Policies Towards Foreign Direct Investment

The Ministry of Economic Development (MED) is responsible for overseeing investment policy in Russia. The Foreign Investment Advisory Council (FIAC), established in 1994, is chaired by the Prime Minister and currently includes 53 international company members and four companies as observers. The FIAC allows select foreign investors to directly present their views on improving the investment climate in Russia, and advises the government on regulatory rule-making. Russia’s basic legal framework governing investment includes 1) Law 160-FZ, July 9, 1999, “On Foreign Investment in the Russian Federation”; 2) Law No. 39-FZ,  February 25, 1999, “On Investment Activity in the Russian Federation in the Form of Capital Investment”; 3) Law No. 57-FZ, April 29, 2008, “Foreign Investments in Companies Having Strategic Importance for State Security and Defense”; and 2) the Law of the RSFSR No. 1488-1, June 26, 1991, “On Investment Activity in the Russian Soviet Federative Socialist Republic (RSFSR).” This framework nominally attempts to guarantee equal rights for foreign and local investors in Russia. However, exemptions are permitted when it is deemed necessary to protect the Russian constitution, morality, health, human rights, and national security or defense, and to promote the socioeconomic development of Russia. Foreign investors may freely use their revenues and profits obtained from Russia-based investments for any purpose provided they do not violate Russian law.

Limits on Foreign Control and Right to Private Ownership and Establishment

Russian law places two primary restrictions on land ownership by foreigners. First are restrictions on foreign ownership of land located in border areas or other “sensitive territories.” The second restricts foreign ownership of agricultural land: foreign individuals and companies, persons without citizenship, and agricultural companies more than 50-percent foreign-owned may hold agricultural land through leasehold right. As an alternative to agricultural land ownership, foreign companies typically lease land for up to 49 years, the maximum legally allowed.

President Vladimir Putin signed in October 2014 the law “On Mass Media,” which took effect on January 1, 2015, and restricts foreign ownership of any Russian media company to 20 percent (the previous law applied a 50 percent limit only to Russia’s broadcast sector). U.S. stakeholders have also raised concerns about similar limits on foreign direct investments in the mining and mineral extraction sectors; they describe the licensing regime as non-transparent and unpredictable as well.  In December 2018, the State Duma approved in its first reading a draft bill introducing new restrictions on online news aggregation services. If adopted, foreign companies, including international organizations and individuals, would be limited to a maximum of 20 percent ownership interest in Russian news aggregator websites.

Russia’s Commission on Control of Foreign Investment (Commission) was established in 2008 to monitor foreign investment in strategic sectors in accordance with the SSL. Between 2008 and 2017, the Commission received 484 applications for foreign investment, 229 of which were reviewed, according to the Federal Antimonopoly Service (FAS). Of those 229, the Commission granted preliminary approval for 216 (94 percent approval rate), rejected 13, and found that 193 did not require approval. (See https://fas.gov.ru/p/presentations/86). In 2018, the Commission reviewed 24 applications and granted approvals for investments worth RUB 400 billion (USD 6.4 billion).  International organizations, foreign states, and the companies they control, are treated as single entities under this law, and with their participation in a strategic business, subject to restrictions applicable to a single foreign entity.

Since January 1, 2019, foreign providers of electronic services to business customers in Russia (B2B e-services) have new Russian value-added tax (VAT) obligations. These include: (1) VAT registration with the Russian tax authorities (even for VAT exempt e-services); (2) invoice requirements; and (3) VAT reporting to the Russian tax authorities and VAT remittance rules.

Other Investment Policy Reviews

The WTO conducted the first Trade Policy Review of the Russian Federation in September 2016. Reports relating to the review are available at: https://www.wto.org/english/tratop_e/tpr_e/tp445_e.htm  .

