The FINANCIAL — Despite ongoing political tensions between the US and the Russian Federation, most of the AmCham Russia member companies are certainly not planning to leave Russia. Currently Russia, which is facing economic problems, has in some ways become even more attractive for US businesses as things have become cheaper. On its side, AmCham Russia’s President believes US private investments continue to be welcomed in Russia.
“We are not in a cold war. I think that is an overstatement. As many have pointed out there is no real ideological basis, which was the basis for the cold war. There are obviously tensions; there are disagreements on international geopolitical matters, but business largely has been neutral to those, it focuses on business and business goes on. In Russia the attitude towards business especially on the part of the official sector is quite positive,” Alexis Rodzianko, President and CEO of the American Chamber of Commerce in Russia, told The FINANCIAL.
Rodzianko does not think that the current economic problems of Russia are temporary. He doesn’t believe they will soon be resolved but at the same time he does not think that the Russian economy is unstable or unsustainable.
Alexis Rodzianko was appointed AmCham Russia President and CEO in 2013. He came to this role after three decades as a banker in New York and Moscow. In his exclusive interview with The FINANCIAL Rodzianko talked about the US businesses in RF against the background of two countries’ political tensions, which many estimated to be a new Cold War.
Q. You were appointed President of AmCham Russia in 2013. Several months later the EU and US imposed sanctions on Russia. What was the most difficult part of your job that you had to deal with?
A. Obviously the sanctions were not good news and the effects of the sanctions, understanding the sanctions, and analyzing what the opportunities for continuing business are was a big challenge in the early part of last year, but the more difficult part I think has been dealing with falling oil prices and its effect on the Ruble and the Russian economy which occurred late last year and through this year so far.
Q. What was the economic damage and losses for US businesses operating in Russia since 2014?
A. It is very hard to tell because so many things have gone wrong, so separating out the sanctions and trying to measure their impact as opposed to the impact of the lower oil price and the impact of the cyclical slowing of the economy which was already underway is a hard task. It is probably fair to say that sanctions have had an effect, particularly the sanctions that limit access to the capital markets, but I would say sanctions have less of an impact than the other two factors: (1) the oil price, and (2) the structural reform issues.
Q. Almost a year has passed since the Russian economy started facing dramatic difficulties. Is the country having fundamental problems, a deep crisis, or you think it is temporary and will soon be resolved?
A. I do not think it is temporary, I do not think it will soon be resolved, but I do not think that the Russian economy is unstable or unsustainable. Russia has dealt with the crisis forced by lower oil prices quite well, the flexible exchange rate policy was a dramatic adjustment, a very sharp adjustment but it was an adjustment and so I think today the Russian economy is in reasonably good shape but at a lower level of activity.
Q. Does Russia remain an attractive market for US businessmen?
A. Russia is, was and will be an attractive market. It is a large country with a large population with a lot of potential for growth and development for business and that has not changed. So I think Russia was an attractive market, is an attractive market and in some ways more attractive because things are cheaper.
Q. Are US companies considering leaving the Russian market and which country has the biggest potential to replace them?
A. First of all, each company has its own strategy so speaking for all companies is a generalization which is bound to have exceptions. But, in general most companies that are members of the American Chamber are certainly not planning to leave Russia. I do not believe there is such a country that can replace US investment in Russia. The officials here point out that it is not a question of replacing anybody, it is a question of doing business with more different people, and I do not think that US business will be forced out or replaced.
Q. Are US investments welcomed in Russia?
A. Yes, US private investments continue to be welcomed in Russia.
Q. During the International Business Forum of St. Petersburg, a US State Department spokesman said that they had expressed concerns and encouraged CEOs not to attend it. What is your personal view regarding such “suggestions”? Don’t you think that after a certain point politicians can overuse their power with businesses?
A. Obviously business prefers to be left alone to do business and governments can of course always interfere. We prefer when the government does not interfere. When the government feels it has strong reasons then it must, but my personal view is it would be better not to do so.
Q. How optimistic are you regarding the sanctions? Do you anticipate them being lifted in 2016?
A. I think the lifting of sanctions depends on the progress of resolution of the Ukrainian crisis and I am not the best person to ask when that might happen. From what I see, I do not believe that it is a quick problem to solve so I would be cautious. But, I would be very happy if in fact the problem is resolved and the sanctions are lifted in 2016.
Q. What are your main motivations at the moment to restore bilateral relations between the USA and Russia?
A. My motivation is to make business operations and financial relations better and that will happen when the bilateral relations are improved, when US and Russia find ways to talk to each other, which I hope they do; the sooner the better.
Q. How flexible were Russian officials about dealing with economic problems?
A. Well the Central Bank Governor Elvira Nabiullina was recently awarded as Best Central Bank Governor at the annual meeting of the World Bank and the IMF last week in Lima, Peru, and the adoption of the flexible exchange rate was probably the best key decision made, which made the adjustment in Russia very painful but very quick. So yes they have been decisive. They have been quick and flexible.
Q. What is your recipe for recovering the Russian economy?
A. My advice to Russian officials has always been to do what they can to improve the investment climate. There is a lot of good advice and lots of smart people who understand what needs to be done. The issue is actually getting it done.
Q. What are the main challenges and needs of the international business community in Russia for now?
A. I think the main challenge everybody is facing immediately is a slowing down of the economy and devaluation of the currency which represents both a challenge and an opportunity. Obviously the geopolitical tensions are a burden on business, they slow things down, they make decision making more difficult, and they make discussions at board levels more cautious. So, I think those are the main types of challenges that our businesses are facing.