBRD-funded projects may contact Sarah
Shackelton in the U.S. Executive Director's Office in London at 44-171-
338-7532 or by fax at 44-171-338-6487.
U.S.-Russia Investment Fund
(formed as a merger of the Russian-American Enterprise Fund and the Fund
for Large Enterprises)
The U.S.-Russia Investment Fund is a merger of the Russian-American
Enterprise Fund and the Fund for Large Enterprises, which were both
funded by the U.S. Agency for International Development. As a result of
the merger, there are two separate functions of the Fund: (1) to assist
small and medium-sized privatized or privatizing Russian enterprises (up
to 2,500 employees) by providing equity investments and loans, technical
assistance in limited circumstances, and trade financing through short-
term loans; and (2) to offer financing packages including equity
investments, loans and technical assistance and training to medium and
large sized enterprises (from 1,000 to 10,000 employees). For more
information contact the Fund's New York office at (212) 668-8391 or the
Moscow office at 7-095-929-9888 or fax 7-095-929-9828.
Defense Enterprise Fund
The 1994 Defense Appropriations Bill authorizes the Department of
Defense to establish a $40 million Demilitarization Enterprise Fund
(DEF). DEF will promote private sector investment and restructuring in
the Russian defense industry. The DEF has been set up as a private
nonprofit corporation with a board of directors appointed by the
President.
Investments will be diversified among smaller enterprises or spin-off
enterprises derived from larger defense enterprises, large enterprises
that have converted or are in the process of converting, and start-ups
formed by formerly defense or military personnel. For more information
contact Mr. Arthur Sweeney at the Demilitarization Enterprise Fund at
tel. (804) 281-2129 or at fax (804) 281-2245.
IBRD
The International Bank for Reconstruction and Development (IBRD), part
of the World Bank group, makes long-term loans at market-related rates
primarily to developing nations, and in recent years its scope of
activity has expanded to include Eastern Europe and the NIS. The IBRD
works to promote broadly based economic growth and frequently focuses on
structural adjustment, sectoral reform and individual project lending.
Typically the Bank does not finance the entire cost of a project.
Rather, it finances the components of a project purchased with foreign
exchange, which on average is about 40 percent of the total project
cost. Each project may cover a wide variety of sectors and can involve
anywhere from one to hundreds of separate contracts of export business
opportunities for suppliers worldwide.
Russia became a member of the IBRD in June 1992. The IBRD's financial
support and policy advice will continue to focus on structural and
institutional reforms to promote economic stability and self-sustaining
growth. Priority will be given to restoring the energy and agricultural
sectors, privatizing productive enterprises, developing a functioning
commercial financing system and developing a social safety net to
protect the most vulnerable groups. For more information on IBRD
activities in Russia please contact Tom Kelsey at (202) 482-4332 or
(202) 458-0118 or by fax at (202) 477-2967.
IFC
Russia also became a member of the International Finance Corporation in
April 1993. The IFC, an independent member of the World Bank Group, is
the largest source of direct project financing for private investment in
developing countries. IFC invests in commercial enterprises of varying
industries by means of loans and equity financing in collaboration with
other investors. IFC does not require government guarantees of
repayment. In addition to funding, IFC also provides financial, legal
and technical advice to private enterprises.
IFC has been involved in a number of projects in Russia, including two
oil and gas projects, a credit line to Russia's leading commercial bank
and funding to a venture capital fund to invest in privatized
enterprises. The IFC has also been particularly active in assisting
Russia in its privatization and economic restructuring efforts.
Companies wishing to make project proposals or to obtain additional
information should contact the IFC's Business Development Department at
(202) 473-1950.
There are a number of other private sources of financing available for
Russia. For a more complete listing please contact the BISNIS office in
the U.S. Department of Commerce at (202) 482-4255.
List of Banks with Correspondent U.S. Banking Arrangements*
Moscow
Avtovazbank: Chase Manhattan Bank
Bank of America
Credit Moscow Bank: Republic National Bank of New York
Bank of New York
American Express Bank
Credo Bank: Bank of America
Republic National Bank of New York
Finist Bank: Bankers Trust
Citibank
Inkombank: Republic National Bank of New York
Bankers Trust
Citibank
BankAmerica
Moscow Business Bank: Bankers Trust
Republic National Bank of New York
Bank of America
Rossiyskiy Credit
Bank: Citibank
Sberbank: Bank of New York
Stolichniy Bank: Bank of America
Bank of New York
Republic National Bank of New York
Tokobank: American National Bank and Co. of Chicago
BankAmerica
Bank of America
Bank of New York
Chase Manhattan Bank
Republic National Bank of New York
United States National Bank of Oregon
Vserossiyskiy
Birzhevoy Bank: BankAmerica
Republic National Bank of New York
St. Petersburg
Bank St. Petersburg: Bankers Trust
Bank of New York
St. Petersburg
Promstroybank: Bankers Trust
Bank of New York
Baltiyskiy Bank: Bankers Trust
Bank of New York
Petrovskiy Bank: Bankers Trust
Bank of New York
Russian Far East
Dalnevostochny Bank: Bank of America
U.S. Bank (Oregon)
Dalrybbank: Riggs Bank
First Interstate Bank (Oregon)
First National Bank of Anchorage
Evrobank: Bank of America
First Interstate Bank (Oregon)
Vneshtorgbank: U.S. National Bank of Oregon
Regiobank: Bank (Oregon)
* This list is not exhaustive.
IX. BUSINESS TRAVEL
Business Customs
Attempts to understand Russian business customs must always be rooted in
the knowledge that Russia has lived for over a thousand years under
authoritarian and autocratic rule. Unlike other countries in Eastern
Europe such as Hungary, Poland and East Germany, Russia has no
institutional memory of democracy or market economy.
In these rapidly changing times, it is difficult to generalize the
business customs of this vast country, but the following are some of the
most commonly followed customs.
Russian business revolves around a system of unequaled red tape.
Stamps, forms and signatures comprise a frustrating maze for western
business which often sees no point in the exercise. Patience, long
suffering and often the goodwill of Russian partners is the only key to
success. Documents carefully notarized in the United States attesting
the bank accounts or viability of a company will often be rejected by
Russians. American business will be asked for notarization by the
American Embassy. Though the Embassy can only notarize that the
requestor states the documents are authentic, this is what seems to
satisfy Russians.
