Opportunities in Russia for Irish firms amid the rouble revival

WITH Russian presidential elections due to take place on March 18, a major shift in economic policy is not anticipated after President Vladimir Putin returns to office, as expected, for another six years.

Counter-sanctions will continue to block Irish exporters in the food sector from re-entering the market until at least December 2018, as Russia focuses on local production.

In a business environment that is strongly influenced by government, even at SME level, the Ireland–Russia Joint Economic Commission (JEC), led on the Irish side by Tanaiste Simon Coveney, galvanises potential partnerships.

It does so by raising awareness of sectoral strengths and facilitating high-level B2B contact with commercial partners that may otherwise be inaccessible to countries of our scale.

While the aims of the JEC are predominantly long-term, it affords short-term wins for Enterprise Ireland-supported companies, particularly in the agri-tech and aviation sectors.

To support these objectives, Minister of State Pat Breen visited Enterprise Ireland’s national stand at the Agrofarm Trade Show, attended by Dairymaster, Lir Agri, Moocall, and Weatherby’s.

This past week, Enterprise Ireland led a National Stand at the Russia & Commonwealth of Independent States (CIS) Aviation Maintenance Repair Overhaul Trade Fair in which Botany Weaving, Dublin Aerospace, Eirtech, ITS, and Skypaq participated, highlighting Ireland’s tradition of excellence in the aviation sector.

Alexander Bogachev, former head of procurement for Russia’s national carrier Aeroflot, and currently assisting Enterprise Ireland-supported companies secure tenders with major airlines, says: “Irish companies have stood by Russian partners, especially over the past three years when business was hard to come by. They still came to Russia and kept relations going. That... is benefiting them now as the market readjusts.”

Last year saw the stabilisation of the biggest factor in the decimation of Irish exports to Russia — the rouble/euro exchange rate. After the Russian Central Bank released the rouble from its one-sided relationship with crude oil, the rate is now mostly influenced by local and relatively stable economic factors, and not international and often volatile macro ones. The currency now consistently hovers around 70 roubles to the euro.

While this ‘new normal’ is 75pc higher than the pre-crisis exchange rate, it is the new benchmark to which Russian customers have adapted, allowing Irish exporters to once again compete on a level playing field.

With Russian GDP growth not expected to exceed 2pc for 2018-2019, the Russian government continues to crank up its import substitution policy which aims to reduce reliance on imported goods, stimulate local infrastructure redevelopment, and increase domestic manufacturing output, none of which makes for good news for Irish exporters.

However, with businesses and government under pressure to meet ambitious self-sufficiency targets, they are also increasingly open to overseas partners who are ready to share knowledge and technology to help accelerate local rebuilding, creating an opportunity for Irish exporters in innovative high-tech sectors.

As Russia focuses on weaning its economy off hydrocarbon dependence, policy makers acknowledge Ireland as a role model, recognising our transformation from the ‘horse and cart’ economy of the mid-20th century, particularly in the ICT and agri-tech sectors.

Trade-focused ministerial visits are crucial to driving success in the market, in which government support adds to our ‘Irish Advantage’. Collaboration through the JEC of government departments, ministries, and the agencies which report to them acts as a high-impact endorsement for Irish companies working in Russia, most of which are repeat visitors, highly aware of the importance of maintaining face-to-face relations and keeping channels open.