The reset in U.S.-Russian diplomatic relations could lead to a reset in U.S.-Russian business relations and the modernization of Russia’s regional economies.
Pictured L-R: Skolkovo Foundation President Victor Vekselberg, Chairman of the Board of LTD RUSNANO Anatoly Chubais, CEO of RBC Igor Agamirsyan at Russian Innovation Week 2013 in Boston. Photo: Greg M. Cooper
While the focus of U.S.-Russian relations has typically been on foreign policy and diplomacy, there are actually a growing number of linkages between the U.S. and Russian business sectors, both at the grassroots and government level.
These business relations, if allowed to develop further and flourish as part of the “Reset” policy established between both nations in 2009, could eventually lead to increased trade between the U.S. and Russia, new opportunities for economic cooperation on a global scale, and new partnerships in innovative fields such as IT, software, biotech and clean tech.
The key to this new round of economic cooperation, of course, is the “reset” policy announced by President Obama and then President Medvedev in 2009. While the “reset” typically applies to a “reset” of diplomatic relations, it also refers to a “reset” in a whole range of other endeavors, including business and innovation.
In 2009, the two nations formed the U.S.-Russia Bilateral Presidential Commission with different working groups for, among other things, re-establishing business links between the two nations and normalizing trade relations. At a time when Russia ranks as one of the largest economies in the world, it is only America’s 28th largest trading partner.
Clearly, there’s more that Russia can do to play a greater role in the world economy. According to the U.S.-Russia Bilateral Presidential Commission, WTO accession for Russia was to become the building block of this economic re-integration policy for Russia. The WTO fits into one of the core ideas of the U.S.-Russia Bilateral Presidential Commission – nations that trade together, stay together.
As a result, government leaders on both sides have been working to do all the blocking and tackling required to make the standards, requirements and trade systems of the U.S. and Russia compatible. The short-term goal is to increase the flow of trade and investment to both nations, while the long-term goal is to establish a more stable footing for the U.S. and Russia to hash out their diplomatic differences.
At the same time as government leaders are creating a level playing field for businesses (especially export-oriented businesses), Russia is actively working to modernize its economy and move beyond a dependence on a few key commodity exports. The centerpiece of this transformation is Skolkovo, a gleaming new innovation center in Moscow that was essentially created by government fiat as a Russian answer to Silicon Valley.
What started as an incubator and accelerator for high-tech businesses free of the irregularities of Moscow’s business sector now includes Skoltech, an innovation and tech school modeled on MIT, as well as the makings of a real innovation ecosystem with VC firms, entrepreneurs and innovation centers.
It is Russia’s hope that this Skolkovo model will be emulated and copied around Russia. Viktor Vekselberg, the head of Skolkovo, has championed the idea that Skolkovo should become an innovation model for Russia’s other regions. To put this into practice, Russia has created a new plan to foster regional economic innovation centers.
This is actually something very new for Russia. In Soviet times, there were “academic cities” of scientists and researchers, but these were typically closed to the West and never became the types of open, high-tech hubs that are now being built all over the world, not just in America. What these Russian regional innovation centers need from the West is not only cash and investment, but also the knowledge of how to commercialize products and attract investors.
Thus far, there are signs that Russia’s early attempts to nurture and create an innovation-focused economy are starting to pay dividends. It’s cool to be a start-up entrepreneur in cities like Moscow -- the city's famed Red October chocolate factory is now a digital media hub.
Russian media companies are creating Top 50 lists of tech startups. Companies like Yandex and Vkontakte are being held up as models of how Russia can create their own homegrown versions of Silicon Valley companies like Google and Facebook. And now innovation has gone beyond just the Internet to include big sectors like Biotech and Clean Tech. For the U.S. government, two priority areas are clean tech and infrastructure. The message is clear: Russian companies that have innovative solutions in these areas are welcome in the West.
But there are also discouraging signs that all of this is really a bit of a Potemkin village, meant to dazzle Western guests while simultaneously draining the bank accounts of deep-pocketed investors. You don’t build Silicon Valley overnight, and you can’t decree the growth of a startup ecosystem using a Five-Year Plan.
And, as Konstantin Fokin noted at this year’s Russian Innovation Week in Boston, nothing gets done in Russia without the involvement of the government. And that means that anything that’s promising or profitable has the risk of being compromised by the state. You need to prove that you can become rich by being a risk-taking entrepreneur. That’s easier said than done – you can’t import risk-seeking behavior the way you import chicken.
Against the backdrop of deteriorating U.S.-Russian diplomatic relations, there are actually a number of top U.S. leaders who are putting their reputations on the line to make business cooperation a success. U.S. Ambassador Michael McFaul, for example, recently attended the Russian Innovation Week event in Silicon Valley and emphasized the strategic importance of the U.S.-Russian business relationship.
Meanwhile, former U.S. Ambassador John Beyrle, who attended the Boston event, is now on the board of the U.S.-Russia Foundation, helping to export American entrepreneurial know-how to Russia. Other business and government leaders are inviting Russian companies to compete for VC money and set up business in their backyard. Others are inviting leaders to Silicon Valley to see how things work and explore how they can modernize their regional economies.
And, at this year’s Russian Innovation Week 2013 in Boston, one of the surprising stars of the event was none other than President of Tatarstan Rustam Minnikhanov, who was invited to keynote alongside Anatoly Chubays and Viktor Vekselberg from the visiting Russian delegation.
Tatarstan, a vibrant economic region located along the Volga, is a symbol of what’s possible once the fruits of U.S.-Russian business collaboration are fully distributed across Russia, instead of being concentrated in Moscow, like much of the nation’s oil & gas wealth. Just as all happy families are alike, all happy economies are alike. They have strong regional economic hubs that help to diversify a nation’s economy. If Tatarstan can become Russia’s Austin or Boston or Seattle, then Moscow can retain for itself the role of Russia's Silicon Valley.