Foreign Companies in Russia for the Long Term
- Dec. 10 2014 00:00
Philippe Pegorier heads French power company and train maker Alstom's operations in Russia, Ukraine and Belarus. And since May, he has chaired the Association of European Businesses, or AEB, a Moscow-based lobby group with over 600 member companies.
Do you think theácrisis has shaken European companies' faith ináthe Russian economy?
We had a survey byámarket research company GfK, which showed ináits most recent report ináMay that European companies are very confident ináthe long term. Thanks toáthe growth ofáthe middle class, modernization ofáinfrastructure andáso on, it is clear that Russia is developing. Maybe not as fast as western businesspeople, western politicians andáwestern journalists would like, but you should not forget that Russians have never inátheir history lived so free andáin such good conditions as now.
Short-term, ofácourse, there could be difficulties, but atácompanies that have been here foráa long time, such as Alstom andáSiemens, we know there have already been many crises, andáwe survived.
So there is aácrisis. There will be other crises ináthe future. But we stay here because we know that between theácrises we will rise with theácountry, as theámarket rises.
What do sanctions against Russia mean foráthe EU?
Economic sanctions will have aávery bad influence onáEuropean economies, raising unemployment andácausing bankruptcies.
There is aáchoice: Do they [European governments] want toáprioritize theáquality ofálife ofátheir own citizens, or ofápeople abroad, Ukrainians? I think with elections inside theáEU, ináFrance, Denmark, Italy andáso on, theámessage ofávoters is: We want theáEU toálook toáus, not toálook abroad.
No election was ever won onáexternal policy. Always, everywhere, elections are won onádomestic policy. Theáproblem ofáRussia, andásanctions onáRussia, is one ofádomestic policy. Theáproblem ofáUkraine is one ofáexternal policy.
This is aáquestion that politicians have toáanswer, but we have toáraise it.
Do you think Russia's much-discussed "pivot east" threatens Europe's role ináthe Russian economy?
Russia is aávery big country, andáChina, like Europe, is its neighbor. It is normal that Russia has ties with both. Even ináthe Soviet era there were ties with China. I think there is space foráeverybody.
Atáthe same time, theáEU accounts forá75 per cent ofáforeign investment ináRussia. TheáChinese are still not atáthis level andáwill need aálong time toáget there. TheáEU's presence ináRussia is historical, centuries-old andáimportant.
What is theárole ofáthe Association ofáEuropean Businesses, especially ináthis current crisis?
Theáassociation's role is toápromote theáactivities ofáour 650 members with European andáRussian authorities.
We are here toáadvocate economic growth andácreate value. Ináthis situation, that means being clearly against economic sanctions against Russia andáalso promoting de-escalation everywhere. Because escalation is bad forábusinessáináRussia ofácourse, but first andáforemost ináUkraine. We will, ofácourse, comply with any economic sanctions, but we look aápriori toáavoid them.
We are also working toward theáestablishment ofánew long-term ties between theáEU andáRussia andáthe negotiation ofáa free-trade agreement between Europe andáEurasian Union [a bloc that unites Russia, Belarus andáKazakhstan].
How do you lobby theáRussian government? Who are you inácontact with?
We are inácontact with everybody. With theáeconomic ministries, with theáForeign Ministryá— Foreign Minister Sergei Lavrov regularly accepts our invitations toáspeak toáthe associationá— andáwith theáState Duma andáthe Federation Council.
It is always better toálobby before laws are written than after they are adopted. So we try toáinfluence laws during their creation, ináthe interest ofáour members or European business or toásay: attention, this law may have aábad influence onáour relations.
Russian lawmakers are very open toádiscussion. I will not say we always agree, but atáleast we discuss. Just as we also nowá— especially nowá— do not always agree with theáEuropean Commission or different European governments.
How has Russia's economic slowdown affected Alstom's operations andáyour sector inágeneral?
Alstom is between two phases ofáinvestment. Theámarket is flat. Investment around theáwinter 2014 Olympic Games ináSochi is over, andáa new phase ofáinvestment toámodernize infrastructure foráthe 2018 Football World Championship is set toástart. We are confident that Russia will have toámodernize theáhost cities. They will need new public transportation andámetro systems, andánew electricity networks. How would you describe your relations with state companies?
Our clients are mainly state companies. We produce locomotives foráRussian Railways andámetro andátram cars forácities andámunicipalities. We also work with energy companies Inter RAO, Rosatom andáRusHydro. We have very good relations with state firms, even partnering with them. We have aájoint venture inánuclear with Rosatom, foráexample. Nuclear is very touchy, andáwe are dealing perfectly with them.
How do you handle staffing with expats andáRussian workers?
Theámost difficult thing is toáfind good high-level Russian employees who speak English. With expats, attracting them is aáquestion ofáwhat we pay. But theáproblem with expats is that usuallyá— atáleast ináour companyá— they do not speak Russian, so you do not use these two resources foráthe same thing.
When, foráexample, we are atáthe design concept stage ofáa new type ofálocomotive, it is better toáhave expats. These transfer their know-how toáRussiansá— after all, we need Russian people foráproduction andáso on. Expats are not here forálife, they come foráa couple ofáyears.
How do you manage staff ináRussia?
Theátraditional way toárule aáRussian company is pyramidal: It all goes toáthe general director, who signs everything. That is theáRussian way.
Western companies, especially big companies like Alstom, are organized ináa matrix structure. So what I need toádo inámy position is toámix both, toástraddle theápyramid andáthe matrix. It is aábit complicated. I would not say it is impossible, because we are managing it, but it is aáchallenge.
What advice would you give toáa foreign company that wants toácome toáRussia?
First you need toáestablish confidence with your clients. Russians only do business with their friends. You need toáknow them, you need toáspend time with them andáonly then can you do business. á