Current business situation
Russia is an important emerging market, defined by both
its size and its growth potential. Many Australian companies have been
successfully exporting to Russia for years. Australian small and
medium-sized companies are now represented in the market alongside large,
well-established multinational companies.
The Russian economy suffered from the fall in the Russian rouble and global
oil prices together with sanctions imposed by the Western states from 2014.
These factors contributed to negative gross domestic product
(GDP) growth in 2015-16, however the economy is gradually recovering
from the recession and recorded positive real GDP growth of
1.8 per cent in 2017 with forecast of growth of 1.5 - 2.0 per cent in the coming years.
Russia can be a rewarding market for Australian companies committing the
time and effort to building a sustained presence. However, it is a market
of some complexity and risk which should be considered prior to market
entry. The Business Risks and Sanctions pages of the Austrade website have
some additional useful information.
As with any international market, Russia has its own way of doing business and unique social norms. For Australian exporters, it is important to take time to understand how business is done in Russia and how to maximise opportunities for success in your business dealings.
In Russia, strong personal relationships are critical to business success so face-to-face business meetings are vital. Some key considerations to help you achieve a successful outcome include:
- Plan what you need to say. Many business visitors fail to present the most relevant benefits of their product. Most business people do not have time to listen to long-winded presentations.
- Make sure that all necessary information is readily available and your website is in working order.
- Brochures, promotional materials and samples should be of high quality, matching industry standards. Use metric measurements. Translate the most important marketing materials into Russian.
- Speak slowly and clearly. While some Russian business people will speak English, they will be more accustomed to American or British accents. Minimise use of slang and provide clear, concrete explanations. Austrade can assist by organising an interpreter to accompany you during visits to the market.
- When negotiating, remember that your first price is seen as a starting point for negotiations. Potential business partners will expect several offers and counter-offers before a mutually acceptable price is reached.
- Russians are generally courteous and positive in listening to your presentation. This can leave a false impression of interest or commitment on their part. You should be careful to clarify what you understand to have taken place. This can be done conveniently in a follow-up email.
- The meeting should conclude with the understanding that you will follow-up. Don’t rely on the Russian business person to make the next move. It is vital to follow up on the phone, on email and even in person to build relationships with potential business partners and customers.
- Fast and comprehensive follow-up is essential in successfully doing business in Russia and the Commonwealth of Independent States (CIS). The Russian business cycle can move considerably faster than in Australia — sometimes clients may even want to sign contracts on the same day. Often the relationship can go cold unless there is immediate follow-up.
- Promised delivery dates and production quantities must be honoured. Failure to deliver agreed quantities at the promised time will lead to lost business and a tarnished reputation for your company and for Australia in general.
- Russian business people tend to dress quite formally. A business suit is expected business attire for men. For women similar guidelines apply. Pant suits are fully acceptable in Russia. It is preferable to dress well and conservatively to create the right first impression.
Setting up in Russia
Finding the right partner
Sustained business in Russia and the CIS requires commitment to a long-term market strategy.
Consider your needs at the time you enter the market while ensuring you have sufficient flexibility to adapt as the market develops over time.
Prior to formalising representation, it is prudent to ensure that the structure proposed is appropriate under local law and that you understand fully the implications of any agreements in the local context. You should ensure the agreement protects your interests to the fullest extent possible. The durability and success of your representation arrangements will depend not on your formal contractual undertakings, but on the strength of understanding, trust and communication that you develop with your in-market representative.
Austrade Moscow and Vladivostok can offer specific assistance to help you identify a range of companies; direct importers, distributors, agents, or joint venture partners, from whom to make your selection of the company best suited to your forward plans.
Austrade can recommend legal and accounting advisors to help structure your arrangements in keeping with local requirements and can suggest other ways of checking the suitability of prospective partners. A useful guide is an assessment of the companies your prospective partner already represents. If appropriate or possible, you may consider speaking to some of these companies to gain a sense of how the local company is performing for them.
Take your time in the selection process as it is generally the most important decision in ensuring that your business not only gets off to a good start, but continues to grow in the market.
Russia is the world’s largest country in geographic terms. Before assigning the entire market to one particular company, assure yourself that the company is capable of servicing such a geographic spread. You may wish to consider separate representation for the Russian Far East and western Russia (e.g. Moscow and Vladivostok are more than 9000km apart).
Banking and finance
The country’s increasing prosperity and rising personal incomes have contributed significantly to this growth and to the proliferation of banks.
Today there are approximately 700 banks operating in Russia. This is half the amount of banks from recent years, owing to stronger regulatory oversight throughout the country. The state-owned savings bank, Sberbank is the dominant operator in the market, accounting for 28.7 per cent of aggregate banking assets (as of 1 January 2016).
The bank is the key lender to the Russian economy and the biggest receiver of deposits in Russia: 46 per cent of retail deposits, 38.7 per cent of retail loans and 32.2 per cent of loans to corporate customers account for Sberbank as of 1 January 2016. The top 10 banks control 66.7 per cent of all Russia’s banking assets. A number of foreign banks are represented in Russia, some having established a presence by buying into existing Russian banks or creating new Russian banking entities.
Links and resources
Government, business and trade
Embassy of the Russian Federation in Australia
Federation Council (Upper House of the Federal Assembly)
Government of the Russian Federation
Ministry of Foreign Affairs
President of the Russian Federation
Russian Chamber of Commerce and Industry
Russian Federal Government Ministries
State Duma (Lower House of the Federal Assembly)
News and media
The Moscow Times
Baker & McKenzie: Doing Business in Russia
Deloitte: Russia Highlights
KPMG: Doing Business in Russia
Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.