26 September 2001
Article in The MoscowNews on Russian-American Business Councilcase

Why Not Strike A Deal?

Yevgenia Kvitko

Russia has an opportunity to get permission from the U.S. defense secretary to sell arms to his country

Dmitry Afanasyev, a member of the board of the Russian-American Council for Business Cooperation and a lawyer with Yegorov, Puginsky, Afanasyev & Partners law firm, believes that Russia stands to gain in economic terms if it takes part in a worldwide antiterrorist operation.

"Since the first day after the terrorist attacks in New York and Washington, American politicians and businessmen have made it clear that those who are not with them will suffer unpleasant consequences. Take this concrete example. America has a general system of preferences, that is, a list of goods exempted from import duties. In 1993, the United States included in the list Russian titanium. In 1997, American titanium plants launched a campaign to secure reimposition of import duties on this metal, which is not over yet. A final decision on the issue is to be made by the U.S. Department of Commerce in late September. The decision will depend on whether Russia will have become a U.S. ally by then. A decision is also pending on Russian export of mineral fertilizers, steel and some other metals.

"Here is another example from our business relations. We have been cooperating with a major U.S. finance company - it had a branch office in New York's World Trade Center, and 90 of its employees died in the terrorist attack on the center. It has $ 150 billion in assets and maintains offices across the world, including Russia. The company's representatives will come to Moscow in October to decide whether to close its Russia office for being 'inefficient.' My gut feeling is that the decision will again depend on whether Russia will have become a U.S. ally. Why? Because if Russia is a U.S. ally, more foreign investments will pour into this country, and these inflows will be serviced by the finance company." What other potential economic gain is there for Russia?

The U.S. defense secretary, for one, can personally allow in Russian goods specified as deliveries on U.S. government orders. This is how Japan and South Korea, let alone the NATO member states, are allowed to sell their wares to America. Our arms manufacturers are yearning for big orders from NATO countries. This seemed an impossible dream only two weeks ago. Now everything depends on Russia itself. The opportunity to strike a deal is there for the taking, and Russia should seize it.

The entire Russian economy is dependent on its export business. Note that most of its exports do not go to Islamic countries. So if we are not with the West, it will cut off our export routes. Besides, getting visas would then certainly become a problem for our businessmen, and this would destabilize Russian business altogether. As a consequence, our economy would slow down.

But don't American companies find it gainful to do business with us?

Americans are still reluctant to pour money into Russia. The amount of their investments here is equal to the amount they sink in Costa Rica, despite the fact that America is Russia's biggest foreign investor. It has to be realized that foreign investments in Russia have been reduced to a mere trickle. The U.S. government insures investments made in some countries, including Russia. The only trouble is that insurance cover for Russia, which is guaranteed by Congress, is minimal. It is not a matter of money, it is politics. If Russia is perceived as an ally in American minds, this would change the situation radically in Russia's favor.

Most of the antidumping suits filed recently against Russian suppliers of fertilizers and metals are a political ploy. It is common knowledge that the judgment in all these court cases depends on whether U.S. big business intercedes for us or not, and on the political factors involved.

Is it possible for the U.S. government to influence the decisions of American companies?

Strange as it may seem, yes. This, despite the fact that American society is far more decentralized than ours, and American companies are hardly dependent on their government. I worked in the United States for many years, and attended meetings with representatives of U.S. companies and of the presidential staff. These companies were advised as to the business partners they should choose. And it was not a matter of ideology. U.S. business people know that their interests coincide with their government's, and so they take its advice