Russian businesses place a very high value on personal interaction and
relationships. Business is rarely conducted on the phone, and decisions
are almost exclusively reached in face-to-face negotiations. Such
meetings usually begin with an exchange of business cards (it is helpful
to have yours also printed in Russian) and progress through serious,
seemingly endless speeches accompanied by tea and cookies early in the
day or vodka toasts for later meetings. When invited for dinner
meetings, the evening can often be very long and seemingly unproductive,
but may be the necessary groundwork for an agreement signed at a later
date.
Russians put great stock in personal relations. A hand shake may be
more binding for them than the actual signed agreement. Contract
sanctity is not a well institutionalized concept in Russia with the
signatory or with Russian courts. The Embassy knows of cases where
Russian businesses simply abrogated signed contracts when difficulties
arose or they deemed the contract no longer advantageous to their side.
Western business persons should be aware, though, that Russians are
zero-sum thinkers. Though westerners expect negotiations to result in
win-win agreements for both sides, Russians often think that they can
only win in a negotiation if the other side loses. To succeed in
business, Russians often have to scheme and plot ways to circumvent
rules and find loopholes in government regulations. Often Russian
businesses allow this approach to spill over into negotiations with
private persons and firms.
Travel Advisory and Visas
The State Department issues travel advisories when political unrest
warrants. In the past two years only during the October unrest of 1993
were visitors warned to avoid travel to Moscow for about two weeks.
Military conflict continues in the Chechen Republic, and the Ingush
Republic and the North Ossetian Republic also witness frequent armed
violence. Political problems continue in the North Caucasus region of
Southern Russia and along Russia's border with Azerbaijan and Georgia.
These areas should generally be avoided if possible.
A passport and a Russian visa are needed to travel to Russia. This visa
must be obtained before leaving the United States and the cost of visas
depends on the amount of time allowed for processing. Given a month's
notice, a Russian visa theoretically costs $20. When asking for very
fast service, a Russian visa can cost 100 dollars or more. Business
travelers must have a letter of invitation from a Russian individual or
organization which serves as the sponsor.
Visas of short duration are stamped with exit dates which must be
strictly observed. Allowing a Russian visa to expire can result in
heavy fines and tedious work with the bureaucracy for permission to
leave the country. If the visa is for a prolonged stay, then an exit
visa must be obtained by the traveler's sponsor after his arrival in
Russia.
If travelers stay more than three days in Russia, they must register
their visa through their hotel or their sponsor. Failure to do so can
result in grave difficulty in leaving the country. Travelers should
ensure that their visa is in order before leaving the United States.
Americans can receive assistance from the Russian Embassy, Consular
Division, 1825 Phelps Place, NW, Washington, DC, 20008. The Russian
Embassy can be reached at (202) 939-8907. Travelers can also receive
assistance from the Russian Consulates in New York, San Francisco or
Seattle.
Holidays
Russian holidays include:
Jan 1 New Year's Day
Jan 7 Orthodox Christmas
Mar 8 International Women's Day
May 1 International Labor Day
May 2 Spring Day
May 9 Victory Day
June 12 Independence Day
Nov 7 Revolution Day
Dec 12 Constitution Day
In the event holidays occur on weekends, Russian authorities announce
during the week prior to the holiday, if the day will be celebrated on
the following Monday.
Business Infrastructure
Air transport to Russia on western airlines is becoming more accessible
all the time. Several western airlines fly daily to Moscow and St.
Petersburg. New flights on Lufthansa have been initiated to
Yekaterinburg and Novosibirsk. Alaska Airlines has summer flights to
Magadan, Khabarovsk and Vladivostok. All major Russian cities can be
reached from Moscow via Aeroflot, and increasingly the joint venture
airline Transaero (which has service approaching western-standard and
which flies Boeing aircraft) is flying to a number of key Russian cities
from Moscow.
Moscow has four major airports which ring the city. International
flights enter Moscow through Sheremetyevo II and travelers may continue
to other Russian cities through any of the other three airports. Travel
time to the departure airport can be as much as an hour and a half from
Sheremetyevo II, and ample time must be allowed for passport control,
customs clearance and baggage retrieval. A new taxi service has been
initiated at Sheremetyevo II which is highly recommended. You can pay
the set rate and avoid hassles with free lance taxi drivers.
The St. Petersburg airport (Pulkovo) has two terminals: Pulkovo I
(domestic flights) and Pulkovo II (international flights). Pulkovo II
handles 70 flights per day and is serviced by major European and
American carriers, including Delta, Lufthansa, British Airways, KLM and
Finnair. The domestic terminal, which is located ten minutes by car
from the international terminal, handles flights to all major Russian
cities, including several flights daily to Moscow. Both terminals are
located relatively close to the city, approximately 40 minutes by car
from downtown St. Petersburg. There are taxi dispatchers at the airport
to supervise taxi service; in addition, the major hotels as well as the
American Express office run limousine services for airport transfers.
Travelers should not expect western standards on Russian airlines. With
the breakup of Aeroflot into many small airlines, travel within Russia
is often unreliable. Domestic air travelers must often cope with
unpredictable schedules and difficult conditions including deterioration
of centralized systems of maintenance and quality of service, as well as
overloading.
Western travelers will be required to pay a higher rate for their
tickets and will generally be seated in the front cabin. This is not
"first class". Travelers will find cramped, sometimes unsanitary
conditions with very little space for carry on luggage. Though food and
beverages are now sometimes served on internal flights, it often pays to
bring your own refreshment if you think you will be hungry. As noted
above, Transaero is a good alternative to Aeroflot for those cities it
serves.
An alternate method of getting around inside Russia is to travel by
train. For cities as close as St. Petersburg, travelers can generally
ride night trains. Trains generally arrive in the center of the city
and save many of the baggage hassles that accrue in air travel. Trains
are also far more reliable, since flights are often canceled for lack of
fuel. Unfortunately, increased incidents of theft and other crimes on
trains has made this mode less safe -- especially for unaccompanied
passengers.
Car travel is not advised except for the cities very close to Moscow.
Roads are often in very poor condition and fuel is sometimes very
difficult to obtain.
Within Moscow and St. Petersburg the metro system provides an excellent,
inexpensive means of transportation. Most major attractions in the city
are very close to metro stops. Signs are all written in Russian, so it
can be challenging especially if you must change lines at any point. Be
sure you can recognize the spelling of all destinations before embarking
on a metro adventure.
Marked taxis in Moscow and St. Petersburg are often scarce. Russians
simply stand on the side of the street and put out their hand for a
ride. It often takes only a minute to find someone willing to drive
you. As in other big cities, you are taking a certain risk in using
this method, especially if you are alone, or it is after dark. Be sure
to negotiate the fee before you get in the car, and never get in a car
occupied by more than just the driver.
