Northwest Is a Back Door To Trade With Russia
Inflation, crime, shifting legal and political climates still obstacles
WHEN Bob Gerend was planning a potato-processing venture in the Soviet Union four years ago, he discovered the ``Ural,'' not a spud, but a rugged motorcycle with a sidecar. Eventually, the potato deal fell through. But the motorcycle has sprouted into a far better venture.
Today, Mr. Gerend is president of Ural America Inc. of Bellevue, Wash., which imports motorcycles for dealers nationwide. The small nine-employee business exemplifies the modest but growing links between the cold war's rivals, the United States and Russia.
Trade between the two countries is now balanced at around $3 billion in imports and exports, notes the US-Russia Business Council in Washington.
The Pacific Northwest, meanwhile, is becoming an important back door to commerce with the giant country that spans 11 time zones. ``Russia is part of the Pacific Rim now,'' says Margaret Niles, an attorney specializing in Russian deals for the Seattle law firm Preston, Gates, and Ellis.
Northwest companies are shipping food and consumer goods to the Russian Far East. Airlines, banks, and architectural firms are also winning new business.
Natural resources are the other big draw to this vast region that is two-thirds the size of the US. Timber companies are developing logging partnerships there. Petroleum companies are also interested in this region, making them the biggest single US investor in Russia.
The Pacific Northwest, while especially close to the Russian Far East, doesn't end its Russian ties there. Much activity is aimed at European population centers such as Moscow.
Carol Vipperman, who heads the Foundation for Russian/American Economic Cooperation in Seattle, says about 40 percent of the group's member businesses have dealings with the European side of Russia. This is true even though almost all the 160-member companies are from the Northwest. Gerend's business imports from a factory in Irbit, which is much closer to Moscow than Vladivostok, in the Russian Far East. The Boeing Company has a research center in Moscow.
All this adds up to a blossoming of two-way commerce - from almost nothing five years ago to close to $200 million this year between Washington State and Russia. The state has even set up a trade office in Vladivostok.
Though progress is impressive, trade with the Russian Far East, so far, is only a minuscule fraction of this state's $74 billion total foreign trade. One reason is that the Far East has only about 8 million residents.
Moreover, this region runs up against the same obstacles that all US businesses face in Russia: inflation, crime, and shifting legal and political climates.
In July, for example, Russia drastically boosted import tariffs, slowing the growth of US exports. Boeing, eyeing a market that may buy $60 billion worth of aircrafts over the next two decades, confronts 50 percent tariffs. Petroleum companies, meanwhile, are anxious for laws clarifying their ability to share profits with Russian partners.
Despite all the challenges, deals are going ahead. The Seattle Trade Consortium, a Russian-owned firm headquartered here, ships consumer goods to the Russian Far East, from cars to oven cleaners. Lately, food has made up the vast majority of shipments.
Private-sector activity, combined with aid from major governments, is vital to the struggling Russian economy. But will it be enough? Russian President Boris Yeltsin spoke of the need for foreign investment during a recent stop in Seattle.
But analysts say foreign firms can't take the lead in Russia's transformation. For one thing, while the long-term opportunities are huge, businesspeople are wary and are finding upfront costs higher than expected.
``The Russians do have to do it themselves,'' says Elisa Miller, editor of the Russian Far East Update, a Seattle-based newsletter for corporations.
Many American businesspeople remain optimistic that, in addition to making profits, they can help foster the rule of law and free markets.
``If everybody says it's unstable [in Russia], and we're not going to make the investment, then lo and behold it's unstable,'' says Dann Oppfelt, vice president of the Seattle Trade Consortium.
Midcom Communications Inc., a Seattle long-distance phone company, is investing $15 million for a 50-percent stake in a Russian Far East firm, Dal Telecom International. Midcom is using the money to build a wireless network. This more-reliable service will not just be a good business venture, says Midcom's Steve Crown, but it is ``essential if Russia is to develop itself into a market economy.''