The politics and geopolitics of doing business in Russia

I would never say "don't do business in Russia".

There is business to do, and money to be made, there.

But do it with your eyes open.

Politics and geopolitics always matter when you do business abroad. Never more so in Russia.

The geopolitics of Russia can impact even on those who do not do business with her, as we discussed at the Chamber event on food and drink earlier this year.

Russia's embargo on European agricultural products, a response to the West Ukraine linked sanctions, has hurt farmers across the EU, including in the North-east.

Shaun Riordan

Russia is not a democracy in our sense of the word.

Rather the paraphernalia of western democracy (elections, opinion polls, focus groups etc) are manipulated to maintain Vladimir Putin's Kremlin family in power.

In Russia this is called political technology (ПолитичеÑких Технологий).

In the west there is much talk of the power of the Siloviki, the security forces hardliners. But in reality Putin has to balance off numerous factions.

This can produce surprises, like the recent demotion of Sergei Ivanov, Putin's chief of staff.

The politics matter, because they condition the business environment in Russia.

With no independent legal system or judiciary, the impunity of Russian businessmen depends on the relative strength of their faction.

It means you need to know who you are doing business with, and where they fit in the political tapestry.

You also need to know what rival factions might want to muscle in.

That may mean making new kinds of friends, academics or journalists, both here and in Russia.

The Chamber is running an event to find out about opportunities in Russia on September 30

The Chamber is running an event to find out about opportunities in Russia on September 30

http://http://bit.ly/29jPn8Qtarget="_blank"http://bit.ly/29jPn8Q

The geopolitics matters too.

Putin is trying to reassert Russia as a major power. That has meant confrontation with the West over the Ukraine and Georgia and support for his ally Assad in Syria.

Any of these could provoke a renewed round of sanctions or counter sanctions.

Most recently, we have seen a warming of relations between Russia and Turkey. Apart from the implications for the Middle East, EU or NATO, this could impact directly on the North East.

The new deep water oil and gas fields and in the Black Sea need precisely the kind of technologies and skills that Aberdeen-based companies developed for the North Sea.

But if the warming of Russia's relations with Turkey is the latest stage in the Russification of the Black Sea (following the seizure of the Crimea and the destabilisation of the Ukraine), it creates a new geopolitical context for doing business there.

Bulgaria - an important market for these technologies and skills - seems to think so and is repairing its relations with Moscow.

Don't be be fatalist about geopolitics.

First, build awareness of geopolitical risk into your business model.

Don't put all your commercial eggs into the Russian basket - hedge the risk of further sanctions.

Even if you do not do business in Russia, be aware of how Russia can affect where you do do business.

But be more proactive too.

Working with the Chamber and others, try to influence how the government reacts to Russia (as I know from my time in the Foreign Office, the government does listen to effective commercial lobbying when designing sanctions).

Work with your commercial partners abroad as well (and their governments) - they too have an interest in business as usual.

And when you talk to your embassy, whether in Russia or elsewhere, try talking to the political section!

  • Shaun is speaking at the Chamber's Doing business in Russia event on September 30, where he is sharing a stage with the executive director of the Russo-British Chamber of Commerce. Come along to find out if you could be exploring opportunities in the Russian sector.