The United Nations Conference on Trade and Development (UNCTAD) issues an annual review of investment and new industrial policies: https://unctad.org/sections/dite_dir/docs/wir2018/wir18_fs_ru_en.pdf  and an investment policy monitor: https://investmentpolicyhub.unctad.org/IPM 

Business Facilitation

The Agency for Strategic Initiatives (ASI) was created by President Putin in 2011 to increase innovation and reduce bureaucracy. Since 2014, ASI has released an annual ranking of Russia’s regions in terms of the relative competitiveness of their investment climates, and provides potential investors with important information about regions most open to foreign investment. ASI provides a benchmark to compare regions, the “Regional Investment Standard,” and thus has stimulated competition between regions, causing an overall improved investment climate in Russia. See https://asi.ru/investclimate/rating/ (in Russian). The Federal Tax Service (FTS) operates Russia’s business registration website: www.nalog.ru.Per law (Article 13 of Law 129-FZ of 2001), a company must register with a local FTS office within 30 days of launching a new business, and he business registration process must not take more than three days, according to. Foreign companies may be required to notarize the originals of incorporation documents included in the application package. To establish a business in Russia, a company must pay a registration fee of RUB 4,000 and register with the FTS. Starting January 1, 2019, a registration fee waived for online submission of incorporation documents.  See http://www.doingbusiness.org/data/exploreeconomies/russia .

The Russian government established in 2010 an ombudsman for investor rights protection to act as partner and guarantor of investors, large and small, and as referee in pre-court mediation facilitation. The First Deputy Prime Minister was appointed as the first federal ombudsman. In 2011, ombudsmen were established at the regional level, with a deputy of the Representative of the President acting as ombudsman in each of the seven federal districts. The ombudsman’s secretariat, located in the Ministry of Economic Development, attempts to facilitate the resolution of disputes between parties. Cases are initiated with the filing of a complaint by an investor (by e-mail, phone or letter), followed by the search for a solution among the parties concerned. According to the breakdown of problems reported to the ombudsman, the majority of cases are related to administrative barriers, discrimination of companies, exceeding of authority by public officials, customs regulations, and property rights protection.

In June 2012, a new mechanism for protection of entrepreneur’s rights was established. Boris Titov, the head of the business organization “Delovaya Rossia” was appointed as the Presidential Commissioner for Entrepreneur’s Rights.

In 2018, Russia implemented four reforms that increased its score in World Bank’s Doing Business ranking. First, Russia made the process of obtaining a building permit faster by reducing the time needed to obtain construction and occupancy permits.  Russia also increased quality control during construction by introducing risk-based inspections. Second, it made getting electricity faster by imposing new deadlines for connection procedures and by upgrading the utility’s single window as well as its internal processes. Getting electricity was also made cheaper by reducing the costs to obtain a connection to the electric network. Third, Russia made paying taxes less costly by allowing a higher tax depreciation rate for fixed assets. Fourth, Russia made trading across borders easier by prioritizing online customs clearance and introducing shortened time limits for its automated completion.

Outward Investment

The Russian government does not restrict Russian investors from investing abroad. In effect since 2015, Russia’s “de-offshorization law” (376-FZ) requires that Russian tax residents notify the government about their overseas assets, potentially subjecting these to Russian taxes.

While there are no restrictions on the distribution of profits to a nonresident entity, some foreign currency control restrictions apply to Russian residents (both companies and individuals), and to foreign currency transactions. As of January 1, 2018, all Russian citizens and foreign holders of Russian residence permits are considered Russian “currency control residents.” These “residents” are required to notify the tax authorities when a foreign bank account is opened, changed, or closed and when there is a movement of funds in a foreign bank account. Individuals who have spent less than 183 days in Russia during the reporting period are exempt from the reporting requirements and the restrictions on the use of foreign bank accounts.

Investment Incentives

Since 2005, Russia’s industrial investment incentive regime has granted tax breaks and other government incentives to foreign companies in certain sectors in exchange for producing locally. As part of its WTO Protocol, Russia agreed to eliminate the elements of this regime that are inconsistent with the Trade-Related Investment Measures TRIMS Agreement by July 2018. The TRIMS Agreement requires elimination of measures such as those that require or provide benefits for the use of domestically produced goods (local content requirements), or measures that restrict a firm’s imports to an amount related to its exports or related to the amount of foreign exchange a firm earns (trade balancing requirements). Russia notified the WTO that it had terminated these automotive investment incentive programs as of July 1, 2018. However, shortly thereafter, the Ministry of Industry and Trade announced that it would provide support to automotive manufacturers if they meet certain production quotas and local content requirements. The government is developing a new points-based system to estimate vehicle localization levels to determine original Equipment Manufacturer (OEM)’s eligibility for Russian state support.  The government will provide state support only to OEMs whose finished vehicles are deemed to be of Russian origin, which will depend upon them scoring at least 2,000 points under the new system to get some assistance and 6,000 point to enjoy a full range of support measures. Points will be awarded for localizing the supply of certain components.

