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. Last Updated: 07/27/2016

Obama Charts Path to Bolster Trade

MTObama addressing university graduates Tuesday in a speech that analysts say is part of an unprecedented U.S. drive to reach out to ordinary Russians.

U.S. President Barack Obama on Tuesday said making good on a Kremlin promise to promote the rule of law would be a vital step toward boosting trade between U.S. and Russian companies.

Foreign Minister Sergei Lavrov said economic ties could soon improve because he had received assurances from the Obama administration that it would prioritize the scrapping of the Jackson-Vanik amendment, a major Soviet-era trade barrier between the countries.

The heads of U.S. and Russian companies, meanwhile, griped at a business conference about the challenges of working in each other’s countries.

“We want Russia to be selling us goods, and we want Russia to be buying from us,” Obama told the Moscow Business Summit co-organized by the American Chamber of Commerce in Russia. “Our fortunes are linked, and yet so much potential remains untapped.”

Annual trade between the countries totals $36 billion, which is about 1 percent of U.S. trade with the rest of the world.

The percentage has remained “virtually unchanged since the Cold War,” Obama said. “That $36 billion is about the same as our trade with Thailand, a country with less than half the population of Russia. Surely we can do better.”

But a condition for better trade relations is Russia’s observance of the rule of law, he said.

“We have to promote transparency, accountability [and] rule of law, on which investments and economic growth depend,” Obama said. “And so I welcome very much President Medvedev’s initiatives to promote the rule of law and ensure a mature and effective legal system as a condition for sustained economic growth.”

Medvedev urged business executives to look beyond Russia’s oil and gas.

“It is important that our American partners not only work in the oil and gas sector … but also invest in other spheres, both in those that are traditional for Russia and in high-technology,” he said.

In a sign that Obama is ready to encourage trade, Lavrov told Vesti state television that the U.S. administration intended to drop the 1975 Jackson-Vanik amendment, which has prevented Washington from granting most-favored nation status to countries that have non-market economies and restrict emigration.

“President Obama has acknowledged that this is, in general, the problem of the American side now,” Lavrov said about the amendment. “President Obama understands all the awkwardness of the situation, and has assured [us] that the dropping of the amendment will be one of the priorities of his administration.”

Russia should scrap visa rules for U.S. citizens in exchange for lifting Jackson-Vanik, said Alexander Shokhin, head of the Russian Union of Entrepreneurs and Industrialists, the other co-organizer of the conference. Calls to Shokhin’s cell phone for further comment went unanswered later in the day.

Russian and U.S. executives held intensive talks for several hours at the conference before Obama and Medvedev arrived. “We talked a lot about high-tech, innovation, investment opportunities, transportation, energy,” Andrew Somers, president of the American Chamber of Commerce, said after the conference. “What we focused on particularly was innovation and high-tech.”

Executives complained about problems with the investment climate in each other’s countries.

“One thing — and I would call that the big white elephant in the room — is the foundation which we all need to have successful business, and that is the rule of law. And that’s not negotiable,” Alcoa chief executive Klaus Kleinfeld told the conference.

On the Russian side, Vladimir Lisin, chairman of Novolipetsk Steel, which runs three mills in Pennsylvania, complained about new U.S. legislation that toughened certification rules for finished steel products from outside the United States.

“The results are the following: Two of our plants have been forced to halve production, 600 people have been sent on the street,” Lisin said. “We think it is an absolutely inadequate measure to support industries because jobs are being lost. We think U.S. authorities must review and amend this legislation.”

The criticism on the part of private Russian firms was echoed by state-run companies. “Today we heard reproach aimed at the U.S. administration that Russian companies … are clearly being discriminated against in the United States,” Vneshekonombank head Vladimir Dmitriyev told reporters.

Billionaire Victor Vekselberg, who chairs the TNK-BP board, said the time was ripe to sign an agreement on protecting mutual investments in both countries.

In an attempt to lighten the mood, Obama mentioned Russia’s sale of Alaska to the United States in his speech. “Along the way, you gave us a pretty good deal on Alaska. Thank you,” Obama said.

Tsar Alexander II sold Alaska to the United States in 1867 for $7.2 million in gold to help Russia’s cash-strapped treasury. The deal is regarded by some Russians as a national disgrace, especially in light of the gold and oil subsequently discovered there.