Reconsidering Russia: LS2group team helps American businesses sidestep trade issues

Nov 21

Written by LS2group

By Perr Beeman, Senior Staff Writer at the Business Record

Friday, November 18, 2016, 6:00 AM

There are a lot of misconceptions out there about Russia. For example, that all trade is banned. That it’s impossible to export goods to the former Soviet Union powerhouse. That Putin is Donald Trump’s best friend.

The folks at LS2group are here to tell you that Iowa businesses, and those in other states, should not assume they can’t do business in Russia. They have assembled a team that helps navigate the sometimes tricky route to selling stuff in a socialist environment.

Former U.S. State Department and Environmental Protection Agency staffer Sarah Mueller leads the company’s international work as senior account executive. Former Iowa lawmaker and LS2group partner Charles Larson is involved. So is Eric Phillipson, senior adviser for LS2 on international work, who is a retired lieutenant colonel in the U.S. Army and spent 20 years in the former Soviet Union. He is fluent in Russian. 

“Russia is an important market,” Larson said. “From an Iowa perspective in particular, whether it’s John Deere or our ag products, it’s a particularly important market.”

In 2014, Russia banned imports of certain European and U.S. food products for a year in retaliation for sanctions levied during Russia’s move into Ukraine. That ban has been extended into 2017. The EU is a large exporter to Russia, but U.S. agriculture products are a small percentage of what Russia buys. 

However, the ban doesn’t mean Iowa companies can’t trade there, Mueller said. Agricultural products can be shipped to a company in another country that then can sell the goods to Russia. Other goods aren’t part of the ban on U.S. exports.

“Since sanctions were imposed in 2014, we’ve had several clients approach us for recommendations about whether this is a good time to approach Russia, or if they should wait, or if they should go through an intermediary country,” Mueller said.

Phillipson said Iowa companies need to sort through the hype, understand Russia, and make the right connections. The reward could be a better market for Iowa products.

“There is a lot of concern about Russia, and a lot of that concern is based on the way Russia gets depicted,” Phillipson said. “It gets depicted as chaotic and unpredictable. Putin gets depicted as a madman, and no one knows what he’s going to do.”

“That really is not very accurate,” Phillipson continued. “Russia under Putin and Putin himself have been tremendously predictable, tremendously focused, and very effective at pursuing what they have been doing. And predictable on what they will do next. That doesn’t mean they are doing what we would like them to do.” 

The bottom line: don’t avoid Russia because you think, erroneously, there is chaos, Phillipson said. 

“That doesn’t make Russia a dangerous place to do business or a particularly risky place to do business. As long as you understand what is going on there, it can, in fact, be a very stable place to do business. A lot of very large companies are doing exactly that,” Phillipson said. 

What businesses in Iowa and the rest of Midwest need to understand is what Russia’s goals are and how to get their products in line with those goals in a way that doesn’t go up against U.S. interests.

What is Iowa’s potential there? 

“Light manufacturing, especially tech stuff that is tied to agriculture,” is one winner, Phillipson said. “Iowa has a clear advantage in that space. Iowa is manufacturing products that Russia will need. Russia is on a path. Part of that path will be food security. Financial security. Energy security.”

“Russia still can’t produce enough food to feed itself, and its leaders understand that he added. “Things like frost-resistant, fast-growing seeds” would be particularly helpful in a country that sits in the northern reaches of the northern hemisphere, Phillipson added. 

John Deere, Vermeer and other companies that offer modern, efficient harvest equipment also could have great potential in Russia. “Iowa businesses are already in a position to be experts in the field. We should work to make that engagement and to fill that niche.” 

Russia is not as technologically advanced as Iowa is on planting and harvesting, Phillipson said. The communal farms have been slow to convert to a new model. And that conversion often involved land barons locking up certificates that gave the ownership of a lot of land. 

“They are just now figuring out who can farm the land, and how their quasi-private, quasi-state system should manage agriculture,” he said.

With the proper approach and counsel, Iowa companies can do profitable business in Russia on a fairly broad scale, Phillipson said.

LS2group’s international work
The Russia work is part of an international initiative that has grown recently at LS2group.

“LS2 has been working the international sphere for about six years now,” partner Charles Larson Jr. said in an interview. That work included a Greater Des Moines seminar on Russia that drew about 70 recently.

“We are helping companies break into targeted countries,” including Russia, China, the Middle East, Lebanon, Latvia, and Chile, Larson said. 

“International trade is critical for Iowa agriculture and manufacturing. We assist companies in the agricultural sphere, pharmaceuticals, education, manufacturing, in identifying targeted markets. And then we help them know how to work in those countries,” he added.

“A lot of times there are trade barriers, so we negotiate around those trade barriers,” Larson said. “We understand what is required in the targeted country, and we can identify the right partner in that country, which is key. And we leverage relationships with the U.S. Embassy to help reach into the highest level of the foreign government if that is where the issue is.”

Other resources
Of course, LS2group is only one of many global players in Greater Des Moines. In addition to companies such as Kemin Industries, DuPont Pioneer, Vermeer and John Deere, the Greater Des Moines Partnership has made global trade a priority issue. The Partnership this year issued a special report on global trade, “Global DSM: Trade and Investment Strategy” (http://bit.ly/2bykVYK), and in 2013 it wrote a regional export plan. Des Moines International Airport serves as a port of entry. Other private companies, local offices of federal agencies such as the U.S. Commercial Service, law offices, the Iowa Economic Development Authority, the governor’s office and others also are heavily involved in trade missions and global trade issues.