#2 - RW 268
No champagne reception for U.S. investors in Russia
Interview with Andrew Somers, President, American Chamber of Commerce in Russia

MOSCOW, Aug 7 /Prime-Tass/ -- If Russia is to see significant growth in U.S. foreign direct investment (FDI) the government will have to revise its attitude to investors, Andrew Somers, President of the American Chamber of Commerce in Moscow told Prime-Tass in an e-mailed interview on August 5.

“Measures (to boost U.S. investment) have to be taken by the Russian government,” Somers said. “It is no secret the Chinese government makes investors feel welcome. The Russian government is either indifferent or doesn’t make investors feel welcome. This is a major problem. On the U.S. side, there has been a significant increase in the number of high-level U.S. executives who have made the decision to invest. They’ve come here, they are doing their due diligence, and they are going to invest – but Russia isn’t making it easier for them.”

Despite the lack of cooperation from Russia, Somers said the Chamber makes great efforts to promote U.S. FDI in Russia. “Increasing FDI is a major mission. That is why the Chamber, and myself personally, spend a lot of time briefing U.S. executives and potential investors, whose numbers have significantly increased in the last four to five months. That is also why I go to Washington and New York every two months – to speak to potential investors and businesses.”

Somers said that achieving growth in sectors of the Russian market where U.S. companies participate or have the potential to participate is important. “Automobile manufacture is an important aspect of trade. I’d like to see more cooperation in aircraft manufacture and in other industrial sectors, as well as in agriculture. I think there is significant potential for U.S. agriculture technology to come to Russia and work with Russian partners,” Somers said.

But a major breakthrough in trade cooperation won’t be likely until Russia joins the World Trade Organization (WTO).

Somers is not pleased with Russia’s progress towards entry to the global free trade body. “I’d say it’s progressing in a relatively positive way. But there are forces within Russia that are concerned about the potential short-term harm and don’t appreciate the long-term benefit to Russia. I think the United States has been fairly reasonable in its negotiations with Russia on barriers that exist now,” Somers said.

At present the U.S. has some major concerns that it wants to see Russia address before it joins the WTO. Somers listed intellectual property protection as among the main problem areas. In this sphere he noted there has been some improvement on the Russian side of late, particularly concerning DVDs and the healthcare sector, but much more progress needs to be seen. He said agriculture is another big issue, but perhaps more of a concern for Europe than the U.S.

“Russia’s subsidies are very small, but they are asking for subsidies as ridiculous as those of the Europeans. We’re hoping that there will be, and I think there will be, a mid-ground compromise on subsidies,” Somers said.

He also mentioned financial services as a problematic area, saying there has been some progress made in the banking sector, but not so much in insurance and pensions. But since Somers does not take part in the negotiations, he said he can only go on what he is told, “which is that the United States is being reasonable and not pressing the Russians fiercely on a number of issues because, as with President (Vladimir) Putin, President (George W) Bush has publicly stated that it is in the best interest of the United States that Russia join the WTO. So the political will exists on both sides. I think this is reflected on the American side by efforts to accommodate, up to a point, Russia’s concerns,” he said.

Presidents Bush and Putin are set to meet at a presidential summit in September, which Somers said he would like to see a give rise to a couple of significant investments. “I’d like to see a couple of major deals. I’m sure the Presidents, even more than I, would like to see a couple of major deals so they have something to announce. There are a couple of major American companies close to significant transactions, which will hopefully be signed, at least in principle, at this summit.

“I think essentially there will be an endorsement by both Presidents of improved hi-tech trade between the two countries, which will suggest to the bureaucrats in both countries and to the legislators that they should reduce export barriers to technology transfers between the two countries. This will be a first step toward trying to do that.”

Also on the subject of trade barriers, Somers said he was not so optimistic on the prospects of Congress repealing the defunct, but nonetheless damaging, Cold War-era Jackson-Vanik amendment this year. He said he does not expect to see the amendment repealed until the spring. “The reason I’m pessimistic about this year is that Congress is unlikely to lift Jackson-Vanik while the U.S. economy is still weak. It’s just a psychological thing. I don’t expect a full recovery until later in the year and that’s when Congress will be in a better mood to give consideration to Jackson-Vanik. That is my guess.”

Trade ties between Russia and Europe are also blighted by minor disagreements, but, in general, the two trading blocs have never been so close. Somers believes that good relations between Russia and Europe are good for Russia and good for the U.S. too.

“Ever-closer relations between Russia and Europe are good. I certainly believe that it is in the interest of the United States that Russia is part of Europe, rather than Asia or something in between. I think trade with Europe is beneficial. It will increase investment in Russia. It will increase technology investment.”

The idea that Russia might end up concentrating the bulk of its trade activity on its European neighbors does not strike Somers as a likely, or worrying prospect, though. He said he thinks Russia adopts an even-handed policy towards U.S. and European trade, judging wherever the economic benefit lies.

“I think there is significant potential for liquefied natural gas imports from Russia into the United States, as there is significant potential for crude oil imports. Of course, there is a whole host of sectors where the U.S. and Russia are compatible, and so too for Europe.

“I’d certainly like to see much more trade with the United States. I don’t think it is bad that Russia has significant trade with Europe. Europe is our partner also. I think there’s enough trade to go around for Russia with both Europe and the United States,” Somers said.

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