Doing Business In: Russia

Doing Business with Russians

 

Soviet influence in Middle East is widespread.

Ezekiel, in Bible, warned the world of Russia’s interests in Middle East.  Why?  Nerve center of communications between 3 continents, a land bridge between Asia, Africa, Europe.  Peter the Great (1682-1725) was first to realize this.  As was Alexander the Great and Caesar of Rome, wanted the “golden jewel”.

Russia put forth in writing in the Ribbentrop – Molotov pact in November 1940.

Russia, needing warm water ports, needs the Black Sea, Mediterranean, and Middle East to control the straits of Hormuz and Suez.

The Wealth of the Middle East – oil – Dead Sea chemicals – the nations that control oil control the world, under communistic “social” structure.

 

 

Meeting and Greeting

  

 The typical greeting is often a very firm handshake with the appropriate greeting for the time of day – dobraye utra (good morning), dobryy den (good afternoon) or dobryy vecher (good evening).

Even though it may sound a bit stiff it is commonplace when doing business in Russia to introduce yourself using only your surname. Before meeting your Russian counterpart ensure you find out if there are any titles they use as these are extremely important and should be used. If you are visiting Russia it is appropriate to refer to your counterpart by either “gaspodin” (a courtesy title similar to “Mr.”) or “gaspazhah” (similar to “Mrs.” or “Miss”) plus his or her surname.

On the whole Russians have three names. The first name is the given name while the last name is the father’s family name. The middle name is a version of the father’s first name, known as a patronymic; for a man, it ends with the suffixes “vich” or “ovich” meaning ‘son of’. For a woman, the patronymic is also the father’s first name but with suffixes “a” or “ova” added, which means ‘daughter of’.

When doing business in Russia make sure you take a business card. It is always a good idea if you plan to maintain contacts in Russia to have one side translated into Russian. If you do so make sure you add your title and any degrees or qualifications you have.
Meetings and Negotiating

 

Always be punctual when doing business in Russia. However do not take offense if your Russian counterpart is not. It is not unknown for Russian business people to turn up hours late. A good indication of how serious a meeting is taken is how punctual they are.

Initial meetings are usually approached as a formality. It is at this stage that your credibility will be assessed. The best strategy is to appear very firm and dignified, while maintaining an air of warmth and approachability.

Pitches or presentations should be simple and straightforward. Generally Russians are not impressed by foreigners doing business in Russia who use special visuals, flashy PowerPoint presentations and the like. These do not sway decisions. The most critical element is demonstrating your knowledge, professionalism and expertise.

Many Russian business personnel speak good English so presenting in the language is not a problem. If it could be then hire a Russian interpreter. It is however that you make the effort to present anything written in Russian.

Negotiations are an interesting affair for anyone doing business in Russia. They are tough and like to indulge in a fair amount of theatre if necessary. Their main aim is to gain concessions so there will be a lengthy process of grinding you down.

Caving in too early is a sign of weakness so stand your ground. If you do feel the need to concede ask for the gesture to be reciprocated in some way. Generally speaking, Russians view compromise as a sign of weakness. Do not be surprised by loss of tempers, walkouts, threats to end the deal, and similar incidents. It is all part of the fun.


Entertaining

Doing business, conducting meetings, making decisions, negotiating and getting to know each other is increasingly being done at dinner. If your Russian counterpart decides to invite you out do not refuse the request as it would be rude.

At the table centre seats are used by the most senior attendees. As a guest you should be sat in the middle opposite your immediate counterpart.

Remember Russians do like a drop or two of alcohol.  Refusing to drink is unacceptable unless you give a plausible excuse, such as explaining that health or religious reasons prevent you from imbibing. Always bear in mind that you may be discussing so know your limit.

Rule is once the bottle is open on the table, the entire bottle is to be drunk before leaving.

 

Russian Appearance

 

Businessmen in Russia usually wear suits that are dark and well-tailored along with good dress shoes.

A businessman’s wardrobe demonstrates the individual’s image as a professional.

Men often do not take off their jackets in negotiations.

Do not stand with your hands in your pockets. This is considered rude.

Women dress rather conservatively, avoiding overly flashy or gaudy outfits.

Women should always cover their heads when entering into any Russian Orthodox Churches.

Skirts should be worn rather than pants.

When attending dinner in a citizen’s home, casual dress of slacks and a nice shirt without a tie are appropriate.

 

Russian Behavior

 

As a foreigner, you are expected to be on time to all business appointments. However, your Russian counterpart may be late, as this may be a test of your patience. Do not expect an apology from a late Russian, and do not demonstrate any kind of attitude if your business appointments begin one or two hours late. This may also be a test of your patience.

