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. Last Updated: 07/27/2016

Lavrov Laments $50Bln in Lost Deals

Itar-TassIgor Yurgens, left, and LUKoil chief Vagit Alekperov, right, mingling with colleagues during the 15th-anniversary conference of the RSPP on Wednesday.
Foreign Minister Sergei Lavrov said Wednesday that cash-rich Russian companies failed to clinch $50 billion in deals over the past year due to Western trade barriers and pledged to do something about it.

Lavrov, speaking at a conference celebrating the 15th anniversary of the Russian Union of Industrialists and Entrepreneurs, or RSPP, also said the barriers and "the discriminatory approach of Western countries" were a sign that European companies perceived the Russians as a "serious competitor."

"We need to fight this, and we'll be doing it together," Lavrov told a room packed with more than 200 of the country's business leaders.

During a meeting with the same business leaders in the Kremlin on Tuesday, Putin praised their "healthy ambitions," saying they had come of age and were ready for great expansion plans abroad.

Russian companies lost 13 deals worth $50 billion, said Lavrov, citing what he said was data from a European consultancy.

He appeared to be referring to a report released late last month by M&A Intelligence, a Russian consultancy. The report said the 13 lost deals included five by Gazprom, three by LUKoil and two by Severstal. Unified Energy Systems, MMK and AFK Sistema were also on the list. The biggest was Severstal's $13 billion bid to buy Luxembourg-based steelmaker Arcelor.

Last summer, Severstal put forward a last-minute bid to take over Arcelor, months after the eventual victor, Mittal Steel, had made its own offer.

Lavrov also expressed hope that Russian businesses would face fewer restrictions in the United States, where he recently met with President George W. Bush, Secretary of State Condoleezza Rice and other officials. Lavrov said the general mood on the U.S. side was that the Jackson-Vanik amendment, a Soviet-era law that restricts trade, was an "anomaly" that would be lifted by the year's end. Russian companies' expansion plans have stoked fears in the West that the Kremlin was using their ever-growing cash reserves to pursue foreign policy objectives.

Speaking of ways to ease the difficulties of expansion to foreign markets, Viktor Vekselberg, an oil and metals billionaire, said Russian companies should do a better job of communicating with their foreign colleagues. Despite RSPP's 15-year history, only last February did the group sign a partnership agreement with its European counterpart, UNICE, Vekselberg said.

He said the Russians needed to explain to the West: "Who we are, why we are coming, what our tasks and goals are, and what our principles are."

Speaking on the sidelines of the conference, he said he planned to travel to Switzerland later this month to tell the European public about the company's intentions. "We'll come and tell everything within the next two weeks," Vekselberg said. He was responding to a question from an Agence France Presse reporter who said the foreign public did not understand what his SUAL metals company was up to. SUAL joined forces with Russian Aluminum and Switzerland-based Glencore last year to create the world's biggest aluminum company.

Billionaire Vladimir Yevtushenkov, AFK Sistema's core shareholder, largely agreed with Vekselberg but said it was only natural that domestic companies were not "greeted with open arms." "We all encounter that. It's a difficult process," he told reporters.

The M&A Intelligence report said a $786 million deal between Sistema and Lithuania's Bite Lietuva, the Baltic mobile operator, fell through last year.

The expansion problems, however, did not appear to spoil the festive mood at the anniversary conference. Severstal chief Alexander Mordashov extolled the government, saying it "has constantly listened to us, the RSPP representatives."

Economic Development and Trade Minister German Gref returned the compliment, calling the RSPP "perhaps the biggest achievement" of the government and business. The RSPP is also known as the "oligarchs' trade union."

Business leaders and officials took turns at the lectern. When Deputy Prime Minister Alexander Zhukov offered RSPP chief Alexander Shokhin a seat, Shokhin declined, saying with a smile that the business community believed "it is better to stand than to sit." The word for "sit" in Russian is also slang for doing time in prison.

One of the RSPP's most high-profile former members is Mikhail Khodorkovsky, the Yukos founder who is now serving an eight-year sentence on politically tainted charges. Khodorkovsky on Wednesday accused the Kremlin of trying to keep him in prison with new charges.

Khodorkovsky's arrest in October 2003 was seen as a turning point in relations between business leaders and the Kremlin. Under Putin's rule, the balance of power between the state and the oligarchs has dramatically shifted, as the RSPP has gone from setting the agenda to following the Kremlin's lead.

Vekselberg joined Wednesday's love-in, saying Tuesday's meeting in the Kremlin had been "conducted at a completely new level."

"It was an open dialogue," he said.

Some observers may have a hard time believing that. "The evolution of the RSPP has been a lost opportunity," said a Western economist who has studied Russia for 15 years. He spoke on condition of anonymity because he was not authorized to comment on Russian politics. The RSPP was set up to institutionalize dialogue between businesses and the state, but the dialogue seems to be all one way these days, he said.

Tina Podplatnik, a visiting fellow at Oxford University's St. Antony's College who wrote her doctorate on the RSPP, said the organization became an organized business lobby under Putin, while under President Boris Yeltsin, "interaction with big business had consisted of a queue outside his reception hall."

But, she said by e-mail from New York, the Yukos affair had marked "the beginning of an existential crisis" for the group and only a handful of its members, including Unified Energy Systems chief Anatoly Chubais and RSPP executive Igor Yurgens, had dared to speak out.

"The majority of Russian businessmen were cowardly, apprehensive and silent in face of the crisis, with many disappearing from public view altogether, not wishing to provoke Putin," she said. "While the RSPP could hardly have controlled Khodorkovsky's behavior -- or 'misbehavior' in the eyes of the Kremlin -- the RSPP was being held accountable for it."

Vekselberg indicated Wednesday that the tycoons and the Kremlin have put the past behind them. "Today, many problems are a thing of the past," he said on the sidelines of the conference. He did not elaborate and dashed away from the reporters.