Discusses key economic indicators and trade statistics, which countries are dominant in the market, the U.S. market share, the political situation if relevant, the top reasons why U.S. companies should consider exporting to this country, and other issues that affect trade, e.g., terrorism, currency devaluations, trade agreements.
Russia presents both significant challenges and opportunities for experienced American exporters. Russia's 2014-2016 economic downturn, driven by low oil prices, Western sanctions, and compounded by a lack of structural economic reform, squeezed both Russian corporations and the average consumer. While targeted American and European economic sanctions remain in place and have gradually expanded, there is no overall trade embargo on Russia. Due to tight fiscal and monetary policy and higher oil prices, Russia achieved GDP growth of 1.7% in 2018. The economy is expected to expand at a comparable or slightly slower pace in 2019. Despite some economic challenges, over 1,000 American firms of varying sizes continued to do business in Russia, due to its 142 million consumers, $29k+ GDP per capita (as measured in purchasing power parity), growing middle class, and highly educated and trained workforce.
There are three broad factors that merit consideration when assessing business prospects in Russia: geopolitics, market dynamics, and rule of law. Russia governmental support for separatists in Ukraine, interference in the 2016 U.S. elections, Russian-origin cyberattacks, and the role of Russian security services in the March 2018 poisonings of residents in the United Kingdom, as well as disagreements with the United States’ positions on certain global security challenges such as in Syria and Venezuela, have raised tensions with the United States and its allies, leading to increased economic restrictions during recent years. U.S. and European economic sanctions imposed in 2014 and subsequently augmented remain in place and are unlikely to be lifted in the near future. Sectoral restrictions on offshore, Arctic and shale oil and gas projects, the financial sector, and the defense industry continue. Additionally, a number of Russian entities and individuals are subject to a range of sanctions, requiring American firms to conduct careful due diligence on potential business partners. Since 2014, U.S. agricultural exporters have been hit with Russian countersanctions, one of a number of protectionist, import-substitution policies designed to provide Russian firms implicit or explicit advantages over international competitors. In 2018, the Russian Duma passed legislation endorsing further restrictions on Western imports in the event of the expansion of existing Western sanctions, and legislation is currently under consideration to make any cooperation with Western sanctions illegal. These laws may not be implemented, as following through could result in costs to some Russian economic interests, yet the fact that such measures are under consideration creates uncertainty that acts as an impediment to business.