Export to Russia
Exporting to Russia is not always simple. Bureaucracy, corruption and the threat of international sanctions discourage many from even considering it. However, at Wagner & Experts we believe that for the right person, the opportunities available in Russia should not be overlooked. Over the last five years, the Russian government has actively tried to encourage foreign business. We expect this trend to continue, as the country creates opportunities for international businesses looking to widen their export destinations.
Debunking the myths
Since 2014, when sanctions were first introduced, it has become much easier to set up a successful business in Russia. Russia has jumped from 92nd to 31st place in the World Bank’s “Ease of Doing Business” index, ranking higher than several EU countries. Since becoming a full member of the World Trade Organization (WTO) in 2012, Russia has enacted measures that facilitate international trade. These include improvements to the protection of intellectual property and changing duty rates to simplify access to the Russian services market. For a full list, visit WTO.
In addition, regulatory reform is happening at both federal and regional levels. This aims to alleviate administrative difficulties faced by investors and entrepreneurs. For instance, in 2020, the Russian government passed the ‘Foreign Investments Law’. This ensures that foreign companies are treated no less favourably than domestic ones and guarantees the right to draw revenue and profits from investments in Russia.
The future looks bright for exporters
Looking ahead, the $26.2 billion Digital Economy Program will rebrand the nation’s economy and enhance its global competitiveness. The jewel in the crown will be the Skolkovo Innovation Center. As the country’s answer to Silicon Valley, it is expected to trigger a wave of funding opportunities for international tech start-ups and businesses.
Although of all the BRIC economies Russia has the smallest population, in per-capita terms it remains the wealthiest. Naturally, the pandemic will impact such figures in 2020, with the IMF forecasting a contraction of 5.5% in the country’s GDP. Despite the negative impacts of the virus, opportunities are still available. The expected wave of domestic bankruptcy will create space for low-cost import substitution and exports of goods into Russia. Furthermore, the low rouble and precarious employment situation will enable foreign businesses to fill the vacuum left by the pandemic.
Indeed, many sectors, such as the domestic supply of consumer goods and services, remain undeveloped. For instance, there are already 4,000 British companies doing business with Russia, resulting in a commercial relationship worth over £10 billion. International businesses are slowly waking up to the untapped potential of exporting to Russia, where an international origin adds an allure to a product that is hard to recreate in a local market.
An overview of potential sectors
There is a wide range of sectors open to international import in Russia. These include:
Energy and natural resources
- Oil & gas: Russia has one of the largest global markets for oil and gas, with a value of US $50 billion annually. This is expected to grow in the coming two decades.
- Nuclear: Russia is a world leader in the nuclear industry. The state atomic energy corporation, Rosatom, already has several international partnerships.
- Renewable: After recently ratifying the Renewable Energy Source Development Measures (RESDM), there is growing interest to partner with foreign companies for both goods and services.
- Electricity grids: there has been a recent trend towards the application of new technologies. These include automated control systems, smart grids and other systems to improve operation.
- Energy efficiency: there is major demand for improved efficiency, including energy generation, distribution and final consumption.
- Mining: with some of the world’s largest reserves of ferrous and non-ferrous metals, Russia already boasts a highly consolidated domestic mining sector. However, international businesses have a strong market in the supply of machinery, consultancy, and recently, in environmental and social areas.
- Education: the Higher Education sector is becoming increasingly international. English is set to become a university entrance requirement, meaning the demand for foreign teachers will only increase.
- Experience economy: with over 2,500 state and private museums, and over 100 million visitors annually, the opportunities in the heritage and visitor attraction sub-sectors remain numerous.
- Financial & legal services: Moscow is a major international financial centre. With a banking system worth around US $1.6 trillion and that is growing steadily, there are many opportunities for foreign companies to enhance banking services. These include risk management, data processing and insolvency rules, mergers and acquisitions, English law litigation and arbitration expertise. Following reforms to Russia’s small insurance and pensions industry, opportunities are opening up for smaller businesses to operate in this sector.
- Advanced engineering: national demand for new metal-machining equipment valued at US $1.5 billion annually.
- Biotechnology & pharmaceuticals: current value of US $30 billion. The Russian Pharma 2020 strategy aims to further develop drug creation and innovation to enhance domestic manufacturing output.
- Consumer goods: currently worth over US $600 billion. Russia is an integral market for fashion houses and global luxury brands. Also, it is one of the fastest-growing markets in Europe for food and drink.
- Telecommunications: Russia is already the largest market for mobile phones, and the domestic demand for developed technologies and equipment has been matched by the government’s programme to enhance communications in remote regions.
Top five goods exporters to Russia, 2019 (%):
Top five products imported to Russia, 2019 (%):
Things to consider before exporting to Russia
For every item imported into Russia, a detailed customs freight declaration has to be filled in, supported by the following documents (when applicable):
- Commercial documents such as invoices, packing lists etc
- Transport documents
- Import licenses
- Technical safety certificates
- Certificates of origin
- Sanitary certificates
- Import permission and licenses
- Documents confirming legitimacy of involved declarants, brokers and importers
As you can see, exporting to Russia may be profitable, but it is no simple task. Therefore, before attempting to surmount the paperwork, we recommend considering some important questions, such as:
- Do you wish to establish your own company presence in Russia, or just find a distributor?
- Have you considered the discrepancies in economic development across Russia (Moscow and St Petersburg have over 77% of internet penetration)?
- Do you have the time and resources to handle the demands of exporting to Russia?
- Do you know how to secure payment for your products and services?
- Have you identified local potential partners, agents and distributors which can facilitate the initial process?
- Or do you prefer a local presence?
- Have you considered the financial & legal considerations, taxation, customs and documentation, shipping?
Conclusion: It’s not all bureaucracy
Despite the considerable amount of work required to start your operations in Russia, this vast nation offers exciting opportunities for those who persevere. With the right plan and coordinated execution, it is possible to take advantage of its growing economy. Wagner & Experts offers incorporation, accreditation, accounting, payroll and tax consulting services to facilitate market entry. We arrange licences and can put you in touch with local industry experts.
Leave us your contact details and we will get in touch to start planning how you could export to Russia.