U.S. Commercial Service Your Key To Russia

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U.S. Commercial Service Your Key To Russia
The R in BRIC Russia as a Strategic Emerging
Market

• The U.S-Russia Chamber of Commerce of New England
• May 3, 2007

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U.S. Commercial ServiceRussia
PERCEPTION
Russia is a riddle, wrapped in a mystery inside
an enigma. Winston Churchill, 1939. Russia is
an engine of growth for American companies
Andrew Somers, President of AmCham Russia, 2007

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U.S. Commercial ServiceRussia
Russia in the Western Press

• Politkovskaya/Litvinenko Cases
• Backtracking on Democracy
• Beslan/Chechnya
• Yukos/Khordikovsky

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U.S. Commercial ServiceRussia
Reality

• Russia is a Developing Country.
• Significant progress over past 15 years.
• Impressive economic growth since 1998.
• Substantial structural, administrative,
• and economic reforms implemented.
• Strategic market with significant assets.

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8 Consecutive Years of Economic Growth
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U.S. Commercial ServiceRussia
Macroeconomic Snapshot

• Average GDP growth 6.7 per yr. since 98
• GDP 2006 987 Billion
• PC GDP 2006 6929 (1,339 only 6 years ago)
• Inflation 9-10
• Unemployment 6.6
• U.S. exports 2006 4.7B to Russia (20)
• U.S. imports 2006 19.8B from Russia (29.5)

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AmCham Survey ResultsDid you know that . . .

• Half of American companies surveyed report sales
  increases of 200 in Russia from 2001 to 2005
• 97 of U.S. companies in Russia project continued
  growth in sales during the next 3 years.
• 92 of U.S. companies in Russia believe that
  continued engagement with Russia is positive for
  American Business and 86 believe Russias
  membership in WTO will bring new opportunities.

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What Executives of American Businesses are saying
about Russia

• Our sales grew 80 in 2006 Johnson Johnson
• During 2006 our sales have increased by 70 with
  a strong trend for future growth Delta Airlines
• Russia now ranks in the top 5 among 180
  countries in which we do business. Wrigley
• Ford became the 1 selling foreign brand in
  Russia in 2006.
• We have exceeded 1B in sales w/ latest annual
  growth rates of 20-30. PG
• Russia represents the largest subsidiary in the
  Europe Region for Mary Kay w/53 of 2006 net
  sales for the region.

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What Executives of American Businesses are saying
about Russia

• Our business is now growing at a yearly average
  of about 40. Dow Chemical
• Since our office opened in 2002 we have grown at
  over 70 annually and growth in increasing. 80
  of our products sold in Russia come from U.S.
  factories in Illinois and Iowa. John Deere
• 3M Russia is a very important subsidiary for 3M
  Worldwide. Our business results, growth and
  profitability have been outstanding over recent
  years and have been some of the highest in 3M
  subsidiaries.

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Commercial Ties Critical to Bilateral Relationship

• While political issues between our nations tend
  to garner the most headlines, economic interests
  should not be ignored. U.S.-Russia commercial
  ties are stronger and more dynamic than ever
  before, providing stability to our overall
  relationship. - Secretary of Commerce Carlos
  Gutierrez, Moscow April 2007

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U.S. Commercial ServiceRussia
Oil and Gas Economy

• Moscow awash with money record oil/gas
  prices driving economy. Trickling down to
  regions.
• Russia will continue to be major player in the
  global energy market
• Worlds largest natural gas reserves and largest
  gas exporter.
• Neck-in-neck with Saudi Arabia for oil
  production 2nd biggest oil exporter.
• Worlds 3rd largest energy consumer.

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U.S. Commercial ServiceRussia
Oil and Gas Economy (contd)

• Putin wants to bring greater share of energy
  sector under state control.
• Simultaneously trying to diversify economy away
  from reliance on petrodollars.
• Energy remains strategic focus of bilateral
  dialogue and Presidential initiatives.

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Putins Last Year(State of the Nation Address)

• Call to spend hundreds of billions of dollars on
  new power stations, roads, other infrastructure
  over next 12 years.
• Russia needs 2/3 more electricity by 2020 to
  ensure sustainable economic growth. 26 nuclear
  hydro,coal plants
• Start using stabilization fund now at 108
  billion.
• Improve housing It is inadmissible for a
  country with such reserves accumulated from its
  oil and gas revenues to be at peace with the fact
  that millions of its citizens live in slums.
• Pensions to increase 65 by 2010

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Russias Automotive Market

• Russia fastest growing market for new car sales
  in Europe and one of most dynamic markets in the
  world.
• 33 billion car sales in Russia in 2006 (6 times
  2001 figure)
• Russian car models cannot compete with foreign
  models.
• Consumer preference shifting to more expensive
  cars. Access to Credit.
• High end niche 70 growth 2005-06.