Crime
Though crime in Moscow, St. Petersburg and other major cities is said to
be no worse than in some major cities of America, crime here is often
targeted against foreigners since they are easily identified and
perceived to be lucrative targets. Travelers should "dress down", and
avoid loud conversation calling attention to themselves.
Pickpocketing and muggings sometimes occur in broad daylight. Americans
should exercise particular caution in airports, open markets, near major
train and metro stations, and when hailing taxis. Groups of children
who beg money sometimes pickpocket and assault tourists. Foreigners'
hotel rooms and residences have also been targets, and some victims have
been seriously assaulted during robberies.
Extortion and corruption permeate the business environment in Russia.
Organized criminal groups target foreign businesses in many Russian
cities and demand protection money (under threat of serious violence).
Many western companies hire security services, but this has not always
been proven effective in avoiding armed extortion attempts.
Language
Many Russian entrepreneurs can speak at least some English. If your
business is outside of Moscow and St. Petersburg or if you are dealing
with large factories or institutes, it may be more difficult to find
English speakers. For important negotiations U.S. businesses may want
to hire a reputable interpreter. Russian interpreters often specialize
in certain technical areas like oil and gas or biotechnology, for
example.
Hotels
Moscow, St. Petersburg, Novgorod, Sochi and Vladivostok have western
style hotels. Most will cost $200/night or more. Russian state hotels
often provide only the barest necessities and charge foreigners over a
hundred dollars for rooms that may not even have hot water.
Clothing
Winters can be extremely cold in Russia with temperatures in the minus
30 range not unusual. Winter clothes can be needed as early as October
and as late as April. Waterproof footwear is a must all year round, and
rain gear is highly recommended from April to October.
Health
Diphtheria outbreaks have been reported throughout Russia. Travelers
should be certain that all immunizations are up-to-date, especially
their diphtheria and typhoid shots. Travelers should drink only boiled
or bottled water throughout Russia. Current advisories can be obtained
from the Center for Disease Control's International Travelers' Hotline.
Tel: (404) 332-4559.
Medical Facilities
Medical care in Russia, even in the major cities, is often far below
Western standards, with severe shortages of basic medical supplies.
Access to the few quality facilities in major cities usually requires
cash dollar payment at Western rates upon admission. The US Embassy and
Consulates maintain lists of such facilities and of English speaking
doctors.
Many Americans living in Russia travel to the West for virtually all of
their medical needs; such travel can be expensive if undertaken under
emergency conditions. Travelers should know their insurance coverage
and consider supplemental coverage for medical evacuation. Elderly
travelers and those with existing health problems may be at particular
risk.
Food
In the past local food was a great bargain in Russia. This is still the
case in many restaurants in cities outside of the main cities.
Currently, most Russian restaurants in Moscow and St. Petersburg charge
as much if not more than western restaurants for food that is often of
lower quality. Weekly the number of western restaurants increases.
Currency Exchange
Travelers' checks are not widely accepted in Russia, credit cards are
only accepted at establishments catering to westerners in major cities;
old or worn dollar bills (or bills with anything written on them) are
often not accepted even at banks.
In Moscow automatic tellers for American Express credit cards are
located at the American Express Office and at the Mezhdunarodnaya
(International) Hotel; an automatic teller for Visa cards is located at
the Metropol Hotel. Dialog Bank at the Radisson Hotel provides cash
advances for Mastercard holders, and cashes personal checks for American
Express card holders. The American Express offices in Moscow and St.
Petersburg can cash American Express Travelers' checks, and personal
checks for card holders. The St. Petersburg American Express Office can
provide cardholders with cash advances up to $500. In St. Petersburg
Promstroybank, Bank St. Petersburg and Baltiyskiy Bank provide cash
advances for all major types of international credit cards and cash
traveler's cheques. Western Union has agents in Moscow, St. Petersburg
and some other large cities which can disburse money wired from the
United States.
Customs Regulations
Russian customs laws and regulations are in a state of flux and are not
consistently enforced. A 600 percent duty is required to export any
item with a value greater than 300,000 rubles (customs officials decide
the value of what you purchased).
All items of historical or cultural value (icons, rugs, old books,
antiques, art, etc. may only be taken out of the country with prior
written approval of the Ministry of Culture and a payment of 100% duty.
Caviar may be taken out of Russia only with a receipt indicating that it
was bought in a store licensed to sell to foreigners. Failure to follow
customs regulations may result in temporary or permanent confiscation of
the property in question.
APPENDIX A
COUNTRY DATA\1
Population: 148.3 million people (January 1, 1995)
Population Growth Rate: 0%
Religions: Russian Orthodox, Islamic, Jewish, Catholic, Protestant,
Buddhist, Other
Government System: Federal with 87 republics, territories, regions and
autonomous areas
Languages: Russian (official), over 140 other languages and dialects
Work Week: 40 hours per week
APPENDIX B
DOMESTIC ECONOMY
1994 1995 1996\3
GDP (Ruble Trillions)\2 630 1450
GDP Growth Rate -15% -9%
GDP Per Capita (Rub. Thous.) 4256 9797
Government Spending
as percent of GDP 37 33
Inflation (Avg. Annual) 878 303
Unemployment (percent) 7.1 7.9
Foreign Exchange Reserves
(USD billion) 4 2
Average Exchange Military Rate 2205 3550
Foreign Debt (USD Billion) 80 130
Debt Service Ratio 27.4 24.4
(before rescheduling)
U.S. Economic/
Assistance\4 1611 343
APPENDIX C
TRADE
(Billions of USD)\5
1994 1995 1996\3
Total Country Exports 43.9 47.1
Total Country Imports\6 33.1 34.5
U.S. Exports to Russia\7 2,579 2,837
U.S. Imports from Russia\7 3,235 5,000
\1 - Source: Russian State Statistics Committee (GOSKOMSTAT)
\2.- The rapid depreciation of the ruble in 1994 and early 995 makes it
meaningless to delineate this data in dollar terms.
\3 - Figures for 1996 cannot be predicted with any degree of
reliability. 1995 figures are U.S. Embassy or officials estimates.
\4 - Millions of U.S. dollars. In addition, 1.2 billion U.S. dollars
were appropriated for fiscal years '92-'94 in military assistance.
\5 - Excluding CIS countries.
\6 - Includes an estimate of shuttle or informal trade.
