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Forum Forecasts British-Russian Business Climate to Improve Post Brexit

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Russia is open for business even in today's unusual circumstances, was the overarching message of the Russian-British Business Forum in London.

This gathering of Russian and British businessmen has been organized by the Russian Trade Delegation in the United Kingdom in cooperation with the Ministry of Economic Development of the Russian Federation in November, and held as part of Eastern Seasons, an annual week of events promoting business and cultural ties between people and countries of Eastern and Western Europe.

The combined impact of the global economic and financial downturn, and of EU anti-Russian sanctions, brought the Russian-British trade down quite dramatically, resulting in real job losses in British manufacturing and agriculture. For instance, JCB,  the world's third-largest construction equipment manufacturer, who had spent 25 years building a position of preeminence on the Russian market, lost it almost overnight because of sanctions and counter-sanctions, said JCB's Director for Global Affairs Philip Bouverat.

© SputnikRussian-British Business Forum in London
Russian-British Business Forum in London - Sputnik International
Russian-British Business Forum in London

JCB's competitors in China, Japan and India were quick to fill the void and now JCB has to rely on its Indian franchise to recover a share of the market. The recovery would be slow, warns Philip Bouverat, and driven by Indian rather than British manufacturing.

It's a similar picture in the Russian financial sector, where British positions used to be strong.

As a result of sanctions, Russian companies have learnt to live without Western investors, said Richard Ogdon of Otkritie Capital. They are now raising the necessary finance internally, and what they can't raise at home they get from the Middle East and Asia.

Enduring the Pressure

However, even in these difficult times British and Russian businesses continue working together, said Russian Ambassador in UK Aleksandr Yakovenko:

"BP and Rosneft are developing large oil and gas fields in eastern Siberia, while Shell and Gazprom carry on their Baltic and Sakhalin-2 LNG joint projects. This November, ACRA (a Russian rating agency), and Urals (an export brand of crude oil) were presented in London — for the first time outside of Russia."

"Russia's economy has proved to endure the pressure of sanctions and is now recovering, having ranked 51st in Doing Business 2016 — better than China (84th) Brazil (116th) and India (130th). Russia's GDP growth is expected to pick up in 2017 (up to 1 % in annual terms), which increases interest in the Russian market".

Sir Edward Leigh, Chairman of the all-party group on Russia urged the British business community to seize the new Russian opportunities.

"We are not cheerleaders for Russia but seek to understand Russian position, to understand that there is another point of world view and try to promote good relations with Russia."

Sir Edward admitted that political landscape for Anglo-Russian relations does remain tricky at the moment but he saw some good signs of a gradual improvement: a new government in the UK, and a new president in the Unites States, offering 'a unique opportunity for calming down the bad feelings between Washington and Moscow.'

In Sir Edward's view a victory by Hillary Clinton, supported by all the anti-Russian hawks would have led to a serious escalation in Syria and a return to the Cold War or something worse.

"We do have natural interests in common, not least our fight against a real existential threat in the world, which is not China, or Russia, or Assad but Islamic extremism, which we must unite in defeating."

Brexit Opportunities

In trade terms "Brexit should provide numerous opportunities for stronger UK-Russia cooperation," said Sir Edward. For now Britain is bound by the sanctions imposed by the EU.

"After 2019 we will be in control of our international trade policy. We will be free to make our own trade agreements with countries across the globe and we will continue to press for removing barriers to free trade. Russia and Britain have had to call on each other for support and in two world wars in the 20th century Russia and Britain stood side by side against militarism and fascism. Some of us will never forget that we are, at either end of Europe, natural allies. So we need to encourage more dialogue, not less, especially in terms of trade," Sir Edward said.

It's a very timely conference, said Roger Munnings CBE, Chairman of the Board, Russo-British Chamber of Commerce. Russian economy is beginning to emerge from a long recession. Russia analysts point out that unlike the oil driven boom of the early-mid 2000-s, this recovery is built on investment and production. It will be slower but more robust, especially that the much talked about modernization and diversification of the Russian economy is finally taking place. And since the cost of labor in Russia is now deemed to be lower than in China, Russia has become an attractive production base.

Groupthink

Daniel Kawczynski, MP, Vice-chair of the All-Party Parliamentary Group on Russia, and a member of the Foreign Affairs Select Committee, which is currently undertaking an extensive report on Anglo-Russian relations, has urged British and Russian businessmen to submit evidence based on their own experiences to the Committee. 

"There is a lot of groupthink in the House of Commons, and a lot of groupthink in the West generally, and it sometimes difficult to go against the trend, against the perceived flow that the current policy is working and is effective. So please Google the Foreign Affairs Committee and engage with us".

A Polish-born Mr. Kawczynski is worried about the creeping militarization around Poland's border with Russia's Kaliningrad Region, with tit-for-tat forces deployments on both sides. God forbid, he says, it should become a no-man's land like the border between North and South Koreas.

© SputnikRussian-British Business Forum in London
Russian-British Business Forum in London - Sputnik International
Russian-British Business Forum in London

A guest from Kaliningrad did not share his alarm. Andrey Tolmachev, deputy economics minister of the Kaliningrad Region, told Sputnik that his region, in line with the policy of the Russian government is taking steps to attract foreign investment and labor, and to liberalize visa regime to make it easier and "more comfortable" to do business in Kaliningrad.

"We have set up an association of foreign investors, and our neighbors from Lithuania, Poland and Germany, as well as from further afield in the EU are signing up in growing numbers in spite of the political climate".

Equal Rights for Foreign Capital

The attractiveness of doing business in Russia will increase starting 2017, Andrey Sharov, Vice-President of the largest Russian bank, Sberbank, told the audience.

He let it on a secret that from 1 January 2017 all small and medium companies with foreign capital resident in Russia will have the same rights — and support from the Russian state — as Russian companies. It means, he explained to Sputnik, that such companies will have access to cheaper financing subsidized by the state and will enjoy same protection from government interference.

This is just one element of a wider government program of improving business climate and investment attractiveness of Russia, the organizers of the event told Sputnik. Dr. Boris Abramov, Russian Trade Representative in the UK, said the number of participants [over 200] proves that the Russian-British trade and economic cooperation is very much on their agenda.

"It's obvious that businessmen on both sides would like to maintain and hopefully expand their ties, both in trade and investment. So, given the success of the Forum we are quite optimistic about the future."

Dr. Abramov expressed hope that the official London would heed the calls of quite a few British MPs and their constituents for resuming dialogue with Moscow.

However, in the experience of Peter Hanro, Chairman of Petropavlovsk plc gold mining company, "there's lack of willingness at the top of the British government to understand Russia or work with those who are on the ground and could tell them what's really going on."

© SputnikRussian-British Business Forum in London
Russian-British Business Forum in London - Sputnik International
Russian-British Business Forum in London

As somebody who has been heavily involved in Russia since 1994, Mr. Hanro told Sputnik the investment climate has changed a lot for the better recently and Russia is a very good place to do business in".

As for the "self-sanctioning" British businessmen who avoid Russia because of all the negative publicity in the Western media, the advice from their British peers at the Forum was this: "get yourself on a plane to Russia and you'd be bowled over by the opportunities."

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