Russia’s Business Diplomacy

Key points in this Briefing Paper:

+ In Russia, as elsewhere, state power is founded in part on the nature and degree of the country's economic involvement with the rest of the world. However, Russia is conflicted in its attitudes towards integration into the global economy, as shown by its slow progress towards entry into the World Trade Organization.

+ The poor business environment has placed limits on long-term foreign investment in Russia and holds back the country's integration into the global economy. This restricts the scope of Russia's soft power as a pole of economic attraction, as does its tendency to employ coercion rather than persuasion.

+ President Dmitry Medvedev has put forward an ambitious but generalized modernization agenda, which if enacted would require close cooperation with the West and much greater foreign investment. However, this conflicts with entrenched economic and political interests.

+ There are several possible scenarios for Russia's future development. It may continue to rely on oil and gas revenues to prop up the current economic and political model. Investment is required to make the most of hydrocarbon reserves. At present, however, the government has returned to budget deficits to cover social spending, rather than seeking to boost growth through reform.