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Investment climate in Russia is favorable — AEB

May 25, 19:56 UTC+3 ST.PETERSBURG

General Director of the Association of European Businesses Frank Schauff says investment climate in Russia is favorable but sanctions pose the main risk for development of this climate’s potential

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General Director of the Association of European Businesses Frank Schauff

General Director of the Association of European Businesses Frank Schauff

© Donat Sorokin/TASS

ST.PETERSBURG, May 25. /TASS/. Investment climate in Russia is now favorable but sanctions pose the main risk for development of this climate’s potential, General Director of the Association of European Businesses (AEB) Frank Schauff said in an interview with TASS at the St. Petersburg International Economic Forum.

"Yesterday we just published our annual study. And we have a scale from zero to 200 to measure the moods of European businesses. Last year we had 141 points out of 200 which was pretty good and close already to the pre-crisis result. This year it was 138 points which is not so much different. But anyway, the tendency is a different one, because it started growing again," he said speaking about the attitude of Western businessmen towards current investment climate in Russia.

"The situation became better last year. The trade between Russia and European Union has grown significantly," he added.

However, the recent sanctions that were imposed in April made the situation more acute, he noted.

"We saw this week that a law has been passed in Duma (State Duma, lower house of parliament), which gives the Russian president the right to impose countersanctions. But we also saw a discussion on criminal liability for companies and their managers which are following foreign sanctions," he said.

Russia’s possible response has placed European business between a rock and a hard place, he said.

Schauff stressed that the proposal to introduce criminal liability for managers of companies who have to follow the Western sanctions is a counterproductive measure.

"But then there has been a proposal to place an administrative liability instead. But it isn’t the end of the problem. It’s just another problem," he said.

From the perspective of the main European office, if compliance with European sanctions is illegal in Russia, it does not matter whether the criminal or administrative liability is envisaged for that. It is still illegal, and therefore it is impossible to work in these conditions.

According to him the law on counter sanctions leads to a situation which harms the Russian economy because many companies will "reconsider their engagement into the Russian market."

"This is something neither European companies want nor - more certainly - the Russian side wants it," Schauff said.

"After more than ten years on my position I have never seen such strong reaction from within the business community, which is very concerned with this situation. I think, it is certainly necessary - if we talk about the sanctions regime - to solve the political problem, which is linked to it. And Russians and Europeans will have to think together in order to solve the problem," he concluded.

The Russian energy sector is not the most attractive investments for European companies now, he said. 

"Trends have changed over the years. Ten years ago it was the energy sector. Nowadays two more sectors have become more important. It’s still the car sector in terms of having more manufacturing on the Russian territory," Schauff said. "I think the food processing is interesting," he noted.

At the same time, Russian goods are not so well established on the European markets, Schauff said. The Russian economy needs to become more competitive, the head of the Association said. "And if you become more competitive, the European market is open to anybody else," he added.

Last week, Russia’s State Duma considered two bills related to counteractive measures against western sanctions. The first bill provided for imposing countersanctions and the second one envisaged criminal liability for compliance with western sanctions on the Russian soil. The second bill raised criticism of the business community. On Monday, Speaker of the State Duma Vyacheslav Volodin, who was one of the initiators of the bills, said the lawmakers postponed consideration of the second bill on liability for aiding sanctions on Russian soil in order to hold additional consultations.

Earlier this week, in an interview with TASS, ex-Finance Minister and new head of the Accounts Chamber Alexei Kudrin said that the bill on criminal liability for the implementation of anti-Russian sanctions requires careful consideration because in its current version it can harm Russian companies.

"I think it's good that the bill on criminal liability has been postponed, and we decided to more carefully check its possible consequences," Kudrin said.

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