Interview with Sergio Millian, President of the Russian-American Chamber of Commerce in the USA

– Mr. Millian, in view of the current economic situation in the U.S. and worldwide, what effects does it have on the U.S.-Russian relationship and the Chamber’s work?  

– The impact on the real economy of the financial crisis that has enveloped Russia and the global markets will depend mainly on the extent to which commodity prices are affected. Nowadays, falling commodity prices, slowing demand growth and the fiscal tightening of the past few quarters create a new atmosphere for doing business in Russia. At the same time, it is a perfect time for U.S. companies to enter the market with minimal expenses.

As far as the Chamber is concerned, it gained 76 new members in 2008 alone – to me, it’s a clear sign that the interest to invest in the Russian economy and in its bilateral business cooperation is still strong. I believe that participation in global projects regardless of the current economic hardships is one of the most reliable ways of dealing with the crisis because it facilitates business development and, if done correctly, will bring substantial profit and benefits in the long run. Despite the global slowdown a growing number of U.S. companies view the Russian market as a promising one. They understand that post-crisis rehabilitation will take time – maybe a couple of years.

It is my strong belief that closer economic relations with Russia are in the national interest of the U.S. – to create conditions for cooperation on non-economic issues, and provide a stronger foundation for the bilateral relationship.

– What areas in the Russian economy are especially attractive for U.S. businesses?

– Some of the biggest areas of interest to foreign investors are energy-related projects, infrastructure development, and the Winter Olympic Games in Sochi.

Russia holds the world’s largest natural gas reserves, the second largest coal and uranium reserves, and the eighth largest oil reserves. At the same time, Russia is the world’s largest exporter of natural gas, the second largest oil exporter and third largest coal exporter. Russia’s gas reserves are owned primarily by Gazprom that produces about 20 percent of the world’s and 85 percent of Russia’s natural gas. Anything of such a magnitude brings attention and interest.

Russia is also currently experiencing a building boom in Krasnodar region.  The construction industry is getting a lot of attention in Sochi, resulting in endless possibilities for investment in infrastructure. For example, the existing public utilities are often overused and in need of a Western-style solution. Future residential areas will need modern energy-efficient technologies, robust building material and machinery. This is where the U.S. companies that specialize in construction come into play; their experience, resources and innovative technology are currently in high demand in Russia.

Russia offers big opportunities for the automotive industry because of the rising personal income of Russians. The country is already the second-largest export market for the Mercedes-Benz GL-Class full-sized sport utility vehicles built at the German automaker’s plant in Vance, Alabama. In 2007, Russia’s new car sales totaled 2.4 million vehicles.

A survey by Ernst & Young shows that in Russia 1.3 percent of GDP is spent on cosmetics, compared to 0.5 percent in Western Europe. The cosmetics industry in Russia presents enormous opportunities.

Moreover, Russia is America’s largest export market for poultry and the fourth largest destination for U.S. pork and pork products.

– What are the most common requests from the Russian business people?

– Recently, the Russian American Chamber of Commerce in the USA has been receiving a lot of requests from Russian investors who are interested in purchasing commercial, residential, and industrial real estate. This is, of course, due to the current low prices on the U.S. housing market. Besides real estate, Russian businessmen are also interested in finding buyers for their products, such as oil and gas, fertilizers, steel pipes, coal, lumber, art, etc.

In those cases, the Chamber assists Russian companies in promoting their business through facilitating meetings, participating in trade missions, and organizing marketing campaigns. At this point, the Chamber also works closely with a number of leading American PR firms that help create an investment brand for major Russian cities and regions. These campaigns lead to the overall image improvement for Russian products, and, consequently, to the increase of their competitiveness on the international market.

– At this stage of development, what are the biggest everyday-type barriers that exist between the Russian and the American business people?