\7 - Source: U.S. Department of Commerce
APPENDIX D
FOREIGN INVESTMENT STATISTICS
Estimates of the amount of foreign investment in Russia vary widely.
According to Goskomstat, Russia had accumulated foreign investment of
about USD 4 billion by the end of 1994, representing some 16,036 firms
with foreign participation. Goskomstat puts foreign direct investment
in 1994 at USD 1 billion. Portfolio investment is estimated at USD 200
million. About 50 percent of 1994 foreign investment was in the
country's fuel industry. Geographic areas receiving the most foreign
money included Arkhangelsk, Moscow, Irkutsk, Tyumen and the Komi
Republic.
Statistics from the Russian Government indicate that the following
countries are leading investors in Russia:
Country Pct. TTL RUBLES MILL # FIRMS
United States 24.1 30,967 872
Hong Kong 6.9 8,810 66
Switzerland 5 7,465 195
Canada 4.0 5,090 126
United Kingdom 3.3 4,208 361
Spain 3.2 4,152 72
Turkey 3.2 4,133 75
Belgium 2.8 3,547 76
PRC 2.5 3,166 311
Appendix E
U.S. AND RUSSIAN CONTACTS
Russian Government Agencies
Oleg Dmitriyevich Davydov
Deputy Prime Minister and Minister of Foreign Economic Relations
Co-chair, U.S.-Russia Intergovernmental Business
Development Committee (BDC)
Krasnopresnenskaya Nab., 2
Tel: (095) 205-5122
Fax: (095) 205-4318
Aleksandr Kharlamplyevich Zaveryukha
Deputy Prime Minister of the Russian Federation
(oversees agriculture)
Krasnopresnenskaya Nab. 2
Moscow
Tel: (095) 205-5058
Fax: (095) 205-6910
Ministry of Foreign Economic Relations
Nikolay Ustinovich Drozdov, Deputy Minister
32/34, Smolenskaya-Sennaya Ploshchad
Moscow 121200
Phone: (095) 244-3690
Fax: (095) 244-1600
Ministry of Finance
Vladimir Grigoriyevich Panskov, Minister
Ulitsa Ilyinka 9, Entrance 1
Moscow
Tel: (095) 923-3456
Fax: (095) 925-0889
Ministry of Fuel and Energy
Anatoliy Tikhonovich Shatalov, Deputy Minister
7, Kitaysky Proezd
Moscow 103074
Phone: (095) 220-5252
Fax: (095) 220-5656
Ministry of Agriculture
Aleksandr Grigoriyevich Nazarchuk, Minister
Orlikov Pereulok, 1/11
Moscow
Tel: (095) 207-4243
Fax: (095) 207-8362
State Customs Committee
Anatoliy Sergeyevich Kruglov, Chairman
1a, Komsomolskaya Ploshchad
Moscow 107842
Phone: (095) 975-3289
Fax: (095) 975-4823
State Committee for Standardization, Metrology and Certification
Sergey Fyodorovich Bezverkhiy, Chairman
9, Leninskiy Prospekt
Moscow 117049
Phone: (095) 236-6208, -4044
Fax: (095) 236-6231, 237-6032
Russian Copyright Agency
Georgiy Artashessovich Ter-Gazariyants, Chairman of the Board;
Vadim Serafimovich Dunin, Head
Foreign Relations Department
6a, Bolshaya Bronnaya Ul.
Moscow 103670
Phone: (095) 203-2996, -4599
Fax: (095) 200-1263
Committee of the Russian Federation for Patents and Trademarks
Vitaliy P. Rassokhin, Chairman
2/6 Cherkasskiy Pereulok
Moscow
Tel: (095) 206-6203
Fax: (095) 923-4093
State Investment Corporation
Yuriy Vladimirovich Petrov, Chairman
35, Myasnitskaya Ul.
Moscow 103685
Phone: (095) 925-6796
Fax: (095) 207-6936
Moscow Registration Chamber
Vladimir Ivanovich Sobolyov, Chairman
Mokhovaya Ul., 11, Bld. 8-E
Moscow 103009
Phone/Fax: (095) 202-2787
Roald Nestorovich Lebedinskiy, Director for
Registration/Accreditation Service (Information in English)
Phone: (095) 132-0500
Tatyana Kuzminichna Nikanorkina, Expert on Registration
of Companies with Foreign Capital (Russian)
Phone: (095) 202-4042
St. Petersburg Mayor's Office
Aleksey B. Miller, Chief of Department
External Affairs Committee
1, Smolniy
St. Petersburg
Phone: (812) 271-0767
Fax: (812) 278-1633
Igor Sorokin
Deputy Chairman
Committee on Economy and Finance
16, Vosnessenskiy Prospekt
St. Petersburg
Phone: (812) 319-9747
(812) 319 9554
Ina L. Bigotskaya
Expert, Foreign Affairs Ministry
67, Suvorovskiy Prospekt
St. Petersburg
Phone: (812) 274-4759
Fax: (812) 274 5986
Foreign Economic Relations Department
Yekaterinburg Regional Administration
Igor Ivanovich Arzyakov, Director
1, Oktyabrskaya Ploshchad'
Yekaterinburg 620031
Phone: (3432) 51-54-97, 58-96-56
Fax: (3432) 51-98-70
Telex: 721721 MORZ
Foreign Economic Relations Department
Yekaterinburg City Administration
Vladimir Ippolitovich Lomovtzev, Director
1, Oktyabrskaya Ploshchad'
Yekaterinburg 620031
Phone: (3432) 51-13-07, 51-43-83
Fax: (3432) 51-90-05
Primorskiy Territorial Administration
Committee for Foreign Economic Relations
and Regional Trade
22, Svetlanskaya Ulitsa
Vladivostok
Andrey Zaumyonnov, Chairman
Phone: (4232) 22-79-37
Khabarovsk Territorial Administration
Foreign Economic Relations Department
Sergey Lopatin, Chief
19, Muravyov-Amurskiy Ul., Khabarovsk
Phone: (4212) 33-41-21
Sakhalin Territorial Administration
Vladislav Rukavets, Commissioner for
Foreign Economic Relations
39, Kommunisticheskiy Prospekt
Yuzhno-Sakhalinsk, Sakhalin
Phone: (42422) 34-908
State Duma (Parliament)
Committee on Budget, Taxes, Banking and Finance
Mikhail Mikhailovich Zadornov, Chairman
2, Georigiyevskiy Pereulok
Moscow
Tel: (095) 229-5586
Fax: (095) 229-5601
Committee for Economic Policy
Sergey Yuriyevich Glaziyev, Chairman
2, Georgiyevskiy Pereulok
Moscow
Tel: (095) 292-4260
Fax: (095) 292-4622
Committee on Property, Privatization and Economic Activity
Sergey Vasiliyevich Burkov, Chairman
2, Georgiyevskiy Pereulok
Moscow
Tel: (095) 229-9559
Fax: (095) 229-6996
Committee on Industry, Construction, Transport and Energy
Vladimir Kuz'mich Gusev, Chairman
2, Georgiyevskiy Pereulok
Moscow
Tel: (095) 229-0365
Fax: (095) 229-9991
Trade Associations/Chambers of Commerce in Russia
American Chamber of Commerce
Peter Charow, Executive Director
Suite 737, Slavyanskaya-Radisson Hotel
2, Berezhkovskaya Nab.
