Bruce H. Andrews
Today, U.S. Deputy Secretary of Commerce addressed a group of American and Russian business leaders during the U.S.-Russia Business Council’s annual meeting in New York. Deputy Secretary Andrews was the first official from the Department of Commerce to address the USRBC in more than two years.
In his remarks, Deputy Secretary Andrews addressed the uncertainty felt by U.S. businesses operating in Russia and articulated the rationale behind U.S. government sanctions.
Thank you, Steven. As some of you may know, Steve is not only a former colleague of mine but also truly knowledgeable about international affairs. I want to begin by thanking the U.S.-Russia Business Council for inviting me to speak today. It is great to be here among so many good friends and respected colleagues. For the last 22 years, the U.S.-Russia Business Council has served as an invaluable source of knowledge, insight, and guidance to policy makers and the business community.
I want to specifically recognize Chairman Klaus Kleinfeld, President Dan Russell, and the entire USRBC leadership team for their personal engagement through outreach, advocacy, and meetings with U.S. government officials. Thank you for your commitment to American businesses and American competitiveness. The interaction between government and business that the USRBC champions is critical to our mutual success. This relationship has been important to achieving progress in the past and will continue to help us reach positive outcomes in the future.
USRBC’s members play a vital role in one of the Commerce Department’s top priorities: helping American businesses succeed globally. As many of you have experienced firsthand over the last 20 months, we welcome your input and incorporate the views of business stakeholders into our policy deliberations. This is just as true in good times – such as the years leading up to Russia joining the World Trade Organization – as it is in today’s much more challenging environment.
Let me begin by saying this: The United States continues to believe that a strong and prosperous Russia – one that is a constructive member of the international community and works to uphold international rule of law – is in all of our best interests.
That is why, for 25 years, we have sought to deepen integration with Russia by facilitating trade and investment and supporting Russia’s accession into global institutions.
The Obama Administration has devoted considerable time and effort to building a strong economic and commercial relationship with Russia. Indeed, many of the businesses in this room have invested in and continue to trade with Russia, and employ Russian citizens. But, over the last two years, Russia’s leaders have made it clear that they no longer accept the important, mutually beneficial rules and institutions that Russia and the West both endorsed at the end of the Cold War.
Today, as a result of its government’s foreign, domestic, and economic policy choices, Russia is in a serious recession, and it is a much more challenging place to do business. I want to be clear: the current state of our economic relationship is a direct result of Russia’s actions. Everyone here knows that trade and investment cannot prosper without peace, stability, and respect for the rule of law and international law. In the absence of these essential ingredients, the United States has been forced to respond to the choices Russia has made.
I know that the targeted, sector-specific sanctions have made life complicated for many of you, and we have used them in a multilateral way after significant consideration and with focused precision. As a result of Russian actions, many of you now have to account for the realities of its current market by pricing in risk premiums. I also know that you, along with many of your Russian employees and customers, are getting a very different narrative from Russian government sources. This is why I wanted to speak with you personally today.
We cannot let distortions and propaganda go unchallenged. We need to remember the facts and the context. We need to place responsibility squarely where it belongs: on the shoulders of the Russian government.
Consider the actions Russia has undertaken in Ukraine: first in Crimea, where it initially denied that the “little green men” were Russian soldiers. Later, throughout subsequent intervention in support of armed separatists in eastern Ukraine, Russia again attempted to cover up its direct involvement. But this goes far beyond their dishonest statements and lack of credibility. These actions seriously threaten the international rules and norms that have underpinned European – and global – stability since World War II. Frankly, Russia’s unauthorized use of military force during the occupation and attempted annexation of Crimea weakens European stability and is an outright rejection of international law. And over the last 18 months, Russia’s military intervention in eastern Ukraine has continued to undermine European security and negatively impact the investment climate in the region as a whole.
The United States recognizes that Russia and Ukraine have a long and complicated history. We acknowledge that Russia has what President Obama calls “legitimate interests in terms of what happens next door in Ukraine.” But Russia’s leadership does not have the authority or any mandate to violate Ukraine’s sovereignty, overrule decisions made by the democratically elected government in Kyiv, or create yet another frozen conflict for a neighbor.
That is why Russia’s actions required an international response. And that is why the United States joined with over 30 countries from around the world – including the European Union, Norway, Australia, Canada, and Japan – in applying sanctions. These sanctions are not an ultimate solution, but a means to an end. The sanctions that the United States and our international partners have imposed are a necessary response to Russia’s irresponsible foreign policy choices.
