Russian-American Business Cooperation

The legal basis of the Russian-U.S. economic relations is the 1990 Trade Agreement and the Agreement on the Prevention of Double Taxation of Profits and Capital (which came into force in 1993). The Agreement on the Promotion and Mutual Protection of Investments, signed in 1992 and approved by the U.S. Congress, was not ratified by the Russian side. In June 2002 the United States granted Russia the market economy status.

After the Act on Friendly Relations with Russia and Other New Independent States was passed in 1993, the United States has revised more than 70 discriminative laws. Russia was included into the U.S. Generalized System of Preferences, which allowed for a duty free export of certain Russian goods to the US market (however, a trend emerged lately to withdraw some articles of Russian export, including wrought titanium, from GSP).

In 1994 Russia was accorded a waiver from the Jackson-Vanik Amendment to the 1974 Trade Act that blocked the rendering of the Most Favored Nation Treatment to Russia on a permanent and unconditional basis. In the beginning of 2002 a legislative process of complete and final graduation of Russia from its action was launched, however, it is halted now.

The promotion of Russian-U.S. economic cooperation is in line with the national interests of the two countries and always appears on the agenda of the Summits between Presidents of Russia and the United States, who regularly adopt joint statements in this regard.

2005 has seen a significant progress in cooperation on ministerial level in financial and economic spheres. In June 2005 US Secretary of Commerce C.Gutierrez and US Secretary of Energy S.Bodman visited Russia. Twice, in April and September the meetings of Minister of Finance of the Russian Federation L.Kudrin and US Secretary of the Treasure J.Snow took place in Washington, D.C. In September Minister of Economic Development and Trade of the Russian Federation G.Gref held bilateral negotiations on Russia succession to the WTO in Washington, D.C. Official visit of the Minister of Industry and Energy of the Russian Federation V.Khristenko, accompanied by a group of leading Russian businessmen, to Washington, D.C., Houston, Detroit and Seattle in October 2005 was of great importance for the diversification of economic cooperation.

The United States is traditionally one of the 5 major trade partners of Russia. At the same time, Russia currently ranks only in the second dozen on the list of U.S. trade partners. The Russian export doesn’t exceed 1 percent and the U.S. import to Russia 0.5 percent of U.S. foreign trade. Raw materials constitute more than 80% of the Russian export to the United States. As to imports, they include mostly meat products, machinery and equipment, non-organic chemicals, electronics and tobacco.

There is a strong acceleration of growth of the bilateral trade during the last years. The main reasons for that are high prices on energy recourses and some other important Russian export goods. For the first 6 months of 2005 the bilateral trade totaled $9.76 bln. (exports from Russia - $ 7.84 bln., US imports to Russia - $ 1.92), which constitutes a growth of 58 percent if compared to the same period in 2004.

As of the end of the first two quarters of 2005, the United States ranked 6th by the volume of accumulated foreign direct investments into the Russian economy ($6.3 bln. compared to $4.7 bln. in 2003). More than half of U.S. investment goes to the Russian fuel and energy sector. Among the major investors into the Russian economy are such industrial giants as Exxon Mobil, Alcoa, General Motors, Ford, ConocoPhillips, Gillette, PepsiCo, Coca-Cola, Philip Morris, Proctor and Gamble, Mars, Wrigley’s, etc. American federal institutions such as Overseas Private Investment Corporation, U.S. Trade and Development Agency and U.S. Eximbank are intensifying their activities by project financing on the Russian market.

Recently investment cooperation has assumed a bilateral character. In 2000 LUKoil purchased the Getty gas station network (1300 stations). Later in 2004 the Russian company acquired 800 more stations from ConocoPhilips. In 2003 the Norilsk Nickel company bought 56% of stocks (for $373.6 mln.) of Steelwater Mining company, producer and seller of palladium and other platinum metals. In 2004 Severstal Company purchased Rouge Industries – fifth largest steel producer in the USA.

The quotas for commercial launches of American satellites by Russian carrier rockets were abolished January 1, 2001 (with the U.S. licensing of each launch still in practice). In November 2004 the Russian Ministry of industry and energy and Boeing signed a Memorandum of Understanding in order to further strengthen industrial and scientific cooperation in airspace, including that in the framework of the project of creation of the new Boeing “787” aircraft. Simultaneously, the American company signed and agreement with “Verkhnesaldinskoye Metallurgical Industrial Association” in order to increase shipments of its processed titanium components for Boeing’s civil aircraft. “Volga-Dnepr” company signed a contract for transportation of extra large-size components for the “Boeing-787” from Europe and Asia to the assembly plant in Seattle, WA. Within the next years Boeing is planning to invest about $2 bln. in the Russian air and space industry.

During the Summit in Genoa (July 22, 2001) Presidents Vladimir Putin and George Bush expressed their support of the initiative by Russian and U.S. business communities to launch the Russian-American Business Dialogue as a permanent communication channel between the business circles and the government agencies of the two countries involved. The High-Tech Round Table is functioning within the RABD framework: in February and November 2005 two bilateral conferences on IT and biotechnology were organized in Stanford University. The Russian-American Banking Dialogue continues to move forward: in 2005 two representative Russian-American banking conferences took place in New York, NY (March) and Washington, D.C. (April).

The meetings of President V.Putin with the representatives of major U.S. companies in Saint-Petersburg (June 2005) and Washington, D.C. (September 2005) as well as the meeting of President G.Bush with the group of leading Russian businessmen in Washington, D.C. (October 2005) made an important contribution to the considerable intensification of the RABD and its upgrade to the qualitatively new level, especially in the energy field.

The Russian-American Energy Dialogue is one of the most promising trends in our bilateral relationship. As part of this Dialogue, the regular meeting of the Bilateral Interagency Working Group was held in Washington in June 2005. The main objective of the discussions was to look at the results of realization of previous accords between the two Presidents and to work out further directions of interaction. Cooperation experience accumulated during the last years (incl. the Russian-American Business Energy Summits in Houston, TX. in 2002 and Saint-Petersburg, Russia in 2003) encouraged the launch of such large-scale projects as the plans of joint development of Shtokman gas-condensate field and the beginning of the swap-based delivery of Russian LNG to U.S. market in September 2005.

In 2005 Russia and the U.S. reached a significant progress in the negotiations on the issue of Russia’s accession to the WTO.

A dialogue is maintained on the matters of intellectual property protection. A special working group met twice in 2005 to determine necessary steps for joint counteraction to the breaking of the law in this area.