Business ties hold awkward relationship in place

The business relationship between Russia and Britain has returned to the spotlight with high level visits in both directions, including Finance Minister, Alexei Kudrin’s London trip to promote a Russian Eurobond issue.

Polonium not only killed Alexander Litvinenko, but also poisoned Russian – British relations, already treading warily through a field of thorns strewn with issues ranging from Russian exiles living it up in London, to differing views on Iran. But despite the lips of diplomacy being pursed, the business relationship between the two nations has held together surprisingly, almost defiantly, well.

Trade between the two countries has been resilient in the face of the downturn, after growing massively in the boom years, with Russian exports to the UK up by quarter in 2008. Over 1000 British companies work in Russia, and the majority of Russian companies listing internationally have chosen the London Stock Exchange – a trend expected to continue when Russian companies resume international listings. Peter Mandelson, the UK’s First Secretary of State, and Secretary of State for Business, Innovation and Skills, says the business relationship is a strength despite the political differences.

“I think it’s increasingly good, in practice and it will only strengthen by ministerial contacts and political discussion, where each of us has huge wealth of knowledge, experience – some different interests but, in the main, a great deal of overlap.”

Business interests have gone some way to forcing politicians to look beyond their differences. This week’s David Miliband visit to Moscow – the first by a British Foreign Secretary for five years was significant, despite the lack of breakthrough on political issues. Breakthroughs probably weren’t expected on either side, and the visit was couched in terms of finding common ground and adding depth.

Business is a key component of that common ground and British companies have long been amongst the most enthusiastic about entering the Russian market. Alexey Gromiko from the Institute of Europe believes better political relations can only make life easier for them.

“If we have the improvement in the political sphere, then we will have a direct positive influence on the economic relations between our countries. But we should stress the economy and economic actors may be quite successful in the circumstances where the political sphere is in the doldrums.”

The London visit by Russian Finance Minister, Alexei Kudrin, to promote a Russian Eurobond issue later in the week has also reflected an acceptance on Moscow’s part that there is an upside to having a better relationship with one of the world major financial centres. The $18 billion Eurobond issue is of a magnitude that requires the clout of the city in managing it. With money once again providing a cause for getting together, politicians can see the benefits of a better relationship.