While the main headlines of the meeting between Russian Foreign Minister Sergei Lavrov and President Donald Trump centered on whether Trump brought up election meddling or not, one market-focused takeaway from the meetup is that the U.S. should be selling more goods to Russia, and vice-versa.
Given the current anti-Russia climate, it’s probably wishful thinking by a deal-maker president.
Russian business daily Kommersant reported on the meeting on Thursday, saying Trump wanted to “increase several times” U.S. trade with Russia. The launch of a bilateral Business Advisory Council, first announced in October, is supposed to get underway in 2020. It would be this administration’s version of a reset, only passing the baton to corporate executives and investors who want to play ball.
The U.S. has a $13.2 million trade deficit with Russia as of October, according to Census data. Last year’s trade deficit in goods was $14.2 million. U.S. imports of Russian goods sank to their lowest levels since 2004 back in 2015 and again in 2016 due to sanctions. They have been on the upswing, but are relatively flat over the last two years.
Bilateral trade reached $61.1 billion in the first half of 2019. The U.S. is the largest source of foreign direct investment into Russia, according to Russian ambassador to the U.S. Anatoly Antonov said.
The United Nations Conference on Trade and Development says the U.S. is not a top 10 source of direct corporate investment into Russia, however. The Netherlands is No. 1, followed by offshore havens like Bahamas, Bermuda and Luxembourg which often serve as tax evasive vehicles for private Russian businesses.
The MSCI Russia is one of the best performing stock indexes in the world this year. Companies listed … [+] on the Moscow Stock Exchange count the U.S. investor as their biggest foreign holder.
(Photo by Sefa Karacan/Anadolu Agency/Getty Images)
American portfolio investors, however, own a big stake in Moscow listed stocks and are the No. 1 foreign owner, according to the Moscow Exchange.
Russia’s capital markets are opening more. There is room for greater participation of American private equity players, and opportunities for venture capital looking for tech startups. There’s also an interest in Russia being a low-cost, high quality labor pool for software engineers, though most U.S. domiciled companies wading in those waters have Russian founders in Silicon Valley.
Betting the U.S. and Russia to do more business together will be difficult considering most of Washington wants to isolate Russia.
If and when the Advisory Council is officially launched, the president of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin, is slated to be the go-to man from Moscow while the head of the American-Russian Business Council, Daniel Russell, will bring in the American businesses interested in Russia, according to Kommersant.
Kommersant speculates that their first meeting will take place at the Saint Petersburg International Economic Forum in June 2020.
During yesterday’s press conference in Washington, Lavrov said that “private business leaders” from both countries would “work out pragmatic, mutually beneficial, agreements on investment.”
“The 1980s Are Calling…”
Hillary Clinton once wanted a reset of relations with Russia. Her team and political allies then … [+] blew up those relations again when she promoted the idea that Trump’s victory was all thanks to Putin. (Photo by Jeenah Moon/Getty Images)
The U.S. and Russia have remained suspicious of each other years after the Cold War ended. Many Russian leaders believe Washington took advantage of a busted and bankrupt Russia after the break up of the Soviet Union.
Vladimir Putin calls the destruction of the U.S.S.R. as one of the greatest tragedies in the world. It destroyed their economy, it took capital out of Russia, and the West’s promise to bring Russia into the fold never came to fruition. Instead, early post-Soviet Russia was an “every man for himself” moment, with Americans just as likely to team up with bad actors (now called oligarchs) as former communists were likely to discover the pleasures of American capitalism. Russia has been odd man out in the West both due to their own distrust of their old foes in Europe, and through U.S. foreign policy that’s kept them in their place.
Moscow and Washington promised to “reset” relations many times. The most recent was when President Obama tasked then-Secretary of State Hillary Clinton to jump start relations with the government of then-prime minister Dmitry Medvedev.
Obama’s policy on Russia changed after the Ukraine Euromaidan revolution in 2013-14 that overthrew the government in Kiev. Around the same time, Putin put his foot down on regime change in Syria after the fall of Libya’s Muammar Gaddafi and opted to circle its wagons around Bashar Assad. That decision arguably put a damper on plans to oust Assad, later adding to Russia’s support of the Syrian leader as a reason for additional sanctions in August 2017.
Trump promised to reset relations as well, saying it was wiser to get along with Russia than to constantly berate and fight them.
But soon after winning the election, Trump’s victory was blamed on Russian dirty tricks and he was blamed everywhere for being “Putin’s puppet”, wiping away any chances of a detente.
During the press conference with Lavrov and Pompeo, the topic of Russian interference in the 2016 election was raised consistently by reporters. Lavrov said the entire situation of election interference, which Moscow denies, has prevented the two sides from cooperating on much of anything.
Moscow’s financial hub. The Russian economy is staging a comeback, albeit a slow one. Trump says he … [+] would like the two countries to do more business together. Politics, on the other hand, makes it difficult.
“Today we again emphasized that all speculations regarding our alleged interference in the internal processes of the United States are unfounded,” Lavrov reiterated.
A Special Counsel investigation led by Robert Mueller says that Russians hacked the servers of the Democratic National Committee and that a group of Russians were paying for political ads on social media, many of them in favor of Trump. The Mueller Report did not say Trump worked with the Russians in any capacity during the campaign to beat Hillary.
Lavrov pleaded innocence again yesterday, “We still haven’t seen any evidence that would confirm what Russians did, and no one presented them to us. Probably, simply because they do not exist,” he said.