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Prudent Scheme? US Leapfrogs EU to Become Russian Preferred Trading Partner

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While EU members bear the brunt of the “trade war” - sanctions and counter-sanctions have cut the bloc’s bilateral trade with Russia by an estimated 100 billion euros ($112 billion) – the US has leapfrogged many of Moscow’s former partners to become its No. 5 trading ally outside the former Soviet Union, according to Bloomberg.

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“Since leading the push for western penalties on Russia over Ukraine two years ago, the US has leapfrogged Turkey, Japan, Poland and South Korea to become the country’s No. 5 trading partner outside the former Soviet Union,” says the article on Bloomberg’s website.

While European Union members “bear the brunt of the trade war”, it adds, US companies led by Boeing Co., Cargill Inc. and Yum! Brands Inc. have been investing for the long-haul and gaining market share.

It further cites data which shows that sanctions and counter-sanctions have cut the EU’s bilateral trade with Russia by an estimated 100 billion euros ($112 billion).

Meanwhile, Boeing, whose design bureau in Moscow is its largest outside the US, this month opened a training and research center at the government-backed Skolkovo technology park with a ceremony that was attended by Deputy Prime Minister Arkady Dvorkovich and US Ambassador John Tefft.

“The Chicago-based company, which buys a third of its titanium from Russia, struck a $7.4 billion deal to sell 20 747-8 freighters to Moscow-based Volga-Dnepr Group last year, providing a much-needed boost to a jumbo-jet program that had no net orders in 2014 for the first time since sales started in 1966. It also won Congressional approval to resume buying Russian rocket engines to launch US satellites through a venture with Lockheed Martin Corp,” the agency adds.

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It further explains that Russia’s ban on EU farm products combined with the president’s drive to achieve food self-sufficiency and the weaker ruble have created opportunities that are being seized by agricultural giant Cargill and restaurant chains like Yum!

“Cargill, which started selling grain to the Soviet Union in 1964, is finishing a $200 million seed-crushing plant in southern Russia and in March announced plans to build an animal-feed facility in central Russia,” it says.

Meanwhile, Yum! has opened about 200 KFC outlets in Russia since 2014 to take advantage of diners downshifting to less-expensive restaurants, lifting first-quarter sales by 27 percent.

McDonald’s Corp., which opened its 500th restaurant in Russia last year, plans to add another 60 in 2016, while Restaurant Brands International Inc.’s Burger King is expanding at a similar pace.

However, not all US companies “have weathered the storm,” Bloomberg acknowledges.

“A record decline in car sales forced General Motors Co. to shutter its assembly plant in St. Petersburg and stop selling Chevrolet and Opel models. And once-lucrative investment-banking fees for Citigroup Inc., Morgan Stanley and other lenders tumbled by two-thirds to a 16-year low,” Freeman & Co data shows.

However for the EU, the situation looks a lot gloomier.

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“Sanctions aren’t good for the German or the Russian economy,” Bloomberg quotes Matthias Platzeck, chief of Russia-Germany Forum, a “powerful lobby group uniting major companies in both countries” as saying.

He also noted that the EU is suffering more from the penalties than the US.

“We can’t exclude the fact that America benefits,” he added.

A similar view is echoed by France. The French Senate last week passed a non-binding resolution to “gradually and partially” lift sanctions by a vote of 302 to 16.

Meanwhile, there is still a discussion in the EU over whether to extend the anti-Russian punitive measures for another six months, as they are due to expire on July 31.

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