U.S., Russian Officials Sign 4 Agreements : Aircraft: Commerce secretary wins lifting of new aerospace tariff, so sale of Boeing 757 jetliners can go through.
U.S. Commerce Secretary Ronald H. Brown signed four U.S.-Russian trade agreements here Wednesday and announced that he had rescued a deal to sell American aircraft to Russia.
The sale of two Boeing 757 jets to Transaero, one of the private airlines created with the breakup of the Soviet state airline, Aeroflot, was derailed March 15 when the Russian government imposed a 50% tariff on all aerospace imports.
Brown, who is leading 28 American chief executives on a six-day trade development trip to Moscow, said Russian officials promised to waive the retroactive tariff, clearing the way for the planes to be delivered in early April.
Brown also said that Prime Minister Viktor S. Chernomyrdin has agreed to review other recently imposed taxes and tariffs that have dismayed American investors and outraged the fledgling Russian business community.
Especially affected are Western oil companies, which have sunk millions of dollars into joint ventures with Russia only to face oil export surcharges of $4 or $5 a barrel.
“What this tax has done is make deals, arrangements that were formerly economically viable, no longer economically viable,” Brown said. “It’s the kind of action that really has a chilling effect on investment and on trade. There has to be some kind of predictability in the tax system.”
Brown also said he had told Russian officials frankly that they will have to compete with other countries for the American investment dollar.
“The challenge for the Russian government is to make it attractive for foreign investment here, because oil companies can go elsewhere,” said Ray R. Irani, the Los Angeles-based president and CEO of Occidental Oil & Gas Corp., which has invested about $140 million in two exploration and pumping projects.
“Some ministries are more understanding of our problems than others,” Irani said. He added that Chernomyrdin, a former Soviet oil executive, seemed to be interested in more foreign involvement, especially by American companies.
Russian policy-makers appear torn between the need to raise revenue fast to comply with International Monetary Fund demands that they curb inflation and bring state spending under control, and the need to keep taxes low enough to stimulate investment in what everyone concedes is a high-risk country.
After a 45-minute meeting Wednesday with Russian President Boris N. Yeltsin, Brown said he was “optimistic” about prospects that the $1 billion that American companies have invested in Russia can turn into $50 billion if the Yeltsin government fosters the proper business climate.
Brown tried to boost that “comfort level” by saying that Yeltsin--whose health has been the subject of endless speculation, rumor and intrigue--appeared rested, healthy and in good spirits. “I’m not a physician, but he sure looked good to me,” the secretary said.
The four trade agreements signed Wednesday include a joint statement on market access and two agreements on setting up business centers in six locations in Russia to offer advice, communications, translation and other help to American businesses that want to set up shop here.
Also approved was a pact that will make it easier for pharmaceutical companies to sell Russian drugs without a lengthy regulatory process, provided the products have been approved by the U.S. Food and Drug Administration.
Brown said that some of the American business executives traveling with him had closed deals previously “stuck in the pipeline.” They range from a joint venture to produce Samsonite and American Tourister luggage at a Russian factory to a Westinghouse Electric contract to modernize Russian nuclear power plants.
