What the US ambassador thinks about when he comes to work
“A friendship founded on business is better than a business founded on friendship.” These wise words spoken by John Rockefeller became, perhaps, the leitmotif for the 18th investment conference “A Tale of Two Worlds,” which was held in Moscow by the American Chamber of Commerce in Russia (AmCham).
During the discussion, Russians and Americans tried to figure out how to resolve another serious crisis in the relationship between the two countries. Jon Huntsman, US Ambassador to Russia, set the tone in his opening speech. It’s worth pointing out that speeches by US ambassadors at economic AmCham conferences are a rare occurrence. Alexis Rodzianko, who heads up AmCham, doesn’t recall it ever happening before. Although the ambassador spoke softly and with a smile, his words were genuine. According him, relations between the US and Russia are “in a crisis due to political differences,” which “complicates the atmosphere” for business representatives. “I think about every time I walk into the embassy.” he said.
Nonetheless, the American embassy and the Spaso House, which is the US Ambassador’s residence in Russia, is full of optimism, not despair. And this optimism is not artificial. Jon Huntsman is inspired by the history of US-Russia relations. There were a lot of bumps in the road, especially after the war. But even during the most difficult periods, the leadership of the two countries were able to find common ground. Speaking about this, Jon Huntsman noted that this is the conclusion he came to after reading books by all the other US ambassadors in Russia, who worked in Moscow before him. “The goals and challenges were similar. We found solutions. This is encouraging,” he said. According to him, it’s worth following the example of musicians who play on the same orchestra or Russian and American astronauts, who have been working together for 20 years. But, of course, Mr. Huntsman thinks that the most important thing is trust.
The US Ambassador called to work on “rebuilding trust” between the politicians of the two countries, pointing out that the frequency of US-Russia contacts noticeably increased this year. US Secretary of Energy Rick Perry’s visit to Russia, along with a visit from a large delegation of American congressmen, serve as evidence of this fact. The diplomat said that Moscow and Washington are holding an ongoing “discussion about DPRK’s nuclear program and regulating the conflict in Syria.” In his opinion, more frequent contacts are the first step. In the future, the prospects of exiting the crisis will be determined by how effective and practical the impact of these contacts turns out to be. “Judging by the last few months, the number of contacts between our countries has increased. It’s not ideal, but we’re working to maintain this pace. Our presidents have held a meeting, and we’ve opened communications channels between our security advisors.”
But in spite of geopolitical tensions, which complicate business operations, and the US constantly introducing economic sanctions against Russia, things aren’t as bad as they seem at first glance. To give an example of constructive cooperation, the ambassador talked about the opening of a factory for the production of Boeing airplane parts in the Ural, which happened in September. Ural Boeing Manufacturing is a joint enterprise between VSMPO-AVISMA and Boeing.
Needless to say, this is a good example. But there are many others examples and numbers cited by Alexander Ivlev, Managing Partner at EY. EY and AmCham Russia jointly polled 72 US companies, over half of which have been operating in Russia since the 1990s. According to poll results, US business activity decreased in 2017: the number if projects dropped in half, from 38 to 19. Two thirds of the companies polled plan to launch new projects (this figure amounted to 80% a year ago). 84% of companies have confirmed that the sanctions had a substantial impact on their business. Every fourth company anticipates that their projects may be frozen. The respondents were also less ambitious in terms of investments. If they were planning to invest $2.86 billion into the Russian economy in 2017, this figure shrank to $2.28 billion in 2018.
The respondents said that “if the status quo with the sanctions is upheld, Russia’s importance for their company will decline.” According to Alexander Ivlev, “there is a perception that we’re on shaky ground.” Head of the American Chamber of Commerce Alexis Rodzianko agrees. “This is stifling business,” he said about the sanctions, “A lot of companies are putting off projects, especially companies that haven’t entered the market here yet.”
At the same time, Alexis Rodzianko pointed out that he never said there is a threat of US companies leaving Russia. According to him, his words are taken out of context. He said that the chances of this happening are “very slim,” adding that companies from the US “don’t have any plans to and don’t want to” leave Russia right now.
US politicians have a different point of view. As of today, they have negative assessments of Russia. Andrew Kuchins, American political scientist and expert on Russian politics from Georgetown University, expressed this opinion. He said that he started learning Russian 40 years ago, but has never felt such strong negativity toward Russia in the US.
According to him, people in the US like to believe that the main purpose of Russia’s foreign policy is to get in the way of US interests, though in reality Russia is simply pursuing its own goals. There is a similar misunderstanding with respect to the sanctions. “There is a fundamental misunderstanding of how politics work in Russia,” he said. Kuchins recalled that the purpose of the US sanctions against Russia in 2014 was not to harm people, but to weaken President Vladimir Putin’s image. However, the sanctions had the opposite effect. According to the professor, in spite of the high oil prices, Russia’s growth rate was close to zero right before 2014, and then President Putin was handed a great argument — the US had weakened Russia. Kuchins claims that this is how the sanctions helped the President carry out a major de-offshoring program. Wealthy Russians started to return, fearing that their offshore assets would be frozen.
According to Professor Kuchins, there aren’t many reasons to be optimistic about short-term prospects, at the very least because it’s unclear what needs to happen for the sanctions to be softened or lifted. The expert reminded the audience that they were introduced in 2014 in response to the events in Ukraine.
“But the issue has become more complicated since then. Right now, there are no criteria for resolving the situation in Ukraine,” Kuchins says, “So what are the criteria for lifting the sanctions?” In his opinion, there is a risk of the sanctions being extended, just like the famous Jackson-Vanik amendment dragged on for decades, “long after it became an anachronism.” The amendment was introduced in the US in 1974, primarily because Moscow imposed travel restrictions, especially on Jewish people who wanted to leave the Soviet Union at the time. But it was only lifted 38 years later, in 2012!
The American side admits that the sanctions are doing damage to business in the US and Europe. According to Daniel Russell, President & CEO of USRBC, the sanctions hinder global trade. “It was supposed to be a tool, but the sanctions have become policy since 2014, and this is a real shame,” he said, “The process has consequences, including for US companies and their partners.” Daniel Russell noted that “business has to not only make money, but also influence politicians.”.
Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs, expressed a similar thought during the conference. He said that “today’s economy is held hostage by politics, and that it’s time to talk about a “cold war of the economy.” Yes, Alexander Shokhin agrees that the sanctions won’t be lifted for a long time. But at the same time, doing nothing about it is not right either. In his opinion, the best way to respond to the sanctions is to hold a dialogue and find common ground, which is something that’s being done even against the backdrop of today’s complicated Russia-US relations.
Professor and President at the New Economic School Shlomo Weber agrees that the lack of stability and uncertainty in US-Russia relations are “killing” business. In his opinion, we should prepared for the toughest scenario given the situation we’re in. Still, he believes that Americans and Russians need each other, and he cited two convincing facts to support this point. According to Weber, it’s important to remember that fans from the US outnumbered fans from any country at the World Cup, which was held in Russia this year. And this happened in spite of the fact that the US didn’t take part in the championship. Second, who won the 2018 Stanley Cup? The Washington Capitals, which has a number of Russian hockey players headed by Alexander Ovechkin.
