The Russian minister for economic development, Alexei Ulyukaev, visited Austria where he met with businessmen and discussed the prospects for Russia-Austria and Russia-EU relations in the context of Trump’s victory in the U.S. election.

Austrian President Heinz Fischer, center, reviews an honor guard marching during a wreath laying ceremony at the Tomb of the Unknown Soldier in Moscow, April 6, 2016. Photo: AP

The long planned visit of Russian Economic Development Minister Alexei Ulyukaev to Austria on Nov. 9 coincided with Donald Trump’s victory in the U.S. presidential election. As a result, the discussion of how to move Russian-Austrian economic relations forward despite the sanctions war between Russia and the EU received an added stimulus amidst the U.S. presidential election.

Ulyukaev hardly planned to comment on the Trump election victory when he planned his first-ever visit to Austria. But news of Trump’s victory was already making global headlines on the morning of Nov. 9, when Ulyukaev was meeting with businessmen at the Economic Chamber of Austria.

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“What is happening today in America – the unexpected outcome of the elections – is to a certain extent an uprising of those who work, create added value and feed the people against those who do not let them work, live and feed in a normal way. It is a very important signal, which we have to dwell upon,” said the minister.

At the same time, Ulyukaev expressed cautious optimism about possible improvement of U.S.-Russia relations amidst Trump's victory. “I think that we have to be reserved in our assessments. A lot remains to be figured out,” he said, recalling that eight years ago, Barack Obama’s presidency had also begun with high hopes, which were followed by disappointments.

Russia-Austria economic ties

Yet, the traditionally good Russian-Austrian economic relations remained the key topic of the day. Both Russian and Austrian officials unanimously confirmed that there are no problems in their bilateral relations, even if there are problems in Russia-EU relations. In fact, Austria sticks to its “dovish” position in the EU, speaking out against expanding the sanctions against Russia.

"In the long term, sanctions are not the right way to build a good cooperation,” said Austria’s Vice-Chancellor and Minister for Science, Research and Economy, Reinhold Mitterlehner. According to him, there are “traditionally good trade relations between Russia and Austria” that the two countries want to “intensify.”

At the same time, Ulyukaev described Russia-Austria economic ties as “useful, productive and straightforward.” He discussed with his counterpart "the ways of how to overcome the abnormal situation with Russian-European relations.

Before coming to Austria, Ulyukaev visited Italy, where the government also plays a critical role in alleviating the sanctions regime. Hovewer, according to the Russian minister, Italians "are looking for ways out of it, but are not independent in their decision making because the mechanism has been transferred to the supra-national level."

During the meeting the parties discussed important economic projects such as the Nord Stream-2 gas pipeline and the construction of the broad-gauge Russian standard railway to Vienna. The upcoming Russian-Austrian year of tourism was also on the agenda of the talks. Special hopes are being pinned on the year to foster Austrian investments in the Russian tourism industry, particularly in the North Caucasus.

Strong bilateral ties

In the past two years the trade balance between Russian and Austria has decreased, but to a lesser extent than Russia-EU trade in general. According to the Russian minister, Austria’s accumulated investment in Russia is about $6.5 billion, while Russia has invested $23.7 billion in Austria.

Companies like Kniel, which builds factories producing optical fiber, wood panel producer Egger and Voith Hydra, which makes turbines for hydro power stations, all have their successful businesses in Russia. The banking sector is also contributing to the equation: there are active Russian banks in Austria and Austrian banks in Russia, like Raiffeisen Banking Group, Bank Austria, VTB, Sberbank, etc. Thus, Russia continues to be an important economic partner for Austria and vice versa.

Ulyukaev reminded the public that, due to the devaluation of the Russian ruble and ruble-denominated assets, the country is presently more attractive for investments. “Now labor in Russia is cheaper than in China. That has never been the case before. Of course, it is a consequence of a deep devaluation of the national currency. Yet it is good for the cost income ratio,” argued Ulyukaev.

The minister confirmed a prediction that Russia will experience modest economic growth next year. It is going to be at the level of about one percent of the GDP. The consumer demand is already restoring while the nominal salaries have begun to grow at least by one percent per year. “At the end of the year we will have an inflation rate of about 5.5-5.7 percent. Of course, that may sound strange for the European ear, but for us, taking into account our history, it is a good dynamic,” explained Ulyukaev.

One of the crucial problems for the Russian economy is the attraction of new investment. According to Ulyukaev, this problem might be partly resolved, “when businesses realize that the situation with consumer demand and inflation is already comfortable and it is possible to receive additional money."

"We hope that is going to happen in 2017,” he clarified.

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Michael Angerer, regional manager of the Austrian Chamber of Economy, told Russia Direct that he considered Ulyukaev’s meeting with the businessmen very useful. “They present the current situation in Russia from a competent minister while providing possibilities for our companies to do business in Russia and also give a certain sense of security,” he said.

At the same time, the meeting’s participants expressed their hope that certain changes will happen in the world with the U.S. election results.

“I find it exciting that today the Russian economy minister is visiting Austria, while on the same day the elections in the United States have brought a new result. And I hope that we have a good chance now to return to the good old state of both bilateral Russian-Austrian relations and EU-Russia relations, which have always included economic, trade and cultural ties,” said Katharina Brook, a consultant working with several Austrian companies active in Russia.