John Deere ploughs ground for the longer term

The world's biggest farm machinery producer John Deere said this week Russia’s protectionist measures make the company more cautious with its investment into the country.

John Deere expects its Russian sales to fall 20% this year after the country imposed tariffs and loan limits on foreign farming machinery in 2008.

One firm the government is trying to help protect with tariff barriers is Russia’s combine maker – Rosselmash. The market leader's output fell almost 23% in the first half of this year, and Prime Minister Putin provided support – although making it clear it was for the short term only.

“As you asked we introduced a temporary 15% import tariff on foreign combines but no less than 120 euros for 1 kilowatt of the engine’ s power. We gave our producers time to relax. These measures justify themselves during “severe” phase of the economic crisis. But they cannot be implemented on the regular basis.”

Putin may claim Russia is not planning to close the market for farm machinery imports forever. But America’s John Deer says changing rules make foreign investors hesitant to commit to Russia.

“You need the confidence that things are going to remain stable, that the ground rules are going to remain stable over a long period of time. I believe that in the long run that is what the government will try to do but, at this point in time, things aren’t as stable as we would like to see it. It makes us hesitant at times. We can always see the long range, in the future there’s so much promise, but in the near term it requires additional navigation instead of immediately going with confidence and putting investments in place.”

John Deere said it expects the Russian government to eliminate import tariffs and provide support for companies who set up assembly lines in Russia. Just as it does to support carmakers.