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Doing Business in Russia

The United States is committed to supporting the trade and investment relationship between the United States and Russia in non-sanctioned sectors of the economy. The foreign Commercial Service (FCS) at the U.S. Mission in Russia serves as an important resource for both U.S. and Russian Businesses seeking to develop and expand new relationships. FCS had helped Russian and American firms introduce innovative technologies and increase investment, strengthening ties between our two countries. The inhumane cap imposed by the Russian Federation on our staff has reduced our in-country presence, limiting our ability to provide the full suite of services. Despite these restrictions, we remain committed to supporting American businesses in the Russian Federation and will provide assistance and information as resources allow.

Market Overview: Russia presents both significant challenges and opportunities for experienced American exporters. Russia's 2014-2016 economic downturn, driven by low oil prices, Western sanctions, and compounded by a lack of structural economic reform, squeezed both Russian corporations and the average consumer. While targeted American and European economic sanctions remain in place and have gradually expanded, there is no overall trade embargo on Russia. Due to tight fiscal and monetary policy and higher oil prices, Russia achieved GDP growth of 1.7% in 2018. The economy is expected to expand at a comparable or slightly slower pace in 2019. Despite some economic challenges, over 1,000 American firms of varying sizes continued to do business in Russia, due to its 142 million consumers, $29k+ GDP per capita (as measured in purchasing power parity), growing middle class, and highly educated and trained workforce.

There are three broad factors that merit consideration when assessing business prospects in Russia: geopolitics, market dynamics, and rule of law. Russia governmental support for separatists in Ukraine, interference in the 2016 U.S. elections, Russian-origin cyberattacks, and the role of Russian security services in the March 2018 poisonings of residents in the United Kingdom, as well as disagreements with the United States’ positions on certain global security challenges such as in Syria and Venezuela, have raised tensions with the United States and its allies, leading to increased economic restrictions during recent years. U.S. and European economic sanctions imposed in 2014 and subsequently augmented remain in place and are unlikely to be lifted in the near future. Sectoral restrictions on offshore, Arctic and shale oil and gas projects, the financial sector, and the defense industry continue. Additionally, a number of Russian entities and individuals are subject to a range of sanctions, requiring American firms to conduct careful due diligence on potential business partners. Since 2014, U.S. agricultural exporters have been hit with Russian countersanctions, one of a number of protectionist, import-substitution policies designed to provide Russian firms implicit or explicit advantages over international competitors. In 2018, the Russian Duma passed legislation endorsing further restrictions on Western imports in the event of the expansion of existing Western sanctions, and legislation is currently under consideration to make any cooperation with Western sanctions illegal. These laws may not be implemented, as following through could result in costs to some Russian economic interests, yet the fact that such measures are under consideration creates uncertainty that acts as an impediment to business.

Economic Sanctions: Targeted U.S. businesses should be aware that the United States imposes sanctions on Russian persons (individuals, entities, and vessels) in response to conduct including Russia’s illegal annexation of Crimea, its invasion of eastern Ukraine, election interference, malicious cyber-enabled activities, human rights abuses, use of a chemical weapon, weapons proliferation, illicit trade with North Korea, and support to Syria. While U.S. companies and individuals can lawfully engage in a broad range of business activities involving Russia that are not subject to sanction, penalties for violating U.S. sanctions can be severe. Therefore, American companies are advised to familiarize themselves with potentially applicable sanctions and to conduct thorough due diligence to ascertain whether a particular type of business activity or particular customers, clients, suppliers or partners may be subject to sanctions.

The Consolidated Screening List can be a helpful tool for due diligence efforts. The Screening List is a web-based platform which consolidates eleven separate export screening lists of the Departments of Commerce, State and the Treasury into a single list of parties for which the USG maintains restrictions on certain exports, reexports, sanctions, and transfers of items. Companies can search the list by entity name, country, and other criteria to help ascertain whether potential transaction parties might be subject to export restrictions or other sanctions. The U.S. Department of the Treasury maintains a Resource Center with comprehensive information regarding Russia-related sanctions, particularly those pertaining to Ukraine. Additional information resources can be found in the “Export Controls” section of this Country Commercial Guide.


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