Fundamentals of Business

Foreign policies and their impact on enterprises

The impact of the current stand off between Russia and United Kingdom and its impact on businesses.
Extract from BBC.
Business chilled, not frozen in spy row By Alexander Koliandre , 20 Jul 2007.
BBC Russian Service.
A British engineer in a remote Siberian oil field, or his countryman banker in a sleek Moscow office, might be forgi forgiven for being ven a bit nervous at the news of the growing diplomatic row between Russia and the UK.
The main fear of both Russian and British businessmen and investors is that economic relations between the two countries might deteriorate.

There is much at stake. With Russia's economy booming, trade between the two countries almost quadrupled in the past six years, growing at 20% annually.
UK companies are trying not to miss the consumer spending frenzy in Russia and to match the growing demand for equipment and services.

UK industry giants such as BP, Shell, HSBC, KPMG, JCB, Rolls Royce, Rio Tinto and Unilever see Russia as an important part of their growth strategy.
With more than $7bn in 2006, Britain is the number one investor in Russia.
Russia's officials were quick to point out that it was business as usual, despite the diplomatic row. Moscow appeared to strike a relatively calm note, suggesting its reaction would be confined to the level of diplomacy.

Anglophiles
One possible reason for this limited reaction might be that despite all the UK interest in Russia, the latter needs the former even more.
In the past several years, London became the financial centre of choice for Russian business. Russia's companies need access to international capital. As New York tightened listing rules, the Russians flocked to the London Stock Exchange.
Russian IPOs reached $4bn in 2005, rose to $15bn the following year, and with a further 30 or so in 2007, might climb even further.

Russian business projects in Britain range from the illfated acquisition of the TVR carmaker to state energy behemoth Gazprom's attempts to enter the UK market.
But it's not only business. For today's Russian elite, London is what Paris was for the Russian aristocrats a century ago - a consumer and cultural Mecca.

Everything British is in demand among the Russians who can afford it. They love to wear Burberry trench coats, drive Bentleys, drink single malt whisky, acquire MBA diplomas from British universities, shop for London houses and even buy football clubs. Moscow has more direct flights to London than to any other capital.
To have an office in London is a hallmark of success for a Russian businessman. For his wife, a deep and personal knowledge of London's boutiques is the equivalent.
They don't want to lose all that because of a poisoned spy and a handful of expelled diplomats.

Businesses are considered politically neutral, though big corporation do lobby for some changes, most of the time they get caught up in the middle. It is paramount for an entrepreneur to understand the political environment of the country you are trading and have some contingency plan.