The government also introduced Special Investment Contracts (SPIC) as an alternative incentive program in 2015. On December 18, 2017, the government changed the rules for concluding SPIC, to increase investment in Russia by offering tax incentives and simplified procedures for government interactions. These contracts, generally negotiated with and signed by the Ministry of Industry and Trade, ostensibly allow for the inclusion of foreign companies in Russia’s import substitution programs by providing access to certain subsidies to foreign producers if local production is established. In principle, these contracts may also aid in expediting customs procedures. In practice, however, reports suggest even companies that sign such contracts find their business hampered by policies biased in favor of local producers. The amendments aim to improve the SPIC mechanism by clarifying investment requirements and necessary documentation. They also provide a timeframe and procedures for application review, and for amending or terminating a SPIC. Finally, the amendments allow for broader composition of the SPIC private partner: the investor may now procure not only manufacturing services, but also engineering, distribution, and financial services, among others.

The Russian Direct Investment Fund (RDIF) was established in 2011 as a state-backed private equity fund to operate with long term financial and strategic investors and by offering co-financing for foreign investments directed at the modernization of the Russian economy. RDIF participates in projects estimated from USD 50 to USD 500 million, with a share in the project not exceeding 50 percent. RDIF has attracted long-term foreign capital investments totaling more than USD 40 billion in the following sectors: energy, energy saving technologies, telecommunications, healthcare and other areas. RDIF has also developed a system for foreign co-investment in its projects that allows foreign investors to participate automatically in each RDIF project.

Foreign Trade Zones/Free Ports/Trade Facilitation

Russia continues to promote the use of high-tech parks, special economic zones, and industrial clusters, which offer additional tax and infrastructure incentives to attract investment. “Resident companies” can receive a broad range of benefits, including exemption from profit tax, value-added tax, property tax, import duties, and partial exemption from social fund payments. The government evaluates and grants funding for investments on a yearly basis.

Russia has 25 special economic zones (SEZs), which fall in one of four categories: industrial and production zones; technology and innovation zones; tourist and recreation zones; and port zones. As of January 2018, 15 U.S. companies are working in Russian SEZs. According to Russian data, U.S. investors had invested over USD 1 billion in SEZs as of October 2018, making the U.S. the second largest investor in Russian SEZs.  A Russian Audit Chamber investigation of SEZs in April 2017 found the zones have had no measurable impact on the Russian economy since they were founded in 2005. “Territories of Advanced Development,” a separate but similar program, was launched in 2015 with plans to create areas with preferential tax treatment and simplified government procedures in Siberia, Kaliningrad, and the Russian Far East. In May 2016, President Putin ordered work on 10 existing SEZ’s to cease and suspended the creation of any new SEZs, at least until a more integrated approach to SEZ’s and “Territories of Advanced Development” was put in place.

Performance and Data Localization Requirements

Russian law generally does not impose performance requirements, and they are not widely included as part of private contracts in Russia. Some have appeared, however, in the agreements of large multinational companies investing in natural resources and in production-sharing legislation. There are no formal requirements for offsets in foreign investments. Since approval for investments in Russia can depend on relationships with government officials and on a firm’s demonstration of its commitment to the Russian market, these conditions may result in offsets in practice.

In certain sectors, the Russian government has pressed for localization and increased local content. For example, in a bid to boost high-tech manufacturing in the renewable energy sector, Russia guarantees a 12 percent profit over 15 years for windfarms using turbines with at least 65 percent local content. Russia is currently considering local content requirements for industries that have high percentages of government procurement, such as medical devices and pharmaceuticals. Russia is not a signatory to the WTO’s Government Procurement Agreement. Consequently, restrictions on public procurement have been a major avenue for Russia to implement localization requirements without running afoul of international commitments.

Russia’s data storage provisions (the “Yarovaya law”) took effect on July 1, 2018, with providers being required to store data in “full volume” beginning October 1, 2018. The Yarovaya law requires domestic telecoms and ISPs to store all customers’ voice calls and texts for six months; ISPs must store data traffic for one month. The Yarovaya law initially required even longer retention with a shorter implementation window, which companies criticized as costly and unworkable.

