Overview of best prospect sectors, major infrastructure projects, significant government, procurements and business opportunities.
Food, Pharmaceuticals/Medical Devices
Russia remains a large market of 144 million people, and certain areas of business related to food, medicine, and consumer goods remain possibly viable for U.S. companies. As of the time of publication, food and medicine are specifically exempted from U.S. Department of Treasury sanctions for humanitarian reasons, although thorough due diligence of all end-users and end-uses is highly recommended when considering any transaction in the Russian market.
Comprehensive sanctions on the Russian banking and financial sector may present issues to U.S. companies for receiving payments and day-to-day operational transactions, and transportation logistics will remain a difficult problem to solve in light of the various restrictions on different transportation modes.
There are other areas of the Russian economy that may present limited opportunities for U.S. companies. The Office of Russia, Ukraine, and Eurasia (ORUE) at the Department of Commerce in Washington, DC can assist companies considering opportunities in Russia and share the various U.S. Government informational resources available as part of due diligence activities.
One of the key resources exporters can utilize is the “Consolidated Screening List” (CSL). The CSL consolidates thirteen export screening lists of the Departments of Commerce, State, and Treasury into a single data feed as an aid to industry in screening parties to regulated transactions.
For legal advice, companies should consider consulting with an experienced international trade attorney.
Based on 2021 figures, Russia has the eighth-largest market for packaged food products. In 2019, revenues from Russia’s food and drink processing sectors reached $102.4 billion.
Prior to Russia’s invasion of Ukraine in February 2022, the fast-moving consumer goods (FMCG) segment had remained the most stable sub-sector, with an 80% share of food products. Additionally, the demand for packaged products had increased substantially, reaching 29 million tons in 2020. However, since February, the market has changed considerably, with soaring prices and scant availability for many staples as well as reports of problems with importation of spare parts and inputs needed to keep food processing facilities functioning.
Medical Devices, Pharmaceuticals
The Russian medical device market in 2020 exceeded $3 billion. The leading categories included cardiology, orthopedic, diagnostic imaging, and general surgery devices.
$19.9 billion of pharmaceuticals were sold in Russia in 2019, equal to 1.2% of Russian GDP and 22.6% of the nation’s health spending. In part due to the COVID-19 pandemic, U.S. pharmaceutical exports to Russia spiked in 2020, and remained significantly above 2019 levels in 2021.
Cardiovascular diseases, cancer, and HIV are the most prevalent diseases in Russia and are driving demand for associated pharmaceutical products. High rates of smoking and alcohol consumption also contribute significantly to illnesses. Per a 2015 WHO report, 39.1% of the Russian population smokes compared to a rate of 22.7% globally and 27.3% in Europe.
U.S. pharmaceutical exporters face an increasingly complex and opaque regulatory landscape in Russia. Russia’s Good Manufacturing Practices regime may lead to delays in foreign pharmaceutical products receiving market access, and there is weak protection of intellectual property rights for patented drugs. IPR issues include erosions in regulatory data protection and patent rights, and the risk of compulsory licensing, further exacerbated by a March 2022 Russian decree that certain patent holders (from countries who have imposed sanctions on Russia) are no longer entitled to any compensation for revenue earned from compulsory licensing of their patents.