In roundabout ways: how Russian business today does business with foreign partners

Russian business, in search of new ways for development abroad, has almost completely reoriented: companies today work not only with Turkey, China or the UAE, but also cooperate much more closely with the CIS countries. At the same time, relations with Western countries also continue, but now everything has become longer, more complicated and more expensive. Guests of the Fontanka round table spoke about the peculiarities of relationships with international partners in modern conditions.

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First of all, Russian business had to face problems and look for solutions in the field of logistics, transportation and money transfer.

— Money transfers — this is the first huge problem, since after all, our economy has historically been fixated on the dollar, and all transfers under contracts were in dollars, — said Ilya Beketov, General Director of R7 Logistics & Supplies. — Accordingly, correspondent banks are located in the United States, and it has happened to us several times that payments are either blocked or sent back. Previously, the money arrived in 3-4 days, but in the new reality, the most difficult case was when our transfer took 4 months. If the company does not have a financial cushion, then it will be very difficult when large sums are suspended.

Although business is beginning to switch to other currencies whenever possible — for example, yuan, — but here, according to the expert, a second problem arises: not everyone, in principle, wants to accept money from Russia. Friendly countries come to the rescue — such as Türkiye or Serbia. But transfers through them still lead to higher prices, since everyone takes a commission. And if you try to convert all processes into ruble transactions, then you lose a large percentage on conversion in foreign banks.

When it comes to opening accounts and financial transactions between Russia and Western countries, certain features arise due to differences in financial systems, legislation and security requirements, explained Stanislav Mareshkin, sales director of Magna Group. First of all, to open an account in a bank in a Western country, a Russian citizen often needs to comply with a number of conditions — Typically this includes proof of identity, residential address, financial status and sources of income. The purpose of all this — combating money laundering and terrorist financing, as well as compliance with international standards in the field of financial control.

— However, despite these requirements, there is a certain discrimination against Russian citizens, — says the expert. — Some Western banks may refuse to service them due to risks associated with the political and economic situation in Russia. This may create inconvenience — especially for those who have a legitimate interest in financial transactions outside of Russia. Opening accounts and transferring money to Russia can also be complicated, as Western banks are often more cautious about Russian-related financial transactions due to possible risks, sanctions and political factors. This leads to additional checks and delays in transfers.

For Russian citizens wishing to open an account abroad or conduct a financial transaction with the West, the expert recommends contacting specialists in international financial transactions and risk minimization. You should also be attentive to the legislation and requirements of each specific country where you plan to open an account or transfer money.

— Since the yuan is trading well, it is comfortable to work with China financially, — Ilya Beketov said. — However, back in 2016–2017, it was difficult to get a card for an individual with a Russian passport. Now the situation has become even worse, since some Chinese companies work with foreign counterparties and fear retaliatory sanctions. For example, they operate under different names on the global and Russian markets to avoid affiliation. Also in Dubai now, not everyone wants to work with Russian business owners. Some banks limit Russian accounts — and this is a wake-up call for everyone.

Problem package

— Our service area — transportation and customs support of goods related to electronics. In particular — trading in equipment for cryptocurrency mining, — notes Beketov. — As a company, we act as an importer, paying for goods to Chinese or Hong Kong suppliers and delivering equipment through supporting countries to the customer company. And in logistics, we also encountered huge gaps: air transportation of electronics from Hong Kong, where our supplies come from, has become very difficult. The plane requires technical stops in Iran and Egypt. Transportation itself has become more expensive — If earlier a kilogram of cargo cost 5 dollars, then at its peak it reached 13 — all together this made transportation even more expensive. But if for the first two months from the beginning of the SVO there were no options for exporting goods at all, then transit routes appeared, and some competition even arose among carriers. This allowed us to bring prices down a little.

