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Executive Report on Strategies in Russia
ICON Group International, June 2007, Pages: 387
How to Strategically Evaluate Russia
Perhaps the most efficient way of evaluating Russia is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
Relative Accessibility
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities.
Latent Demand and Accessibility in Russia
This report provides an extremely detailed overview of factors driving latent demand and accessibility in Russia. Latent demand is largely driven by economic fundamentals. But, latent demand only represents half of the picture. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks.
Chapter 2 deals with macro-accessibility. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Russia:
Openness to Trade in Russia
Openness to Direct Investment in Russia
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are also covered in Chapter 2, which is presented from the perspective of an American firm, though it is equally applicable to most firms entering Russia. This chapter has been authored by local offices of the U.S. Government. I have included a number of edits to clarify the provided information as it relates to the general strategic framework.
In Chapter 3, I summarize the economic potential for Russia over the next five years for hundreds of industries, categories, and products. The goal of this chapter is to report my findings on the real economic potential, or latent demand, represented by Russia when defined as an area of dominant influence. The data presented are the result of various spatial econometric and time-series forecasting models which, for each category presented, are applied to forecast and allocate latent demand across all countries of the world and major distribution centers or centers of dominant influence within each country. This is accomplished knowing that economic fundamentals (e.g. income) generally vary from one country to another within a given country over time. In this chapter, I report the allocation for each category for Russia as an area of dominant influence in Europe and, potentially, the world.
The report concludes with trade indicators for Russia. Often, the amount of trade flowing into and out of a country is a strong indicator of trading partners, trade openness, and related latent demand. Trade indicators are purely statistical in nature. Although international trade is not a direct measure of latent demand, it does provide an indicator of general market conditions with respect to trade flows and trade openness in Russia.
As a whole, this report presents a strategic assessment of Russia by considering an extremely broad set of factors affecting both latent demand and accessibility, as outlined in the following chapters.
MACRO-ACCESSIBILITY IN RUSSIA
Investment
Many foreign firms with a long-term presence in Russia are reporting healthy returns and stepping up investment, and there are signs that significant new foreign direct investments are being readied. Despite efforts by the Russian government to address persistent weaknesses in the investment climate, Russia remains a challenging environment for foreign investors.
Political Environment
Democracy is new to Russia and democratic institutions are fragile. The Russian Federation is composed of 89 subjects, which include regions, autonomous republics, and territories, each having some authority over internal economic and political issues. The U.S. relationship with Russia has evolved significantly and reaches well beyond the traditional arms control relationship to matters of trade, investment, counter-terrorism, scientific cooperation, space exploration, and more. Increasingly, the focus of the relationship is shifting towards commercial and economic interaction. The United States continues to support Russian efforts to build a democratic society and strengthen its market economy, with the goal of integrating the country more broadly and firmly into the international community.
Economic Fundamentals and Dynamics
U.S. Presence and Third-Country Competition
Since the breakup of the Soviet Union, Russia has been the subject of sustained interest by European exporters and investors. Europe is Russia’s largest trading partner and by far its largest customer of oil and gas exports. In turn, European companies are aggressively marketing their goods in Russia and establishing relationships with Russian partners. While the level of interest declined considerably following the 1998 financial crises, it resurfaced with particular intensity from 2002 onwards. German and Italian companies continued to build upon their traditionally strong ties with Russia, while France has recently emerged as a key partner in many commercial agreements.
The ‘dirigiste’ nature of the Russian government, and that of some of its European trading partners, disposes both sides to consider large-scale, multifaceted, bi-lateral trade and investment projects. In sectors it views as key to its long-term economic success, Russia sends clear signals that it does not intend to be simply a customer, but is ready to engage as a partner and consider a broad range of factors in concluding a deal.
With the general economic slowdown in the U.S. and Europe, Russia has become one of the few growing markets, and competition is increasing. In some sectors, such as telecommunications where massive over-capacity exists elsewhere, competition for the rapidly expanding Russian market has become fierce.
Western European firms are active throughout Russia in most industrial sectors and are particularly strong in consumer goods. In the Far East, Urals and Siberia, Asian firms are marketing aggressively, notably in equipment and lower-cost consumer goods. In the northwest, Scandinavian and Finnish firms are prevalent in infrastructure development. Norway and Finland have investments in Russian mobile phone service providers. Turkish firms are strong in the construction industry and are increasingly successful in retailing.
