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RUSSIAN-AMERICAN BUSINESS COOPERATION

The regulatory framework for Russia-U.S. economic relationship is established by the 1990 Trade Agreement and the Treaty on the Avoidance of Double Taxation of Earnings and Capital (came into effect in 1993). The Treaty on the Promotion and Mutual Protection of Investments signed in 1992 and approved by the U.S. Congress has never been ratified by the Russian side. In June 2002, the United States granted Russia a market economy status.

Following the passage of Russia and Other New Independent States Relations Act in 1993, the United States has revised more than 70 laws discriminating against the Russian Federation. Russia was included in the U.S. Generalized System of Preferences (GSP), which allowed for a duty free export of certain Russian commodities to the U.S. market (however, a trend has emerged recently to withdraw some of the Russian export items from the GSP, including wrought titanium).

In 1994, Russia was temporarily exempted from the Jackson-Vanik Amendment to the 1974 Trade Act that had blocked on a permanent and unconditional basis the provision of the most favored nation treatment in trade with the United States. In early 2002, a legal process to revoke completely and finally the abovementioned provision in respect of Russia was launched. Today, however, it is suspended.


In November 2006 in Hanoi, Vietnam Russia and the U.S. signed the Protocol on the succession of the bilateral negotiations on Russia’s WTO accession.

The advancement of Russia-U.S. economic ties meets the national interests of both countries and always features high on the agenda of summit meetings between the two Presidents who regularly adopt joint statements in that respect.

Year 2007 saw intensive bilateral and G8 interagency cooperation in the finance and economy field. Secretary of Commerce Carlos Gutierrez visited Russia in April. in May Deputy Chairman of the Government of Russia Alexandr D. Zhukov took part in the Russian-U.S. investment conference in New York.

The United States has traditionally been one of Russia’s five largest trade partners. At the same time, Russia currently ranks only in the second dozen of U.S. trade partners, with Russian exports to the U.S. not exceeding 1 percent and U.S. exports to Russia staying within 0.5 percent of U.S. foreign trade turnover. Energy resources account for most Russian exports to the United States. As to Russian imports, they generally include machinery and equipment, foodstuffs, non-organic chemicals, and other manufactured products.

There has been a drastic acceleration of growth in the bilateral trade in recent years, driven primarily by growing prices for energy resources and a range of other key Russian export items. In the first six months of 2007, the trade turnover between our countries totaled $12,2 bln. (exports from Russia once again exceed $9 bln., imports from the U.S. increased by 45 percent, amounting to $3,2 bln.).

As of the end of the first half of 2006, the United States ranked among the first dozen countries by the volume of accumulated foreign direct investments in Russia ($7,5 bln.). More than half of U.S. investments are channeled in the Russian fuel and energy sector. Among the major investors in the Russian economy are such industrial giants as ExxonMobil, Chevron, Alcoa, Boeing, General Motors, Ford, Pratt & Whitney, ConocoPhillips, PepsiCo, Coca-Cola, Phillip-Morris, Procter & Gamble, International Paper, Wrigley’s etc. U.S. federal institutions, such as the Export-Import Bank, Overseas Private Investment Corporation, U.S. Trade and Development Agency continue to provide strong support to U.S. companies investing in Russia.

The investment cooperation is becoming a two-way street. Russia’s accumulated direct investments in the U.S. economy exceed $4 bln. In 2000, Russian oil company, LUKoil, purchased the Getty gas station network (1330 stations). Later, in 2004, it bought 795 additional stations from ConocoPhillips. In 2003, Norilsk Nickel bought (for $373,6 mln.) a 56 percent stake in Steelwater Mining company, producer and seller of palladium and other platinum metals. In 2007 Norilsk Nickel extend its presence on the U.S. market by purchasing of the OM Group nickels assets for $400 mln. In 2004, Severstal bought Rouge Industries – fifth largest steel producer in the United States. In 2006, Gazprom set up its subsidiary Gazprom Marketing and Trading USA in Texas, which will be involved in marketing supplies of liquefied natural gas (LNG) to the U.S. market, as well as buying regasification plants. In 2007 Evraz Group became the owner of the 100 percent shares of Oregon Steel Mills ($2,3 bln.).

A quota system for commercial launches of U.S. satellites by Russian booster rockets was abolished in 2001 (with the U.S. continuing to license each launch). In November 2004, the Russian Ministry of Industry and Energy and Boeing signed an MOU to further enhance production and scientific cooperation in aerospace, in particular, as part of developing new Boeing 787 aircraft. At the same time, Boeing negotiated a contract with OAO Verkhnesaldinskoye Metallurgical Production Association to expand deliveries of its processed titanium components for the company’s civil aircraft. In May 2006, Boeing and VSMPO-Avisma signed a joint venture contract to process pressed titanium articles for aircraft. Russian airline Volga-Dnepr entered into a contract to transport extra large-size components for Boeing 787 from Europe and Asia to an assembly plant in Seattle, WA. Within the next few years, Boeing is planning to invest about $2 bln. in the Russian aerospace industry.

During the Genoa Summit (July 22, 2001), Presidents Vladimir V. Putin and George W. Bush expressed their support for the initiative by Russian and U.S. business communities to launch the Russian-American Business Dialogue (RABD) as a permanent communication channel between businesses and interested government agencies of the two countries. A high-tech round table was established within the RABD framework.

President Vladimir V. Putin’s meetings with leading U.S. businessmen in Saint Petersburg (June 2005 and 2006) and Washington, DC (September 2005), as well as the October 2005 meeting between President George W. Bush and a team of Russian industrialists in Washington, DC made an important contribution to intensifying RABD, including in the energy sector, and bringing it to a qualitatively new level.

Russia’s information technologies are further making their way onto the U.S. market. Russian IT companies are becoming significantly more active. They have sponsored several meetings of Russian-American IT and telecommunications round table, as well as a number of traveling marketing exhibitions. Russian programmers have been part of a range of conferences and fairs. Major Russian IT firms have opened their offices in the United States. Orders for Russian-developed software are being placed by leading U.S. companies, such as IBM, Intel, Motorola, etc., with some of them setting up their own design centers in Russia staffed with Russian programmers.

The countries are pursuing dialogue on the protection of intellectual property rights. An ad-hoc working group met in May 2007 in Washington, DC to decide on joint action to counter violations in that area.