Guidance

Overseas Business Risk - Russia

Updated 15 August 2019

Please read the latest information for UK businesses on Russia and Ukraine, including the Crimea.

Political and economic context

Russia’s interventions in Ukraine and illegal annexation of Crimea and chemical attack in Salisbury pose a challenging backdrop for British businesses operating in Russia. There are limitations on pursuing some activities in Russia but legitimate business can continue and UK exports remain robust in both goods and services.

The Department for International Trade (DIT) (formerly known as UK Trade & Investment) continues to support British companies in the market with a range of services including targeted events, sector-specific advice, market introductions and trade missions.

Russia is the world’s 13th largest economy by GDP according to the IMF´s estimates for 2019. The economy has recovered from the 2015 recession and grew by 2.3% in 2018. However, the outlook remains subdued due to sanctions and structural constraints. Macroeconomic policy continues to prioritise stability; government and corporate debt is low and inflation is low and stable. The IMF predicts growth to be 1.6% in 2019 and 1.7% 2020. A new $400bn government spending programme, the ‘National Projects’, could push growth higher and presents opportunities for businesses in areas like infrastructure, financial services, healthcare and education.

Although Russia has the smallest population of the BRIC economies, it is the wealthiest in per capita terms by a considerable margin. This means that it has a relatively large middle class; though recent low growth has suppressed their real incomes. Consumers nonetheless seek quality and innovation within a growing retail sector. Russia’s domestic supply of consumer goods and services is still underdeveloped – so there are opportunities to develop new business e.g. e-commerce. Growth is currently sector-specific e.g. mining, hydrocarbons and agriculture.

The heightened political tensions and Russian government’s focus on import substitution have made some companies more wary of buying foreign goods and services. However, Russians understand that British exports provide some of the highest quality, most innovative goods and services available. Significant opportunities remain in, for example, consumer goods, luxury, education and machine tools.

Russia’s investment climate is mixed. It reached 31st position in the World Bank’s Doing Business rating in 2019; it currently ranks higher than China, India and Brazil. However, there are concerns about the rule of law, transparency and access to credit. These concerns pose challenges for domestic and international investment but major Western companies continue to have a large presence in Russia in a range of sectors including energy, finance, business services, consumer goods, automobile and engineering. Despite the sanctions and the economic downturn, a number of companies are continuing to invest.

In 2011, Russia, Kazakhstan and Belarus entered into a Customs Union. In 2015 the union evolved into the Eurasian Economic Union, which consists of a Customs Union and a Single Economic Space. Armenia and Kyrgyzstan has since joined the Union. The organisation is still developing, but regulation of various different sectors and technical regulations are now being set centrally by the Eurasian Economic Commission. The Eurasian Economic Union’s ultimate ambition is for free movement of goods, services, capital and labour.

EU sanctions

The UK government and our international partners, including the EU, have introduced sanctions against Russia’s interventions in Ukraine and the illegal annexation of Crimea. These sanctions mean that trade and investment with Russia in specific targeted areas and/or with specific entities/individuals is illegal.

We are working hard to secure full implementation of the Minsk Agreements and work with our international partners to ensure future stability and prosperity in the region. To achieve these objectives we will use the full range of our diplomatic channels and keep our overall engagement with Russia under constant review.

Information about the restrictive measures that have been implemented can be found on the GOV.UK site. If in doubt, businesses should consult the Business Support helplines. UK businesses should be mindful of the potential risks and challenges of working in a sanctions environment. Business should continue to pay close attention to the Russia sections of the DIT and FCO. Companies may also need to be aware of sanctions regimes imposed by other countries, for example, the US.

The EU’s restrictive measures are targeted, so legitimate business may continue where sanctions do not apply. Companies should consult the information about sanctions on the GOV.UK site and if in doubt contact DIT Russia who can share contact details for Moscow based law firms familiar with the sanctions regime.

It is important that companies research sanctions thoroughly and take advantage of the advice offered by DIT. We expect UK companies to stay strictly within the law.

Human rights

Russia is a country of concern for human rights issues. See the FCO Annual Human Rights Report on Russia for more details.

Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Corruption is endemic in Russia and is a major concern for businesses operating there.The Russian government continues to state its commitment to reducing corruption and other damaging informal practices but they remain a challenge in practice. Russia fell in Transparency International’s Corruption Perceptions Index in 2018 to 138 out of 180 countries.

Visit the Business Anti-Corruption portal which provides advice and guidance about corruption in Russia.

Read the information provided on our Bribery and corruption page.

Terrorism threat

There is a high threat from terrorism. Although there is no indication that British nationals or interests have been specific targets, attacks could be indiscriminate, including in places frequented by foreigners. You should remain vigilant in all public places, including tourist sites and crowded places, particularly where access is not controlled (eg open-air events and markets) and in major transport hubs. Previous attacks have targeted transport infrastructure, including airports, buses, trains and metro systems. Further attacks are likely, and could take place anywhere in Russia.

See the FCO travel advice.

Read the information provided on our terrorism threat page.

6. Protective security advice

There are protective security issues attached to doing business in Russia; business people need to be conscious of the following activities of the local security service (FSB):

• IT attack against office computers, laptops, PDAs and other electronic devices
• physical, audio and video surveillance
• approaches to staff
• interception of telephone calls (landline and mobile), texts, emails, fax and post
• searches of offices, homes, vehicles and (especially) hotel rooms (including safes)

For specific advice email MoscowBusinessSecurity@fco.gov.uk

Read the information provided on our protective security advice page.

Intellectual property

IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, then you should consider registering your IP rights in your export markets.

Read the information provided on our Intellectual Property page.

Organised crime

Read the information provided on our organised crime page.

Department for International Trade contact

Contact us on tradeinvestmentmoscow@fco.gov.uk