Q: What can be bought from Russia?
Q: What are Russian prices like?
Q: What are the main problems?
Q: Are spot buys of raw materials possible?
Q: What about OEM manufacturing?

Q: What can be bought from Russia?
A: The Russia's strength in raw material - ferrous and non-ferrous metals, rare earth metals, diamonds, amber, medicinal herbs, bee and snake venom, fish, cotton, pulp and paper products, chemical fertilizers, chemicals, oil and gas, timber, etc. - is well-known.

It is, in general, more difficult to find manufactured goods that are exportable, but there are numerous exceptions:

• Semiconductors and electronic components;
• Optics, lasers
• Various kinds of other high-technology and specialty products (e.g. isotopes);
• Certain textiles and garments;
• Led crystal;
• Cars, trucks, airplanes/helicopters, machinery;
• Military equipment;
• Vodka and other spirits.

It is generally advisable to look for what Russia does well and try to export that, rather than to 'go fishing'. In other words, if one is looking for given product and asking for competitive quotes from around the world, one is probably just wasting time in Russia.

Q: What are Russian prices like?
A: Russian prices for raw materials, say, are usually competitive.

It is also probably fair to say that the relatively lower prices are compensated for by greater difficulties (which shall be discussed below). In our experience, the successful companies are making their money not so much from lower Russian prices per se, but from their ability to handle the Russian situation at a reasonable cost which allows them to take advantage of the lower prices.

The situation in manufactured products is similar: relatively low prices are offset by hassles and difficulties. Companies that can operate in this environment can do quite well.

Q: What are the main problems?
A: First, payment. It is common for Russian producers to demand payment in advance in cash, even if L/C payment has been arranged. The reason is that many factories require money for production and are unable to factor the L/Cs in Russia. Of course, only companies that are able to evaluate the supplier very carefully are willing to do business on these terms. This situation is improving, however.

Second, many purchasers want CNF quotes, but Russian suppliers prefer FOB (and that interpretation now often means "at the port" or "just outside of the port", not "on the boat") and ex-factory (ex-works) is popular. The reason is that internal transportation can be problematical, as can actual loading at the port. Many companies have found it necessary to have significant staff in country to handle logistics, since the suppliers often will not or can not.

Third, supply may not be available. Sometime supply is artificially restricted through quotas, or by the fact that the year's production has been allocated already, or by the fact that domestic sales may currently be more profitable than export sales. In general, Russian producers of the 'popular' products know which products are in demand in the world markets, know the prices, and often have no shortage of customers. It is often necessary to offer the supplier something 'extra' - which is not necessarily a better price. It might be advance payment or a credit line that can be used to refurbish plant or equipment; it might be investment; it might be a marketing joint venture.

Q: Are spot buys of raw materials possible?
A: We often get requests like "I need to buy ..... with delivery within two weeks". These requests are almost never successful. The reasons given above should make this clear. Buyers that are not familiar with the Russian market are usually unwilling or unable to meet Russian conditions, even if spot supplies are available (as they often are). Therefore, the spot buys normally go to the companies who are already buying in significant quantities from Russia and who have developed their own solutions to these issues. (And these companies, of course, do not need to ask us.)

Of course, there are always exceptions. But if a Russian product is available immediately, and shippable immediately, then the price is likely to be much closer to the 'world price'.

Q: What about OEM manufacturing?
A: Very few companies have Russian companies manufacture products to their spec and few Russian factories have experience in this business. Companies normally find that they must either buy "standard products" or must exert considerable control over factory processes, so much so that this becomes a de facto investment. See: Investing in Russia