The U.S. goods trade deficit with Russia was USD 12.0 billion in 2007, a decrease of USD 3.1 billion from USD 15.1 billion in 2006. U.S. goods exports in 2007 were USD 7.4 billion, up 56.7 percent from the previous year.

Corresponding U.S. imports from Russia were USD 19.4 billion, down 2.4 percent. Russia is currently the 30th largest export market for U.S. goods.

The stock of U.S. foreign direct investment (FDI) in Russia was USD 10.1 billion in 2006, up from USD 8.6 billion in 2005. U.S. FDI in Russia is concentrated largely in the mining sector.

Russia’s efforts to negotiate the terms for its accession to the World Trade Organization (WTO), begun in 1993, are well-advanced. Russia has completed its bilateral market access negotiations with most interested WTO members, including the United States. Currently, the only outstanding bilateral negotiations are with Georgia, Saudi Arabia, and the United Arab Emirates. Russia is now focused on multilateral negotiations regarding other terms for accession. Discussions are ongoing on a number of issues including sanitary/phytosanitary measures, agriculture (including domestic support levels), intellectual property rights protection, and the operation of state-owned and state trading enterprises on a commercial basis. Russia also must enact legislation to implement its commitments.

Import policies

Russia continues to maintain a number of restrictions with respect to imports, charges, and fees that exceed the cost of the service, licensing, registration, and certification regimes that are burdensome. Discussions continue on eliminating other border measures or modifying them so that they are consistent with WTO requirements and internationally-accepted practices. Russia also maintains tariff-rate quotas (TRQ5) on exports of interest to the United States.

Tariff-rate quotas

Consistent with the United States-Russia Meat Agreement, in December 2005 the Russian government established country-specific tariff-rate quota volumes (including for the United States) and reduced tariff rates for beef, pork, and poultry meat imports from 2006 to 2009. Later, in June 2007, under its Government Program for Agriculture and Market Regulation 2008-2012, the government announced that after 2009, country allocations would be abolished and out-of-quota tariff rates raised. Russia has promised that its agricultural policies will be consistent with its bilateral and multilateral commitments, including the United States-Russia WTO Bilateral Market Access Agreement that includes a framework and a time schedule for negotiating how these meat products will be treated after 2009.

Import anti-activity licenses

Import licenses and activity licenses for wholesaling and manufacturing activities are necessary to import a number of products, including alcoholic beverages, pharmaceuticals, products with encryption capability, explosive substances, drugs, nuclear substances, hazardous wastes, and some food products (e.g., unprocessed products of animal origin). While some of these requirements address legitimate health and safety concerns, others appear to be unnecessary additional requirements for imported goods and an unfair burden for the parties importing these products.

For example, all importers of alcoholic products must have a license to produce or distribute and store such products, placing a burden on importers that should be applied only to distributors. Importers of vodka and tequila must also obtain a “white spirits” license, which can take up to two months for the Ministry of Economic Development and Trade (MEDT) to issue. Application for the license requires submission of documents that can take an additional two months to obtain, some of them from Russian government offices. This costly and time-consuming endeavor is not required of domestic distributors and specifically targets vodka imports. (Additional burdens imposed on importers of alcohol-containing products are described below in the section on nontariff barriers.)

In a November 2006 bilateral agreement with the United States, the Russian government agreed to set up a streamlined system for the import of goods containing encryption capability with transparent, nondiscriminatory procedures. The Russian government also agreed to allow the importation of most commercially-traded information technology and telecommunications goods after a one-time notification, or, in some cases, with no licensing or notification requirements at all. The United States continues to work actively with the Russian government in addressing its licensing barriers to trade in goods containing encryption capability and ensuring the full implementation of the terms of the bilateral agreement.

Customs issues, taxes, and tariffs

In addition to tariffs, there are two types of taxes applied to goods at the time of importation, the Value Added Tax (VAT) and selective excise taxes, both of which are also applied to similar domestic goods.

Pharmaceutical importers have complained that new pharmaceuticals imported in the clinical trial stage (prior to registration) were improperly assessed the VAT because they could not produce a certificate of registration. The U.S. government has raised this issue with MEDT and the Ministry of Finance.

Excise taxes apply to a number of luxury goods, such as liquor and cigarettes. Wine of 15 percent alcohol or less is assessed at 2.20 roubles per liter, whereas wines exceeding 15 percent alcohol are presumed to be fortified and are assessed at 112 roubles per liter of ethyl alcohol content. Because some California wines exceed 15 percent alcohol without fortification, U.S. industry contends that this differential tax rate constitutes a discriminatory tax against U.S. wine. Excise taxes on other goods can total as much as 570 percent ad valorem.

