Russian food industry is one of the branches of Russian economy, and economy almost always goes hand in hand with politics. Therefore, you always need to know and monitor political situations in the countries where you either do business or plan to do business.
Today I will talk about the sudden change of Russian Government and Prime Minister and will share my thought on how it will influence Russian economy and Russian food market.
Timeline of events.
On January 15, 2020, President Vladimir Putin dismissed Prime Minister Dmitry Medvedev and fired the entire Government (22 ministers). On January 16, 2020, Vladimir Putin introduced the new Prime Minister of Russia, Mikhail Mishustin. You do not need to remember this name. It will not be useful for you in the future.
Here are some facts for your interpretation.
Vladimir Putin has been in power since 2000, which is for 20 years and he has changed 6 Prime Ministers. I’m sure most of you do not even remember who these people were. Even I, as a Russian, had to confirm this information in Google.
Why, as a Russian, don’t I know all prime ministers of Russia for the past 20 years? Probably because Vladimir Putin controls Russia and the position of the Prime Minister does not involve strategic tasks in Russia.
In this article I will not go deep into politics, I am an unique expert in Russian food market, but not a political analyst. Therefore, let’s move on to the changes that have happened in the new Government.
Change without a change.
The old Government consisted of 22 ministers and was dismissed… Some days later almost of them were hired again.
This is a normal practice for Russia. All key ministers returned to their posts – Minister of Defense, Minister of Internal Affairs, Minister of Industry and Trade, Minister of Foreign Affairs, Minister of Agriculture, etc.
The new ministers are Minister of Culture, Minister of Health, Minister of Sports, Minister of Education, etc.
In general, as you can see, the main goal of dismissing the Government was to change the Prime Minister and ministers of the “social” bloc, the block that does not affect economy or food market in Russia.
Therefore, the course that was taken by Russian economy and politics in past years will be preserved in the coming years. So, those foreign companies who are already working on the Russian food market are not in danger.
New foreign companies that are still planning to enter the Russian food market will have to decide for themselves. If everything suited you on the Russian food market before the change of the Government, then go for it and do not be afraid. Foreign companies that were waiting for changes in Russian economy to enter the Russian food market will be upset to know that there will be no changes.
But if everything is going to be the same on the Russian food market, why am I writing this article? There is one very important thing that all foreign companies must be aware of if they want to work on the Russian food market in Russia.
Stronger control on taxes.
The new Prime Minister Mikhail Mishustin is a former Chief of the Tax Service of Russia. Thanks to his work Russian Government has collected the maximum amount of taxes over the past 2 years. It is his merit that a lot of businesses in Russian economy have become transparent.
After taking over the post of Prime Minister, he has also brought his team and people from key positions in the Tax Service of Russia.
Please, remember that Vladimir Putin has personally made the decision to dismiss the Prime Minister and appoint a new one. Russian President was the person who has chosen Mikhail Mishustin. This means that Vladimir Putin trusts the new Prime Minister and gives him freedom of action in the areas of his expertise.
It means that in the upcoming years there will be more control over tax collection in Russia. Companies that avoid paying taxes or use “gray” accounting to reduce taxation will be punished more severely.
Of course, there are different foreign companies that work in Russia, but most of Russian laws violations in the field of taxes are made by entrepreneurs from China. So, if they want to continue developing their business in Russia, they will need to use business schemes permitted in Russia.
We all know that Vladimir Putin has always personally supported foreign business in Russia. For example, he was personally present at the opening of Mercedes plant in Moscow region or supported the 25% reduction of customs duty on all food products for businessmen from Iran and introduced a 0% customs duty on such food as coffee from Dubai.
There are special economic regimes for foreign companies in various regions of Russia where foreign companies are exempted from taxes for 49 years. And there are a lot of other preferences for foreign business in Russia.
In my book, “Your First 50 Right Steps to Enter the Russian Food Market” I devoted a whole chapter to this topic. If you are interested, you can look at the contents of my book here.
You might be surprised, but there are no such preferences and benefits for Russian businesses. As you can see, it is more profitable for foreigners to conduct business in Russia than for Russian companies.