Across most sectors U.S. companies already active in the Russian market are expanding their presence. However, it is only very recently that other U.S. firms have begun to take a serious interest in exploring the Russian market and the level of U.S. participation in major trade shows is relatively low.
Regional Economic Integration
Russia more resembles a continent than a country. It occupies 17 million square kilometers, or 1.8 times the size of the United States. Across its vast territories there are major variances in terms of natural resources, economic and social condition, business and investment climate, industry sector mix, and receptivity to the reform process. The main population centers of Moscow and St. Petersburg were sufficiently large to developed relatively mixed economies. However, under the former Soviet centrally planned economy, Russia’s regions were perhaps too interdependent. There was little, if any internal competition and little trading with the world outside of the closed Soviet system. With the collapse of the Soviet Union, many regions, and newly created former Soviet states, found themselves uncompetitive, with significantly reduced domestic markets and little experience in developing overseas markets.
Central Russia Region
The Central Region of Russia comprises 3.8 percent of Russia’s land surface, and has a population of 36.7 million (25.3 percent of total population).
The City of Moscow
(Population: 10 million)
Moscow’s population, when combined with that of the surrounding oblast (region), makes up over ten percent of Russia’s total population. Together, the city and the oblast represent the largest and wealthiest metropolitan consumer market. Only 8, of Russia’s 89 regions, have income levels higher than the national median. The annual retail trade turnover in Moscow is around $20 billion, or about 30 percent of national retail turnover, even though the city accounts for only 7 percent of the national population. Moscow is Russia’s undisputed political and financial center; it has superb infrastructure (by Russia’s standards) and a strong industrial base.
The city of Moscow is also the leading international partner with the highest amount of cumulative foreign investment (direct, portfolio, and other.) 70 percent of Russian small businesses operate in Moscow.
The Moscow City Government is active in facilitating business development. It emphasizes the importance of such sectors as high technologies, pharmaceuticals, tourism, food processing industry and retail trade.
Moscow Oblast
(Population: 6.7 million):
Moscow Oblast offers a unique mix of opportunities to local companies and foreign investors. Foreign companies in the oblast enjoy proximity to Moscow’s consumer market while retaining reduced production and overhead costs. Moscow Oblast offers a well-developed business infrastructure including a transportation network, telecommunications, and a services market. The Moscow Oblast Customs Department oversees seven customs posts and processes one-third of Russia’s trade turnover.
Although the city of Moscow is the capital of the Moscow Oblast, the oblast and the city are two separate administrative entities. Since 1997 the Moscow Oblast Administration adopted several laws that provide foreign investors with significant tax privileges and guarantees.
Moscow Oblast has tremendous industrial potential. It specializes in machine building (represented mainly by electronics, instrumentation, and aerospace), metal processing, chemical production, construction materials, and textiles. It also possesses a well-developed agricultural sector. U.S. companies are among the five major foreign partners. Recently, it received more foreign investment due to projects in the dairy, automotive, chemical, furniture, and other sectors. A dozen U.S. companies are resident in the region.
Moscow Oblast ranks among Central Russia’s regions with the lowest investment risk. In both the city and oblast of Moscow, companies generally do not face the liquidity problems endemic in other Russian regions.
Kaluga Oblast
(Population: 1.1 million)
Kaluga is located in Central Russia, adjacent to Moscow Oblast and 180 kilometers south of the national capital. Major industries include machinery and metallurgy, food processing, wood and paper, and electrical engineering. Kaluga’s industrial sector faces challenges common to all of Russia’s 89 regions: lack of investment for reconstruction and modernization, government cutbacks in orders to former defense enterprises, and a disrupted distribution network. Currently, 200 companies with foreign capital are operating in Kaluga Oblast, including 48 representative offices of foreign companies.
Both domestic and foreign investors are eligible for tax breaks from the Kaluga Oblast administration under a number of legislative acts adopted to improve the investment climate in the region. The Kaluga Regional Administration offers tax cuts to companies reinvesting their profit in local production or lending funds to scientific research centers for development of new technologies. The Kaluga Administration can participate in investment projects and will consider providing guarantees for investments.