Moscow 121151
Phone: (095) 941-8435
Fax: (095) 941-8437
American International Business Association of St. Petersburg
Lucas Angell, Executive Administrator
57 Bolshaya Morskaya
St. Petersburg
Tel: (812) 110-6042
Fax: (812) 311-0794
Council for Trade and Economic Cooperation (CIS-USA)
Boris Petrovich Alekseyev, President
3, Naberezhnaya Shevchenko
Moscow 121248
Phone: (095) 243-5514, -5470
Fax: (095) 230-2467
Russian Chamber of Commerce and Industry
Stanislav Alekseyevich Smirnov, President;
Yuriy Nikolayevich Denissenkov, Head,
Sergey Borissovich Kulyba, Expert on Accreditation
Protocol Department
6, Ilyinka Ul.
Moscow 103684
Phone: (095) 929-02-86, -60, -61, -62, -63
Fax: (095) 929-0356
Primorskiy Territory Chamber of Commerce and Industry
Aleksandr Pisarev, Chairman
13A, Okeanskiy Prospekt, Vladivostok
Phone: (4232) 26-96-30
Fax: (4232) 22-72-26
Khabarovsk Territory Chamber of Commerce and Industry
Mikhail Kruglikov, President
113, Shevronova Ulitsa, Khabarovsk 680000
Phone: (4212) 33-03-11, 33-11-30
Fax: (4212) 33-03-12
Russian Commercial Banks
Please contact the U.S. Commercial Service in Moscow, St. Petersburg and
Vladivostok for a listing of Russian commercial banks.
U.S. Government Personnel Handling Trade Issues in Russia
U.S. and Foreign Commercial Service, Moscow
John Peters, Minister Counselor for Commercial Affairs
15, Novinskiy Bulvar
Moscow 121099
Phone: (095) 255-4848, 255-4660
Fax: (095) 230-2101
Satellite telephone: 7 (502) 224-1105
Satellite fax: 7 (502) 224-1106
U.S. Embassy, Moscow
Michael Mozur, Minister Counselor for Economic Affairs
21, Novinskiy Bulvar
Moscow 121099
Phone: (095) 956-4139
Fax: (095) 956-4296
U.S. Embassy, Moscow
Mary Revelt, Minister Counselor for Agricultural Affairs
21, Novinskiy Bulvar
Moscow 121099
Phone: (095) 956 4103
(502) 221 1245
FAX: (095) 975 2339
(502) 224 1356
U.S. Embassy, Moscow
William Murden, Treasury Attache
21, Novinskiy Bulvar
Moscow 121099
Phone: (095) 956-4258
Fax: (095) 956-4296
Federal Aviation Administration (FAA)
Dennis B. Cooper, Senior Representative
8, B. Devyatinskiy Per.
Moscow 121099
Phone: (095) 956-4036
Fax: (095) 956-4293
U.S. Agency for International Development
Office of Privatization and Economic Restructuring
Thomas Rishoi, Private Enterprise Officer
8, B. Devyatinskiy Per.
Moscow 121099
Phone: (095) 956-4281
U.S. and Foreign Commercial Service, St. Petersburg
David Schneider, Principal Commercial Officer
57, Bolshaya Morskaya Ul.
St. Petersburg, Russia
Phone: (812) 110-6656, 110-6727
Fax: (812) 110-6479
Satellite phone: (812) 850-1902
Satellite fax: (812) 850-1903
American Business Center, St. Petersburg
Zhanna Agasiyeva, Assistant Manager
57, Bolshaya Morskaya Ul.
St. Petersburg, Russia
Phone: (812) 110-6042, 110-6271
Fax: (812) 311-0794
Satellite phone: (812) 850-1900
Satellite fax: (812) 850-1901
U.S. and Foreign Commercial Service, Vladivostok
Timothy Smith, Consul for Commercial Affairs
2, Batareynaya Ul., Vladivostok
Satellite phone/fax: (509) 851-1211
Phone: (4232) 25-46-25
Fax: (4232) 25-46-61
American Business Center, Vladivostok
Inna Nazarova, Assistant Manager
2, Batareynaya Ul., Vladivostok
Satellite phone/fax: (509) 851-1212
Phone: (4232) 25-46-25
Fax: (4232) 25-46-61
U.S. Consulate General in Yekaterinburg
Jonathan Turak, Commercial/Economic/Political Officer
AMCONGEN Yekaterinburg
Department of State
Washington, D.C. 20512-5890
Phone: (3432) 564-619
Fax: (3432) 564-515
Phone: (3432) 564-736 (Foreign Commercial Service)
Telex: 612-696 CONS SU
Internet: consulat.yekaterinburg@sovcust.sprint.com
Washington-Based USG Contacts for Russia
Overseas Private Investment Corporation
Nicola Bradley
Manager, New Independent States, Investment Development
1100 New York Avenue, N.W.
Washington, D.C. 20527
Phone: (202) 336-8618
Fax: (202) 408-5145
U.S. Trade and Development Agency
Daniel Stein, Regional Director
SA-16, Room 301
Washington, D.C. 20523-1602
Phone: (703) 875-4357
Fax: (703) 875-4009
Export-Import Bank
Mitchell McCauley, Insurance officer
811 Vermont Avenue, NW
Washington, DC 20571-0999
Phone: (202) 566-8190
Fax: (202) 566-7524
Business Information Service for the Newly-Independent States (BISNIS)
U.S. Department of Commerce
Linda Nemec, Director
Room 7413
Washington, D.C. 20230
Phone: (202) 482-4655
Fax: (202) 482-2293
U.S.- Russia Defense Conversion Committee
U.S. Department of Commerce
Bureau of Export Administration
Dan Hurley, Editor for Russian Defense Business Directories
Room 3898
Washington, D.C. 20230
Phone: (202) 482-1455
Fax: (202) 482-2387
Special American Business Internship
Training Program (SABIT)