The Central Bank of Russia has imposed caps on the percentage of foreign employees in foreign banks’ subsidiaries. The ratio of Russian employees in a subsidiary of a foreign bank is set at less than 75 percent. If the executive of the subsidiary is a non-resident of Russia, at least 50 percent of the bank’s managing body should be Russian citizens.

Capital Markets and Portfolio Investment

Russia is open to portfolio investment and has no restrictions on foreign investments. Russia’s two main stock exchanges – the Russian Trading System (RTS) and the Moscow Interbank Currency Exchange (MICEX) – merged in December 2011. The MICEX-RTS bourse conducted an initial public offering on February 15, 2013, auctioning an 11.82 percent share.

The Russian Law on the Securities Market includes definitions of corporate bonds, mutual funds, options, futures, and forwards. Companies offering public shares are required to disclose specific information during the placement process as well as on a quarterly basis. In addition, the law defines the responsibilities of financial consultants assisting companies with stock offerings and holds them liable for the accuracy of the data presented to shareholders. In general, the Russian government respects IMF Article VIII, which it accepted in 1996.

Credit in Russia is allocated generally on market terms, and the private sector has access to a variety of credit instruments. Foreign investors can get credit on the Russian market, but interest rate differentials tend to prompt investors from developed economies to borrow on their own domestic markets when investing in Russia.

Money and Banking System

Banks make up a large share of Russia’s financial system. Although Russia had 432 licensed banks as of March 13, 2019, state-owned banks, particularly Sberbank and VTB Group, dominate the sector. The top five largest banks are state-controlled (with private Alfa Bank ranked sixth). The top five banks held 59.2 percent of all bank assets in Russia as of March 1, 2019. The role of the state in the banking sector continues to distort the competitive environment, impeding Russia’s financial sector development. At the beginning of 2019, the aggregate assets of the banking sector amounted to 91.4 percent of GDP, and aggregate capital was 9.9 percent of GDP. Russian banks reportedly operate on short time horizons, limiting capital available for long-term investments. Overall, a share of non-performing loans (NPLs) to total gross loans reached 5.5 percent as of January 1, 2019. Foreign banks are allowed to establish subsidiaries, but not branches within Russia. The Russian Central Bank and the Far East Development Ministry have proposed a number of policy initiatives aimed at creating a Regional Financial Center (RFC) in the Russian Far East. The Far East Development Ministry has drafted a bill to create the RFC that is still undergoing an interagency approval process.  These proposed measures, still to be approved, include legal amendments permitting foreign bank branches in the region. Foreign businesses operating within Russia must register as a business entity in Russia.

Foreign Exchange and Remittances

Foreign Exchange

While the ruble is the only legal tender in Russia, companies and individuals generally face no significant difficulty in obtaining foreign currency. Only authorized banks may carry out foreign currency transactions, but finding a licensed bank is not difficult. The Central Bank of Russia (CBR) retains the right to impose restrictions on the purchase of foreign currency, including the requirement that the transaction be completed through a special account, according to Russia’s currency control laws. The CBR does not require security deposits on foreign exchange purchases. Otherwise, there are no barriers to remitting investment returns abroad, including dividends, interest, and returns of capital, apart from the fact that reporting requirements exist and failure to report in a timely fashion will result in fines. To navigate these requirements, investors should seek legal expert advice at the time of making an investment.

Currency controls also exist on all transactions that require customs clearance, which, in Russia, applies to both import and export transactions, and certain loans. As of March 1, 2018, the Central Bank of Russia (CBR) no longer requires a “transaction passport” (i.e. a document with the authorized bank through which a business receives and services a transaction) when concluding import and export contracts. The CBR also simplified the procedure to record import and export contracts, reducing the number of documents required for bank authorization. Additionally, banks are now responsible for preparing reporting documentation and keeping record of such contracts. The new instruction is an example of further liberalization of the settlement procedure for foreign trade transactions in Russia. In 2016, the CBR tightened regulations for cash currency exchanges: a client must provide his full name, passport details, registration place, date of birth, and taxpayer number, if the transaction value exceeds 15,000 rubles (approximately USD 220). In July 2016, this amount was increased to 40,000 rubles (approximately USD 606). The declared purpose of this regulation is to combat money laundering and terrorist financing.