As for maritime transport, according to Ilya Beketov, containers used to go through the Indian Ocean around Africa to the ports of Rotterdam and from there to St. Petersburg. Now this happens only through Vladivostok, which in the first months after the start of the Northern Military District was unable to cope with all the goods flow that fell on it. There are also problems with the flow of goods from Europe to us: neighboring countries are increasingly processing it “gritting their teeth.”

Business relocation

The international situation has required Russian entrepreneurs to look for new ways to develop international business. As Stanislav Mareshkin said, data analysis and expert opinions say that the most popular countries for Russian businessmen in 2022–2023 are Turkey, Cyprus and the UAE.

So, Turkey offers many opportunities for business development due to its geographical location between Europe and Asia. Particularly attractive sectors — tourism, real estate and agriculture. In addition, the country has simplified procedures for company registration and taxation.

— Cyprus is a tax haven, offering low taxes and other incentives for foreign investors, as well as a platform for interaction between the European Union and the Middle East, — the expert continued. — The UAE, especially Dubai, has become a magnet for Russian businessmen. This is due to the high level of economic development, diversity of business sectors and openness to foreign investors. The country offers high-quality infrastructure, world-class banking services and business rules that suit Russians, attracting our entrepreneurs to various sectors, including real estate, trade and tourism.

The experience of “unfriendly countries” is indicative here in many ways. As Stanislav Mareshkin said, in the United States, for example, it is possible to reduce rates on corporate profits, tax credits for investments in certain industries and states, as well as deductions for research and development and the development of new technologies. And Ireland is known for its low tax rates on corporate profits (12.5%) and numerous incentives for companies, especially in the technology sector. This attracts large IT companies — for example, Apple and Google.

Of other countries that are more friendly to us, Singapore, for example, is known for its attractive tax system and stable economic climate. Here, entrepreneurs and companies are offered a low income tax rate (approximately 17%), as well as a 100% tax exemption on dividends and capital investments abroad.

Hong Kong is generally considered one of the most business-friendly cities in the world due to its simple and transparent tax system. Here, entrepreneurs pay tax only on income received from local economic activities — it is 16.5%.

— It is important to note that the conditions and benefits in each country are constantly changing, — the expert specified. — You must also remember that rates and rules depend on the type of activity, the specific situation and the degree of friendliness of the country. Therefore, before making final decisions, it is recommended to contact lawyers and tax specialists for detailed information and advice.

There is a future

Ilya Beketov sees the main prospect in partnership with Belarus and the countries of the Customs Union.

— The main thing is that these countries also see us as partners, — he says. — And financial instruments like remittances would come in handy right now. In addition, if a tourist can get to Europe through Kazakhstan, Armenia, Serbia or Turkey, why not create not only a passenger, but also a logistics hub in Armenia in order to freely deliver goods from Europe to the Russian Federation.

According to him, business management is now in manual mode — established business processes very quickly begin to become outdated.

If previously it was possible to work for a year and a half on old mechanisms without changing or modernizing anything, now you have to constantly keep your finger on the pulse, since everything is changing rapidly.

— Next, we plan to develop in the direction of mining and create a certain fund for investment by our clients — after all, Russian partners have fewer tools for investing, — Beketov said. — The fund will attract funds on a turnkey basis, protecting against many risks. For example, if we now provide services for procurement, transportation and customs clearance, then soon we will also have our own data center, and we will completely cover all business processes: from receiving money to making a profit, which will allow us to control them.

Such investments may be of interest: according to the expert, the demand for mining equipment is growing. After the SVO, people did not understand where to take money for investments, and foreign sites stopped working, so many began to invest in equipment.

As Ilya Beketov summed up, it is clear that business is now aimed at circumventing sanctions in terms of delivering goods, while Western countries, on the contrary, are trying to fight intermediaries. It is not yet known how this will end. You can depend on helping countries for some time. But, if we remember the recent situation — when, for example, friendly Kyrgyzstan stopped accepting money from Russia for some time, — this can further complicate processes.

— You just need to learn to live and work in these conditions on your own or with the help of partners from neighboring countries and friendly countries, — he finished.