The economic relations between Russia and France are currently at a low point, but businesses from both countries are still maintaining connections and finding opportunities. As a result, France is playing an increasingly large role in Russia's external trade, which is supported by mutual investment.
EU sanctions against Russia and Russia’s counter-sanctions that have already been extended till the end of the year are likely to remain in effect for the near future, which inevitably affects the economic partnership of Russia and France. On top of that, France’s new President Emmanuel Macron takes a hard line on Russia.
Despite all that, the cooperation continues:
Speaking with the representatives of France’s business community a year ago, President Vladimir Putin said that none of over 500 French companies working on the Russian market had left the country post 2014. In 2016, France’s investments in the Russian economy increased to EUR 4.9 billion, compared to EUR 4.4 billion in 2015. In 2016, Leroy Merlin opened 15 stores in Russia, investing RUB 22.5 billion in its Russian business. Total has announced the construction of a motor oil plant in the Kaluga Region. The investment will amount to USD 50 million. In 2017, Danone plans to invest over RUB 1 billion to upgrade its production site in Samara. French-owned Grand Laitier is starting the construction of a cheese production facility in the Kaluga Region in 2017, which will cost RUB 1.3 billion.
In the span of five years, Russian investment in the French economy has increased from EUR 300 million to EUR 1.8 billion. In 2016, French TV service Molotov received USD 24 million from an investor pool formed by Mikhail Fridman, Alexei Kuzmichev and German Khan. There are 80 Russian companies doing business in France. In 2016, Russian venture companies launched eight new investment projects there.
The trade turnover between Russia and France amounted to USD 13.3 billion in 2016, up 14.1% y-o-y. However, there are new challenges up ahead. The Russian counter-sanctions of 2014 did not affect the traditional and integral French import – wines and cognacs. However, in May 2017 the Russian Ministry of Finance signed an order that makes wine importers unable to use a lower rate of excise tax on wine products with a protected geographical indication and protected designation of origin. Suppliers may have to pay additional excise tax retroactively starting 1 January 2016. In 2016, the share of French wine on the Russian market shrank to 4.42%, which is a steep decline compared to 2011, when France was the leading importer ahead of Spain and Italy.