Doing Business in Russia: Culture, Economy & Trade Guide

Geography, Climate, and Topography

The Russian Federation occupies most of Eastern Europe and northern Asia. It stretches from the Baltic Sea in the west to the Pacific Ocean in the east, and from the Arctic Ocean in the north to the Black Sea in the south (Pearson Education, 2012). It is the largest of the 21 republics that make up the Commonwealth of Independent States. There are also 6 federal territories, 2 federal cities, 49 regions, 1 autonomous region, and 10 autonomous areas (Pearson Education, 2012). Norway and Finland border the Federation in the northwest, while Estonia, Latvia, Belarus, and Ukraine border it in the west. In the south it is bordered by Kazakhstan, Mongolia, China, and North Korea. Russia occupies a land area of approximately 17,075,500 sq km (Pearson Education, 2012).

Russia spans all climatic zones except tropical. West of the Ural Mountains, from the Black Sea to the Arctic Ocean, lies a broad plain with low hills (Pearson Education, 2012). East of the Urals lies Siberia, which is covered with coniferous forest, swamps, tundra, and mountainous terrain (Russian Embassy, 2012). The country possesses an array of natural resources, including deposits of oil, coal, natural gas, strategic minerals, diamonds, and timber (Pearson Education, 2012). Coastlines along the Arctic and Pacific Oceans and the Baltic, Caspian, and Black Seas hold significant reserves of fish, oil, and natural gas. Russia has a harsh continental climate with large differences between winter and summer temperatures, and only 8% of its land is arable (Pearson Education, 2012).

The first Russian dynasty was founded in Novgorod in 862 by the Viking Rurik. The many tribes of the federation were united by the spread of Christianity in the 10th and 11th centuries (Pearson Education, 2012). This culminated in the conversion of Vladimir the Great — also known as Saint Vladimir — in 988. Power was centralized at Kiev, where grand dukes resided. When Kiev was destroyed by the Mongols in 1240, Russian territory was split into smaller dukedoms (Pearson Education, 2012). Moscow's role as an administrative and trade center — coupled with its function as the seat of the tribute collector for the Mongols — allowed early dukes of Moscow to extend their influence over other Russian cities. When Duke Ivan III acquired Novgorod and Tver in the late 15th century, he threw off the Mongol yoke. Ivan IV is credited with creating the Russian state, particularly after crushing the powers of rival princes and boyars (Pearson Education, 2012).

Historical Background

Russia remained largely medieval until the reign of Peter the Great (1689–1725). Peter was the grandson of the first Romanov tsar, Michael, who reigned from 1613 to 1645. Peter's rule was characterized by extensive reforms. His defeat of Charles XII of Sweden at the Battle of Poltava in 1709 extended Russia's boundaries westward. Catherine the Great (1762–1796) continued his expansionist legacy, acquiring Crimea, Ukraine, and part of Poland (Pearson Education, 2012). When Napoleon attempted to subdue Russia during the reign of Alexander I, he was defeated, and new territories — including Finland and Bessarabia — were acquired. The Holy Alliance, Alexander's brainchild, helped crush Europe's rising liberal movements. Alexander II (1855–1881) pushed Russia's borders to the Pacific and into Central Asia, and during his reign serfdom was abolished, though restrictions were imposed on the emancipated class (Pearson Education, 2012). After Russia's defeat in the war with Japan, revolutionary strikes forced Nicholas II (1894–1917) to grant a representative national body known as the duma. Its members were elected by a narrowly limited suffrage, and it held its first sitting in 1906, though it had very little influence on Nicholas (Pearson Education, 2012). The USSR was formally established on December 30, 1922.

Russia's Gross Domestic Product (GDP) as of 2011 was $2.38 trillion, with a per capita income of $16,700. The real growth rate stood at 4.3%, inflation at 8.9%, and the unemployment rate at 6.6% (Pearson Education, 2012).

To do business effectively in Russia, it is essential to understand local customs around greetings, negotiations, and general business conduct. Greetings are characterized by a firm handshake and should be appropriate for the time of day: dobraye utra (good morning), dobryy den (good afternoon), and dobryy vecher (good evening). It is common practice for people doing business in Russia to introduce themselves using their surnames (Kwintessential, 2004). Foreign nationals should find out whether their Russian counterparts hold any professional titles, as this is considered extremely important. One should address a counterpart as gaspodin or gaspazhah — the equivalents of Mr. and Mrs. — followed by the surname (Kwintessential, 2004).

Russians have three names: a given name, a patronymic (a version of the father's first name), and the father's family name. For men, the patronymic ends in the suffix "-vich" or "-ovich," meaning "son of." For women, it ends in "-a" or "-ova," meaning "daughter of." Business cards are important when working in Russia and should have one side translated into Russian, with all relevant titles and degrees included (Kwintessential, 2004).

Business Culture, Etiquette, and Per Capita Income

Punctuality is expected of foreign visitors, though Russian business counterparts may arrive hours after the agreed time — their lateness is often an indicator of their seriousness about the meeting rather than a sign of disrespect. During an initial meeting, Russian businesspeople will assess a visitor's credibility, so one must be firm and dignified while remaining warm and approachable (Kwintessential, 2004). Elaborate visual presentations and flashy slides are unlikely to impress; demonstrating genuine knowledge, professionalism, and expertise carries far more weight. While many Russian businesspeople speak English, attempting to present in Russian is appreciated, and a professional interpreter can be hired if necessary.

Negotiations in Russia tend to be tough and theatrical. Concessions should not be offered in the early stages, as Russians view compromise as a sign of weakness. Loss of temper, walkouts, and threats to end a deal are all considered normal parts of the negotiation process (Kwintessential, 2004). Business meetings are often conducted over dinner, and invitations to dine should always be accepted — declining is considered rude. The most senior attendees occupy the center seats at the table, and guests sit in the middle opposite their immediate counterparts. Alcohol is a customary part of Russian business dinners, and refusing to drink is generally unacceptable unless a plausible reason — such as health or religious grounds — is offered (Kwintessential, 2004).

Literacy levels in Russia are nearly 100%, with the exception of some areas dominated by ethnic minorities. Three-fifths of Russians aged fifteen and older have completed secondary school, and 8% have completed higher education (US Library of Congress, n.d.). Urban populations have higher school attendance rates than rural ones. Russia's educational system comprises pre-schools, elementary schools, secondary schools, and tertiary institutions. Children attend pre-school until the age of seven. State education is provided free of charge, while private education is funded by individual families.

Russia holds major deposits of oil, natural gas, coal, strategic minerals, diamonds, and timber. However, exploiting these resources is made difficult by formidable obstacles of climate, terrain, and distance.