Russian business in search of new partners

The Russian double-headed eagle, which for a long time was looking exclusively to the West, is beginning to turn heads in different directions in search of new partners.

 

Under extreme sanctions pressure, Moscow is focused today on looking for new partners. This is not an easy business. Experts are certain that automatic substitution of the West for the East will not happen. Even the Chinese who are sympathetic to Russia’s situation are not prepared to lose out on attractive US and EU markets. It is also important to consider the oriental culture’s members, who may sign a pile of memoranda and make numerous visits, while leading to nowhere.

China – Russia’s main strategic partner can’t by solely relied upon even though our trade and economic relationships have made serious progress in many industries. Considering the high-level political and diplomatic cooperation with Beijing, we still have numerous problems with economics. For instance, many companies and the PRC banks are openly afraid to work with us due to the threat of secondary sanctions from Washington, which continues to be their most important trade partner.

Russia is only number 13. We cannot switch overnight to full-scale settlements in national currencies that would allow both sides to get rid of the dollar addiction. Perhaps the process will be helped by creation of clearing centers and special banks.

What shall we do? There is just one solution, as analysts believe, which is to search for partners among numerous friendly countries in Asia, Africa, and Latin America.

Being under the pressure of Western sanctions, Russia, while looking for reliable trade and economic partners, ought to take a closer look at Latin America which is comprised of over 30 countries that have no hostility towards Russia, – states the Latin America Institute director Dmitry Razumovskiy.

‘The whole of Latin America and the countries of the Caribbean, are in essence friendly countries’, – he told Capital Ideas in an interview.–‘Certainly, with some of them we have forged closer bonds, but we do not have bad relationships with any of them. There is no bad blood in our history together and the differences that they have had have been with the United States which has tried to trample them in the past’.

In order to set up robust trade and economic relationships, it is necessary to make at least two important decisions concerning logistics and finances.

Since commercial transportation between Latin America and Russia is by maritime transport, Russia should be focued on creating shipping lines wherever feasible. The Soviet merchant marine, was afterall considered one of the largest in the world. Under the current sanctions we cannot make use of the services of the western company Maersk, which specializes in cargo marine shipment.

Secondly, the Institute director affirms, it is imperative to decrease the reliance on the dollar and the euro in mutual settlements and increase the share of payments in national currencies. ‘It is not easy to do because developing countries’ currencies are unstable and the financing of our economic contacts is happening preemptively via western and American banks.’

 

 

One of the options is to make use of the yuan. ‘China has a powerful banking system, comparable with an American one. Beijing could fractionally substitute western banks. In any case, this transaction channel should be thoroughly explored. There is also a high demand for the development of trade and economic relationships between Russia and Latin America.’, – concluded Razumovskiy.

African countries have also expressed an interest in development of trade and economic relationships with Russia. ‘Russian business should not miss out on this opportunity and begin to actively develop trade and economic relationships with Africa, which is waiting for our know-how and hi-tech equipment,’ believes Irina Abramova – the Institute of Africa with the Russian Academy of Sciences director.

‘The focus of Russian foreign economic activities has changed direction due to western sanctions and we need to reconsider our attitude towards Africa and get to business with that continent. Not one country out of the 54 on that continent has poor relations with us.’,– she said during interview with Capital Ideas.

All of them remember, that it was Moscow who not only helped them in the fight against colonialism in the past, but also laid the groundwork for the emergence of their economies. They want us to participate more actively in the African market, which is growing incredibly fast, and doubling every 5 years.

The current trading volume between Russia and Africa does not satisfy both sides. ‘Its spike occurred in 2018 when it was 20.4 billion dollars which is nothing compared to the potential of our trade and economic relationships’.

According to Abramova, Africa today is not simply waiting for financing and loans, but rather hi tech equipment, machinery of all sorts, and localization of Russian enterprises.

‘Africans, since soviet time, love our technology and our machinery in general and they’re in high demand. For instance, they enjoy driving Russian UAZ off roaders and KAMAZ trucks’.

Africans would like to localize our production enterprises and to build automotive plants, railcar- and locomotive-building plants, mining enterprises for metals – which are plentiful in Africa, oil refineries. ‘All the areas of potential collaboration are difficult to list. And we can’t forget agriculture, nuclear power, and IT’,– reiterated Abramova.

Latin America and Africa are more or less clear, in contrast to the Arabian east which is more complicated, and delicate. Besides, relationships with Latin America and Africa have a long history but the Arabian East for Russia is still fundamentally is terra incognita. No wonder, when conversation drifts towards the East, even experts start with Fyodor Suchow’s quotation from the movie ‘White sun of the desert’ : ‘East is a delicate matter’.

Our relationships with the Arab world, which comprises 22 countries, have not been damaged by wars or conflicts. However, we don’t know each other well, senior research fellow of the Center of Arab and Islamic studies at the Institute of Orient with the Russian Academy of Sciences, M.Sc. Svetlana Babenkova told CI. That is why it is necessary to begin trade and economic relationships by establishing contacts between members of the small and medium sized businesses of our countries.

Moreover, the East is complex and heterogeneous: there are many cultures, many ethnicities, many written and unwritten rules in both social and economic lives.

‘Islamic banks, for example, do not charge interest; their operation is conducted under the Law of Sharia; also quite a bit of nuances of Muslim business. Anyway, if we intend to seriously turn to the Arabian East, we need to learn all of it to set-up solid and long term relationships’,– concluded the expert.