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Russia and Japan Keep Doing Business Despite Sanctions

Chairman of the Russian-Japanese Business Council discusses how trade between countries is moving away from purely raw materials


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This article originally appeared at Russia Beyond the Headlines

RBTH: Russian exports are now on the rise due to the weakened ruble. Have Japanese companies taken advantage of this situation?

Alexei Repik: You could say so. Japanese companies have begun to partially transfer production to Russia a long time ago, as early as in the beginning of the 2000s. But the process of localization of production is directly related to the size of the local market. At a certain stage, it becomes unprofitable for any company from any country to "bring" goods from abroad, and profitable to produce them on the spot.

The weakening of the ruble is, rather, more stimulating for the export ambitions of the manufacturing companies already operating in Russia. For example, it has been officially announced that the newly revived Japanese car brand Datsun will be produced in Togliatti, not only for the needs of the Russian market and the CIS countries, but also for the global sales of the Renault-Nissan alliance. 

RBTH: Which areas and projects do you think offer the most promise when it comes to Russian-Japanese cooperation in 2015?

A.R.: The countries will move ahead from cooperation purely in raw materials.

There will be new areas of cooperation, such as the joint implementation of infrastructure projects, projects in the field of urban development and others. I think that the task set by the leaders of the two countries to increase bilateral trade to $50 billion per year will be accomplished in the near future.

For the development of cooperation, in December 2014, we recreated the Russian-Japanese Business Council, which already comprises of more than 100 companies from different market segments, including the engineering industry, agriculture, transport, energy, financial services and many others.

RBTH: How do you think Russian-Japanese business relations will develop in the conditions of sanctions by Tokyo? When does the impact of sanctions on businesses get minimized?

A.R.: Of course, Japan has also introduced restrictive measures against Russia. But our collaboration has not stopped because of this, although it may slow down, especially in the growth rate. If businesses increase the volume of cooperation, this will create conditions for further growth of trade and investment. There is such aspiration on our side. The Russian economy needs cooperation and integration with the Asian partners, especially with the Japanese ones, as much as ever.

RBTH: Japanese automakers have claimed they do not intend to close their enterprises in the Russian Federation due to the loss of demand. Is there a threat that Japanese automakers will leave Russia?

A.R.: The automotive segment is characterized by a certain periodicity. Maybe the hallmark of this market is that the drop in demand happens in an avalanche-like way, in the case of changes in the economy. But this market will recover quickly enough. Most Japanese automakers have received near-record profits on the Russian market in 2014. This is despite the fact that the situation in the Russian economy was already quite tense.

RBTH: The Japanese government has defined the priority areas for business development with Russia. One of them is medicine. What are the prospects in this area now?

A.R.: The Russian group of companies, R-Pharm, has been successfully implementing mutually beneficial projects with Japanese colleagues for several years. And it is not only just about the import of drugs from Japan, but about the production of these drugs on the territory of Russia, and, more importantly, for the joint development of innovative drugs.


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