Things to know when doing business with Russia
- Marcel Hoebink
- The basis
- 12 May 2023
- Edited 28 Feb 2023
- 8 min
- Managing and growing
Various sanctions against Russia have been in place since 2014. Russia's recognition of 2 renegade Ukrainian regions and the Russian invasion of Ukraine on 24 February 2022 has led to more sanctions. This makes doing business with Russia more difficult. Russia is the largest country in the world and connects Europe with Asia. The economy is based on extracting and exporting oil and gas.
In this article, you can read more about the sanctions against Russia. And you get information about doing business with Russia.
Russia invaded Ukraine
Russia invaded Ukraine on 24 February 2022. Russia supports pro-Russian rebels in the Donetsk and Luhansk regions in eastern Ukraine. Three days before the raid, Russian President Vladimir Putin recognised the self-proclaimed “People's Republics” of Donetsk and Luhansk in Ukraine. Several countries, including the United States and the EU, immediately responded with sanctions against Russia.
The invasion prompted the international community, including the EU, to impose new sanctions. The EU sanctions have consequences for European companies that (want to) do business with Russia.
The sanctions include, among other things, a ban on doing business with certain Russian individuals, companies, and organisations. In addition, there is an export or import ban on various products and services. Several Russian banks have been disconnected from the SWIFT international payment system. For some banks, there is a complete transaction ban. On 25 February 2023, the EU adopted the 10th package of sanctions (in Dutch). This package includes:
- A freeze on the assets of three additional Russian banks.
- Approximately 120 new individuals and organisations with whom you are not allowed to do business.
- Additional export restrictions for certain dual-use goods. For example, electronic components that Russia uses in drones and missiles.
- An import ban on bitumen and related materials such as asphalt, and on synthetic rubber and carbon black.
Keep an eye on the Netherlands Enterprise Agency (RVO) website for current developments (in Dutch) and a complete overview of the EU sanctions. The Russia Business Desk (in Dutch) answers questions about the sanctions.
There have been sanctions against Russia for a while, partly because of the annexation of Crimea and Sevastopol in 2014. For example, there is a complete import ban on products from Crimea and Sevastopol. Since 1 July 2016, the EU has extended these sanctions against Russia by six months each time. The sanctions are still in effect.
In response to the sanctions, Russia is boycotting many European agricultural, horticultural and fisheries products. Furthermore, Russia imposed several counter-sanctions in response to the new Western sanctions. These counter-sanctions restrict or ban the import and export of certain products. An overview of Russian counter-sanctions can be found on the RVO website (in Dutch).
Doing business with Russia is difficult
Due to the sanctions that the EU and several other countries have imposed on Russia, doing business with Russia is currently difficult or even impossible. A number of Russian banks have lost their connection to the international payment system SWIFT and transport to and from Russia leads to major delays or is impossible.
The information that follows about doing business with Russia is about the period before Russia invaded Ukraine and before international sanctions were imposed by, among others, the EU.
The Netherlands Chamber of Commerce KVK is not currently issuing ATA carnets for Russia, Belarus and Ukraine.
Subsidy for alternative markets
Do you do business in Ukraine and Russia, and have you been financially affected by the trade restrictions? You may be eligible for the subsidy SIB Alternative markets Ukraine and Russia from RVO. With this subsidy, you can get help in finding alternative markets and in optimising your supply chains, logistics processes, and international production.
Video: Doing business with Russia. What now?
Please note: the following information about doing business with Russia covers the period up to Russia's invasion of Ukraine. This was before more international sanctions were imposed by the EU.
A key part of the Russian economy is extracting and exporting oil and gas. The agricultural sector is also well developed, so Russia depends less on food imports.
The Netherlands is an important trading partner (in Dutch) of Russia. In addition to oil and natural gas, Dutch companies import aluminium, iron, steel, chemical products, fishery products and wood products from Russia. Dutch exports mainly consist of medicinal and pharmaceutical products, machines and electrical equipment, means of transport and computer equipment.
Due to the size of the country, it is impossible to cover all regions. Therefore, the initial focus is on the wealthier areas around Moscow and St. Petersburg.
Sectors such as infrastructure (including shipbuilding and ports), healthcare (including hospital construction and medical equipment) and living environment (including waste management and recycling) offer opportunities for entrepreneurs from the Netherlands. There is also a demand for high-quality agricultural and production machines.
With almost 150 million inhabitants, Russia remains an important consumer market. The e-commerce market was able to record tremendous growth during the coronavirus pandemic, as did supermarkets with delivery services.
Finding the right buyers or suppliers takes time. Visiting a local trade fair provides quick insight into the Russian market. In addition, it is a physical place for you to make first connections and build a network. You can find overviews of Russian fairs on various websites, for example AUMA or Expodatabase. Take into account the postponement of fairs due to the coronavirus.
Various organisations support you in the search for potential business relations, sometimes for a fee. Enterprise Europe Network (EEN, website in Dutch) is a professional network of 600 organisations in more than 60 countries, including Russia. The digital database (in Dutch) of EEN contains profiles of Russian companies that are looking for cooperation partners.
