The region encompassing Russia and its neighbours is home not only to natural resources but also to commercial opportunities.
Knowing that I had a background as a lawyer in Australia, a legally trained Russian friend of mine once said to me: “Omran, in your country the law regulates relationships. In mine, relationships regulate the law”. Whilst I did not take these words literally, I took the not so subtle hint: Relationships in Russia are critical if one wants to engage in business in any serious manner.
Our overall context
The world is one. Russia is a big part of that one. Yet it’s not by a long shot as actively engaged with as possible. Today, each one of us is capable of shifting from one spot to another like never before. We are also capable of crossing geographical boundaries economically. Even with the internet, however, we are not yet capable of doing so, economically or otherwise, without friction. The ‘rules to the game’ that each nation-state has added to the ‘doing business’ equation creates that friction. These rules are formally set up as ‘the law’. In certain parts of the world, the formalities are not always as they seem. Furthermore, the laws are not the only layer of friction. There is a cultural dimension that one needs to be acutely attuned to. How does one deal with both the surface and with that which lies unseen beneath it?
The seen scene: law
As with any other nation, local laws and regulations have to be complied with when doing business in Russia. You have to carefully choose your business structure. Partnership, LLP, joint-stock company LLC…? Will you simply have a representative office? If so, there will be limits as to the kinds of activities you can engage in. Will you establish a branch office? If so, you will have greater freedom to conduct your business. Will you establish a Russian legal entity? If you have plans for a JV or the like, this may prove to be more pragmatic (in light of other regulatory obligations that you’ll have to satisfy). You need to be aware of tax responsibilities. This is directly correlated with your choice of business structure. There are local taxes that need to be paid, including VAT. Particularly relevant to foreign entities wishing to do business in Russia are rules related to withholding tax. If there are plans to employ anyone, you’ll need to take account of labour laws. Pay particular attention to the fact that there are social security responsibilities that employers must bear. In short, on the legal & accounting fronts, careful analysis and planning, together with specialist advice, are necessary.
The unseen scene: culture
Far more ambiguous that the written laws are those that are unwritten. Culture and its’ nuances are what need to be addressed here. Relationships and mindsets are intangible in nature, but they have very real & tangible impacts on business. Do you know what a Banya is? What about Maslenitsa? Have you heard of Pushkin? There are certain things which, if learnt, will assist one in manifesting genuine respect for the Russian culture. In turn, this will assist you in earning respect from your future comrades.
Relationships
Good relationships are necessary in Russia. Necessary not only to thrive, but even to survive. Having the right individuals (& companies) advising you, assisting you and collaborating with you, will give you the base that you need in order to do business in Russia. Choose carefully.
The Russian mindset
Reference to the need for good relationships in Russia, is, in fact, a subset of the reference to account for the Russian mindset. What is the Russian mindset? Not an easy question to answer. Suffice to say, there are some idiosyncrasies one needs to be attuned to.
Of special note:
• respect their space, and their traditions;
• recognize that your smiley face doesn’t always enamour trust, BUT proper actions will; &
• rid yourself of the idea that business and personal relationships are totally separate spaces.
Bringing it all together
The cornerstone of doing business in any part of the world is bringing value. Russia is no different in this regard. You must come with a high-value proposition. There are however rules to the game in Russia. It’s more than just a language gap. Take note of the cultural differences. Focus on your relationships. Get a strong and trustworthy local ‘partner’ that you can work with and rely upon; this is a base requirement. Much care needs to be taken to ensure that your partners/associates/representatives themselves have good relationships on the ground in Russia. Your ‘partner’ will be worth their weight in platinum when hurdles are stumbled upon.
На здоровье! A toast to your good health; the ultimate wealth!