Remittance Policies

The CBR retains the right to impose restrictions on the purchase of foreign currency, including the requirement that the transaction be completed through a special account, according to Russia’s currency control laws. The CBR does not require security deposits on foreign exchange purchases. Otherwise, there are no barriers to remitting investment returns abroad, including dividends, interest, and returns of capital, apart from the fact that reporting requirements exist and failure to report in a timely fashion will result in fines. To navigate these requirements, investors should seek legal expert advice at the time of making an investment. Banking contacts confirm that investors have not had issues with remittances and in particular with repatriation of dividends.

Sovereign Wealth Funds

On February 1, 2018, Russia combined its two sovereign wealth funds, the Reserve Fund and the National Wealth Fund (NWF). These funds have a combined holding of USD 59.13 billion as of March 1, 2019. The government plans to use domestic and foreign borrowing to finance the budget deficit in 2019, while accumulating funds in the NWF. The Ministry of Finance oversees the fund’s assets, while the CBR acts as the operational manager. Russia’s Accounts Chamber (the standing body of state financial control established by Russia’s parliament) regularly audits the NWF, and the results are reported to the State Duma. The NWF is maintained in foreign currencies, and is included in Russia’s foreign currency reserves, which amounted to USD 479.3 billion as of March 8, 2019.

Russia does not have a unified definition of a state-owned enterprise (SOE). However, analysts define SOEs as enterprises where the state has significant control, through full, majority, or at least significant minority ownership. The OECD defines material minority ownership as 10 percent of voting shares, while under Russian legislation, a minority shareholder would need 25 percent plus one share to exercise significant control, such as block shareholder resolutions to the charter, make decisions on reorganization or liquidation, increase in the number of authorized shares, or approve certain major transactions. SOEs are subdivided into four main categories: 1) unitary enterprises (federal or municipal that are fully owned by the government), of which there are 862 unitary enterprises owned by the federal government as of January 1, 2018. 2) other state-owned enterprises where government holds a stake of which there are 1,130 joint-stock companies owned by the federal government as of January 1, 2018 – such as Sberbank, the biggest Russian retail bank (over 50 percent is owned by the government); 3) natural monopolies, such as Russian Railways; and 4) state corporations (usually a giant conglomerate of companies) such as Rostec and Vnesheconombank (VEB). There are currently six state corporations. Nevertheless, the number of federal government-owned “unitary enterprises” declined by 22.2 percent in 2017, according to the Federal Agency for State Property Management, while the number of joint-stock companies with state participation declined by 20.2 percent in the same period.

SOE procurement rules are non-transparent and use informal pressure by government officials to discriminate against foreign goods and services. Sole-source procurement by Russia’s SOEs increased to 45.5 percent in 2018, or to 37.7 percent in value terms, according to a study by the non-state “National Procurement Transparency Rating” analytical center.  The current Russian government policy of import substitution mandates numerous requirements for localization of production of certain types of machinery, equipment, and goods.

Privatization Program

The Russian government and its SOEs dominate the economy. The government approved in early 2017 a new 2017-19 plan identifying state-controlled assets of Sovcomflot, Alrosa, Novorossiysk Commercial Seaport, and United Grain Company for privatization. The plan would also reduce the state’s share in VTB, one of Russia’s largest banks, from over 60 percent to 25 percent plus one share within three years. However, citing unfavorable market conditions, the government once again put on hold privatization of Russia’s largest SOEs and sold none of its largest companies slated for privatization in 2017-2019. As a result, the total privatization revenues received in 2018 reached only RUB 2.44 billion (USD 39 million), down 58 percent compared to 2017.

Despite some government efforts to combat it, the level of corruption in Russia remains high. Endemic corruption at the highest levels of government was the focus of nationwide protests in March 2017 led by one of Russia’s opposition leader Alexei Navalny. Anti-corruption protests continued across Russia in April 2017, days after President Vladimir Putin admitted Russia had a problem with state corruption. The protests hit the capital and several other cities, but attendance was notably smaller than in March 2017, when Russians took to the streets in droves demanding government reforms to tackle the issue. Transparency International’s 2018 Corruption Perception Index (CPI), ranked Russia 138 out of 180.

