May 20th, 2014

A Letter from the Chairman of the Committee for Russian Economic Freedom

SPIEF

Twenty years ago it was widely believed that free trade and global markets do not provide for dictators. Today, however, the connection between global trade and political freedoms has weakened to a dangerous level.

Dear fellow members of the U.S.-Russia Business Council,

Twenty years ago it was widely believed that free trade and global markets do not provide for dictators. Today, however, the connection between global trade and political freedoms has weakened to a dangerous level. With Vladimir Putin’s rise to power, Russia’s integration into the global economy took the country off the democratic path. With the inflow of foreign investments, Putin’s authoritarian regime thrived, while corruption penetrated every corner of Russia’s economy and everyday life. Western companies that came to do business in Russia were impressed with the country’s rich natural resources and rapidly developing markets, and with the government’s promises of fortunes. As a result, many of these companies became enmeshed in Russia’s corrupt regime.

St. Petersburg International Economic Forum is opening on May 22

In the spring of 2014, Russia’s annexation of Crimea and active military support of insurgents in Ukraine’s western and southern regions marked a new period in the relationship between Russia and the West. The West had to react. They did the right thing in imposing economic sanctions on a number of high-profile Russian officials, businessmen, and companies associated with corrupt practices or involved in Putin’s inner circle. The sanctions work to deprive these individuals of the perks of Western civilization and limit their comfort within Russia. As history shows, such sanctions, if taken further, will become more efficient in the long term, leading to the collapse of the corrupt regime.

Yet many leading U.S. and EU corporations continue to pursue ways to strengthen trade ties to Russian state-owned businesses. Among these corporations are Exxon Mobil, which has signed a deal with Rosneft on Arctic offshore development, and Shell, which cooperates with Rosneft on the liquefied natural gas project in Sakhalin, as well as Boeing, PepsiCo, GE, Ford, and many others. There is no question that these corporations are extremely interested in minimizing U.S. and EU sanctions and ensuring their continued access to Russian markets in spite of the Ukraine crisis.

Their key argument to this end—that sanctions harm American exports—is an exaggeration. Let us not forget that U.S.–Russia trade is worth no more than $40 billion, a very small percentage of the U.S. GDP. In a way, by lobbying against sanctions, these corporations are insisting on dealing with one of the most corrupt regimes in the world; bolstering the Kremlin (as the Kremlin controls all large businesses in Russia); and ultimately maintaining authoritarianism in Russia.

On the eve of the St. Petersburg International Economic Forum, which is opening in Russia this week and which many U.S. companies will attend, it’s important to remember a few things: By launching a unified pushback campaign against the Kremlin, the West will undermine Putin’s regime and draw it closer to an end. Tougher sanctions will accelerate the possibility of a free, democratic, and prosperous Russia—a Russia able to overcome endemic corruption, create a favorable business climate, decrease investment risks, and become a reliable global partner. Therefore, the U.S. and EU business lobby should stop opposing sanctions on Kremlin cronies, and should rather help defeat the corrupt regime that restrains Russia from becoming a member of the civilized world.

Pavel Ivlev
Chairman of the Committee for Russian Economic Freedom
Principal of Feldmans Consulting, LLC, a member of USRBC

Categories: Uncategorized Tags:
  1. No comments yet.
  1. No trackbacks yet.