Liesl Duhon, Acting Director
International Trade Administration
U.S. Department of Commerce
Room 3413, Washington, D.C. 20230
Phone: (202) 377-0073
Fax: (202) 377-4098
U.S. Department of Commerce Liaison
to the U.S. Executive Director's Office
International Bank for Reconstruction and Development
1818 H Street, N.W.
Room D-13004
Washington, D.C. 20433
Phone: (202) 458-0118
Fax: (202) 477-2967
Office of Multilateral Development Banks
U.S.& Foreign Commercial Service
U.S. Department of Commerce
Room H-1107
Washington, D.C. 20230
Phone: (202) 482-3399
Fax: (202) 273-0927
U.S. Department of State
William Bellis, Economics Officer
2201 C Street, N.W.
Washington, D.C. 20520
Phone: (202) 647-6749
Fax: (202) 736-4710
U.S. Department of Commerce
Office of International Operations
U.S. and Foreign Commercial Service
Russia/NIS Program Office
Vivian Spathopoulos, Deputy Director
Room 1235
14th & Constitution Ave., N.W.
Washington, D.C. 20230
Phone: (202) 482-2902
Fax: (202) 482-2456
U.S. Department of Commerce
International Trade Administration
Russia and Independent States Division
Jack Brougher, Director
Room 3318
Washington, D.C. 20230
Phone: (202) 482-2354
Fax: (202) 482-3042
U. S. Agency for International Development
Washington, D.C. 20523
Department of State
Gregory Huger, Director, Office of Privatization and Economic
Restructuring
Phone: (202) 736-4410
U.S. Department of Agriculture
14th St. and Independence Avenue
Washington, D.C. 20250
Gordon Nicks, Russian Area Officer
Phone: (202) 720-3080
National Association of State Departments of Agriculture
Richard Kirchhoff, Executive Vice President
1156 15th Street, N.W. Suite 1020
Washington, D.C. 20005
Tel: (202) 296-9680
Fax: (202) 296-9686
U.S.-Based Multipliers and International Organizations
with Interests in Russia
U.S.-Russia Business Council
Eugene K. Lawson, President
1701 Pennsylvania Ave., N.W. Suite 650
Washington, D.C. 20006
Phone: (202) 956-7670
Fax: (202) 956-7674
Russian-American Chamber of Commerce
Irene M. Lewis, President
6200 South Quebec St., Suite 210
Englewood, Colorado 80111
Phone: (303) 689-8642
Fax: (303) 689-8762
World Bank
Thomas Kelsey, Department of Commerce liaison
1818 H Street, NW, Washington, DC, 20433
Phone: (202) 458-0118
Fax: (202) 458-0118
International Finance Corporation (IFC)
Mark Constantine
1850 I Street, NW, Washington, DC 20433
Phone: (202) 473-9331
Fax: (202) 676-1513
Moscow Office: Roger Gale
6, Neglinnaya St.
Tel: 7-095-928-5328
Fax: 7-095-927-6832
Funds
European Bank for Reconstruction and Development
One Exchange Square
London EC2A 2EH United Kingdom
Sarah Shackelton, Commerce Liaison
Tel: 011-44-171-338-6569
Fax: 011-44-171-338-6487
U.S.-Russia Investment Fund
(formed by merger of Fund for Large Enterprises in Russia and the
Russian-American Enterprise Fund)
17 State Street, New York, NY 10004
Paul Asel, Vice President
Phone: (212) 668-8391 in New York
Phone: (095) 929-9888 in Moscow
Fax: (095) 929-9828
Satellite phone: 44-81-913-3-382
Paine Webber Russia Partners Fund
Paine Webber
1285 Avenue of the Americas
New York, NY 10019
Phone: (212) 713-3214
Fax: (212) 713-1087
Mr. Drew Guff, VP
Equity investments in natural resource-related companies,
telecommunications, light manufacturing and consumer products and
services. OPIC has provided guarantee for this fund.
First Russia NIS Partners Fund
Baring International Investment Management
155 Bishopsgate
London EC2M3XY, England
Nancy Curtain
Tel: 011-44-171-214-1708
Fax: 011-44-171-214-1725
Equity Investments in natural resource-related companies,
telecommunications, light manufacturing and consumer products and
services. OPIC has provided guarantee for this fund.
Defense Enterprise Fund
Michael Lehner
Phone: (617) 527-3307
Art Sweeney
Phone: (804) 281-2129
Fax: (804) 281-2245
(Funding for US-Russian joint ventures in the defense sector. Funding
now available for joint ventures in military housing construction and
defense conversion.)