Tula Oblast
(Population: 1 million)
Covering an area of 25,700 square kilometers, Tula is 100 miles south of Moscow. The region has attracted some well-known foreign companies through tax and investment incentives. The most developed industries include the machinery, metallurgy, chemical and woodworking sectors, as well as food processing and power generation. Tula is the only Russian region boasting completely digitized telecommunication. Among Central Russian regions, Tula is third (behind Moscow and the Moscow Oblast) in exports to non-NIS countries.
Dozens of foreign companies find Tula attractive. However, although over 100 companies, including 22 with direct foreign participation, have started operations in Tula, it still has the smallest foreign business community in Central Russia. Tula’s investors produce a quarter of the region’s industrial output. The presence of large American corporations in Tula may make it more accessible to American companies. Compared to other Central Russia regions beyond Moscow and Moscow Oblast, Tula is the largest foreign investment recipient.
Tver Oblast
(Population: 1.6 million)
Tver is rich with forests and water and is the source of fresh water for Central Russia and the city of Moscow. The oblast has an excellent location in terms of access to the two largest metropolitan areas in Russia: Moscow and St. Petersburg.
Tver industry is concentrated in electrical energy, machine building, food processing, light industry and textiles, and wood processing. Agribusiness in Tver Oblast is mainly concentrated in flax harvesting and dairy and meat processing. Tver Oblast used to produce up to 40% of all flax in Russia. Despite 35 textile plants, not all flax is processed locally; the majority of the local mills work with resources purchased elsewhere. One reason for using imported materials is the region’s lack of processing equipment. New, contemporary technologies are needed. The timber and wood processing industries also hold potential for development as the region refocuses from exports of raw materials to increased local processing.
Ryazan Oblast
(Population: 1.5 million)
Foreign investors have only started to take notice of Ryazan. Due to its high concentration of defense enterprises, the region had been closed to foreign visitors during the Soviet era. The region acquired the reputation of being “red zone” and this has impacted economic development. However, the situation is rapidly changing.
The energy, oil refining, machine building, construction and food-processing sectors are viewed as the strongest and most important sectors for the regional economy. Wood processing and food processing are among the best investment prospects as regional enterprises lack equipment.
Yaroslavl Oblast
(Population: 1.4 million)
East of Moscow, Yaroslavl is a hub of important highways, railroads, inland waterways, and air routes. The oblast is famous for heavy machinery (diesel engines, electrical equipment), refined petroleum, textiles, aviation, synthetic rubber and tires. Yaroslavl is increasing its regional output. Recently, the Yaroslavl Motor Plant, the sole surviving manufacturer of diesel engines in the former Soviet Union, and Rybinsk Motors, producing aircraft engines, showed significant growth. A number of U.S. companies have participated in investment projects in these industry sectors.
Furthermore, oil reserves have been discovered in Yaroslavl Oblast, although significant geologic and economic research needs to be completed before commercial production can be launched.
Petersburg and Northwest Russia
The Northwest Region of Russia comprises 9.8 percent of Russia’s land surface, and has a population of 14.4 million (10 percent of total population).
Northwest Russia, including St. Petersburg, Leningrad Oblast, Archangelsk, Kaliningrad, Karelia, Komi, Murmansk, Novgorod, Pskov, and Vologda, covers a vast area of 1,679 sq. km comparable in size to Alaska. The region is home to 14.3 million people. St. Petersburg, Russia’s second largest city and the fourth largest in Europe, boasts a population of approximately 5 million, and is a major commercial, educational, research, industrial, and financial hub. Its factories produce everything from heavy machinery and electronics to a wide variety of consumer goods. St. Petersburg’s ports and railways comprise a major transportation center, tying Russia to the Baltics, Scandinavia and the rest of Europe. Surrounding the city, Leningrad Oblast is home to 1.8 million people in an area comparable to Ireland. Combined, St. Petersburg and Leningrad Oblast form a substantial market for consumer and industrial goods.