Import tariffs on automobiles, aircrafts, and aircraft parts have presented particular obstacles to U.S. exports to Russia. The effect of the tariff, VAT, and customs handling fees on aircrafts was equivalent to a 40 percent tax, making it virtually impossible for Russian airlines to afford to purchase foreign planes. When Russia joins the WTO, tariffs on aircrafts and aircraft parts will be substantially reduced. Tariffs on civil aircraft parts, including engines, will be reduced to an average of 5 percent. In particular, the bilateral agreement on leased aircrafts, which entered into force on November 19, 2006, obligated the Russian government to reduce immediately tariffs on narrow body leased aircrafts. As a result, in January 2007, the Russian Interdepartmental Commission for Protective Measures in Foreign Trade and Customs Policy approved the decision to cut import duties on foreign leased aircrafts from 20 percent to 8 percent for aircrafts with 50 seats and fewer and from 20 percent to 10 percent for aircrafts between 115 seats and 160 seats. The measure would apply to planes leased for no more than 3 years and would remain in force until January 1, 2011. However, the necessary decree implementing this tariff reduction has not yet been signed.

The current import duty on new passenger vehicles is 25 percent, which, when combined with the excise tax based on engine displacement and the VAT, increases the price of larger U.S. passenger cars and sport utility vehicles by 70 percent. Similarly, for motorcycles, Russia imposes a 20 percent special duty on large motorcycles, plus an additional 18 percent VAT, increasing significantly the prices on imported large motorcycles.

In a bilateral agreement signed*in*November 2006, Russia committed to revert to and maintain the previously-applied 5 percent duties on imports of combine harvesters and threshers and to bind the rates upon accession to the WTO. In February 2008, MEDT announced a safeguards investigation in response to increased imports of agricultural combine harvesters.

Customs authorities in Russia continue to assess duties on the royalty value of imported audiovisual materials, such as television master tapes, DVDs, etc., rather than solely on the physical value of the carrier medium. The industry has indicated that this practice is contrary to international and European legal standards and that it represents a form of double taxation, since royalties are also subject to withholding, income, value added, and remittance taxes.

U.S. industries also complain of high tariffs on agricultural products such as sugar, fruit, processed food, and forest products. Once Russia is a WTO member, it must bind its tariffs on all agricultural products, thereby providing more predictability for its tariff rates.

A new Customs Code, intended to bring Russia’s customs regime into compliance with WTO requirements has been in force since 2004. It simplified customs processes and established specific procedures for the application and payment of tariffs. Russia also amended its Customs Tariff Law to update its customs valuation practices to implement provisions of the WTO. However, significant problems remain. Reportedly, the Russian government issues unpublished recommendations on import valuations to customs posts to help combat undervaluation of imports. However, these recommendations can also be applied as reference prices for customs valuation or substituted for the invoice value of the imports. U.S. industry also reports that Russia does not publish all regulations, judicial decisions, and administrative rulings of general application to customs matters. In addition, U.S. exporters report that customs enforcement varies by region and port of entry, and that frequent changes in regulations are unpredictable, adding to costs and delays at the border. Russia recognizes that it will need to revise elements of its customs fees. In addition, the United States is working with Russia in the multilateral WTO Working Party process to make substantial improvements on these customs issues and ensure full incorporation of the WTO Customs Valuation Agreement into Russia’s laws.

Nontariff barriers

U.S. companies continue to face a number of nontariff trade barriers when exporting to Russia. Nontariff barriers are a topic of detailed discussions in Russia’s WTO accession negotiations.

Pharmaceuticals

Russia’s pharmaceutical market has seen some of the fastest growth in the world over the last three years. Foreign firms account for 75 percent to 80 percent of total sales in the Russian market. Despite the impressive growth prospects in almost all segments of the market, the government’s drugs benefit program for social welfare beneficiaries has slowed imports in 2007. The program, known as the Additional Drug Supply or “DLO” was plagued by deficit spending and distribution problems in late 2006 and early 2007. U.S. industry reports that higher priced imports, which are often safer and of a higher quality than locally produced pharmaceuticals, are often absent from reimbursement lists and state purchases because the government focuses more on price concerns than on the quality and safety of the products.