We needed to make it clear that – if Russian troops pressed further into Ukraine or crossed into another one of its neighbors – the international reaction would be swift, unified, and even stronger. On the other hand, President Obama has clearly stated that the sanctions related to Russia’s actions in eastern Ukraine will be rolled back once Russia fulfills its commitments under the Minsk Agreement. This outcome is 100 percent under the control of the Kremlin. The choice is theirs.
Our goal is a change in Russia’s policies which ensures that its neighbors can make their own foreign and domestic policy choices without coercion. Until that happens, we will continue to enforce our sanctions on Russia in conjunction with our partners.
At the same time, we are working to support Ukraine’s efforts to build a more independent, stable, and prosperous country. We want Ukraine to have a fair chance to accomplish the goals its population overwhelming supports, namely: the chance to integrate with the global economy; the chance to deepen its integration with Europe; and the chance to be free from the cronyism and corruption that plagued its government for too many years.
Over the last year, I have personally met with Ukraine’s leaders on several occasions. And, today, Secretary Pritzker is in Kyiv continuing our bilateral conversations about how to develop a more attractive investment climate. The progress we are making matters to all of us here today. A stable and economically prosperous Ukraine – one that can pay its bills and serves as a reliable supplier and customer – is in all of our interests.
Today, both Russia and Ukraine are at economic crossroads. Ukraine is making the key choices necessary to grow its economy and attract new foreign investment, including fighting corruption and improving transparency. Russia, too, faces a number of important decisions, given the enormous ramifications that its policies – both foreign and domestic – have had on the country’s economy. Russia’s businesses and people are seeing the hardships caused by the Kremlin’s unfortunate decision-making.
After squandering many opportunities by failing to reform and diversify its economy, the Russian government appears increasingly reliant on protectionist policies in hopes of supporting domestic industries. As a result, over the last year and a half, Russia has fallen from the world’s 9thlargest economy to its 15th largest. And over $198 billion of capital – both foreign and domestic – has left the country since early 2014. But it is not too late for Russia to reverse this trend. Russia can once again become an attractive destination for investment – but first, it must make some key choices of its own. Most importantly, Russia must take steps to implement the commitments it agreed to in the Minsk Agreement.
The time is now for Russia to support a diplomatic solution to the crisis in eastern Ukraine and to return to a foreign policy that is consistent with international rules and norms. Domestically, Russia must adopt the public accountability measures necessary to minimize corruption and help industries operate more efficiently. Russian independent media and civil society can play a vital role in this. Russia must choose to unlock the creative and entrepreneurial potential of its people. And Russia must realize the pitfalls of attempts at self-sufficiency based on mercantilism and import-substitution, if Russian companies hope to become competitive players in global supply chains.
Our ability to engage with Russia in the economic sphere is being driven and circumscribed by the willingness of Russian leadership to make these key choices. But no matter what Russia chooses to do, I promise you this: we, at the U.S. Department of Commerce, will continue to work closely with American firms to help you navigate this challenging market. Ambassador Tefft is providing strong, experienced, and determined leadership in Moscow, and you couldn’t ask for better supporters than our U.S. Commercial Service team, led by Commercial Counselor Keith Kirkham at the Embassy in Moscow. In addition, regardless of the circumstances, the U.S. government highly values our long-term relationship with the USRBC and American companies that export to and operate in Russia – and we want to hear from you.
The Department of Commerce is a customer service organization at heart, and you and your companies – no matter where you are doing business – are our clients. We are here to serve you, and we take your feedback very seriously. Your input and ideas are particularly crucial now, given the current situation in the region. We want to ensure that our decisions are informed by the information you share with us, along with the many other important imperatives that we in government have no choice but to take into account.
The main thought I want to leave with you today is this: Russia’s ability to realize its potential as an important economic player and as an integral part of the global economy ultimately depends on the choices of its leadership. Put simply: the ball is in the Kremlin’s court. They must choose which path to follow.
We hope they will choose a path that restores international trust; reopens doors for prosperity and business cooperation; and most importantly, declares and abides by a renewed respect for sovereignty, self-determination, and dignity of Russia’s neighbors. We can’t make that choice for Russia, but it is vitally important that we leave Russia no doubt about where we stand.
Thank you for the opportunity to speak to you today.
Editor in Chief