PEACE & SECURITY | Creating a more stable world
29 April 2008
United States, Russia Building New Economic Partnerships
Growing trade and investment ties encourage closer cooperation
Washington -- On September 6, 2007, young Muscovite Alyona Mikhailova made history by ordering a cappuccino.
Mikhailova's order was the first taken at the first Starbucks coffee shop in Russia. For government officials and business leaders attending the new U.S.-Russia Economic Dialogue in Washington April 28, it also was an encouraging sign of deepening and expanding trade ties between the two countries.
President Bush and Russian President Vladimir Putin launched the dialogue April 6 following their final presidential meeting at the Black Sea coastal resort of Sochi, Russia, one component of a broader “Strategic Framework Declaration” charting the course ahead for U.S.-Russian relations. (See "Bush, Putin Chart Course Ahead for U.S.-Russian Relations.")
The new economic dialogue is co-chaired by Under Secretary of State Ruben Jeffrey and Russian First Deputy Foreign Minister Andrei Denisov and focuses on assessing current conditions in the global economy, boosting bilateral investment and expanding energy cooperation between Washington and Moscow.
“The United States and Russia for a long time have enjoyed very significant commercial relationships, going back to the days when Russian fur traders actually came to Alaska and the West Coast,” Jeffrey said. “Today those relationships are very broad, very deep, very robust, with the significant potential to expand our trading and investment relationship on a mutually advantageous basis.”
Since 2004, U.S.-Russian bilateral trade has grown an average of 22 percent per year, says Jeffrey, topping $26 billion in 2007. The relationship has proven mutually beneficial, he added, pointing out that overall trade volume is almost equally divided between the two countries.
Russia is the world's largest exporter of natural gas and the second largest exporter of oil, according to the U.S. Energy Information Administration. Global demand for energy and raw materials have fueled marked, steady, growth in the Russian economy, making it a prime location not only for energy investors, says Eugene Lawson, president go the U.S.-Russia Business Council, but also for those looking to invest in real estate, consumer goods, manufacturing, technology and services.
“What is particularly telling about the Russian market and the successes of U.S. business there is that 80 percent of U.S. companies say that their [return on investment] is higher in Russia than in any other emerging market,” says Lawson, whose trade organization helps more than 300 U.S. businesses do business in Russia, as well as a growing number of Russian businesses seeking to expand into the U.S. market.
While McDonald’s and Pepsi have been active in the region since the 1970s, a number of other American companies, including food company Heinz, automakers General Motors and Ford, Dow Chemicals, Coca-Cola, Procter & Gamble and International Paper are joining Starbucks in today’s Russian market.
ConocoPhillips has a 20 percent share of Russia’s Lukoil, while Severstal, Russia’s top steel producer, holds an 85 percent share in the U.S.-based steelmaker SeverCorr. Boeing has hired 1,400 Russian engineers for a new design center in Moscow, and is working with Sukhoi to develop a new generation of passenger jets. In all, U.S. investments have brought more than 100,000 new jobs to Russia, says U.S. Ambassador William Burns.
The new economic dialogue seeks to encourage these positive trends by creating government-to-government and business-to-business networks for the United States and Russia to promote greater transparency and strengthen the rule of law. Both of these issues have been identified as leading policy priorities by Putin’s successor, Dmitry Medvedev, who will take office May 7.
While in Washington, Russian officials also met with Commerce Secretary Carlos Gutierrez, U.S. Trade Representative Susan Schwab and senior White House economic advisers to discuss other elements of U.S.-Russian economic cooperation outlined in the Bush-Putin Strategic Framework, including a new bilateral investment treaty, a parallel U.S.-Russia energy dialogue and Russia’s bid to join the World Trade Organization.
Denisov said that the dialogue will continue on the sidelines of the St. Petersburg Economic Summit in June, and again later in the year. “The foundation for such kind of dialogue is our mutual interest,” he said.