Experts estimate that sales of counterfeit drugs in Russia are at least USD 200 million to USD 300 million per year, with some 70 percent of the fake drugs being produced domestically.

Alcohol

Alcohol trade in Russia is governed by a burdensome array of no fewer than 105 laws, decrees, and regulations. Importers of alcohol face a variety of discriminatory measures. As part of the Law on Production and Turnover of Alcohol, as amended in April 2006, all customs duties, excise taxes and VAT on alcohol must be paid in advance using a bank guarantee and deposit. These funds must be deposited twice, once for import and once for transit (the second transit guarantee has purportedly been eliminated, but Russian customs has, for procedural reasons, ignored its revocation).

The advance payment requirement for duties and taxes has the effect of limiting trade volumes due to the amount of money that must be tied up in guarantees. The deposit requirement also discriminates against imports because the guarantee required of domestic producers is equal to only the excise taxes. Furthermore, the customs registration fee,
7 000 roubles, exceeds user fee levels for such services in other countries.

Importers face additional burdensome and discriminatory procedures under the current regulatory regime. The United Federal Automated Information System (UFAIS) requires importers and domestic manufacturers to print Universal Product Code (UPC) data on a small paper excise stamp attached to each bottle. This system, comprising both hardware and software, is expensive to purchase, difficult to use, and has failed thus far to fulfill its purpose to track alcohol from manufacture or import to the retail sales point. The importer is responsible for marking the imported alcohol products with excise stamps before the products enter the Russian Federation. To do this, the importer must register the imported alcohol product in the UFAIS system, as well as to print the data about the alcohol-containing product on the excise stamps, procure such stamps, and attach them to the consumer packaging. The importer bears responsibility for the authenticity of the data, as well as for the correctness of their placement on the excise stamps.

Not only is the process burdensome and expensive, but as implemented, it discriminates against imported spirits. Most notably, imported alcohol products are required to use and report sequentially numbered strip stamps, while domestic producers may use and report stamps by batches of products. Importers are required to record by hand the strip stamp sequential number of each bottle, in blue ink, in a special notebook, every page of which has been hand stamped by tax authorities, when the bottle enters the warehouse. When bottles leave the warehouse, the strip stamp sequential number must again be recorded by hand, in blue ink, in the book. Moreover, importers must report the strip stamp sequential numbers contained on every packaging size (from the bottle to the case, pallet, batch, consignment, etc.).

Finally, whereas domestic manufacturers/distributors*are required to report only to the Tax Authorities (and only by batches of products, not individual strip stamp sequential number),*importers must report their more detailed data to Russian Customs in a different format, increasing the reporting cost as well as the possibility for error.

Since*the*UFAIS system was first introduced,*numerous problems have arisen in its implementation. For much of 2006, the new stamps were not available and then the stamping machinery did not work. Wholesalers were not legally allowed to apply the stamps on behalf of importers. It was not until March 2007 that the Russian government passed the necessary amendment that allowed bottles to receive new excise tax stamps in wholesalers’ warehouses. Although the backlog of U.S.-origin products has been re-stamped and released from warehouses, logistical challenges continue. Problems include the difficulty in stamping miniature, food service-sized bottles; the frailty of the stamps which tear easily; the discriminatory reporting requirements imposed on importers; and software glitches causing importers’ data to be corrupted, costing time and money.

Notwithstanding the initial and ongoing problems with the strip stamps, the Russian government is considering adding a second stamp across the top of the bottle to combat empty bottles being refilled and sold, raising tax avoidance and health issues. The U.S. government has discouraged such a step, citing the chaos in the market caused by the introduction of the original stamp and the failure of the stamp to meet the intended goals.

The requirements for spirits alcohol – information reporting requirements, usage of the UFAIS system, payment of the excise tax, application of the excise stamp, and import and licensing requirements – were also imposed on products such as perfumes, cosmetics, household cleaners, and solvents containing more than 1.5 percent alcohol, severely disrupting trade. In 2007, the Russian government amended the Law on Production and Turnover of Alcohol to exempt permanently cosmetics, perfumes, and personal care products in packages of up to 500 ml. The United States is encouraging further amendment of the law to exempt permanently all nonfood goods containing alcohol from the alcohol-related requirements above.