Social events are more relaxed.  It is acceptable for foreigners to be 15 to 30 minutes late.

Patience is an extremely important virtue among Russians; punctuality is not.

Russians are known as great “sitters” during negotiations, this demonstrates their tremendous patience.

The U.S.S.R. was officially an atheist nation in the days of communism. Now, however, participation in religion in increasing, with many citizens practicing Protestantism, Islam, Russian Orthodoxy, and Judaism.

Some Russians still view compromise as a sign of weakness, and often refuse to back down. To these individuals, compromising is bad business.

As a foreigner, you should realize that “Final Offers” are often not actually the end of the negotiations, and that often times the outcome will be more beneficial and attractive if you can hold out.

There is a Russian term meaning “connections” or “influences”. It is extremely difficult to do business in Russia without help from a local. To help with this, gifts, money or other items are often a good idea when doing business in Russia.

If attending dinner at a family residence, it is appropriate to bring a gift, such as a bottle of wine, dessert, or a bouquet of flowers.

When shaking hands with someone, be sure to take off your gloves, as it is considered rude not to.

When attending any formal engagements such as the theatre, it is appropriate to check your coat and other belongings at the front door of the establishment.

Do not show the soles of your shoes, as this is considered impolite. They are considered dirty, and should never come in contact with any type of seat (like on a subway or bus).

Be sure to have plenty of business cards with double sides of information. One side should be printed in English, the other side in Russian.

Be alert and open to taking a drink or having a toast, as refusing to do so is a serious breach of etiquette.

 

Russian Communications

 

Russian is the official language.

Speaking or laughing loudly in public is considered rude, as Russians are generally reserved and somber.

Many Russians speak English, as it is often taught beginning in the third grade.

Russians are highly literate, and have almost a 100% literacy rate.

Good topics of conversation include peace, the current changes taking place in Russia, and their current economic situation.

After years of subdued expectations there is an air of confidence surrounding the Russian economy as it pairs its economic potential with economic growth. But regardless of the positive strides it has made, many challenges to doing business in this diverse and notoriously tricky economy still remain.

Traditionally regarded as a resource-reliant economy, notable growth in retail, telecommunications and real estate development in recent years has driven an expansion in the country’s consumer base. Incomes are increasing and consumer lending is also becoming more widespread, which has allowed the country to weather the economic storm far better than other export-reliant nations.

As the market matures and open market policies are favored over a protectionist stance, the international business community is starting to warm to Russia as an investment destination. However, the obstacles are difficult to overcome without local help.
Starting a Business

 

According to a report by the World Bank and International Finance Corporation (IFC), it takes an average of nine procedures and over 23 days to start a business in Russia. What’s more, it costs on average 2.3% of income per capita, with Surgut found to be the hardest place to start a business and St Petersburg ranked the easiest.

Construction Permits 
The number of steps needed to acquire construction permits can vary significantly from city to city; Novosibirsk requires only 16 compared to 47 in Moscow. As a result, there is huge variation in the time it takes to acquire permits; a year in Moscow compared to five months in Surgut.

Registering Property
Registering property is relatively cheap in Russia, and registration fees are among the lowest in the world and well below the OECD average. However, it still requires an average of four procedures and over 35 days to complete the procedure.

Getting Electricity

 

 

Getting electricity is an extremely laborious task in Russia and firms can wait between four months and a year to get switched on, depending on the destination. Design approval is a particularly complicated step, requiring several trips to public agencies and taking anything from 30 to 120 days.

Punctuality
Businesses often find Russia’s polychromic culture – where attitudes to punctuality are a little more relaxed – hard to grow accustomed to. Many meetings will not conform to linear agendas used in other nations, which can disrupt inter-business communications.

 

Undeveloped Infrastructure

 

Russia’s infrastructure is heavily Moscow-centered, with most transport channels of economic significance emanating from the country’s capital. Commercial transportation is heavily reliant on rail, although it is insufficiently integrated into world transport systems. For such a large nation, air links are still underdeveloped, making inter-country travel arduous.

Intellectual Property Rights 
Establishing intellectual property rights in Russia is still a tiresome business, although steps have been taken to simplify the process. As of 1 February 2013, a specialized court for intellectual property rights has been instituted within the commercial courts of the Russian Federation.

Government Transparency
Government transparency is a notoriously fraught problem in Russia, although the situation has improved significantly. A survey conducted by the International Budget Partnership found Russia has significantly improved its budget transparency over the years and is now telling its public more about government income and spending than countries such as Germany or Spain.

