Negotiating in Russia

Name RUSSIAN FEDERATION

Place of Birth EARTH, UNIVERSE 
Age 1158 years old

q territory of 17 mln km2 [6,5 mln ml2]

q 11 time zones
q 18 border-states
q 142.2 mln. people - 9th in the world

q largest reserves of forest, mineral and energy resources

q 25% of world unfrosen fresh water, 13% of world water
q Nuclearweapon state. World stockpile of weapons of mass
destruction.
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 Ø
q 8th Economy in the world by GDP [12th in 2009]
6th largest by Purchasing Power Parity
GDP 2.26 trillion USD, GDP per capita $15992 [52d], $15176 in
2009
q flat personal income tax 13% [ 2d attractive personal tax st. after UAE]
q Monetary unit ruble
q ECONOMY Services sector – non-manufacture sector
[transport, trade, banking, medicine, education etc.] yields 57% GDP
q Main business areas: trade & retail, medicine, education, transport and
communication technologies, construction.
q Key Industry extracting & exports of oil, gas, metal, minerals & timber.


Main business partners

 Netherlands 12.2%
Italy 9%
Germany 7.1%
Turkey,
Belorussia, China,
Ukraine & Poland


q ETHNIC GROUPS
Russian 79.8%,
Tatar 3.8%,
Ukrainian 2%,
Bashkir 1.2%,
Chuvash 1.1%,
Armenian 0.8%,
Chechen 0.9%,
other – 10.4%.
q
q 27 Co-official languages
along with official Russian
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q 83 federal constituencies:
46 oblast [provinces],
 21 republic,
14 autonomy regions,
2 federal cities
 Moscow and Saint-Petersburg
•
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ü
Theory
 Greetings and conversation
ü
ü
q Hand shaking when meeting or leaving
q Introduction is direct and informal
q Address people by title such a Director or Minister
q Business cards are in Russian and English
q Good conversation topics are Russian ballet, art,
architecture or literature, sport
q Avoid conversation about politic and social conditions
Theory 

Key negotiating pointers


q Warm and intelligent but not hard workers
q Punctual
q Business goes through ministry and is slow, connections
can speed up the process
q Lots of technical questions about product
q Could invite a seller only for gaining some information and
not buying anything
q Price could be higher, technologies in Russia are not very
developed
q Like quotate orders of others sellers
q Financial aspects are very important
Theory


 Day-to-day pointers


q Visiting cirkus, concert, dinner at restaurant

(not at home)
q After 8 p.m. orchestra and dancing in restaurants,
a lot of toasts and alcohol
q Gifts are very usual (quality pens, alcohol, perfume,
cosmetics)
q Typical food includes bread, potatoes, cabbage (also
borsch and goulash), meat is popular but expensive

Theory
 To remember!
ü
q Women are not in key professional or decision making
positions
q Potential for economic growth, but goes very slowly
q Poor infrastructure and distribution systém, political
uncertainties, low tax-collection rates, organized
crime, and corruption
q Plan trips month in advance for visa and travel
arrangements

Reality


 BUSINESS RELATIONSHIPS


 Emphasis on personal relations in business

 deal with those you know & trust.


q USE Concessions for relationships and USE Concessions Game

q PEOPLE AND PROBLEM goes together and perceived together.

q POSITIONs change if worthy. Alternatives POSSIBLE if reasonable.

q LONG vs. SHORT-TERM – Both are beneficial

Reality
 Contract is a Conclusion and Implicit Start


q Local Level important but formal

q International level - Highly important.
•

TACTICS


q Win-lose within Russia

q Win-Win for International
Ø
q “Russian start with Extreme Demand” – We Do.
q “YES equals NO” as usually – to have the way back.
q Delayed Tactics to have time.