Appendix F
MARKET RESEARCH
List of Available and Upcoming Industry Sector Analyses (ISA's)
AVAILABLE
Automatic Lathes -- October 1994
Avionics -- November 1994
Paging Telecommunications Equipment -- December 1994
Non-Industrial Construction Services -- December 1994
Men's Apparel -- January 1995
Office Furniture -- February 1995
Surgical Medical Instruments -- March 1995
Computer Software -- March 1995
Hand and Power Tools -- March 1995
Port and Shipbuilding in Northwest Russia - May 1995
Forestry and Woodworking Machinery (Far East) -- May 1995
Industrial Process Controls -- June 1995
UPCOMING
Paper and Paper Products -- July 1995
Medical Equipment (Far East) -- July 1995
Food Processing and Packaging Equipment (Far East) -- July 1995
Shipbuilding Equipment (Far East) -- July 1995
Hotel and Restaurant Equipment (NW Russia) -- September 1995
Cosmetics -- September 1995
Telecom Services Infrastructure -- September 1995
Air Traffic Controls -- September 1995
Environmental Equipment and Services (contract) -- September 1995
Equipment and Services for Upgrading/Refurbishment of Power
Generation Facilities -- September 1995
Bakery Equipment -- October 1995
General Aviation -- November 1995
Dental Equipment -- December 1995
Office Supplies -- January 1996
Children's Apparel -- January 1996
Computer Services -- February 1996
Building Products -- March 1996
Consumer Goods -- March 1996
Water Pollution Control Equipment -- April 1996
Household Consumer Goods -- May 1996
Commercial Fishing Equipment -- June 1996
Heavy Construction Machinery -- July 1996
Electrical Generating Equipment -- July 1996
Automotive Accessories and Service Equipment -- August 1996
LIST OF USDA/FAS Commodity Reports and Market Briefs (FY1995 [as of June
1, 1995] and FY1996)
Oilseed and Products (annual) - June 1, 1995
Cotton (annual) - June 20, 1995
Poultry (annual) - June 20, 1995
Annual Marketing Plan Information Report - July 15, 1995
Livestock (annual) - August 1, 1995
Honey (annual) - August 25, 1995
Fresh Deciduous Fruit (annual) - September 10, 1995
Seafood (annual) - September 15, 1995
Agricultural Situation (annual) - September 30, 1995
Sugar (semi-annual) - October 10, 1995
Foreign Buyer List Annual Report - October 15, 1995
Dairy (annual) - November 30, 1995
Livestock (semi-annual) - February 10, 1996
Planting Seeds (annual) - February 10, 1996
Forest Products (annual) - February 15, 1996
Sugar (annual) - April 10, 1996
Tobacco (annual) - May 1, 1996
Oilseeds and Products (annual) - June 1, 1996
Cotton (annual) - June 20, 1996
Poultry (annual) - June 20, 1996
Annual Marketing Plan Information Report (annual) - July 15, 1996
Livestock (annual) - August 1, 1996
Honey (annual) - August 25, 1996
Fresh Deciduous Fruit (annual) - September 10, 1996
Seafood (annual) - September 15, 1996
Agricultural Situation Report - September 30, 1996
Appendix G
TRADE EVENT SCHEDULE; MAJOR TRADE SHOWS IN RUSSIA
COMTEK AUTUMN '95 - October, 1995, St. Petersburg
Computers and Communications
Organizer: Comtek International
43 Danbury Road
Wilton, Connecticut 06897
Phone: (203) 834-1122
Fax: (203) 762-0773
NIZHNY NOVGOROD AUTUMN - October, 1995, Nizhny Novgorod
International trade fair for consumer goods
Organizer: Nizhegorodskaya Yarmarka JSC
13, Sovnarkomovskaya Ul.
Nizhniy Novgorod, Russia 603086
Phone: (8312) 44-12-58, 44-03-81, 44-44-55
Fax: (8312) 44-34-04, 44-01-46
Telex: 151000 INTUR SU; 151145
URAL-MEDIKA '95 - October 10-14, 1995, Chelyabinsk
1st International Exhibition of Hospitals, Clinics and Diagnostic
Centers, Pharmaceuticals and Medical Equipment
Organizer: PM EXPO AG Messeorganisationen (Switzerland)
Stockackerstrasse 30
CH-4142 Munchenstein
Phone: 41-61-411 66 06
Fax: 41-61-411 66 09
Telex: 964041 pmex ch
FALL IN KHABAROVSK- October 12-16, 1995, Khabarovsk
International Trade Show for Consumer Goods, Clothes and Sporting Goods
Organizer: Khabarovsk International Fair
Khabarovsk, Russia 680028
Rooms 14-18, South Tribune, Lenin Stadium
Phone: 7-4212-332-020, 332-040, 399-373
INTERAVTO-95, October 17-21, 1995, St. Petersburg
International Auto Salon
Organizer: LENEXPO
Phone: (812) 355-5988
Fax: (812) 355-1985
NETCOM '95 - October 23-28, 1995, Moscow
2nd International Specialized Trade Show for Computer Networks
Krasnaya Presnya Exhibition Center
Organizer: COMTEK INTERNATIONAL
43, Danbury Road
Wilton, Connecticut 06897
Phone: (203) 834-1122
Fax: (203) 762-0773
and CROCUS International
Phone in Russia: 7-095-249-8606
FAX: 7-095-249-8611
BANK AND OFFICE '95 - October 23-28, 1995, Moscow
5th International Trade Show for Banking Equipment
Krasnaya Presnya Exhibition Center, pavilion 2
ORGANIZER: NOWEA INTERNATIONAL GMBH
P.O. Box 101006
D-40001 Dusseldorf
Germany
Phone: (211) 45-60-02
Fax: (211) 45-60-740; and
EXPOCENTR
1-a, Sokolnicheskiy Val
Moscow 107113 Russia
Phone: 7-095-268-1340, -255-3712
Fax: 7-095-288-9537, 205-6055
PAN-PACIFIC CONSUMEXPO '95 - October 24-28, 1995, Vladivostok
International Fair for consumer goods, house hold and office electronics
Organizer: VLADEXPO Exhibition Hall
19, Okeanskiy Prospekt
Vladivostok, Russia 690600
Phone: (4232) 22-20-25, 26-76-46
Fax: (4232) 22-72-26
INTERSTROY '95 - October 31 - November 1, 1995, St. Petersburg
Construction Equipment and Materials
Organizer: LENEXPO
Phone: 7-812-356-3587
Fax: 7-812-355-1985
WORLD FOOD '95 - November 13-18, 1995, Moscow
4th International Food, Food Processing and Packaging Exhibition and
Conference
U.S. Department of Commerce Certified Trade Fair
Organizer: EXPOCENTR and COMTEK INTERNATIONAL (USA) (see above)
ENERGETICS AND ENGINEERING ECOLOGY '95 - November 24-28, 1995,
Vladivostok (Equipment and technologies for environmentally-safe power
generation and use, energy-efficient construction, and use of recycled
energy and other natural resources)
Organizer: VLADEXPO Exhibition Hall
19, Okeansky Prospect
Vladivostok, Russia 690600
Phone: 7-4232-22-20-25, 26-76-46
Fax: 7-4232- 22-72-26
SDRAVOOKHRANENIYE/HEALTH CARE '95 - December 4-9, 1995, Moscow
6th International Trade Show for Medical Engineering, Pharmaceuticals
and Health Care Products
Organizer: NOWEA INTERNATIONAL GMBH (see above)
and EXPOCENTR, Firm MEZHVYSTAVKA
14, Krasnopresnenskaya Nab.
Moscow, Russia 123100
Phone: 7-095-255-3738
Fax: 7-095-205-6055
CONSUMEXPO '96 - January 15-19, 1996, Moscow
Organizer: NOWEA INTERNATIONAL GMBH
and MEZHVYSTAVKA, EXPOCENTR (see above)
INFORMATION TECHNOLOGY '96 - March, 1996, Yekaterinburg
Computers and Software, Information systems
Organizer: URALEXPOCENTRE
18, Komsomolskaya Ul.
