Partnership

A Way Towards Integration

Vladimir Churov,
Vice-Chairman of the Committee for Foreign Relations

        - Mr. Churov, everyone regards as urgent the problem of the broadening of economic relations with the former republics of the USSR. In what way is this problem being solved here in St. Petersburg?
        - Trade and economic relations with the countries of the CIS are very important for our region and for St. Petersburg in particular. Above all, our industrial cooperation with the former Soviet republics has long been traditional. Our city has been importing a wide variety of food products as well as raw materials and half-finished products that are produced in their final form here. Now we have major opportunities for further joint work and there are wide opportunities for the introduction of mutual offsets and mutual supplies of raw materials, among other forms of collaboration. We are aware of the fact that our region plays an important role as a transit territory. This increases commodity transfer and through traffic, and promotes our penetration into the CIS market with the goods produced in our region.
        - How was the commodity exchange influenced by the August 1998 crisis?
        - There was a recession. Trade with Ukraine and Kazakhstan has slowed down. Our supplies to Ukraine decreased due to the foreign trade doctrine adopted in that country according to which Ukraine must strive to become increasingly independent from Russian sources of energy. But at the same time we are observing a steady growth of trade with Armenia, Uzbekistan, and Kirghizia.
        -Apart from the crisis, are there any other reasons that hamper the development of mutual trade?
        - Analysis shows that the basic reasons are industrial depression in the CIS countries, complicated and often-changing legislation, the absence of credit resources, and unbalanced mutual trade which lead to trade deficit.
        The export of resources by former Soviet republics is now oriented towards the foreign market outside the CIS with the aim of obtaining hard currency. Commodity exchange is further complicated by unstable and sometime non-convertible national currencies, as well as by certain limitations within the inner-republican currency exchange markets.
        We must also take into account the relatively low quality of products manufactured in the countries, something that is due to their technological backwardness. Commodity exchange is also restricted by high currency rate quotations and additional cargo dues. Transportation costs so much that sometimes commodity exchange becomes pointless.
        - How are these difficulties overcome?
        - For the time being Petersburg's relations with CIS countries are based on mutual agreements with their governments. In the last two years trade and economy agreements have been signed with Azerbaijan, Armenia, Belorus, Georgia, Kazakhstan, and Moldova. However control upon the realization of these agreements has been rather weak. This was the reason why we offered to prepare the supplements to basic mutual agreements in which the enterprises responsible for bilateral cooperation would be listed.
        The visit to Georgia of the Petersburg delegation headed by Governor Vladimir Yakovlev reached the same conclusions regarding the problems involved. The aim of our region's businesspeople is to broaden economic relations with Georgia, so mutual work resulted in the development of several programs. Both sides decided to create a Tbilisi universal wholesale store in Petersburg with the aim of getting Georgian goods here where they will be resold. Through this store we intend to supply to Georgia ferrous rolled stock and steel wire from Cherepovets, electric welded tubes and nonferrous rolled stock from Petersburg, as well as paper, plywood, and timber from Arkhangelsk and Kotlas.
        This spring a group from Dushanbe came to St. Petersburg. They acquainted themselves with the city's computerized delivery service. In autumn 1999 the sides discussed the problem of how to adapt such a system to Tajikistan and it was also decided to acquire the necessary information technologies. In Petersburg a plan is being prepared to create a wholesale warehouse for goods produced in Tajikistan. Both sides also stressed the necessity to coordinate their strategic plans concerning transit transportation.
        Generally speaking, there are many joint projects aimed at cooperation within the CIS. They are all being gradually realized. These projects deal not only with the supply of goods. A number of projects foresee the creation of joint ventures and the production of various goods that are of high demand within the CIS. There is a project to involve Ukraine in organizing a joint venture to produce electrical and diesel railway engines and passenger and freight cars. There is also close cooperation between the Belorus consumer goods industry and the Petersburg Clothing Association. Our region is to be supplied with synthetic fibers to produce the final product here.
        Various banks have contributed to the boosting of international economic ties. It is worth mentioning the Baltic Bank that has purchased the major Latvian RER enterprise where electrical equipment is produced for the rolling stock. This equipment is planned to be delivered not only to our region but to the other countries of the CIS as well.
        - What favorable terms are being created for the business activities of CIS partners?
        - Petersburg is greatly contributing to the creation of advantageous conditions for international business. We are now developing a buy-back strategy to supply the products of our region's machine-building industry to CIS countries and obtain various necessary goods from them. A leasing operations database is now being organized. It will include information about all enterprises interested in cooperation, that is, information about raw material and equipment suppliers, potential investors, and so on. Our city legislation envisages a partial exemption from duties as well as other franchises for those partners who cooperate in joint ventures and programs. There is a plan to organize a center in Petersburg that will simplify mutual settlements between businesspeople from the CIS by using a unitary form of mutual payments.
        Our region plays a unique role in the North-West because the economic interests of the CIS and European Union intersect here. This is our region's great advantage, and we must use and develop to its fullest potential.

Interview by Aleksei Maksimov