On August 30, 2019, experts from the SCHNEIDER GROUP’s Legal and Import Departments together with representatives of the Canadian Business Association in Russia and Eurasia (CERBA), tried to answer this question in SCHNEIDER GROUP’s House of German Economy office in Moscow.
As a result of sanctions and counter-sanctions, Russia was overtaken by Turkey for 4th place in volume of international trade, and exports from the EU to Russia have dropped by 15.7% annually. However, the speakers of the event noted some positive aspects of the sanctions, most prominently the growth of domestic production. According to the Russian Ministry of Agriculture, the volume of tomatoes and cucumbers grown in domestic greenhouses increased by 20% from 2016 to 2017. According to experts, neither the sanctioned or sanctioning party benefits from sanctions. Despite this, there are a number of strategies for companies to develop their business in Russia more safely and successfully.
Vasily Bortsov, Manager of Import Services, spoke about such strategies for foreign companies. According to Mr. Bortsov, good options are localizing production in Russia or changing the country of supply to Russia. For example, a Norwegian fish producer which has been sanctioned by Russia can open production in Chile, from where it can supply fish to Russia. In addition, companies also use “buffer zones” around Russia, such as Belarus, where the products are prepared for export and, after receiving a new customs code, can be legally exported to Russia.
It is critical to follow the conditions and procedures that allow for maximum transparency in exports and to check the reliability of a trading partner in Russia. It is very important to conduct full-fledged due diligence of a partner to verify their integrity and assess the risks of cooperation. Mr. Bortsov highlighted the classic markers of a potentially unscrupulous partner: offshore accounts of the company, a request for payment in cash or a bonus for the implementation of a project, and a lack of complete information about logistics and the final point of export of goods.
At the end of the program, the General Director of the Russian branch of HATCH, a leading international consulting and engineering company in the mining, metallurgy and energy sectors, Andrey Sirach, shared his practical case study of the company’s management under sanctions. The projects that the company conducts in the regions that are part of the international sanctions zone are assessed by the company as high-risk. In this regard, the company has established a special “Committee for Global Risk Assessment”, the approval of which is necessary for the project in the sanctions regions. Nevertheless, Mr. Sirach noted that international sanctions against Russia have not affected the company’s strategy towards the country, but only modified the tactics of doing business.
SCHNEIDER GROUP provides a full range of due diligence services to verify business partners necessary for business development in the country. Our experts with many years of experience will be happy to advise you and provide you with full support in entering the market.