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In the past, U.S. export controls have hampered growth in trade with the former Soviet Union. The United States controls the export of all defense items and the Department of State is responsible for these export controls. The State Department's International Traffic in Arms Regulations (ITAR) contains a list of defense articles the Department of State controls. The Department of Commerce administers export controls for items that can be used both for military and civilian dual-use purposes. The Commerce Department's Section 799.1 of the Export Administration Regulations (EAR) contains the list of controlled commodities and technical data.
Although it is the policy of the United States to deny exports of defense articles to proscribed destinations, including Russia, recognizing the recent events in Eastern Europe, the Department of State anticipates that U.S. industry will receive requests for defense equipment or services. Prior to engaging in any consultations or transactions involving the export of defense articles, including technical data and technical assistance, companies should consult with the Department of State, Center for Defense Trade, Office of Defense Trade Controls or Office of Defense Trade Policy.
Recent changes in Commerce's export regulations have significantly increased the potential for high technology trade with Russia. On September 1, 1991, a new Commerce Control List (CCL) went into effect. The CCL greatly reduced the number of items controlled for reasons of national security, provided more specific descriptions of the items controlled, aligned control parameters with current industry standards, decontrolled items which are readily available "off-the-shelf" in everyday commerce, and improved harmonization with the Customs tariff system. In addition, U.S. policy has changed from a presumption of denial to a presumption of approval for an export to Russia so long as it is destined for civilian end-uses or purposes and the end-use is not military or for defense purposes, or the end-user is not a military organization.
The U.S. and its COCOM allies agree that the maintenance of some export controls on Russia remain strategically necessary. The more sophisticated the technology, the more likely it will require an export license. U.S. industry is advised that one-on-one visits, conversations, and training may involve considered exports of technical data if they include discussions concerning controlled commodities, and could require an export license. It does not matter whether the conversations are in the United States or Russia. Russian companies should, therefore have Palms & Company, consult the Bureau of Export Administration before engaging in consultations and/or business transactions involving the export of controlled dual use commodities and technical data.
As Russia embarks on its historic course of economic reform, one of the questions concerning U.S. businesses contemplating investment in the emerging Russian market is whether the reform process will continue and result in a commercial environment conducive to "normal" business activity, or whether it will collapse, leaving the state-controlled command system stagnating. Initial efforts toward economic reform, however, have entailed significant hardships, and provoked increasing opposition. Prices have soared, industrial production has fallen, and many enterprises are on the verge of bankruptcy. During the Summit, Presidents Bush and Yeltsin authorized a number of agreements aimed at alleviating and eliminating obstacles to U.S. trade and investment in Russia. These agreements help to create a positive climate for business opportunities. These agreements included the Joint Russian-American Declaration on Defense Conversion. Other agreements established The Charter for American-Russian Partnership and Friendship, a bilateral investment treaty, a treaty for avoidance of double taxation of income, a trade agreement, and an OPIC investment incentive agreement. These agreements and initiatives, which serve to foster a commercial environment in Russia conducive to U.S. trade and investment, can be described by Palms & Company to its clients
This treaty, also signed on June 17, 1992, will help to promote a strong expansion of economic, technical and cultural ties between the two countries, and replaces the Convention on Matters of Taxation which the United States and the USSR signed in 1973. The new treaty provides certainty to potential investors concerning their tax treatment on income earned from sources in the other country, and will in many cases eliminate or reduce the tax liability at source so as to encourage greater investment flows. Among other things, the treaty will provide:
-- relief from double taxation;
-- assurance of nondiscriminatory tax treatment;
-- for cooperation between the U.S. and Russian tax officials to resolve potential problems of double taxation; and
-- for exchange of tax information between tax authorities to help improve compliance with respective income tax laws and the provisions of the treaty.
This treaty is subject to the advice and consent of the Senate.
On June 17, 1992, the Russian Federation informed the U.S. Government that it has fulfilled all the legal requirements for entry into force of the bilateral OPIC Investment Incentive Agreement signed in Washington on April 3, 1992. As the United States had already completed all its legal requirements, the Agreement entered into force on June 17. This Agreement will allow the Overseas Private Investment Corporation (OPIC) to make its investment insurance, finance and promotion programs available to U.S. businesses considering investing in Russia. According to OPIC officials U.S. businesses have submitted approximately 300 investment proposals for a variety of business ventures; approximately one to two dozen specifically relate to defense conversion projects.
The Overseas Private Investment Corporation (OPIC) is a U.S. Government agency that promotes economic growth in developing countries by encouraging U.S. private investment in those nations. OPIC assists American investors through three principal agreements:
With respect to OPIC activities in the Russian Federation and the Newly Independent States (NIS), OPIC has several initiatives available to the American business community. First, OPIC offers the NIS Private Sector Initiative which assists U.S. companies in locating and exploring private sector investment opportunities throughout the NIS. Second, to facilitate investment in the pharmaceutical and medical equipment and supplies manufacturing industries, OPIC has also implemented the NIS Health Sector Initiative. Through both of these programs, OPIC will organize and execute investment missions to selected NIS countries and OPIC will also coordinate conferences and seminars in the U.S. Third, the OPIC Project Development Program (PDP) assists U.S. businesses in evaluating investment opportunities in Central and Eastern Europe and the NIS. The PDP provides eligible U.S. investors with up to $150,000 or 50 percent (75 percent for small businesses) of the costs required to conduct preinvestment evaluations to determine the commercial viability of proposed investments, which may include, but are not limited to, market-entry strategy assessments, business plan development, small-scale "pilot" project implementation, and feasibility studies.
