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The Urals and Western Siberia

Consulate Yekaterinburg’s consular district covers 11 Russian regions:  Sverdlovsk Oblast, Chelyabinsk Oblast, Tyumen Oblast (together with its autonomous districts of Khanty Mansiysk and Yamalo Nenetsk), Kurgan Oblast, Orenburg Oblast, Omsk Oblast, Perm Kray, and the republics of Bashkortostan and Udmurtia.  Situated as it is in the middle of Russia, the district straddles the border of Europe and Asia, which can make it logistically attractive.  Historically the Urals and Western Siberia have been known as the “feeding artery” of Russia with world class oil and gas deposits in the Polar North, heavy industry in the Middle Urals, and an agro-industrial South.  The region still boasts a rich bounty of mineral wealth, with significant deposits of copper, iron, chrome, nickel, cobalt, zinc, carbon, oil, natural gas, gold, and gems.  In fact, almost all elements of Mendeleev’s Periodic Table are to be found in the Urals.  The Urals and Western Siberia are also well endowed with thick forests and extensive fresh water resources.  Traditionally known as Russia’s mining and metallurgical heartland, the Urals also has a well developed agricultural sector in its southern and middle sections.

The Ural region is increasingly integrated into the world economy.  Over the past decade most of the region’s major industrial enterprises have developed and implemented international development strategies.  In 2010-2011 the Ural Federal District (which includes six of the consular district’s 11 regions) attracted more investment than six of the seven other Russian federal districts.  In all, 17 percent of Russia’s gross investment was made in the Ural Federal District.  The oil and gas sectors of Khanty Mansiysk Autonomous Okrug and Yamalo Nenetsk Autonomous Okrug continued to retain their investment attractiveness through even the global economic crisis.  The metallurgical, machine building and processing sectors of Chelyabinsk and Sverdlovsk, on the other hand, were impacted severely by the 2008-09 crisis.  By the end of 2010, however, they had begun to rebound and even expand.  In 2010 Chelyabinsk Oblast saw an inflow of $3.3 billion in foreign capital, making it the sixth best among Russia’s 89 constituent regions for investment attractiveness.  For many years Sverdlovsk Oblast has been the Ural leader in international trade development.  In 2011 the oblast’s share of Ural gross international trade turnover exceeded 49 percent.

Since 2010 foreign direct investment has trended upwards in the Urals.  In 2011 the volume of foreign investment surpassed the pre-crisis level.  The negative consequences of the financial crisis forced regional governments throughout the consular district to reconsider their investment policies.  Those regions that were already economically developed and diversified began to see the importance of designing and implementing new, creative approaches for promoting themselves.  For instance, Chelyabinsk Oblast introduced a “start-up office” for potential foreign investors which now provides temporary office space, equipment and, crucially, administrative support and assistance.  The Sverdlovsk Oblast government launched the first “investor’s e-assistant,” an e-portal that guarantees registered users on-line administrative support, consultation, and control over the implementation of their projects.  The portal is, however, in Russian only.
The Tyumen Oblast government has introduced a bilingual business portal which now serves as an effective means of disseminating information about the regional economic climate.  The regularly updated portal is a practical tool for foreign businessmen, providing them with step-by-step guidance on investing in Tyumen.  Meanwhile, other regions like Perm Kray, Bashkortostan, and Khanty Mansiysk have established government–affiliated, for-profit consulting agencies which “lead” foreign investors along the complicated path of investing in Russia’s economy.  Finally, many foreign investors may expect to find various preferential tax and customs regimes which vary from region to region.

While cautionary tales about investing in Russia do apply to the Urals, the peculiarities of “regional investment policies” are worth keeping in mind.  Having survived the economic crisis, the Urals and Western Siberia have renewed interest in improving their investment potential and have gotten more active and creative in attracting that investment.  General practice has shown that the more economically developed and diversified regions tend to offer better platforms for investment.  What follows below is a list of regional “Investment Portraits” which may be useful resources for those thinking of investing in the Urals and Western Siberia.