Reality
 “Day-to-day” comments
q
q Emotions = honesty. Moderate, more open than reserved.
q Punctuality = Reciprocal Respect.
q Address people by First Name. Preferably First and Second name.
q Topics of conversation Sports, Billiard -Yes. Family – is not inviolable.
Ø
• “Not hard Workers” – work week in Russia is 40 hours and above
• “Bureaucracy” – less in business than in government authorities.
• “Lags far behind in High-tech” - already just “behind”, not so “far”
• “Cuisine includes meat, for some extent”  Just Meat  “but very
expensive” – not more than in the other countries


Corruption, Organized crime –much lower than 10 years ago

Much better Developed is the Infrastructure and Distribution system
Former political uncertainty changed to Anticipated Stability
Reality
 Business etiquette

q Dark and well tailored suits along with good dress shoes are
traditional for Russian businessmen.
q Most likely, men will not take off their jackets in negotiations.
q Women dress very well and stylish, with expensive jewelry,
nice perfume, fashionable shoes.
q Patience is very important to Russians.
q “Final offers” are often not actually the end of a negotiation
and if you hold out there will often be an outcome that is
more beneficial and attractive to you.
q There is a Russian term meaning “connections” or
“Influences”. It can be very difficult to do business in
Russia without local help. Sometimes gifts or money are
helpful when doing business in Russia.



Reality
 Behavior during negotiations


 Main characteristics:


q Active and initiative

q Non-standard point of view
q A little spontaneous
q Fear of responsibility
q Authorization behavior but patient to everybody
q Persistent


 Strategy of business behavior:



q Try to search «the happy medium» between necessity of competition

and sense significance of cooperation
q Find «the happy medium» and decide if to compete or compromise
Reality

Good rules for Russians



q
q Be honest and reliable for best relations in business
q Wish for long cooperation with partners
q Define and agree guarantees in advance
q Be trustworthy
q The highest standards of efficiency and qualification
q Relations, approved for years, are very important
q Young specialists are tested for loyalty
q Rule of Subordination (Senior vs. Junior)
q Be Allegiant to the company
q Be ready for Often corporate events
•
•
Business problem

The problems of business in Russia

and
how does they work for you.

qBureaucracy
qTaxes
qCriminal & corruption
qEmployee
Business problem
Bureaucracy – the problem #1 for Russian business.
Disadvantage:

qMany licenses, permits, fees and other obstacles are made by

officials.
qThis makes opening and running business cost.

Advantage:

qBarrier for other firms deciding to enter the market.

qChance for you to be the monopolist.

Example:

Official price for license for construction is approximately 500 EUR.

But it will cost you at least 4 times more and takes much time
because of collecting all documents, signatures, fees and permits.
Business problem
Taxes are really high and should be paid monthly, quarterly and annually.
Disadvantage:
800 EUR 100 EUR – 13%
qBusiness profit is very low.
qPrice for mistake is very high.
qThe underground economy.

Advantage:

qSuch system makes people 900 to create

EUR new ways how to pay 13%
– 13% and how
do not pay taxes by law and reduce them. Businessman decided how
many taxes to give to the state.
The minimum wage is 100 EUR in Russia. So, if you have salary 900 EUR
that means you will be paid 100 EUR – 13% + 800 EUR (In fact, that is less
Example:
than 900 EUR). It also means that in all documents will be mentioned that
Official
yoursalary
wage isand
100income
EUR. are different terms. Because the tax for the
official (white) salary is 13%, employer separate income on “white”
salary, which is taxable, and grey salary, which is free from any taxes.
Business problem
Criminal & corruption
Raiders and bribe are 2 things that make Russian business dangerous.

Disadvantage:

qRaiders – possibility to lose business at all or pay additional “tax” for

somebody.
qBribe – makes business run costly.

Advantage:

qYou can hire some raiders to press your competitor.

qBribe can help you to receive all licenses and permits quickly.

Example:
Official price for license for construction is approximately 500 EUR. But
it will cost you 6 times more but 2 times faster because of “special gift”
for “special people”.
Business problem

Employee
There is a big problem to find qualified workers.

Disadvantage:

qLow quality of production and high time expenditure.

Advantage:

qOpportunity to pay low salary at the beginning and after, so

business cost declines in the time.

Example:

Salary of the post graduate students is 400 EUR and after 2 years of
working it may increase by maximum 50% while productivity was
doubled.
Thank you