GSP 166, Yekaterinburg, Russia 620219
Phone: (3432) 49 30 17
Fax: (3432) 49 30 19
Telex: 721705
MODA '96, March, 1996, Moscow
International Fashion Show
(likely to be certified by USDOC)
Organizer: COMTEK INTERNATIONAL
43, Danbury Road
Wilton, Connecticut 06897
Phone: (203) 834-1122
Fax: (203) 762-0773
COMTEK '96 - April, 1996, Moscow
International trade fair for computer systems, peripherals and software;
(likely to be certified by USDOC)
Organizer: COMTEK INTERNATIONAL
43 Danbury Road
Wilton, Connecticut 06897
Phone: (203) 834-1122
Fax: (203) 762-0773
URALS ECOLOGY '96 - April, 1996, Yekaterinburg
Environmental control and protection equipment, equipment for waste
treatment
Organizer: URALEXPOCENTRE (see above)
DALPHARM '96 - April 18-22, 1996, Vladivostok
Drugs and pharmaceuticals
Organizer: VLADEXPO
VLADEXPO Exhibition Hall
19, Okeansky Prospect
Vladivostok, Russia 690600
Phone: 7-4232-22-20-25, 26-76-46
Fax: 7-4232- 22-72-26
MEDICINE '96 - May, 1996, Yekaterinburg
Medical equipment, medical and dental supplies
Organizer: URALEXPOCENTRE
18, Komsomolskaya Ul.
GSP 166, Yekaterinburg, Russia 620219
Phone: (3432) 49 30 17
Fax: (3432) 49 30 19
Telex: 721705
CONSUMER GOODS '96, May, 1996, Ufa
Organizer: UFAEXPO
Phone: (3472) 52-54-98, 52-53-86
Fax: (3472) 52-55-93
Telex: 162125 PTB SU Expo
TRANSTEC '96 - May, 1996, St. Petersburg
Organizer: Dolphin Exhibitions Ltd.
Phone: 44-449-741 087
Fax: 44-449-741-628
and LENEXPO
Phone: 7-812-356-3561
Fax: 7-812-355-1985
SVYAZ/EXPOCOMM '96 - May, 1996, Moscow
International Trade Fair for Telecommunications
(likely to be certified by USDOC)
Organizer: EXPOCENTR and
E.J. Krause & Associates, Inc.
7315 Wisconsin Avenue, Suite 420 East
Bethesda, MD 20814
Phone: 301-986-7800
Fax: 301-986-4538
Telex: 4944944 EJK EXPO
CONSTRUCTION '96 - May 23-28, 1996, Vladivostok
Construction equipment and materials
Organizer: VLADEXPO Exhibition Hall (see above)
CEM/IHHM/PWM '96 (Consumer Electronics/Housewares and
Hardware/Photographic Equipment), June, 1996, Moscow
(likely to be certified by USDOC)
Organizer: COMTEK INTERNATIONAL (see above)
DEFENSE CONVERSION ' 96, June, 1996, Yekaterinburg
Organizer: URALEXPOCENTRE (see above)
AUTOMOBILE SHOW '96 - June, 1996, Yekaterinburg
Organizer: URALEXPOCENTRE (see above)
INTERNATIONAL COMPUTER FORUM - June, 1996, Moscow
7th International Conference and Trade Show for Computers
Organizer: International Computer Club
Office 506A, Entrance 3
12, Krasnopresnenskaya Nab.
Moscow Russia 123610
Phone: 7-095-253-9123, 253-9124
Fax: 7-095-253-9102
MACHINEXPO-95 - June 7-13, 1995, Moscow
3rd International Technical Machinery Fair
Organizer: MEZHVYSTAVKA, EXPOCENTR (see above)
NEFTEGAZ '96 - June 17-22, 1996, Moscow
6th International Fair for equipment for the oil and gas industry;
(likely to be certified by USDOC)
Organizers: MEZHVYSTAVKA, EXPOCENTR (see above)
NOWEA INTERNATIONAL GMBH
P.O. Box 101006
D-40001 Dusseldorf
Germany
Phone: (211) 45-60-02
Fax: (211) 45-60-740
BYT I MODA/Consumer Goods and Fashion Show, July 2-6, Moscow
4th International Trade Fair
Organizer: NOWEA INTERNATIONAL GMBH (see above)
BANK AND OFFICE '96 - August, 1996, Vladivostok
Bank and office equipment and furniture
Organizer: VLADEXPO Exhibition Hall (see above)
INTERNATIONAL AVIATION AND SPACE SALON '96 - August, 1996, Moscow
Zhukovsky Airfield, Moscow Region;
U.S. Department of Commerce Certified Trade Fair
Organizer: Global Tradeshow Services, Inc.
P.O. Box 1247
Springfield, VA 22151-0247
Phone: (703) 941-2420
Fax: (703) 941-1480
in Europe: Gebr. Helbig Industrie-Messen GmbH
P.O. Box 1580
D-92605 Weiden, Germany
Phone: 961-388-1122
Fax: 961-388-1130
AVTOSALON-96 - August, 1996, Moscow
3d Russian International Automobile Salon
Organizer: MEZHVYSTAVKA, EXPOCENTR (see above)
(likely to be certified by U.S. Department of Commerce)
SECURITY '96 - August, 1996, Vladivostok
Security equipment
Organizer: VLADEXPO Exhibition Hall (see above)
RUSSIAN FARMER - September, 1996, St. Petersburg
5th Agricultural World Trade Fair
Organizer: LENEXPO
Phone: (812) 356-3561
Fax: (812) 355-1985
TECHNOLES '96 - September, 1996, St. Petersburg
Machinery and Equipment for Forestry
Organizer: LENEXPO
Phone: 7-812-355-1946
Fax: 7-812-355-1985
INTERMEBEL '96 - September, 1996, St. Petersburg
Furniture
Organizer: LENEXPO
Phone: 7-812-355-1946
Fax: 7-812-355-1985
COMMUNICATION, INFORMATION TECHNOLOGIES '96 - September, Ufa
Organizer: UFAEXPO (see above)
STROITECHNIKA '96 - September 2-6, 1996, Moscow
International Trade Fair for Construction Industry
Organizer: EXPOCENTR and NOWEA INTERNATIONAL GMBH
P.O. Box 101006
D-40001 Dusseldorf
Germany
Phone: (211) 45-60-02
Fax: (211) 45-60-740
TRANSPORT, ROADS AND SERVICE '96 - September 18-23, 1996, Vladivostok
Transportation and construction equipment and products
Organizer: VLADEXPO (see above)
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