LETTER FROM THE U.S. OMBUDSMAN
The Russian economy has begun to stabilize, following the economic crisis of August 1998, but there is still a considerable amount of work to be done before foreign—and Russian—investors’ confidence in Russia begins to return. We need to keep in mind that the transformation of Russian society is a very complicated task that will likely take a generation to complete. There have been, however, positive developments in the U.S.-Russian relationship, and you, the business community, are a large part of this picture. In June, I cochaired the fourth annual meeting of the U.S. West Coast-Russian Far East Ad Hoc Working Group (AHWG) in Vladivostok, in which over 200 Russians and Americans participated. A key result of this meeting was an expansion of the CLEAR-PAC project, which streamlines customs procedures in the Russian Far East. Representing Vice President Gore, I was present at the July 30 celebration of the first oil output from the Sakhalin II project—the first oil to come from a production-sharing agreement (PSA) to develop deposits offshore Sakhalin Island. Even in the midst of economic difficulties, clear progress is being made.
Rule of Law
We have now completed a draft Handbook on the Russian Commercial Arbitration System. We have also drafted the Basic Guidelines for Codes of Business Conduct, designed to promote good business practices and ethical behavior in commercial relations between private firms, as well as with government authorities. Both of these works in progress have been presented at international roundtables and conferences and have received strong support from Russian and Western businesspeople and government officials. This fall, building on this success, we initiated a project on the Handbook on Corporate Governance and Shareholder Rights, and are encouraged by the broad, positive response to this idea. These concrete steps are aimed at developing a functioning rule of law and court system that will provide greater protection for business and assist in the fight against corruption.
Regional Cooperation
As many of you are well aware, some of the Russian regional governments have proved more successful than Moscow in establishing a market economy and providing a business climate that encourages foreign investment. During the past year, I have visited many regional capital cities—Novgorod, Irkutsk, Yuzhno-Sakhalinsk, Yekaterinburg, and Perm—and have noted regional officials offering tax and other incentives to attract investors, Russian and foreign alike, to their cities. Other regional governments are working hard to have projects approved as PSAs by the federal government.
Commercial Energy
As evidenced by Sakhalin II’s first oil, the PSA framework is beginning to produce tangible results, and the Russian Government is currently working on the normative acts needed to support this framework. The Duma is moving toward authorizing more projects to move forward under a PSA by adding those projects to the “Law on Lists.” There is still much to be done, such as revising the tax code to fit the PSA structure and reducing tariffs, and the U.S. Government remains committed to working with you to meet these challenges.
We are encouraging the Russians to work with us, as well as with other Western countries, on projects that could significantly benefit the regions. Moreover, we continue to pursue private-public sector partnerships that will prove beneficial to both U.S. companies and Russia.
The task ahead—to transform Russia into a growing free-market democracy—is enormous. There have been successes, but still far too few. Nonetheless, the best way to pursue this transformation remains the same—and centers on the private sector. The U.S. Government will continue to be actively engaged in pursuing the reforms Russia needs to move forward—and to support your efforts as you continue to play such a critical role in the process.
Jan H. Kalicki
Counselor to the Department of Commerce and
U.S. Ombudsman for Energy and Commercial
Cooperation with the New Independent States