British Business In Russia

Britain is one of the most important business partners of Russia. According to all available statistics, the UK surely ranks among the top four foreign investors. According to the volume of direct investments and securities Britain shares with Germany and Switzerland in second place, giving way to the U.S. A.

The biggest UK companies are in key sectors including energy, telecommunications, banking, trade and consumer goods, giving long-term commitment to the Russian market.Despite the economic difficulties the British companies continue trade and investment activity in Russia. It has a wide spectrum: from the supply of mining equipment to the sale of children's clothes, they work closely with local partners.

Obviously, in the interests of both countries, Russia and Britain, the volume of trade and investment must grow. For Russia, the UK business is a source of investment and expertise that can make a valuable contribution to reforming and reviving the economy. Britain is also a growing export market for Russian firms. For British companies Russia is potentially a huge market close to the UK.

In the Russian market operate a large number of British companies. Among them, for example are: "British Petroleum", "Rolls-Royce, British Nuclear Fuels", "Cadbury Schweppes".

In recent years British businessmen show interest to the region. Particularly noticeable their presence is in St. Petersburg, Nizhny Novgorod, Yekaterinburg.The British are very carefully watching the development of the financial situation in Russia.

Foreign Relations of St. Petersburg and the UK, for example, are characterized by steady growth. British firms are among the largest investors in the economy of St. Petersburg (4 place after the USA, Finland, Austria).

Throughout Russia British companies are representing a wide range of industries. The UK remains among the biggest investors in the Russian market. Recent financial and economic problems hinder the work of British companies in Russia, but most have not lost confidence in the fact that the Russian market remains difficult and promising in its development is still worth investing capabilities.

The British government will make efforts for British business in Russia could develope, but Russia itself should able to catch up with world standards of business due to WTO accession.

The latter said Vince Cable, the British Minister of State for Business who visited Moscow on Nov. 25, 2010.

UK companies show interest in the innovation project Skolkovo. As reported by Interfax, the great interest of a number of British firms to participate in this project was discussed at a meeting of Russian President Dmitry Medvedev and British Prime Minister David Cameron in November 2010.

A source in the delegation of the British prime minister told reporters that during the meeting voiced the following phrase: "despite the desire of England to create a similar object, a number of British companies have expressed their desire to participate in the construction of this progect Scolkovo in Russia."

Earlier, British Prime Minister David Cameron said that in east London there will be created an analogue of the U.S Silicon Valley  - a cluster that brings together the giants of IT-industry.

Export Of Russian Capital

Mechel OJSC intends to acquire additional facilities in Brazil. Metallurgists state that Russia tariffs and distances make business unprofitable. The era of Russian cheap energy products is over and will never return, for production of hydrocarbons is becoming more and more sophisticated. Furthermore, domestic oil and gas companies are not anxious to invest funds in the fuel industry, choosing to develop fields in other countries. It means that in the foreseeable future Russians will lose both jobs and ability to buy energy. 

Mechel, a mining and steel company, specializing in coal, steel and power production, began to purchase foreign facilities several years ago. At present, in addition to Russian factories, it owns coal strip mines in the USA, ore operations in Kazakhstan, metallurgical production facilities in Romania and Lithuania. Experts assume that Mechel has influence on the owners of the Estar Group that owns the British MIRsteel plant. 

Late in August, mass media informed that Igor Zyuzin, owner of Mechel, intends to acquire three blast furnaces from Cosipar or to set up a joint venture with this company. The Russian metallurgical company is tempted by sizeable reserves of iron ore in Brazil and by the location of the factory that is close to the ocean, simplifying the delivery of coal from the USA and shipment of pig iron to Great Britain for processing.

The arrangement, though logical in business terms, calls in questions from experts. They believe that the intended production chain is aimed at loading MIRsteel, which has actually been idle for more than two years. Thereby, experts want to know whether it is proper to provide jobs to foreign workers, when modernization of metallurgical operations results in mass redundancy of employees in Russia. 

Russian business people do not have any other option but transfer their facilities closer to ports or acquire ready-to operate facilities in other countries. It is obvious that factories that were built in hinterland regions within the vast Russian territory during the Soviet period will be able to survive on the market only at very low tariffs for energy and cargo transportation. This is exactly what nobody can promise. 

Having privatized Soviet black gold, Yeltsin-time business entrepreneurs embarked on milking the industry. Without having exploration and drilling technologies that could be applied to shelf conditions, without state-of-the-art refineries, oil and gas company owners spent their huge profits on payment of dividends, lining their own pockets, rather than on know-how. Development of Eastern Siberia (and the Yamal peninsula) is impossible without cutting-edge technology and extremely costly control systems. This will require technological reforms in the entire industry and in research financing.

At the same time, Russia has not even considered the problem of liquefied gas transportation from Yamal, which requires special ice-class tankers. Things came to the point that today Russian oil-field experts are not able to perform properly fracturing operations, opting to invite professionals from the Schlumberger Company to do the job.

Experts believe that the only alternative to this process is nationalization of major properties, price control, free secondary and higher education, and task-specific public investment in innovative industries. Can these tasks be accomplished in today's situation? Most unlikely. The two-year-long talks of the Kremlin about industry modernization have shown that the economic and political system of the country is geared to primitive guzzling up of resources. Therefore, it may happen that Russia soon will have to import fossil fuels; however, there is the question that has been factored out - where will it take money from to purchase them.

By Vladimir Terletsky