Minnesota group setting stage for Russian investment in state

Minnesota's trade with Russia, relatively small to date, is poised to grow, opening the doors to more Russian businesses in the state.

The groundwork has already been laid.

The American-Russian Chamber of Commerce of Minnesota (ARCCoM) — the first of its kind in the state — was created last summer. A chamber meeting in October is expected to draw up to about 100 participants, including at least 25 Russian entrepreneurs and scientists.

"The relationship between the U.S. and Russian governments hasn't been great for a while. That has probably trickled to business," said Laurence Reszetar, director of foreign investment for the Minnesota Trade Office. "This could change. Having Russian companies based here, they can better understand our values through understanding our products and how we operate businesses. And we can understand better what is coming out of the Russian market."

Imports into Minnesota from Russia jumped from $9.2 million in 2014 to $41.5 million in 2015.

Exports were $83.9 million, and some of the state's largest companies — including Cargill, 3M and Pentair — operate in Russia.

Plus, the state now has about 10,000 Russians, according to the Minnesota State Demographic Center. Add post-Soviet Union populations such as Ukrainians, and the number of Russian speakers in Minnesota jumps to between 30,000 and 40,000, said Mark Ritchie, former Minnesota secretary of state.

Observers point to several areas in engineering and agriculture as prime for Russian investments: biomedicine, energy efficiency and resource-saving technologies, food technology and safety, water technology, and wood pulp and materials.

A few Russian companies have already shown interest in putting their start-ups in Minnesota. One medical start-up from Udmurtia in central Russia is developing immunological anticancer preparation, said Anatoli Korkin, chair of ARCCoM. A second is a Moscow holding company that plans to make energy-conserving lighting for large projects.

Businessman Todd Lefko, who trades with Russia, also knows of two Russian companies interested in Minnesota — one in plastics and another that makes metal screens used in paper factories.

Lefko and Korkin said the companies do not want to be named at this time.

Minnesota also could be an easier location to start a business than other states, especially for some of the IT and technology start-ups. It is easier for businesspeople to get resources and make connections that they need here in Minnesota because it's a large state with a relatively small population, Korkin said.

"Distance between governor and start-up here is much smaller than in Massachusetts or the Silicon Valley, and all elements of the business ecosystem are easier to access from government to investors, potential partners and customers and everyone else a foreign company may need for establishing its business in the U.S.A.," he said.

Another reason to choose Minnesota is R&D opportunities, particularly in medicine and agriculture. For example, the Moscow region has the same climate as Minnesota, but there is no grape and vine production there. So there is "room for maneuver."

In 2014, Minnesota hosted the U.S.-Russia Innovation Conference that drew about 250 participants. One of the outcomes of that meeting was establishing ARCCoM, Ritchie said.

The chamber is hoping the fall meeting will spur business activity.

Marina Liberman, who owns the restaurant Moscow on the Hill in St. Paul, moved to the U.S. in 1992. She said it was nice not to have to worry about bribery in American business, but she also was surprised at the high level of bureaucracy.

"Government employees are never in a hurry. To get a decision on approval from the historical society, we were waiting for two months," she said.

"On the other hand, I spoke with a Russian entrepreneur and she asked me, 'Do you pay to fireman?' I said, 'No, what a nonsense.' Then she asked, 'To sanitary inspector?' Here we even don't know when the sanitary inspector will come. Once I offered to inspector a glass of water, and she looked at me as if I offered a bribe. There is no way for bribery," Liberman said.

Lefko, the businessman, said there are also risks for a start-up to come into the mature marketplace in the U.S.

"You may not get a payoff for two, three, four years," he said. "What you find out is maybe one out of 10 or 20 ideas works out. It is more difficult to bring things here because of the legal [and] competitive issues, but also because the amount of front-end money to establish."