Investment in Northwest Russia
During the last several years, Northwest Russia has attracted a large proportion of the total U.S. investment in Russia, and U.S. companies such as Caterpillar, Coca-Cola, Ford, Gillette, International Paper, Lucent, Otis Elevator, Philip Morris, RJ Reynolds and Wrigley have all established production facilities. Following the 1998 economic downturn, regional authorities were forced to become more competitive, and local and regional governments became more willing to grant tax and other concessions in order to encourage foreign investment in their regions. To varying degrees, the regional governments have taken the right steps toward attracting such investment through the creation of foreign investment laws, tax abatements, and the creation of foreign investment advisory councils. Several oblasts have been especially successful at creating commercial environments conducive to investment. Leningrad Oblast and Novgorod Oblast are the best examples, accounting for over $1.4 billion in U.S. direct investment.
With their proximity to European shipping routes, St. Petersburg and Leningrad Oblast comprise a natural transportation hub. In fact, Northwest Russia is the nation’s leading export region. The U.S. ranked as one of the region’s best trade partners (8% of trade turnover). The Seaport of St. Petersburg, Ltd. is Russia’s largest commercial seaport by volume, handling roughly a third of Russia’s imports. Commercial seaports are also located in Murmansk, Kaliningrad, Arkhangelsk, Vyborg, and Vysotsk. For the most part, Russian ports are not sufficiently equipped to provide modern services, and commercial opportunities exist for U.S. firms in modernizing port handling facilities, developing modern freight forwarding systems and constructing cargo-processing terminals. The St. Petersburg area also has an extensive rail network connecting with Europe, the Baltic states, and the rest of Russia.
Tourism
According to UNESCO, St. Petersburg is the only Russian city ranked among the world’s top 10 cities in “tourism appeal.” St. Petersburg has few mid-range hotels, and is in dire need of international-standard two and three star hotels. The city administration is attempting to cultivate joint ventures with foreign investors and hotel chains and to conclude management contracts with international chains that can invest in hotel renovation.
The Urals and Western Siberia
The Urals Region and Western Siberia territories cover an area larger than the United States east of the Mississippi and are home to over 40 million people. They possess some of Russia’s most valuable resources, with minerals, fossil fuels and vast forests, and provide 25% of Russia’s industrial output. During the Soviet period, the Urals became a leading center of heavy industry (metallurgy and machine building), as well as defense and aerospace plants. Today, those industries remain concentrated in Sverdlovsk, Chelyabinsk, and Perm Oblasts. In Western Siberia, Tyumen Oblast is known for its prolific gas and oil reserves. This is a very wealthy region: of 89 Russian subjects, Sverdlovsk, Chelyabinsk, Perm and Tyumen are four of only nine net contributors to the federal budget.
In addition to fossil fuels and heavy industry, the telecommunications and food processing industries offer opportunities for U.S. firms. The telecommunications infrastructure around urban centers has developed rapidly. Local landline services are concentrating on data communications and digital switching upgrades. Production of consumer goods grows very fast in the region. Food processing also has been expanding. The region is home to over 6,000 food processing firms, many of which seek imported processing and packaging lines to meet the increasing demand for high quality, competitively priced foodstuffs.
Sverdlovsk Oblast
(Population: 4.6 million)
The Sverdlovsk Oblast is one of Russia’s most urbanized areas; 87 percent of the population lives in cities. Its capital, Yekaterinburg (1.3 million inhabitants), is Russia’s fourth largest city, and home to a university and a lively arts scene. Sverdlovsk Oblast has the largest GDP of any oblast in the Urals, producing five percent of Russia’s industrial output and ranking second only to Moscow Oblast in that category. Ferrous metallurgy and machine building form a large portion of Sverdlovsk’s economy, much of it defense-related. Services have grown to 40 percent of regional GDP, and the consumer retail sector is booming. Yekaterinburg is a major road and rail hub and also has regular air service to several European cities. Its banking infrastructure is the best in the Urals, about 30banks and many major branches of commercial banks from other regions. Sverdlovsk Oblast leads the Urals in investment potential, but lags behind due to corruption and government interference with foreign investments, including several attempts to deprivatize companies. Sverdlovsk’s top exports are steel, copper, chemicals, aluminum, titanium and radioisotopes. Sverdlovsk’s major import is oil and chemical products, machinery and equipment, mineral products. Non-ferrous metallurgy remains a growth sector, and VSMPO, the world’s second-largest titanium producer and a supplier to Boeing, is located here. Here are located the heavy machinery plants (the major are Uralmash, UralTransmash, Uralchimmach, Uralelectrotyazhmach) for production of mining and metallurgical equipment, equipment for chemical industry, turbines, tractors, oil and gas equipment which offer significant opportunities to investors.