Russia’s CPI scores declined in 2018 to 28, down from 29 in 2015-2017. Roughly 39 percent of entrepreneurs surveyed by the Russian Chamber of Commerce in June-July 2018 said corruption declined in the preceding six months, while 9.5 percent said corruption intensified. Businesses mainly experienced corruption during applications for permits (39.2 percent), during inspections (34.5 percent), and in the procurement processes at the municipal level (30 percent).

In December 2018, Russia’s Prosecutor General Yuri Chaika reported 7,800 corruption convictions in 2018, including of 837 law enforcement officers, 63 elected officials at regional and municipal levels, and 606 federal, regional, and municipal officials.  Among these corruption convictions was Sakhalin Region’s former governor, Aleksandr Horoshavin, sentenced to 13 years in prison for bribery and money laundering.

In December 2018, the Russian government awarded 46 million rubles (USD 690,000) to a private company to direct discussions on anticorruption and civil-society development across the country.  During 2019, the contractor will conduct 135 events in Moscow, Saint Petersburg, Crimea, and 17 regions in Russia. These will include round table discussions, lectures, seminars, forums, and conferences. The company will also conduct social polling and in-depth interviews.

Russia adopted a law in 2012 requiring individuals holding public office, state officials, municipal officials, and employees of state organizations to submit information on the funds spent by them and members of their families (spouses and underage children) to acquire certain types of property, including real estate, securities, stock, and vehicles. The law also required public servants to disclose the source of the funds for these purchases and to confirm the legality of the acquisitions. Recent anti-corruption campaigns include guidance for government employees and establishment of a legal framework for lobbying. In 2014, government plans called for an education campaign for employees and students in tertiary education on bribery and the law. In 2015, federal legislation provided a clear definition of conflict of interest as a situation in which the personal interest (direct or indirect) of an official affects or may affect the proper, objective, and impartial performance of official duties.

The 2016 anti-corruption plan, typically adopted for two years, called for anti-corruption activity in the judiciary, investigations into conflicts of interest, and increased practical cooperation between the NGO/expert community and government officials. Legislative amendments were introduced in 2017 to improve the anti-corruption climate including the creation of a registry of officials charged with corruption-related offences (entered into force on January 1, 2018). The information about the officials who were dismissed for having committed corruption-related offences will be kept in the registry for the period of five years. The employer of an official dismissed for corruption will be responsible for entering the information in the online database. The Constitutional Court gave clear guidance to law enforcement bodies on the issue of asset confiscation due to the illicit enrichment of officials. Russia has ratified the UN Convention against Corruption, but its ratification did not include article 20, which deals with illicit enrichment. The Council of Europe’s Group of States against Corruption reported in 2016 that Russia fully complied with 11 recommendations – and partially complied with 10 – provided by this organization during the previous periodic review.

Nonetheless, the Russian government acknowledged difficulty enforcing the law effectively, and Russian officials often engaged in corrupt practices with impunity. Some analysts have expressed concern that a lack of depth in the compliance culture in Russia will render Russia’s adherence to international treaties a formality that does not function in reality. The implementation and enforcement of the many measures required by these conventions have not yet been fully tested. In recent years, there appear to have been a greater number of prosecutions and convictions of mid-level bureaucrats for corruption, although real numbers were difficult to obtain. The areas of government spending that ranked highest in corruption were public procurement, media, national defense, and public utilities.

Corruption in the past was mostly associated with large construction or infrastructure projects. Russia’s Federal Security Service stated in February 2016 that RUB5 billion (USD 77 million) of defense spending was lost to corruption in 2014. In 2016, authorities brought corruption charges against three governors, one federal minister, one deputy minister, the head of Federal Customs (charges were later dropped), and the deputy head of the Federal Investigative Committee. Not one law-enforcement agency managed to avoid high-level corruption investigations in their ranks, including the newly-formed National Guard. In September of 2016, Russian authorities arrested an MVD colonel who allegedly had stashed more than USD 120 million in cash in a Moscow apartment.

It is important for U.S. companies, irrespective of size, to assess the business climate in the relevant market in which they will be operating or investing and to have effective compliance programs or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in Russia should take time to become familiar with the relevant anticorruption laws of both Russia and the United States in order to comply fully with them. They should also seek, when appropriate, the advice of legal counsel.

