From Russia with love

Apr 22 2008 By Sue Scott

RUSSIANS, like the Brits, are good at queuing, which is just as well because they do a lot of it these days. Come Friday rush hour, they’ll be nose to tail on the Russian equivalent of the Middlesbrough flyover.

And that makes export guru Ross Cordiner a happy man.

Because the rising frustration of the Moscow middle class is also a sign of their rising wealth - which they’re spending on products from the North-east.

“This year, Russia came into the Top 10 North-east export destinations for the first time. It’s a very important market for us,” says Cordiner, deputy international trade advisor for the North-east with UK Trade and Investment (UKTi).

In demand are products and supplies for the automotive, chemicals and pharmaceutical industries, which make up 50-60% of everything we send to Russia with love. In fact, Teesside’s pharma exports have met with a big, passionate Soviet embrace, as the Russian market grew a massive 28% last year, making it the fastest growing drugs market in the world.

Hard-bitten cossacks, it appears, are catching the West’s neuroses.

“As the prosperous middle class grows, so does healthcare,” says Cordiner.

“Russia is a high growth economy and wage rates are increasing. When I was in St Petersburg six months ago there was virtually no unemployment.”

Oil and gas are fuelling the expansion and melting Russia’s once ice cold isolationism. Russia is the world’s largest producer of hydrocarbons with 33% of the world’s gas reserves and 5% of its oil. But it needs help building the infrastructure to support expansion and renew outdated plant, not just in energy but also in other heavy industrial sectors. Russia’s importance as an energy supplier to Europe is growing and it has aspirations to strike deals with Asia. The UK is already the biggest foreign investor in Russian oil and gas, notwithstanding recent fears that Russia is intent on seizing foreign assets and that’s expected to grow to around $300bn dollars over the next 20 years, which is good news for Teesside firms, especially those with expertise in the hazardous subsea environment.

“Our North Sea expertise is renowned around the world and the Russians are looking for companies with experience of these very difficult and hazardous environments.”

Seventy five per cent of all Russian revenue is driv en by oil and gas - so critical is it that premier Putin put aside a stabilisation fund of $100bn from oil revenue to cushion any spike in the fuel market.

A UKTi trade mission from the North-east planned for October will deliberately co-incide with an oil and gas expo, but as Russia plays catch-up with Europe to meet export regulations, imposed by an increasingly-stringent EU, there’s bouyant demand across all sectors for tooling and heavy engineering.

“We probably have more metal bashers here than any other region,” says Cordiner and there are plenty of opportunities to make an impression in Russia’s sprawling industrial landscape, concentrated to the west of St Katherine’s.

But as Russia shakes the last frost from its Cold War past, Cordiner predicts it will be making more intellectual and financial investment here too. Following what would have been a once unthinkable partnership with fomer space race rivals America on a Boeing aerospace project, there are likely to be more tie ups between Teesside research centres and Russian scientists. And, with 40% of investment property in London already owned by Russian magnates, Cordiner says it’s only a matter of time before more roubles are sunk in UK firms.

“Apart from the odd football club, you struggle to name any Russian-owned UK business.

“But there are some very wealthy people in Russia looking to invest here - I’m sure it will come.”

Make mine a Vladimir

“POLITICS is for politicians, but in any market I’ve ever experienced business is pragmatic,” says Ross Cordiner, of the UKTi, which, given the recent cooling in relations between Moscow and Britain, is a comfort if you’re thinking of sinking a few Vladivars with a potential client.

Trade from the North-east with Russia has increased, despite the diplomatic stand-off, reaching an all-time high of more than £300m last year. “It’s perceived to be a difficult market to get into because of the history of the Soviet Union,” says the UKTi’s special agent Jonathan Gamblin, but the Russia of John Le Carre has long gone.

“Today, Moscow can compete with London, New York and Paris - all the luxury items and goods are there. It’s a very cosmopolitan place to be.”

And, he stresses, you do have to be there, if you’re a business wanting to make an impression.

Gamblin, whose job it is to “help businesses kiss a few frogs before they meet their prince”, advises firms to have a physical presence. “A lot of business in Russia relies on the strength of personal relationships and once you’re in, it’s long standing.”

There are plenty of agents and distributors to act as a go-between, but if you are going it alone, be warned. The Russians waited a long time to enjoy their new material wealth and they like to savour it. So be prepared to be indulged. Not only do you need a strong handshake, but also a strong constitution to do business in Bond land.

“You need to be patient,” says Gamblin. “Russian business meetings tend to go through a lot of social stuff first.”

Anyone for a top up?

Language: Russian - don’t rely on them to speak English

Rate of exchange: US$ 0.04

Principal industry: Oil & gas

Key import sectors: Automotive, oil and gas, pharmaceutical

Financial stability: Good - Russian economic growth hit a six-year high of 7.9% last year; it has $400bn in foreign reserves

Useful contact: UKTi North-east, tel 0845 05 05 054 or email: enquiries@ukti.rito.co.uk