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. Last Updated: 07/27/2016

For Dealmaking, U.S. Sends Top Man

It is an odd role for a member of the U.S. Cabinet: Ace-in-the-hole for 28 American businesses in Russia that say they are hurt by recent tax hikes, decentralization of power and changes in national economic policy.


In an interview Tuesday, Commerce Secretary Ron Brown acknowledged that his role during his five-day Russian visit as the key negotiator for specific American business projects was "unusual."


He said he was not against "rewriting" his "job description when needed" to adapt to the situation in Russia where many business projects still require high-level government approval, despite the country's move toward a free-market economy.


Brown, the tough-talking former chairman of the Democratic Party who has close ties to President Bill Clinton, said he is attempting to use his influence to untangle a myriad of U.S. business deals in Russia worth an estimated $45 billion.


The success or failure of his down-to-business visit, which began Monday and includes a meeting Wednesday with President Boris Yeltsin, will largely be measured by how many agreements Brown can help American businesses close before he leaves Friday.


Brown himself acknowledged that such deal-counting is the way many people will score his visit.


"Some agreements we expect to have signed," he said, adding that he anticipated "movement on some of the specific projects."


Visiting American business people said they will be monitoring progress on three key projects:


?Sakhalin-2. Will the $10 billion oil deal to develop the Sakhalin shelf get an exemption from the potentially crippling $5 per barrel export tax? The consortium includes two U.S. companies, Marathon Oil and McDermott International, Inc. Brown said he would seek exemptions for oil developers whose investments preceded the tax.


?U.S. West. Will the American telecommunications company, whose president is traveling with Brown, announce new investment for the Russian Telecommunications Development Corporation? U.S. West contributed its share in four joint telecommunications ventures to gain a role in a multinational consortium to upgrade Russia's dilapidated communications network. By some estimates, it could cost $80 billion to $120 billion to bring the system up to Western standards.


?Bristol-Meyers Squibb Company. Will the drug maker be able to capitalize on Russia's recent decision to automatically accept all drugs approved by the U.S. Food and Drug Administration? The regulation which has come under question in Russia could be a boon to Bristol-Meyers which operates a plant outside Moscow that makes its popular products Capoten and Corgard.


Two agreements have already been announced in conjunction with Brown's visit: a defense conversion project to create a drug distribution network and a plan to open seven U.S. business centers in the former Soviet Union this year.


Brown said he was "confident" that talks were "moving in the right direction" for gaining tax exemptions for U.S. oil deals following his meeting Tuesday with Finance Minister Alexander Shokhin.


Shokhin specifically mentioned the cloudy tax picture surrounding the Sakhalin project and went on to criticize the current system "in which every major project has to be piloted through the parliament, compelling it to devise a dedicated legal network for every particular project."


On Tuesday, Brown met Prime Minister Viktor Chernomyrdin with whom he vowed to push for exemptions on oil export taxes.


Previously, Chernomyrdin was the deputy prime minister for the gas and oil industry and has career-long contacts in the industry.


In the interview, Brown said the Russian economy was experiencing a "bumpy period" on a route that was "generally moving in the right direction."


"Clearly there is frustration on the part of private investors," he said, singling out as Public Enemy No. 1 a string of new taxes and hikes in existing taxes. "Business people like predictability. When you change their assumptions, some would say 'arbitrarily,' the rationale changes."


Brown estimated that U.S. firms had investments totaling only about $1 billion in Russia. By comparison, American companies have invested about $3 billion in Hungary, he said.


"I think that $1 billion could easily grow to $50 billion," he said.


On Monday, Brown announced that the Department of Commerce was expected to give $2 million for the training of an additional 250-300 interns in its Special American Business Internships Training program.


The program brings mid- and senior-level managers to the United States where they train with local companies. The funding would bring the interns to about 750 per year, according to Brown.