RVO helps to find reliable Russian business partners. For this, RVO uses its foreign network, including embassies. RVO can make an overview of business partners (in Dutch) for you based on your specific questions and requirements. A personal introduction is also possible. The Netherlands has an embassy and a consulate-general in Russia. The employees know the Russian market and have a network there. They will perform a company check for you on request. That is how you can find out if a Russian company actually exists.
The cultural differences between Russia and the Netherlands require a different approach towards your business partner. Keep in mind the business etiquette and manners in Russia to increase your chances of success. Personal contact is an important condition for success.
Here are some tips:
- Russians value that you are on time.
- It sometimes happens that your business partner is late. This may be a way to test your patience or to show power.
- When making agreements with local authorities, it is quite normal for your conversation partner to be late.
- Appointments and meetings often run late.
- Plan your follow-up appointments well in advance and do not show that you are under time pressure. Your business partner may use this to make the negotiation as favourable as possible for themselves.
If you want to do business in Russia on a structural basis, you cannot do so without local representation. Also, you need a visa to visit Russia.
Ask your bank about the options and about the payment form used in export and import, and the currency that best suits the transaction. Also ask what you should pay attention to when it comes to payment habits and payment behaviour in Russia.
Record contracts in writing
Record agreements with your Russian business partner in writing. Have these written agreements assessed by a lawyer with knowledge of Russian law. The Netherlands does not have an execution treaty with Russia. This means that a judgment of a Dutch court does not have to be executed in Russia. Resolving disputes through arbitration is an alternative in that situation. Instead of a judge, an arbitration court rules, such as the Court of Arbitration of the International Chamber of Commerce (ICC). Russia and the Netherlands are both signatories to the New York Convention. As a result, they recognise each other's arbitral decisions and enforcements.
The order is final, and you are exporting your product to Russia. In addition to an invoice, transport documents and packing list, you sometimes need additional export documents, such as a Certificate of Origin (CVO), issued by KVK. Via Access2Markets you can find out which documents are required when importing your product into Russia. RVO explains how to look up information (in Dutch) in this database.
You invoice your Russian customer with 0% VAT. The condition is that you can demonstrate in your administration that the goods leave the EU. For example, based on the export declaration, transport documents and payment receipts.
Product requirements for export
Russia sets high standards for products. Therefore, many products, such as equipment and consumer goods, require a Certificate of Conformity (in Dutch) of the Eurasian Economic Union. The certificate is also called a CU TR certificate or EAC certificate. With this certificate you demonstrate that the product meets the standards, quality and safety requirements of the Eurasian Economic Union (EAEU). The EAEU consists of Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan. The certificate of conformity is valid for all member states of the EAEU. Recognised (accredited) certification agencies provide this certificate.
For products with a lower risk, a declaration of conformity (Declaration of Conformity of the Eurasian Economic Union) is sufficient to demonstrate safety. The statement is also known as a CU TR statement or EAC statement.
Products that comply with the technical regulations of the EAEU may carry the EAC (EurAsian Conformity) logo. This is the Eurasian version of the European CE logo. Other product requirements are possible. This depends on the type of product you are exporting. Access2Markets provides information about product groups and associated product requirements.
The Netherlands has sufficient experienced logistic service providers who are aware of customs procedures in Russia. A lot of transport (in Dutch) is by road. Airfreight represents a modest share of domestic logistics. Most of the extra costs you incur during transport depend on Russian customs. Besides some peaks around the turn of the year and a shortage of transport permits, waiting days at customs form the largest part of unexpected extra costs (source: evofenedex). Make clear agreements in advance with your Russian business partner. Agree on an Incoterm® with each other and include this in the contract.
When importing from Russia you usually pay import duties. There is no trade agreement between Russia and the EU. The amount of the import duty depends on the so-called commodity code, or TARIC code, of your product. In addition, you also pay Dutch VAT (in Dutch).
Specific import regulations apply to the import of certain products. For example, when it concerns goods that may pose a risk to safety, health, the economy and the environment. Inquire in advance at customs or your customs broker which documents are required when importing your product from Russia.
The rates of import duties and any other levies that you pay when importing from Russia are stated in the Customs Tax Service's Usage Rate (in Dutch).
Product requirements and product liability
Are you importing a product from non-EU countries such as Russia? Then take into account the European and national requirements and rules that apply to the product. The product must be safe and usable. As an importer of products from Russia, you are liable for (injury) damage caused by a faulty product. Does the product pose a risk? Then insure yourself against product liability.
If you provide services in Russia, you will need a visa and an invitation letter from your Russian business partner. If you carry out a job in Russia for which you bring tools that you take back after your job, you can use an ATA carnet for this. This 'goods passport' prevents you from paying import duties, VAT or a deposit for temporary import into Russia and re-import into the EU.
Consult the Tax and Customs Administration tool ‘Diensten in en uit het buitenland’ (in Dutch) to find out whether the service you provide in the Netherlands or Russia is taxed with VAT. If you supply electronic services directly to Russian consumers or companies, you must register for VAT in Russia and pay VAT there.