Nuclear power generation

Russia continues to pursue the expansion of its nuclear power generation capabilities and will commission a total of 9.8 GW of additional reactor capacity by 2015. In November 2007, the State Duma passed legislation approving the creation of Rosatom, a 100 percent government-owned corporation, to replace the existing Federal Atomic Energy Agency. Nearly all of the country’s civilian nuclear industry assets (mining, enrichment, fuel production, equipment manufacturing, and nuclear power plant construction and operation) are being transferred to the Rosatom Corporation. The concept is that such a corporation will be better positioned to implement the ambitious domestic nuclear power expansion program and be more competitive on the world market. This new entity will report directly to the president of the Russian Federation, will be funded from the state budget, retaining all profits from its activities.

Russia has also increased its efforts to reach supply agreements with other uranium-supplying countries, such as Australia, which could allow Russia to utilize fully its uranium enrichment capacity and become the world’s leading exporter of reactor fuel and other enriched uranium products. The export arm of Russia’s nuclear power sector, Atomstroyexport, is a significant competitor to U.S. companies. Russia’s lack of a nuclear liability law to provide adequate legal protection for U.S. firms creates a high risk to U.S. suppliers of equipment, fuel, and nuclear energy services to Russia and has impeded their entry into Russia’s market.

Other

In October 2007, deputies in the State Duma’s Economic Policy Committee introduced a draft law that envisioned the creation, as an anti-counterfeiting measure, of a complicated product tracking system, similar to the controversial UFAIS system now used for alcohol-containing products. Under the draft bill, a similar system would be applied to a broad range of traded goods including audio and visual works, sound recordings and computer software and databases on any media, pharmaceuticals, biologically-active supplements, cosmetics and perfumery products (originally excluded from the reporting requirements), building materials, cars, aircrafts, railway carriages and spare parts thereof, and explosives. This draft bill was not brought up for a first reading in the State Duma, but U.S. industry and the U.S. government continue to monitor this issue.

Export policies

The price of gas for Russian industrial consumers is held artificially low by law. The downstream effects of this pricing policy are significant, because gas sells on Russia’s domestic market for approximately USD 75/tcm to USD 95/tcm, with gas exported to Europe fluctuating between USD 230/tcm and USD 350/tcm over the past year (estimates of cost-recovery levels are at roughly USD 35/tcm to USD 40/tcm). The Russian government recently approved a plan that calls for increasing domestic prices to European levels by 2011. If implemented, over time, higher domestic prices should provide incentives for both gas producers (greater investment and reallocation of resources) and consumers (greater energy conservation). The gas sector and Gazprom, Russia’s near-monopoly supplier, play a significant role in Russia’s economy, and the Russian government is proceeding slowly and cautiously with reform of the sector.

Although Russia has eliminated export duties on a few products, it maintains export duties on nearly 450 types of products for both revenue and policy purposes. Russia has indicated that it intends to eliminate gradually most of these duties, except for products deemed as strategic, such as hydrocarbons and scrap metals. For example, Russia has agreed to reduce its 15 percent duty on ferrous steel scrap to one-third of current levels within 5 years after it becomes a WTO member. Russia also currently maintains a 10 percent export duty on copper cathode, while no export duty is charged on copper wire rod. As part of the bilateral WTO market access agreement, Russia has agreed to eliminate its export duty on copper cathode within four years after it becomes a WTO member.

A variety of agricultural products are subject to export licensing and/or tariffs, such as certain fish products, grains, oilseeds, and wood products. Russia was not permitted to export beluga caviar in 2006, but a limited quota was approved under the Convention on the International Trade in Endangered Species (CITES) for 2007. No export quota was approved for other types of Russian caviar.

In November 2007, a prohibitive export tariff of 30 percent ad valorem was imposed on barley exports and 10 percent ad valorem on wheat exports. This policy is intended to insulate Russia’s internal grain market from rising world grain prices, as the government of Russia seeks to constrain domestic inflation.

The Russian government is also pursuing a policy of raising export tariffs on round wood in order to encourage domestic processing and export of sawn lumber and finished goods. In 2007, the government increased the export tariff on coniferous logs to 20 percent, but not less than 10 euros for one cubic meter. On April 1, 2008, the tariff increased to 25 percent, but not less than 15 euros per cubic meter, and as of January 1, 2009, it will go up to 80 percent, but not less than 50 euros per cubic meter.

