On March 21, 2017, the Valdai Discussion Club held a seminar, titled "Russian-American Economic Relations," focused on US economic sanctions against Russia and the development of United States – Russia economic ties.
Yaroslav Lissovolik, Programme Director of the Valdai Discussion Club, Chief Economist at the Eurasian Development Bank, opened the discussion by listing statistics on US-Russia trade, noting that the share of US-Russia trade and direct investment in Russia's total has grown in 2014-2016, compared to 2011-2013, with the share of direct investment growing several times. He added that during the same periods, Russia-EU trade fell by a much greater amount.
Charles Ryan, Chairman of the Board at UFG Asset Management, noted that while geopolitically, the US-Russia relationship has been troubled, investors and companies already involved in Russia have been increasing their involvement. He also said that currently, the main investments are primarily in real estate, technology firms and private equity.
Ryan added that new uncertainty has primarily been coming from the United States, as for the first time it appears that the Russian economic policy is more stable than that of the US. He explained this by noting that political leaders are responsive to what the voters have been asking for, with regards to economic changes as a result of globalization. He noted that the US has a greater stake in sustaining the global trade order.
“One elephant in the room, in terms of US-Russia economic relations is the issue of sanctions, so there is a direct connection between geopolitical differences and the ability of US and Russian economic actors to come together,” Ryan said.
Discussing sanctions, Ryan said that they have made it more difficult for new companies to enter Russia, as understanding sanctions places a major administrative hurdle. At the same time, sanctions are not as broad as those against Iran, and Russia is in better economic shape than many other countries in the world.
Alexis Rodzianko, President of the American Chamber of Commerce in Russia (AmCham), said that sanctions have become a central irritant to the business relationship. He noted that while the US perceives the sanctions as having zero impact on its economy, AmCham’s surveys showed that those multinationals that replied invested around $50 billion into Russia since Soviet collapse, while the official statistic is around $15 billion.
He also noted that US-Russia trade is often misinterpreted by the US, as three-fourths of US-Russia trade in the survey crossed other borders.
“A classic example is Apple. Let’s say half of Russia’s population has some sort of Apple device, and that trade between Russia and the US is zero, that’s China-Russia trade, even though the three-fourths of value of that trade goes back to California,” Rodzianko said.
Looking at the US-Russia relationship, Rodzianko noted that before the Ukraine crisis, the official US line was that it sought to do more business with Russia to stabilize the relationship. He brought up the example of China, which, despite having more conflict with the US, is not labeled an existential threat or an enemy because of the depth of the US-China economic relationship.
Lissovolik noted that the importance of developing economic links to stabilize the political situation and opened the question and answer segment by asking about Russia’s susceptibility to risks from economic sanctions.
Rodzianko replied that it does not appear feasible to extend sanctions to a point, where Russia is susceptible to real economic risks, as the blowback would be equally dangerous for the rest of the world. Ryan noted that the sanctions have so far created the political will in Russia to create somewhat successful import substitution, but that low oil prices and ruble devaluation have played a greater role.
Ryan also noted that some of the vulnerabilities Russia faced were the result of liberal economic practices. For example, Russia used Visa and MasterCard without creating a national payments system and relied on Amazon Web Services to host government documents, until it became an obvious vulnerability. Rodzianko added that AmCham, Visa and MasterCard lobbied against a national payment system in 2012, but that the sanctions, which by mistake shut off card services for a major Russian bank for several hours led Russia to reconsider.
Answering a question on future contours of US-Russia scenarios, Rodzianko said that he hopes to see an end to the current relationship between the US government and finance industry, in which the US government can advise banks against certain investment decisions and issue fines in cases that they cannot win.
