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High hopes in Russia that Trump will ease trade sanctions

Russia investors react to Trump

Among the many issues facing President-elect Donald Trump as he ascends to the nation’s highest office is world trade, including the complex trade dynamic between the West and Russia, which is still operating under the weight of the 2014 economic sanctions.

European Union foreign ministers met over the weekend to discuss the sanctions, which are up for renewal in January, when Trump will also be inaugurated as president. These sanctions have hit Russia’s economy hard after the West aimed to punish Moscow for its annexation of Crimea and intervention in Ukraine.

In 2015, Russia’s economic growth contracted by 3.7 percent. The International Monetary Fund estimates the world’s largest oil producer will see a further GDP shrinkage of 1.2 percent this year. An International Monetary Fund (IMF) report cited “structural bottlenecks and the impact of sanctions on productivity and investment” that will hurt the country’s recovery, though higher oil prices are providing some relief.

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Not surprisingly, Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), believes sanctions are very negative for business -- “both U.S. business and Russian business.” He added, “They achieved absolutely the opposite result of what they wanted to achieve.” Moscow created the RDIF, a $10 billion dollar fund, in 2011 to attract global investment into Russia. 

Dmitriev hopes the sanctions will be lifted, but he expects the Russian economy t0 grow even if they aren’t. However, he said, ending the punitive measures “will be the right thing to do and will create a sense of trust that is needed between Russia and the U.S.”

Russian President Vladimir Putin has said he hopes to build trust and improve relations with the U.S. when president-elect Trump takes over in January. Russia looks forward to “their good personal relationship,” Putin spokesman Dmitry Peskov said in a recent interview with the Associated Press. 

Dmitriev is perhaps even more optimistic, positing that a Trump presidency is great for his country and a “huge opportunity” to “reset Russia’s relationship with the U.S.” He added, “Just as the previous one didn’t work, we hope that this one would. And we’re very impressed by President-elect Trump’s position that he wants to have good cooperation with Russia.”

He insisted Russia wants to be a “good partner,” saying “with President-elect Trump, there is a possibility to work jointly between Russia and the U.S. on issues like fighting terrorism and to make sure that our economies continue to grow as we provide access to each other to our markets.”

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Dmitriev acknowledged that Russia “doesn’t expect President Trump to give away anything from the U.S. priorities because, of course, every President wants to defend what’s important to his country, but we have lots of joint priorities. Fighting terrorism is one of them. Working together on economic growth is another one. And we believe that those win-win scenarios can be achieved very well by President Putin working closely with President Trump.”

Based on the IMF’s projections, Russia’s economy will return to growth, of a scant 1 percent, in 2017. Dmitriev believes the country has reached a macroeconomic stability and that steadying oil prices will aid the recovery.

In reference to getting foreign companies to invest in Russia, Dmitriev said, “There’s huge opportunities to make very good return in Russia. There’s a partner like the RDIF to invest in Russia with. We believe that’s why lots of our partners are investing with us. We invest quite a bit of money with UAE, Japan with China, with Korea, with lots of other partners.”

The RDIF has also invested in venture companies like the visionary high-speed transportation system Hyperloop One. “We are one of the investors hoping that Hyperloop will transform transportation in the world,” said Dmitriev. “We’d like to invest more in the U.S., and we believe we and our partners will achieve lots of synergy by investing in the U.S.”

Dmitriev argued that RDIF is “quite independent” from the Russian government. “All of our investment decisions are independent, and we invest with our partners, so we need to make a joint investment decision. The government doesn’t tell us what deals to do and what sectors to invest in.”

Lauren Hoenemeyer contributed to this report.

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