Standards

U.S. companies cite technical regulations and related product-testing and certification requirements as major obstacles to U.S. exports of industrial and agricultural goods to Russia. Russian authorities require product testing and certification as a key element of the product approval process. Opportunities for testing and certification performed by competent bodies outside of Russia that are recognized by Russian authorities are limited. Procedures associated with Russia’s approach to supplier’s declaration of conformity are unnecessarily burdensome. Manufacturers of telecommunications equipment, oil and gas equipment, and construction materials and equipment, in particular, have reported serious difficulties in obtaining product approvals within Russia. The current classification and approval system for food supplements and dietetic products is costly and lengthy. Food and dietetic products that are sold legally in the United States and the European Union are subject to an expensive and lengthy certification process in Russia that takes between three months and five months. Products are also subject to redundant technical reviews conducted by both the Nutrition Institute and the Ministry of Health, procedures that take between 6 months and 12 months.

In an attempt to move to a system of self-certification of pharmaceutical products, the Russian government has, since January 1, 2007, required imported pharmaceutical products to be accompanied by a complex declaration of conformity rather than a certification. Under the applicable regulations, the declaration of conformity has to be prepared by a Russian legal entity, acting on the basis of an agreement with the foreign manufacturer. The Russian legal entity has to obtain a license for the manufacture of medicines, register in its own name all of the medicines supplied, and obtain the right to use the intellectual property (patents and trademarks) with respect to the medicines that it will be releasing onto the Russian market. In addition, the system discriminates against importers by requiring them to provide a Declaration of Conformity for each batch of medicines, while Russian manufacturers are permitted to provide a declaration for a full series. The industry has alleged that the new requirements are not an improvement over the previous complicated certification practice and have increased costs. The Russian government has argued that the new regulations are a useful anti-counterfeiting measure.

The United States continues to work with the Russian government to bring its product regulations and certification requirements into conformity with international standards and practices. The Russian government is attempting to put into place the necessary legal and administrative framework to establish transparent procedures for developing and applying standards, technical regulations, and conformity assessment procedures to accomplish this goal. The December 2002 Law on Technical Regulation provides a framework for the development of specific requirements for industrial goods, as well as sanitary and phytosanitary requirements for agricultural commodities, processed foods, and plants. The law was amended in May 2007, resulting in the expansion of methods by which technical regulations can be adopted. In addition to the current legal process requiring State Duma approval, regulations can now be adopted by a government decree without State Duma approval.

Russian sanitary and phytosanitary (SPS) measures have had a negative effect on U.S. trade. Russia often blocks the import of products deemed “sensitive,” seemingly without a scientific basis for the measure. In 2007, the Russian government issued resolutions directing that international standards, guidelines, and recommendations of the World Organization for Animal Health and the International Plant Protection Convention (IPPC) be followed. There is, however, currently no corresponding resolution that states Russia will follow Codex Alirnentarius recommendations and guidelines. In November 2006, the United States and Russia signed bilateral agreements to address SPS issues related to the trade in frozen pork; the certification of pork and poultry facilities for exporting products to Russia; trade in beef and beef byproducts; and trade in products of modern biotechnology. Notwithstanding the progress in implementing these bilateral agreements, U.S. exporters of poultry and pork continue to have products rejected at the border for the presence of salmonella and other requirements that lack scientific justification. The U.S. is continuing its engagement with Russia’s officials on these issues.

Pork

Historically, Russia had accepted only freezing as mitigation for trichinae for U.S. frozen pork destined for further processing. Costly testing for trichinae was required for all U.S. pork imported for retail sale. Russia now accepts freezing as mitigation for trichinae for U.S. pork for retail sale as well as for further processing. As a result, imports from certified plants are permitted when accompanied by the export certificate that was agreed upon between Russia’s veterinary service and the U.S. Department of Agriculture’s Food Safety and Inspection Services (FSIS).

Facilities inspection

Previously, Russian and U.S. officials jointly audited all pork or poultry facilities that wanted to export products to Russia. This process delayed exports from new plants or plants needing to remedy a deficiency found during a previous joint audit. U.S. exporters also noted concerns about the time it took Russian officials to provide formal approval for facilities after an audit and to provide an updated list of approved facilities to its customs officials so trade could begin. The U.S. Food Safety and Inspection Service (FSIS) is now authorized to certify new facilities and/or facilities needing to remedy a deficiency based on agreed inspection criteria.

The Russian government also agreed to specific time frames to respond to requests to list facilities FSIS has inspected and determined to be in compliance with requirements to export to the Russian Federation, as well as to a new process for selecting plants for a joint audit. During the first joint inspection under the new agreement, Russian inspectors at times continued to inspect based on unapproved standards (standards not agreed to by both sides and contained in the Act of Inspection). The U.S. Government has been addressing this issue directly with Russia’s veterinary service. Plants have been certified for export based on an FSIS inspection.