Government Interference
Russia’s main challenges as being corruption, government interference and the high level of monopolization. Although steps have been made to amend problems in central government, overseas firms still find the state of governance in Russia difficult to navigate.

Protectionism
An EU report revealed a “staggering increase” in protectionist measures as governments seek to shield national industries from foreign competition amid a difficult economic environment. Russia was among the worst offenders; the report concluded that Moscow was not in compliance with its future obligations to the World Trade Organization.

 

 12 Tips for Doing Business in Russia

 

  1. It is important to get formal language and titles right. They are not suggested and often status and titles are proud accomplishments. One expat stated that they were berated by telephone by a Russian Ministry official after correspondence was sent out with the wrong title. It almost torpedoed the deal. Do not act informally unless your partners suggest it. Be formal in meetings and refrain from self-deprecating humor as this will most likely be misunderstood.

 

  1. Russian business culture is not homogenous. There is a mix of old bureaucracy and Western thinking in Moscow and people who understand both of these systems are extremely valuable. The perestroika generation that grew up during the transition often is particularly adept at navigating the space between these two worlds. Remember to pay attention to the age of your colleagues and which system they grew up in: This will help you understand their approach.

 

  1. Russians place more emphasis on and are largely more successful than their Western colleagues at achieving a work and life balance. This can tie into not wanting to joke around at work. As Russians try not to work all of the time, they tend to be serious at meetings, so that they can have time for joking with family and friends later. Russians typically do not linger on the phone when a conversation is over. Hanging up the phone once an agreement is made doesn’t mean a partner is being rude. Russians just do not engage in small talk as much, so do not be surprised by the abruptness.

 

  1. People want to get to know whom they are doing business with. Expats generally agree that as compared to the West, people invest more time getting to know people before they do business with them. This can make the business process seem a bit slow, but Russian partners just see it as being cautious. One long-time expat in Moscow stated that it is necessary to invest your time in people. When you can develop good personal relationships with your Russian staff you may be amazed by their flexibility, appreciation and dedication.

 

  1. Remember holidays and birthdays. For example, if you do not properly celebrate International Women’s Day (March 8), you may come to regret the friction you feel from your female colleagues in the months afterwards. Gifts, gifts, gifts. Many more occasions than you may be used to at home require gifts or would be enhanced with presents. In Russia if you’re not sure whether to bring a gift, it’s probably a good idea to bring one.

 

  1. It can be quite tricky to schedule a meeting in the morning. Russians tend to start work a little later and work a little later in the evenings than they do in the west. This varies from industry to industry, but in general it is better to schedule discussions for after lunch, and leave a little window of time between appointments: Do not be surprised if a partner cannot meet right away or is late.

 

  1. Connections are very important. Even if you feel extremely qualified as a foreigner trying to land a job in a Russian company, your ability to get that job is often contingent on connections. This applies to business deals as well: Personality and relationships are paramount.

 

  1. Mobile phones for relationships. It would seem that a nation that values their family and free time would be very hard to reach. Instead, people will answer their phones in a meeting, while teaching a class, at the cinema, nearly anywhere. Remember that relationships are important and only privileged people are given cell phone numbers and they want to keep these relationships going. They will answer their phones and they will expect you to do the same.

 

  1. Evaluate and train your employees. You can be quite direct with Russians and give your feedback. Russians appreciate this, especially when you explain that your comments are not personal, but are meant for the improvement of the company’s performance or the employee’s skills. Create an open atmosphere where giving feedback to each other is able to flourish. Always be direct: Do not hint at something and assume that others understood what you meant.

 

  1. If you need to engage officialdom, be prepared for the bureaucracy. Most of what you heard is true, although understanding the system and being prepared will help you. You will often have to track the right contact person down and send faxes and wait. This takes patience and persistence. However, explain very clearly to all involved if there is a strict deadline that it is not flexible.

 

  1. Get something in writing if you can. You will rarely get an agreement in writing (in an email for example) since that would commit to something that may not be possible when the time comes. Personal relationships are very important and should be fostered because these are the people that will help you when you need it. Russians dislike planning not because they are lazy, but because they dislike breaking their promises.

 

  1. Finally, doing business in Russia requires flexibility. Successful businesses in Russia adapt quickly to changing circumstances. You may encounter resistance to planning, but your ability to plan and improvise will ensure that you have a backup plan and often be one step ahead of the competition.

 

 

Published by The Academy of Market Intelligence
© Academy of Market Intelligence (AMI SINCE 1997)
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