Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Putin & Bush Get Down to Business

MTPresidents Vladimir Putin and George W. Bush putting pen to paper at the treaty signing ceremony in the Kremlin on Friday.
The signing of the arms treaty may have been hailed abroad as the high point of the summit, but another kind of history was made in St. Petersburg and Moscow over the weekend, one that may prove more profitable to Russia and the United States in the long run.

Recent trade tensions over chicken and steel aside, the U.S.-Russia summit marked a milestone in economic relations, as business representatives from both countries played a key role in their respective delegations for the first time.

In addition to conferences on aerospace, information technology and media entrepreneurship initiated by the presidents and attended by delegation members, Presidents George W. Bush and Vladimir Putin signed a joint declaration on cooperating in the energy sector, which Bush characterized as a "major new energy partnership."

Although no breakthroughs were announced concerning two of the most burning issues for Russia -- the repeal of the Jackson-Vanik amendment tying emigration policies to trade and official U.S. recognition as a market economy -- Bush said he would lobby Congress on Russia's behalf regarding Jackson-Vanik and that a decision on market economy status was coming soon.

"I am determined to work with Congress to remove Russia from the Jackson-Vanik amendment," Bush said Friday. As for market economy status, a key step toward entering the World Trade Organization on standard terms, Bush said it was a "regulatory matter" that the Commerce Department would decide by June 14 and that he had discussed the matter with Commerce Secretary Donald Evans.

Putin, speaking after Bush's departure from St. Petersburg on Sunday, said that although Russia "was not thrilled" over the lack of movement on Jackson-Vanik, "we have the right to fully consider this visit a success."

"We are holding talks to resolve misunderstandings or the results of misunderstandings," Putin said in televised remarks Friday. "We are focusing on building new economic relations," he said, adding that the two countries "need to remove barriers left over from the past."

Members of the business community shared Putin's bullish assessment of the summit.

"This is the first summit that involved the actual participation of the business community, which is a lot more important than the number of pieces of paper signed," said U.S.-Russia Business Council president Eugene Lawson, a member of the Russian-American Business Dialogue, initiated by Bush and Putin at the G-8 summit in July 2001. The RABD also includes the American Chamber of Commerce in Russia, the Russian-American Business Council, and the Union of Industrialists and Entrepreneurs, or RSPP, Russia's most powerful business lobby.

At a special meeting Friday, RABD representatives presented a report to Bush and Putin on target areas for improving the business environment, such as strengthening property rights and developing commercial mediation. The report also called for more transparent and steamlined visa processing on both sides and for better market access for Russian exports to the United States.

Top bankers also presented the presidents with reform recommendations that were developed with the participation of the Central Bank's first deputy head Andrei Kozlov. The group urged the adoption of the full set of Basel Committee norms, phasing out government ownership of banks and enhancing banks' ability and opportunity to lend. The only point on which the members could not reach consensus was whether foreign banks should be allowed to open branch offices, rather than subsidiaries, Kozlov said. Branch offices would allow foreign banks to expand within Russia without having to meet the Central Bank's capital requirements, raising fears that Russian banks would face an uneven playing field.

"The presidents want the participation of business people, which will have a benign ripple effect," Lawson said.

In signing the energy pact on Friday, Bush called on American businesses to "take the lead in developing the vast energy resources of Russia and the Caspian.''

The agreement could pave the way for increased U.S. investment in production, transportation and refining capacity, as well as higher sales of Russian oil to the United States.

Economic Development and Trade Minister German Gref said that although cooperation in the oil and gas sector has "the greatest potential," he noted that Russia is limited by infrastructure bottlenecks, primarily the lack of deep-water ports that can accommodate the supertankers required for profitable transoceanic shipping.

The energy agreement also creates a working group that is expected to meet for an energy summit in Texas later this year.

In addition to protocols and intentions, several important energy deals were signed during the summit. ExxonMobil signed an agreement with the Amur Shipbuilding Plant for a $140 million offshore platform, and Sovcomflot and ChevronTexaco signed a memorandum of understanding for further cooperation in crude oil shipping from the Caspian Pipeline Consortium.

In one of the few deals moving the other way, United Heavy Machinery, or OMZ, bought a U.S. oil rig design company, Friede and Goldman Ltd., for $15 million. OMZ said the purchase would allow it to tap into the growing demand for oil platforms in the Caspian Sea, the annual demand for which it estimates will be $10 billion by the end of the decade.

One of the most important outcomes of the summit for the Russian economy could be increased awareness of Russia in the West, said Yevgeny Gavrilenkov, chief economist at Troika Dialog. "Russia may achieve greater prominence in the minds of American specialists and businesspeople and that could lead to more interest in coming here to invest or work."

According to a source close to the U.S. delegation, the refusal of Congress to repeal Jackson-Vanik, which requires Russia to apply each year for normal trade status and precludes Russia from obtaining most-favored-nation status, was a response to Moscow's temporary ban on American poultry this year.

"Jackson-Vanik is a political issue, and Congress's decision was tied closely to the issue of U.S. chicken imports," the source said.

After banning U.S. poultry for a four-week period beginning March 10, the Agriculture Ministry revoked import licenses and has been slow to reinstate them.

"The U.S. party wanted to see the issue on the negotiating table," Reuters quoted Agriculture Minister Alexei Gordeyev as saying Saturday. "The Russian president was quite straightforward in explaining that we see it as a technical issue, linked to veterinary requirements."