At the end I would like to add two more important facts that you need to know in order to correctly and adequately analyze the situation with the sudden change of the Prime Minister and the Government.
1,000 years of sole control.
The first fact is about Vladimir Putin’s role in this whole situation with the sudden change of the Government. I have read in many foreign media and social networks that by changing the Government Vladimir Putin strengthens his power and acts like the Tsar.
Let me tell you a little more about the history of Russia. Russia as a country and a state originated in 900s. So, the age of Russia as a state is more than 1,000 years. For example, the United States as a state are about 250 years old.
Out of these 1,000 years, only the last 100 years Russia was not ruled by the Tsar. Historically, it is normal for Russians that one person rules the country. If the Tsar was good for ordinary citizens, everything was fine, and the country prospered. If the Tsar did not suit ordinary people, people raised a riot and overthrew the Tsar (usually killed him). These are simple historical traditions in Russia.
Whether you like it or not, but this is Russian history. In order to understand the current political and economic processes in modern Russia and the modern food market, you need to know such historical facts about Russia.
Therefore, the sole control of the country does not cause any psychological or moral rejection in Russia.
Amendments to Russian Constitution.
The second fact that you need to know relates to the day before the resignation of the Government.
The day before the resignation of the Government, Vladimir Putin delivered an official speech. Its most important thesis was the introduction of amendments to Russian Constitution. According to these amendments one person shall not hold the position of the President of the Russian Federation more than twice in a lifetime.
According to the laws of Russia, new amendments to the Constitution will not have a retroactive effect. They will be valid only from the moment when this law comes into force and further. In other words, these amendments to the Constitution “nullifies” all presidential terms of Vladimir Putin. And it is important to know!
A video news episode about the resignation of the Government was shown in Russian media too. In this video it was clear that all ministers of the Government were completely calm, it was clear that everyone was ready in advance, the Prime Minister Dmitry Medvedev was also ready.
Dmitry Medvedev was immediately appointed to a new post – Deputy Head of the Russian Security Council. So, the ex-Prime Minister of Russia stayed in the Kremlin but went into the shadow.
What for? The same scheme was already used in Russia in 2008 when Vladimir Putin had already had two terms as the President of Russia and could not participate in the elections. At that time, he supported the election of Dmitry Medvedev that became the President for the next 4 years. Dmitry Medvedev appointed Vladimir Putin as the Prime Minister of Russia.
From 2008 to 2012, Vladimir Putin was officially in the position of Prime Minister, but everyone in Russia knew and saw that it was him, not Dmitry Medvedev, who ruled Russia.
At the end of Dmitry Medvedev’s presidential term, in the next election, Vladimir Putin took part in the elections and won the first round. Then he appointed Dmitry Medvedev as his Prime Minister.
Therefore, it is obvious what will happen next. In 2024, Vladimir Putin’s second presidential term will be over, and he will no longer be able to participate in the next presidential elections (according to new amendments to the Constitution). But Dmitry Medvedev will take part in the presidential election with the support from Vladimir Putin. Therefore, Dmitry Medvedev will win.
Dmitry Medvedev is now the only person in Russia who has already been the President. So the next (second) presidential term will be his last one.
At the same time, since the new amendments to the Constitution will “nullify” all the past presidential terms of Vladimir Putin, he will be able to take part in the election and win. According to analytics’ estimates, Vladimir Putin’s policy is supported by more than 72% of Russian residents. To win the presidential election in Russia, you need to win more than 51% of votes.
Therefore, in the presidential election in 2028, Vladimir Putin will win again (I hope no one has any doubts about this) and will have two more presidential terms. One presidential term in Russia is 5 years. So, Vladimir Putin will be able to rule Russia until 2038.
By the way, if you open predictions of the very famous Bulgarian clairvoyant Vanga, you will read that 50 years ago she predicted that “there will be a prince in Russia, called Vladimir, and he will rule Russia until 2040”.
When I read this prediction as a law student, I did not believe it, because the laws of Russia do not allow any person to be the President for so long. But now we are in 2020, and Vladimir Putin has been leading Russia for 20 years. What can prevent him from leading Russia for 20 more years?..
Business Adviser on the Russian Food Market
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