– Despite the fact that Russia is considered to be a democratic state and a free enterprise economy, the country is usually portrayed in a negative light in the news – it may be due to a lingering Cold War mentality or simply a current lack of strong business relationships. There is not enough information on both sides about the “way business is conducted.” This missing link touches many levels of understanding, be it political, economic, or cultural awareness of each other.

This barrier is evident when it comes to communication; Russian companies are still not very familiar with the Western business culture. There still are people that tend not to answer e-mails or return phone calls for several weeks; they may not fulfill all the terms of agreements, and do not pay enough attention to timely appearances at business meetings.

– As a person who deals with the U.S.-Russian trade on daily basis, what steps would you think are necessary for overcoming these barriers?

–  To make our partnership more productive, it is vitally important to know more about each other – how our political, economic, and social systems work, and how we make decisions that advance our common goals. The Chamber recommends several steps to help overcome these barriers. From the Chamber’s prospective, taking into consideration that our main office is located in Atlanta, a Georgia state trade mission needs to be opened in Moscow to increase export support and facilitate trade for companies interested in the Russian marketplace. A Russian Consulate needs to be established in Atlanta in order to strengthen government-to-government cooperation, deal with immigration issues, and provide informational support. The interest to do business with each other is there, however more export and import support is needed in order to create a smoother path.

The obstacles that are hindering successful trade are many times simpler than visa issues and government rules and regulations miscommunication. Moreover, we support the creation of a Caucus on Russia in the U.S. Congress to foster necessary political changes to produce a healthier economic environment, grant permanent normal trade relations status, and get rid of the outdated Jackson-Vanik Amendment. Afterwards, a new bilateral investment treaty with Russia should be signed. Thus, American investors will have additional legal protection against unforeseen circumstances in Russia. By the way, most members of the EU have such a treaty with Russia in place!

– Why stronger government ties versus business ties?

– Because more and more business transactions are directly related to the government, both here in the U.S. and in Russia. Last year alone, the Russian American Chamber of Commerce signed memorandums of cooperation with ten American and Russian governmental organizations. We have organized and held a large number of seminars, lectures, and forums on this issue. The Belarusian Chamber of Commerce and Industry has appointed us to be its official representative in the United States. We have also signed the memorandum of acceptance and cooperation with the Chamber of Commerce and Industry of the Russian Federation in the USA – the only official representative of this organization in the United States. We work hard on establishing business contacts with various regions in Russia, including Siberia that offers unlimited resources and possibilities. At the end of the day, all these developmental and large-scale business transactions are founded on laws and state initiatives, and stronger governmental ties would result in more frequent and more successful business transactions.  

– In what direction do you see the relationship between Russia and the U.S. going and how will the Russian American Chamber of Commerce be a part of it?

– The beginning of the year 2009 has brought great changes in the bilateral relationship. Both countries elected new leaders and both countries have realized the necessity of a stable partnership in political, commercial, and economic areas. The “reset” button was pressed during the meeting of the Russian Foreign Minister Lavrov and the U.S. Secretary of State Clinton. Presidents Medvedev and Obama at the G-20 summit in London have come to a mutual agreement that the U.S. and Russia have a lot of common interests, which they should develop and strengthen.  All of the signs point to significantly closer political and business relationships, and we foresee a drastic increase in the amount of business and trade conducted between the two countries in the near future.

Because of these positive developments and the growing potential for our economies, the Chamber will continue to build even bigger bridges between the U.S. and Russia – especially if the idea of state representation will be realized. Right now, the Chamber has five departments, which include marketing, public relations, energy, consulting, and business development. Most of the staff members of the Chamber come from the countries of the former Soviet Union. They hold diplomas from the best universities in their home countries, have real-world corporate work experience in Russian markets, and therefore fully understand the specifics of the Russian business mentality, the Russian culture and language. Equally, all of them are familiar with the U.S. business environment, the American market and are fluent in English. This combination of experiences makes the Chamber a truly unique link between the two countries – the link that is currently missing on a bigger scale.