In response to President Bush's initiative, the Congress repealed legislative restraints on Eximbank activity in Russia on April 1, 1992, by repealing the Stevenson and Byrd amendments that had a $300 million Eximbank financing ceiling and constraints on financing of oil and gas transactions. Eximbank medium-term loans and guarantees and short and medium-term insurance programs are available for U.S. exporters, and Eximbank has already approved $185 million in financing for U.S. exports. Eximbank estimates that financing of $500 million to $1 billion will be approved through fiscal year 1993. Eximbank has also entered into two separate "full faith and credit guarantee" framework agreements, one with the Bank for Foreign Trade of the Russian Federation (VTB), and the other with the Bank for Foreign Economic Affairs of the USSR (VEB). Eximbank is preparing a draft framework agreement to cover financing for U.S. exports of oil equipment and services to Russian oil production association for improvements in existing fields and developments of new fields. The Russian Central Bank and Ministry of Fuel and Energy will be Eximbank's partners. Individual transactions under the framework agreement will be considered on a case-by-case basis.
Interdepartmental Analytical Center (IAC)
16, Petrovka St.
P.O. Box 163
Moscow, 103050, Russian Federation
Contact: Dr. AlekseyK. Ponomarev, Director
Phone: 011-7-095-200-44-66
Fax: 011-7-095-200-44-65
The Interdepartmental Analytical Center (IAC) provides analytical and information support to Russian governmental departments and commercial structures in the fields of conversion, innovation and investment projects, technology transfer; science and technology policy, and international economic relations.
Russian Co-Chair: Deputy Prime Minister Alexander Shokhin
EXECUTIVE COUNCIL
Russian Co-Chair : Kyrill Ivanou, First Deputy Chairman, Agency for International Cooperation and Development
Russian Executive Secretary: Nikolai Drozdov, Director, Department of Trade and Economic Relations with Countries of the Americas, Ministry of Foreign Economic Relations
WORKING GROUPS
Standards Working Group
Russian Co-Chair: Sergei Bezverkhi, President, GOSSTANDART
Foreign Trade Regulations Group, Russian Co-Chair: Yuri A. Petrov, Ministry of Foreign Economic Relations
Business Facilitation Group, Russian Co-Chair, Nikolai U. Drozdov, Director, Department of Development of Business Cooperation Abroad, Ministry of Foreign Economic Relations
Investment and Commercial Projects, Russian Co-Chair: Evgeny A. Rogovsky, Director, Department for Strategy and Promotion of Exports, Ministry of Foreign Economic Relations
Defense Conversion Subcommittee, Russian Co-Chair: Ivan S. Materov, Deputy Minister of Economy
Industry Sectors and Trade Promotion Group (and Sub-Groups), Russian Co-Chair: Viktor K. Glukhihk, First Deputy Minister of Industry
Subgroup on Oil and Gas Equipment and Services, Russian Co-Chair: Anatoliy T. Shatalov, Deputy Minister of Fuels and Energy
Subgroup on medical Equipment, Russian Co-chair: Viktor M. Cherepov, Deputy Manager, Department of Resources, Environment, and Public Health Care
Subgroup on Aerospace Equipment, Russian Co-Chair: Valentin A. Stepanov, General Director of the Department of Space-Rocket Technology, Committee of Defense Industries.
Subgroup on Financial Services, TBD: Last named Russian Co-Chair: Sergei V. Gorbachev, Deputy Minister of Finance
Subgroup on Construction and Mining Equipment, Russian Co-Chair: Anatoly Z. Shevtsov, Director of the Department of Metallurgical Industry, Minister of Industry
Subgroup on Food Processing and Packaging Equipment, Russian Co-Chair: Boris I. Gontar, First Deputy Chairman, Committee of Food and Processsing Industry, Ministry of Agriculture
Subgroup on Information Equipment and Services, TBD: Last named Russian Co-Chair: Igor N Bryantsev, Director, Main Department
Promyshlennya Ul., 14A
St. Petersburg 198095
Contact: Konstantine Karczmarczyk, General Manager
Phone: 011-7-812-186-2830/812-252-9477/812-252-9587
Fax: 011-7-812-186-2807
International Integration Association (IIA)
P.O. Box 33
Moscow, 107120, Russian Federation
Contact: Sergey V. Kortunov
Phone: 011-7-095-244-15-23
Fax: 011-7-095-253-90-82
The Association unites Russian leading defense enterprises and research institutions in their effort to promote comprehensive integration of Russian hi-tech industries into the world market economy. The Association seeks to achieve this goal through establishing direct links and ties between its members at home and abroad, identifying promising areas and elaborating mutually beneficial joint projects and programs of international cooperation, utilizing for this purpose Russian advanced technologies, know-how, production and manpower potential in such fields as aerospace and nuclear industries, communications, transportation and ecology, as well helping to create favorable environment for foreign investment in the Russian economy.
Dr. Zurab Yakobashvili
USSR Academy of Sciences
TsEMI
32 Krasikova
Moscow 117418
Phone: 129-64-91
A U.S.-Soviet joint venture promoting bilateral and multilateral economic and scientific interests in the U.S. and U.S.S.R. in the fields of: conversion; technology transfer; ecology; energy; agriculture and agriculture distribution systems; building and land use development; telecommunications and networking. Sergey Vadimovich Kortunov
Chief of Department, Ministry of Foreign Affairs: Boris Dmitrievich Urlov
Chief of Department, Ministry of Science of Russia: Vladimir Grigorievich Vinogradov, Chairman of Committee
Ministry of Atomic Energy: Valeriy Aleksandrovich Dementyev, Deputy Chief of Head Department
Ministry of Defense: Alexey Konstantinovich Ponomarev
Director of the Interdepartmental Analytical Center: Albert Fyodorovich Trifonov
Russian Committee for the Defense ,Sectors of Industry: Vladimir Vasilievich Salo, Chief of Department, Ministry of Economy
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