Chinese President Xi Jinping is visiting Russia, along with other heads of state, to attend Moscow’s Victory Day Parade for its celebration of the 80th anniversary of the end of World War II. The Chinese leader is by far the highest-profile leader attending, which speaks volumes about the growth of the bilateral relationship over the last three years.
Meanwhile, according to unnamed officials, the United States has prepared new banking and energy sanctions on Russia. The sources state that companies such as Gazprom, Russia’s largest natural gas producer and exporter that is already under certain restrictions, and other major state-owned entities are included in the list of targets. If issued, the sanctions package would reflect a shift from earlier reports that the administration was considering lifting the existing restrictions and exploring economic cooperation with Moscow.
Russian President Vladimir Putin’s envoy on international economic cooperation, Kirill Dmitriev, has been adamantly pushing for the opening of trade with the United States. Shortly following his appointment as Russia’s special representative on trade and investment matters earlier this year, Dmitriev stated, “Russia is open for U.S.-Russia economic cooperation and believes such cooperation is key for a more resilient global economy.” But with the threat of new sanctions from the U.S., the business community should be wary of the Kremlin’s push to do business in Russia.
This is especially true if Congress were to pass legislation to impose a range of new sanctions – and tighten existing ones – on Russia if it doesn’t comply with efforts to reach a ceasefire. The bill currently has 70 senators listed as co-sponsors. With the recent U.S.-Ukraine minerals deal now official, Moscow worries it will see a more Ukraine-aligned Trump Administration and may try to lure American companies to invest. They’d be wise to resist any temptation.
Meanwhile, the European Union is working to strengthen its sanctions on Moscow. It’s clear that Russia will continue to make itself a pariah with nations that support Ukraine, and given Putin’s incessant attacks on Ukraine and lack of interest in ending the war it started, the country will likely continue to face the economic consequences it has created.
Moscow’s response to these economic restrictions has been the opposite of what Western officials hoped for. Several agreements between China and Russia are expected to be signed during Xi Jinping’s visit to strengthen their “no-limit” partnership. Other countries expect to sign similar deals, including Venezuela, whose relationship with the U.S. remains tense.
Russia will remain a threat to the democratic world, and as a consequence, a unstable environment for any ethical business to succeed in. Even if U.S. sanctions are lifted in the future, the administration’s recent actions suggest that Moscow will remain a volatile environment for corporate entities due to the legal risks – and a risky place in which to do business.
Therefore, business leaders should continue to prioritize risk management strategies. Avoidance is the best policy in this case. The number of sanctions and other restrictive measures should be both a moral and a commercial deterrent to doing business in Russia. And as the recent actions by the United States and European Union demonstrate, the future for an open and stable Russian market remains distant.