Perm Oblast
(Population: 3.1 million)
Perm region is rich in mineral resources. Perm Oil belt with over 100 separate deposits of oil and gas with estimated reserves at 422.1 million tons. One third of the world’s reserve of sodium, potassium and magnesium chlorides is concentrated in a unique Verkhnekamsk deposit. Perm produces 98 percent of Russia’s potassium-based fertilizers.
The industrial complex is based on chemical and petro-chemical industries, fuel industry, electric-power engineering, metallurgy, machine building, and wood processing. Much of the heavy industry is defense-related, including production of aircraft engines, Proton rockets, and space control systems. Pratt and Whitney holds a 25% and two share blocking stake in the Perm Motors’ Air Jet PlantThe oblast is also a regional center for electricity generation. The timber-industrial complex in Perm region is the Russian leader in wood production and processing. The pulp and paper mills manufacture about 20% of total output of Russian paper used for various purposes. The city of Perm, the oblast capital, is a major river port, has two airports and is situated on the Trans-Siberian railway.
Chelyabinsk Oblast
(Population: 3.6 million)
Chelyabinsk Oblast, also situated on the Trans-Siberian railway, ranks fifth in Russian industrial output. Ferrous metallurgy and machine building play a key role in the oblast’s economy. Metals account for 85 percent of the oblast’s exports and over 40 percent of total output. The oblast is rich in iron ore, copper, zinc, bauxite, refractory raw materials and gold. Over 70 percent of Chelyabinsk Oblast’s ferrous metal exports originate from the giant Magnitogorsk Metallurgical Works. Small and medium business develops very actively in the region. The food processing and retail sectors start its development and offer good potential.
Tyumen Oblast
(Population: 3 million)
Tyumen is Russia’s third largest oblast in terms of territory, and includes two autonomous districts, Khanty-Mansiysk and Yamalo-Nenets. Tyumen is rich in oil and gas: its combined output of both exceeds 7 percent of Russia’s GDP (including over 91 percent of Russia’s natural gas and 64 percent of its oil) Official statistics show average salaries in Tyumen at nearly twice Moscow levels. Gazprom dominates the gas industry in Yamalo-Nenets, while Lukoil, Yukos, Sibneft and Tyumen Oil Company are the oil leaders in Khanty-Mansiysk. British Petroleum (BP) and TNK merged for production and sale of crude oil. American Company Marathon Oil purchased Khanty-Mansiysk Oil Co. Southern Tyumen Oblast is predominantly agricultural. There are the outstanding opportunities for investment in food processing sector. The vast territory of the region, mostly Khanty-Mansiysk district is covered with forest. The region’s forest and wood processing industries are very advantageous for investors.
Medicine equipment and Pharmaceuticals sector is growing quickly (40% of all Russian manufactured syringes, produced in the region).
Machine building and Equipment are also the sectors of interest. Tyumen Accumulator Plant produces 40% of all Russian manufactured accumulators.
Tyumen is an important electric power producer, accounting for seven percent of Russia’s electricity. It also produces a third of Russia’s automobile batteries.
The Volga Region
The Volga Region of Russia comprises 6.1 percent of Russia’s land surface, and has a population of 31.8 million (22 percent of total population).
The Nizhny Novgorod Oblast ranks seventh in Russia in terms of industrial output, and industry accounts for 83 percent of the oblast’s gross domestic product. Key industrial sectors include automotive, aviation, machine-tool manufacture, chemicals and petrochemicals, lumber and paper production, and woodworking. In addition, the region has a number of companies engaged in radio electronics, light manufacturing, the production of building materials, and agribusiness and food processing. The huge Gorky Automobile Plant (GAZ), a manufacturer of cars and trucks is located in Nizhny Novgorod, as is the SOKOL aircraft plant, which produces MIG fighters and commercial jet planes. The oblast has a population of 3.72 million, of which 1.5 million live in the capital city of Nizhny Novgorod. It boasts an extensive, integrated and heavily used transportation system, connecting it with the rest of Russia and beyond by rail, waterway, road, and air. The investment climate of Nizhny Novgorod is among the most favorable in Russian, and has attracted over 500 joint ventures to the region, including major U.S. and European firms.
