Much has been said about the new "global Britain" that will rise, phoenix-like, from the ashes of the UK's moribund relationship with the EU. There are all those trade agreements to be signed with high growth markets post-Brexit, and new opportunities to be explored beyond the EU.
But in practical terms, some of the new markets will take many years for British exporters to cultivate. Asian and Latin American markets are certainly attractive, but there are obstacles, not least that biggest natural barrier - distance. One market which presents new growth opportunities but which is closer to home is Russia.
Russia is certainly not for the faint-hearted. There are also huge distances involved, at least for part of the market. There are sanctions. A stagnant economy. Corruption. Various conflicts on its outer borders. Rock bottom relations with the UK and US.
Yes, Russia certainly gets a bad press.
For all that, for those who get their foot in the door, there are many opportunities and it can be an attractive market. I find it quite interesting that people I know who do business with Russia tend to be quite upbeat about their experience. People who have not done business with Russia tend to be more pessimistic about it and see the difficulties rather than the opportunities.
Well Winston Churchill did say "Russia is a riddle wrapped in a mystery inside an enigma", and he was probably right. It is a difficult place to get to know and to begin to operate there. But once you are in, you don't want to leave! At least that's my experience after doing business there, on and off, for the last 30 years!
This ambivalence is borne out by statistics from the World Economic Forum's Global Competitive Report. Corruption is perceived to be the most problematic factor for doing business in Russia, followed by tax rates, access to financing, inflation and tax regulation. On the surface, not an attractive business environment. Yet, despite this, Russia's overall ranking is 38th out of 137 economies, narrowly behind China, and well ahead of the other BRICS countries.
Let's try to begin to answer the riddle, uncover the mystery and untangle the enigma.
For the British exporter exploring this market for the first time, here are a few of the things to look out for which make Russia a very "different" place to do business.
Dealing with local laws and regulations
Since the collapse of the Soviet Union, Russia has adopted many Western legal principles and to a large extent has harmonised standards with the EU. However the current system also contains much of the legacy of the Soviet Union - highly bureaucratic, with lots of red tape and lengthy procedures. They are all manageable, but they take time and attention to detail. Sometimes the expertise of a specialist agent is needed. For British companies, even procedures which would elsewhere be relatively straightforward, in Russia can be extremely frustrating, for example setting up a branch office, acquiring land, clearing goods through customs.
The legal system works very differently from our own, and protections and recourse to law which we take for granted cannot be assumed. Challenging areas include registration of patents, protection of intellectual property rights, and protection of minority shareholdings.
With excess red-tape and poor law enforcement comes corruption, from small facilitating payments to gifts and favours to larger scale bribery. In fact, especially for foreign companies, business is possible without resorting to bribery, but there are various techniques for resisting it which need to be employed. This is perhaps one of the greatest risks faced by British companies in Russia.
Sanctions and export and import controls
The Russian annexation of Crimea in 2014, resulted in a number of trade restrictions which British companies need to be aware of. There are Western sanctions on doing business with companies and enterprises that belong to certain individuals targeted by the EU and US. There is a Western embargo on primary and dual-use technology intended for military use or a military end user, controls on export of equipment for the oil industry, and a restriction on certain financial instruments. Russia retaliated with a ban on imports of fruit, vegetables, meat, fish, milk and dairy imports from the EU, including the UK. The chances are that your business will not be affected, but it's worth finding out, especially if you are selling high tech products. And beware, it's a moving target, depending on the political winds of the moment.
A diverse nation
There's an idea in the West that Russia is a very uniform, monolithic country. In some respects that is true, in others not. The Soviet system, during its 70-odd years of existence, managed to leave its imprimatur on the entire landmass of 11 time-zones, from the Baltic to the Bering Sea, and diverse climate, from the tundra to tropics. But within that territory are 130 different nationalities, as many languages, several religions, and that's even without the former Soviet republics which became independent in 1991. Local governors in the 85 administrative regions - who may make decisions about Western investment projects - play to their own rules.
The point is, for the exporter, business may begin in Moscow, but it certainly doesn't end there. During the forthcoming World Cup in June and July, look out for those other nine venues outside Moscow and St. Petersburg where the group stage matches will be played: Rostov and Sochi - on the border of the multi-ethnic region of the Caucasus; Nizhnii Novgorod, Samara, Saransk and Kazan in the heartlands of Russia - home to old Slavic, and exotic Bashkir and Tatar tribes; Kaliningrad - the medieval city and old capital of East Prussia, Königsberg, now a Russian exclave, on the Baltic Sea. Most of these cities - and several others in the European part and in Siberia and the Russian Far East - have populations of over 1 million, and are major industrial centres in their own right. Each presents their own local challenges.
A modern economy
Russia, with some justification, is viewed as a country which has been unable to adapt to the needs of the modern age. It still depends on oil and gas, extractive industries and raw material processing and heavy industry: it simply has been unable to diversify. That is only partly true. The Soviet era provided for universal education and an obsessive focus on science. The result is that there is a highly educated population, very computer literate, with excellent access to the internet. From media accounts, we know that there is an army of clever young IT people engaged in programming, antivirus development, virus development, hacking and trolling. And while a generation of scientists emigrated from Russia to the West (like the famous Geim and Novoselov, inventors of Graphene, Nobel Prize winners, now at the University of Manchester), many have remained, and new generations continue to develop. If there are any opportunities for British companies in Russia, then they are most likely to be in the area of high tech, pure science, materials development, precision engineering.
In summary, Russia may not be the automatic first port of call for the intrepid post-Brexit British exporter, but it's definitely worth exploring and finding out more.
Brook Horowitz will be running a one-day workshop, "Russia without Tears," for the Institute of Export and International Trade on 22nd May in London.
For more information, click here
