Greediness prevents Russian businesses from gaining foothold on foreign markets – diplomat

MOSCOW. Jan 1 (Interfax) – Greediness often prevents Russian businesses from gaining a foothold on foreign markets, says Alexander Gorban, the director of the Russian Foreign Ministry’s economic cooperation department.

“I would like to mention one significant difference between Russian and Western businesses: it is their desire to have a high profit margin,” Gorban said in an interview with Interfax.

“Our business is young, and you can even call it wild to some extent,” Gorban said. “Profit margin on the Russian market is sometimes exorbitant. Our companies have gigantic appetites; these appetites can even be called greediness,” he said.

Therefore, “our companies are far from being interested in all markets abroad, especially if the matter concerns long-term work,” Gorban said. “That is, when it is not just about entering a market, carrying out some flash-like deal, biting off a profit and carrying it away in one’s teeth but about working regularly with profit margin normal for this or that country,” he said.

“In many countries, 10%-12% profit is considered luck, and many countries work with 3%-5% profit and feel quite well with this,” Gorban said. “But Russian business sees these figures as not exciting at all,” he said.

In addition, “Russian businesses are inclined toward unreasonable expansion,” Gorban said. “They seek to seize as much as possible and buy enterprises and mineral fields without always calculating the consequences,” he said.

“This expansion is often funded through borrowings, with one’s own assets serving as security,” he said.

“But, after all, there can be problems with the development of natural resources, and there can be crises involving, for instance, a decline in the demand for metals. And the results of such an expansion could be not very pleasing,” Gorban said.

Gorban acknowledged that politics often plays a role in Russian businesses’ operations abroad. “Purely political decisions are sometimes made to prevent our companies from entering markets. Most likely, such decisions are a result of local business communities’ influence on the national governments, which, in turn, give the political go-ahead,” he said.

As an example, the diplomat mentioned Russia’s failed attempt to buy Opel. “We almost reached an agreement to buy the concern, but then an order came from Washington not to sell. After all, we planned not only to buy but also to acquire the technology possessed by Opel in order to elevate the technological level of our own automobile companies,” Gorban said.

“A similar thing happened with the United Kingdom, where we planned to buy not the largest gas distribution company, but there was a political decision not to sell it,” he added.

“All these are quite natural manifestations of global competition,” Gorban said. “It is stupid to be offended by this and strike a wounded pose. And besides, the situation is somewhat changing. Many come to the conclusion that Russia is not that horrible, that our business is not that wild and barbarian and that it can well be worked together with,” he said.