Samara Oblast
The Samara region is quite unique in Russia in that it has two major industrial centers - Samara City and Togliatti. During the Soviet era the city of Samara was a center for military development and was closed to foreigners. The former city of Stavropol was renamed Togliatti, in honor of an Italian communist leader, when the immense Volga Automobile Plant (VAZ) was completed in 1964 as a joint venture with Fiat. The Samara Oblast has successfully applied its industrial heritage to the market economy and has attracted significant foreign direct investments.
The Samara region also has tremendous agricultural potential, and is considered one of the top areas of petroleum by-product and machinery production in Russia. The region is home to 3.3 million, who represent the third wealthiest population in the country after Moscow City, St. Petersburg and the Moscow Region.
Central Siberia
Novosibirsk, with a population of 1.5 million is Siberia’s largest city and Russia’s fourth largest. It stands at Russia’s crossroads, geographically, politically and economically, and represents one of the most important commercial centers outside of European Russia. It does not boast the mineral wealth found in neighboring regions, but serves as the processing and handling center for much of those regions’ resources. The capital city, around which the Novosibirsk region of 2.8 million gravitates, came to prominence during World War II and derives its economic-strategic position largely from its location on main rail, road, water and air routes. A center of research, it boasts 28 scientific institutes and 3 universities. Its primary industries are heavy machinery, chemicals, electrical equipment, metals, and timber.
The Omsk Oblast
The City of Omsk ranks 4th among the industrially developed cities of Russia after Moscow, St-Petersburg and Yekaterinburg. It accounts for more than 90 percent of the oblast’s total industrial output and is home to one million of the region’s 2.18 million population. As much as 70-80 percent of its engineering capacity remains concentrated in the defense sector. Aerospace is a prominent industrial sector, and the region is Russia’s largest hub of oil refining and the petrochemical industry.
The Tomsk Oblast’s distinctive feature is a favorable combination of natural, industrial and intellectual resources. Its natural environment includes the famous Siberian cedar forests, which cover most of the region’s territory, and there are abundant reserves of other natural resources, such as oil, gas, and non-ferrous ores. It is also a scientific and educational center, and scientists from its 50 institutions conduct research in physics, chemistry, technology, and medicine. The Region has a highly developed defense complex, focusing on the manufacture of high technology products, which potentially represent natural incubators for innovative and high-tech enterprises. Nearly half of the region’s one million population live in the city of Tomsk.
Southern Federal District
The Southern Region of Russia comprises 3.5 percent of Russia’s land surface, and has a population of 21.5 million (14.8 percent of total population).
Rostov is the capital of the Russian Southern Federal District, the second largest Russian producer of agricultural products and home to the country’s major manufacturers of agricultural machinery, electric locomotives and helicopters. The region’s natural resources include coal and anthracite, oil and gas, and raw construction materials. The most important resource, however, is Rostov’s fertile black soil, which produces high-value crops on an area under cultivation which is twice as large as Denmark. The region ranks sixth in Russia by population. The Port of Rostov-on-Don is accessible from five seas and Russian river-to-sea vessels make regular runs from Rostov to many Mediterranean ports. The reform-minded government and relatively favorable investment climate have attracted strategic investments from several large international corporations, such as Coca-Cola, Citroen, Russian Aluminum Holding and others.
Krasnodar Krai
Five million people inhabit Krasnodar Krai, which includes the cities of Krasnodar, Novorossiisk, and Sochi. The krai (region) contains transportation infrastructure vital to Russian and Caspian Basin oil and gas exports, and transportation routes crossing the krai connect Russia and Central Asia to the Mediterranean, Europe, and the Middle East. Agriculture is the largest sector of the Krasnodar economy, and much of the region’s 75,500 squa
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