Beef

The Russian market for U.S. beef was reopened following the negotiation of a bilateral agreement and a new veterinary health certificate in November 2006. Under the certificate, de-boned beef, bone-in beef, and beef by-products from cattle over 30 months of age can be exported from plants that have been inspected and certified to export to the Russian Federation. In October 2007, as a result of a U.S.-Russian joint audit, 18 U.S. beef processing and cold storage facilities were approved to export to Russia. The November 2006 bilateral agreement calls for negotiation of a new export certificate for beef and beef byproducts to reflect the May 2006 OlE designation of the United States as a controlled-risk country. Under this certificate, export of beef and beef byproducts from cattle of all ages (excluding specified risk materials that the OlE requires to be removed) would be permitted.

Modern biotechnology

In accordance with a bilateral agreement between the United States and Russia signed in November 2006, Russia will establish a permanent biosafety regulatory system for products of modern biotechnology consistent with the WTO SPS Agreement. Until a permanent system is in place, Russia will maintain an interim approval and registration system for products of modern biotechnology that is science-based, transparent, predictable, and consistent with the WTO SPS Agreement. The United States is continuing to follow-up on the registration process for biotechnology products to ensure that all pending applications are indeed addressed. Russia and the United States agreed to consult annually on the status of applications for the re-registration of products whose registrations have expired during the year and to establish an ongoing bilateral consultative mechanism to discuss issues of regulatory development in the area of agricultural biotechnology. The United States also continues to press the Russian government on the significant reservations that U.S. industry has expressed regarding Russia’s food labeling policy, including the substance of draft legislation on that subject.

Rice

In September 2006, Russia imposed a ban on imports of all U.S. rice, citing the discovery of genetically-modified rice seeds not approved for import in shipments of U.S. long-grain rice. The ban was imposed without prior notice or sufficient justification. In December 2006, Russia also imposed a de-facto ban on all rice from all origins, noting a variety of sanitary and phytosanitary concerns.

Systemic issues

In addition to these specific issues, exporters of agricultural goods to Russia face systemic issues related to the certification of agricultural products. Russian authorities require phytosanitary and/or sanitary (veterinary) certificates for nearly all agricultural and processed food products. Producers are required to seek certificates from their domestic regulatory authorities for certain products for which Russia has not provided scientific evidence of an alleged risk. For example, Russia requires certificates for bulk shipments of roasted coffee, which, due to the nature of its processing, does not present a pest risk and, consequently, does not receive phytosanitary certification from the U.S. Government. Russian authorities also require a sanitary-epidemiological certificate or certificate of state registration for the importation of nonfood items such as styrofoam cups, bulk shipments of cardboard boxes, and furniture. The Russian government issued revised regulations in February 2008 to bring its SPS regime into conformity with WTO requirements.

Investment barriers

Russia’s foreign investment regulations and notification requirements can be confusing and contradictory, which has an adverse effect on foreign investment. According to an industry report issued in March 2007, Russian companies raise up to one-fifth less money than foreign counterparts because international equity markets perceive Russia’s legal regime as offering little protection for investors. Only 52 percent of Russian companies considering an initial public offering abroad have independent directors, a condition considered essential for an international listing. Independent foreign nationals make up only 3 percent of board seats at Russian companies currently planning to list.

U.S. investors and others cite corruption in commercial and bureaucratic transactions as another barrier to investment. In 2007, reports by the World Bank, Transparency International, the Foreign Investment Advisory Council, Russia’s Higher School of Economics, and Columbia University found that corruption had worsened and had become a greater concern for Russia’s businessmen. Reasons cited for these trends were slowing reforms and government complacency fostered by oil revenues,

Telecommunications and media services companies also report investment restrictions. Russian entities with more than 50 percent foreign ownership are prohibited from sponsoring television and video programs or from establishing television organizations capable of being received in more than 50 percent of Russia’s territory or by more than 50 percent of the population.

Further obstacles to increased U.S. investment in Russia include inadequate dispute resolution mechanisms, weak protection of minority stockholder rights, the absence of international accounting standards, and the failure of companies to adhere to business codes of conduct. Initiatives to address these shortcomings through regulation, administrative reform, or government-sponsored voluntary codes of conduct have made little headway in countering endemic corruption. Inadequate transparency in the implementation of customs, taxation, licensing, and other administrative regulations also discourages investment.

The United States and Russia have just begun to engage in exploratory bilateral investment treaty discussions.