October 1997

by Craig Karp

U.S. Vice President Al Gore and Russian Prime Minister Viktor Chernomyrdin joined to highlight business opportunities in Russia's regions and advance solutions on energy, tax, and other commercial issues during the ninth session of the Gore-Chernomyrdin Commission (GCC), held September 22-23 in Moscow, and September 24 in the city of Samara on the Volga River. The U.S. side focused on the priority issues for U.S. businesses: tax reform, production sharing legislation, and the protection of investment.

Vice President Gore was joined by Secretary of Commerce William Daley, the vice chairman of the Gore-Chernomyrdin Commission and co-chair of its commercial component, the Business Development Committee (BDC); Secretary of Energy Federico Pe¤a; U.S. Ombudsman for Commercial and Energy Relations Jan Kalicki; and other cabinet-level members of the commission.

Priorities: Energy, Taxes, Transportation
The top U.S. priority remains Russia's adoption of a fair tax regime which allows deductibility of normal business expenses and ensures fair administration of tax laws, a view shared by the Prime Minister, who made clear that his government is working hard to ensure passage of Russia's draft tax code. Another U.S. priority is that key energy projects stay on track, or where they have strayed, get back on track. The U.S. delegation advised the GCC formally known as the Joint U.S.-Russia Commission on Economic and Technological Cooperation that even as some U.S. energy investments, particularly those near Sakhalin Island, are gathering momentum, continuing inability to conclude and implement production sharing agreements jeopardizes tens of billions of dollars of future energy investments.

The U.S. side also urged that tenders be upheld, licensing decisions be reviewed, commitments to existing joint ventures be maintained, and joint work on cost-effective energy transportation continue. Following a positive exchange, Russian officials indicated they wished to work with their American colleagues to resolve these issues. The two sides agreed to produce a joint report within two months on the status of these priority projects and make recommendations on how to move them forward.

The United States also pressed to have the U.S.-Russia Bilateral Investment Treaty ratified by the Russian Parliament, to improve protections for each country's investors. The U.S. side confirmed its support for Russia's accession to the World Trade Organization and agreed to accelerate work on product labeling and certification, and urged stronger enforcement of Russia's laws on intellectual property. The BDC's Commercial Crime Working Group recently held joint seminars in Khabarovsk, Moscow, and St. Petersburg with Russian and U.S. law enforcement officials. One practical result is a directory of law enforcement contacts throughout Russia, which is available via BISNIS Online.

Regional Investment Initiative
This session of the commission highlighted the new Regional Investment Initiative (RII), which was agreed to in February at GCC-VIII. The U.S. and Russian governments have already taken initial steps to launch this important initiative, which will direct resources to those places of greatest need and potential in Russia.

Vice President Gore and Prime Minister Chernomyrdin, along with secretaries Daley and Pe¤a, Overseas Private Investment Corporation President George Mu¤oz, and Small Business Administration Administrator Aida Alvarez, met in Samara one of Russia's most commercially promising regions with regional officials and U.S. companies already doing business there. U.S. and Russian firms shared experiences and highlighted some of the obstacles they faced. These generally reflected the GCC priority tax and regulatory issues, but also focused on the need for local officials to take a problem-solving approach in working with foreign investors. The Vice President and the Prime Minister also visited Samara Cable Company, site of two U.S. companies' investment projects.

Elsewhere in Russia, regional coordinators who focus RII efforts in the pilot cities of Novgorod and Khabarovsk will take up their duties in the near future. They will work with local officials to improve the investment climate in the target areas and to help resolve obstacles. A parallel business development effort will assist interested regions across Russia to attract and keep investment through business-climate reform and investment promotion skills.

Craig Karp is on the staff of Jan Kalicki, Counselor to the Department of Commerce and U.S. Ombudsman for Energy and Commercial Cooperation with the New Independent States.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)