Additional country information related to corruption can be found in the U.S. State Department’s annual Human Rights Report available at https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/.

Resources to Report Corruption

Vladimir Tarabrina
Ambassador at Large for International Anti-Corruption Cooperation
Ministry of Foreign Affairs
32/34 Smolenskaya-Sennaya pl, Moscow, Russia
+7 499 244-16-06

Anton Pominov
Director General
Transparency International – Russia
Rozhdestvenskiy Bulvar, 10, Moscow
Email: Info@transparency.org.ru

Individuals and companies that wish to report instances of bribery or corruption that impact, or potentially impact their operations, and to request the assistance of the United States Government with respect to issues relating to issues of corruption may call the Department of Commerce’s Russia Corruption Reporting hotline at (202) 482-7945, or submit the form provided at http://tcc.export.gov/Report_a_Barrier/reportatradebarrier_russia.asp  

The Russian labor market remains fragmented, characterized by limited labor mobility across regions and substantial differences in wages and employment conditions. Earning inequalities are significant, enforcement of labor standards remains relatively weak, and collective bargaining is underdeveloped. Employers regularly complain about shortages of qualified skilled labor. This phenomenon is due, in part, to weak linkages between the education system and the labor market. In addition, the economy suffers from a general shortage of highly skilled labor. Meanwhile, a large number of inefficient enterprises, with high vacancy levels offer workers unattractive, uncompetitive salaries and benefits. After years of gradual hikes, the monthly minimum wage in Russia will finally be increased to the official “subsistence” level of RUB 11,163 (USD 196) on May 1, 2019, eight months ahead of the original schedule. Employers are required to make severance payments when laying off employees in light of worsening market conditions.

The rate of actual unemployment, calculated according to International Labor Organization (ILO) methodology, averaged 4.9 percent in 2018. As of the end of 2017, Moscow and the Republic of Ingushetia had the lowest and highest unemployment rates in the country – 1.2 percent and 26.3 percent, respectively. Real wages increased in 2018 by 6.8 percent year-on-year, with retail sales expanding by 2.6 percent year-on-year. Private businesses must compete with SOEs, which dominate the economy. Recent surveys indicate Russians would prefer to work for SOEs because they offer better salaries and benefits. SOEs and the public sector employ 33 percent of Russia’s 65.6 million economically active persons. The public sector, which maintains inefficient and unproductive positions, directly accounts for about 24.5 percent of the workforce.

The 2002 Labor Code governs labor standards in Russia. Normal labor inspections identify labor abuses and health and safety standards in Russia. The government generally complies with ILO conventions protecting worker rights, though enforcement is often insufficient, as the Russian government employs a limited number of labor inspectors.

Official statistics show 1.8 million registered migrant workers in 2017 (down from 1.83 million in 2017) who have valid work permits from visa countries or work “patents” from visa-free Central Asian countries. Workers from EAEU countries (Armenia, Belarus, Kazakhstan, and Kyrgyzstan) are eligible to work in Russia without work authorization documents. The Russian Interior Ministry estimated at the end of 2018 that the number of illegal immigrants in Russia accounted for about 2.0 million people and continued to fall. Migrant workers are concentrated in the construction, retail, housing, and utilities sectors. The Russian government enacted sectoral restrictions for foreign workers in 2016 that cap the percentage of foreign workers allowed in different industries.

The U.S. Overseas Private Investment Corporation (OPIC; slated to be incorporated into the U.S. International Development Finance Corporation in October 2019) announced in the wake of Russia’s actions in Ukraine in 2014 that it had suspended consideration of any new financing and insurance transactions in Russia. Prior to this decision, OPIC had been authorized to provide loans, loan guarantees (financing), and investment insurance against political risks to U.S. companies investing in Russia since 1992. OPIC currently has 15 active projects in Russia totaling nearly USD 502 million (10 projects covered by OPIC finance and five projects by OPIC insurance). See https://www.opic.gov/opic-action/active-opic-projects for more information.

The OPIC agreement (Investment Incentive Agreement) between the United States and Russia can be found at https://www.opic.gov/sites/default/files/docs/europe/BL_Russia-04-03-1992.pdf .