BRITISH statesman Lord Curzon once famously said that every Englishman enters Russia a Russophobe, and leaves it a Russophile. Though time has passed since the Great Game of Rudyard Kipling, the saying is still relevant.
According to a recent Economic Intelligence Unit survey of 200 international senior executives, less than 15 per cent would view merging or being acquired by a Russian partner as a positive development. They would prefer to deal with firms from any other Bric economy over Russia. The same survey highlighted the continued mistrust and lack of confidence about management attributes, and the abilities of Russian companies in general. Competitiveness, flexibility, reliability and transparency all ranked very low.
Taken in isolation, this is solemn reading for Russian businesses, with the same old, tired stereotypes coming to the fore. But delving a bit deeper, these perceptions are not reflective of reality. For those companies that have previously done business with Russian counterparts, nearly three quarters stated it was a positive or very positive experience. Access to energy, technical abilities, financial strength and the education of the workforce were all highlighted as key advantages.
In the last two years, Basic Element companies have signed over a dozen cooperation agreements with foreign partners. We now sell aluminium to China through our joint venture with Norinco, manufacture Skoda vehicles with Volkswagen, and produce aluminium in Australia with Rio Tinto, to name but a few. Russian businesses understand global opportunities and are consistently developing, as they look for more partners in different countries. Nor is this one way traffic. Increasingly, my old partners from the West are asking for our recommendations on other Russian players, as they look to increase their Russian exposure. They understand that Russia has the potential to become the largest market in Europe.
So why do the negative stereotypes persist? The problem is that the global business community knows comparatively little about Russia. We faced this problem when the first wave of global expansion by Russian companies came in the early 2000s. For RUSAL, it was a question of survival. Our Siberian smelters lacked bauxite – the primary raw material for alumina production – and we had to prove ourselves and gain the trust of international partners to ensure our future. It took us seven years to build the supply chain by integrating assets in Ireland, Jamaica, Guinea, Guyana, Australia, Italy and Ukraine. We managed to persuade Glencore to merge our assets — it was one of the first merger and acquisition deals in Russia that included assets abroad. All the others were about global companies coming to Russia to buy a share of local markets.
Russia’s expansion was stopped by 2008-2009 global downturn, but it will inevitably resume. The country’s recent accession to the World Trade Organisation demonstrates that it’s on track to integrate itself into the global economy. As investment gradually improves, I’m positive we will see deals taking place in and outside Russia. This will be even more evident as we approach the 2014 Winter Olympic Games, where there are countless commercial opportunities for international cooperation with Russian firms.
The ongoing uncertainty caused by the global downturn means businesses from across the globe should look to work together, putting stereotypes and past quarrels aside. I’m not suggesting that the task ahead is small. It isn’t and it will not be easy. However some concerns are easily tackled. For example, communication issues will soon be a distant memory, with the number of Russians learning foreign languages, primarily English, growing 10-15 per cent annually for the last three years.
Certain areas of Russian business still need to make further progress in fields like transparency and corporate governance. But these are principles that need be implemented not only in the boardrooms and C-suites, but from the top to bottom of every company – from the chief executive to the last intern. As one of the final conclusions of the survey demonstrated, over two thirds of global executives intend to do business with Russian companies in the medium term. I believe Russia is stepping up to the task. I’m confident that we will prove Lord Curzon right and convert our future international partners into Russophiles.
Oleg Deripaska is chairman of Basic Element, president of En+ and chief executive of UC RUSAL.