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Car Sales in Russia (thousands of vehicles) Over
2 million vehicles sold in 2006, a 20 increase
from 2005
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Manufactured near St. Petersburg since
2002 72,000 Ford Focus produced in 2006 6 month
waitlist for new Focus.
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Its not just Moscow anymore
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Russia 145 Million People

• Largest country in world but heavily urbanized
• Moscow 11 million - St. Petersburg 5 million
• 13 cities over 1 million people
• 32 cities over 500,000 people
• 100 cities over 100,000 people
• Outside of Moscow and St. Petersburg retail
  market underdeveloped.
• Enormous Scope for Retail Growth

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Opportunities for Retail Expansion
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Lentas Drive to the Regions

• Lenta founded in 1993. HQ in St. Petersburg,
  Russia.
• Operates 14 hypermarkets - 15 sites under
  construction.
• Ten of the existing retail complexes are in St
  Petersburg, two in Novosibirsk and one each in
  Astrakhan and Tyumen.
• First big-box Russian retailer to expand into
  Western Siberia and the Volga regions.
• Stores under construction in Barnaul, Nizhny
  Novgorod, Novgorod, Novosibirsk, Omsk,
  Petrozavodsk, Rostov-on-Don, Ryazan, St.
  Petersburg, Togliatti, and Volgograd
• EBRD 50 million unsecured loan to finance new
  regional outlets

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Retail Lending Consumer Access to Credit

• Credit card business still in infancy in Russia
• Increased 128 in 2006 to 5.7 million cards
  issued
• Car loans doubled 2005-2006 to almost 10 billion
• Mortgage lending increased almost 4 times
  2005-2006 from 3.8 billion to 13.5 billion

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St. Petersburg
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Northwest Russia

• Total Population Approximately 15 million
• St. Petersburg 4.8 million
• St. Petersburg and surrounding Leningrad Region
  constitutes the second largest regional market in
  Russia, as well as a base for operations
  throughout the NW.

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St. Petersburg

• Founded by Peter the Great in 1703 as a window to
  the west. Also known as the Venice of the North
• Maintains a western atmosphere and is an
  important international marketplace due to its
  close proximity to the Baltic countries,
  Scandinavia and the rest of Europe
• Major intellectual, cultural, financial,
  commercial, and industrial center of the Russian
  Federation

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St. Petersburg

• Natural transportation center for the entire
  Northwest
• St. Petersburg seaport is Russia's largest
  commercial port by volume
• Port handles over a third of all of Russia's
  imports
• Extensive rail network connecting to Europe,
  Moscow and key regions in the country

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Foreign Investment in St. Petersburg

• Over 6 billion in new FDI announced in 2006
• U.S. Largest Foreign Investor in NW Russia
• U.S. Investors in St. Pete/LenOblast
• Ford, Gillette, Wrigley, Kraft, International
  Paper, Philip Morris, Caterpillar, Motorola,
  Otis, Intel, HP, Sun Microsystems, General Motors
• Retail investment IKEA, Shopping Malls,
  Franchises
• Increase in business/tourist visitors new
  hotels

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St. PetersburgForeign Investment
370,8
143,9
141,6
79,0
of previous year
Source AmCham, St. Petersburg Administration
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St. Petersburg/Leningrad RegionKey industrial
investment projects

The city covers an area of 1,439 k?2
International Paper
Pepsi-Cola
Baltika
Nissan
Ford
Saint-Petersburg
Sea port
Gulf of Finland
JTI
General Motors
Wrigley Gillette
Severstal
Coca-Cola
Ring road
Kraft
Bosch-Siemens (BSH)
Toyota
Elcoteq
Caterpillar, Roca, Henkel
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Best Prospects for U.S. Companies in NW Russia

• Automotive Parts and Equipment
• Building Materials and Construction Equipment
• Oil and Gas Equipment and Services
• Information Technology
• Franchising
• Port Equipment and Services

• Food Processing and Packaging
• Forestry, Woodworking and Pulp and Paper Eq
• Safety and Security Equipment
• Tourism
• Medical Equipment
• Retail Equipment

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U.S. Commercial ServiceRussia
Advice for Doing Business in Russia

• Perform detailed market research identify
  specific sector opportunities.
• Find a qualified local partner conduct due
  diligence.
• Be patient maintain a long-term timeframe for
  plan implementation.

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U.S. Commercial ServiceRussia
Advice for Doing Business in Russia (contd)

• Know your trade financing options make use of
  TDA, EXIM, OPIC.
• Consider regions ground floor opportunities
  (13 cities w/populations gt 1m).

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U.S. Commercial ServiceRussia

• Our Offices
• CS Moscow, CS St. Peterburg, CS Vladivostok
• Includes CS, BIS, BISNIS, OPIC/EXIM, SABIT

Our Website www.buyusa.gov/russia/en/

• News Events in Russia
• Our Products Services
• Trade Leads
• Upcoming Conferences

• Recent Market Reports
• Industry Highlights
• Special Programs

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What Our Clients Say
You and your service are to be applauded for the
efforts and dedication I want to express my
deepest appreciation for efforts with the various
elements of the Russian bureaucracy. Potomac
International, Inc., Alexandria, VA
The Gold Key Service was everything that was
promised and more I assure you we will use this
fine service in the future and recommend it to
all our business contacts J.D. Watkins
Enterprises, Inc., St. Louis Park, MN
We would like to thank you very much for making
our Gold Key visit to Moscow a success. Due to
your excellent preparations, the meetings were
meaningful and we are now hopeful to acquire some
solid customers in Russia Horner Discus
International, Inc., Fort Lauderdale, FL
I am very grateful for your prompt and skillful
efforts on my behalf. I did not realize that
there was such good service -- and such fine
people -- available from our government to help
my business. J. Lyman Industries Inc., Chicago,
IL
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Contact Us

• Keith L. Silver
• Principal Commercial Officer
• U.S. Consulate General
• St. Petersburg, Russia
• Tel[phone]
• Fax [phone]
• Email keith.silver_at_mail.doc.gov
• http//www.buyusa.gov/russia/en