Expert opinions, Interviews

Peter Löschl: Investments from Russia are welcome in Austria

While attending the Innoprom International Industrial Fair in Russia’s Yekaterinburg, Peter Löschl, an outstanding business consultant from Austria, shared his views of Russian-Austrian economic relations with Invest Foresight.

Could you comment on the economic cooperation between Russia and Austria? Is there much interest in Austria in cooperating with the Russian Federation and in which areas?

There is a lot of interest in Austria in cooperating with Russia. There are some historic reasons for that. In 1955 Austria signed a peace treaty after the Second World War and decided to be and remain a neutral country, and this neutrality was guaranteed by the four peace treaty powers, i.e. the US, the UK, France, and the Soviet Union. So there is a close political connection between Austrians and Russians, because Austria has been a neutral state, and it has been in Russia’s interest to have a neutral state within Europe. From the micro-strategic point of view, that has been one of the reasons for the close ties, and ever since, Russian industries and Russian strategic objectives have had something to do with Austria with regards to Europe. This is the reason why Gazprom decided many years ago that Austria should be the place to distribute natural gas deliveries to Europe. Accordingly, the major gas line from Russia came to Austria and then to the rest of Europe. It was only later that another gas line was built to Poland and then much later another gas line was built through the North Sea to Germany. So, there is an historic aspect.

The second point is in the 1990s when the process of glasnost was accelerating and all East European countries were suddenly opening up, Austria was at the forefront. It was the nearest nation to the Eastern Europe. As a result, the first foreign investors coming from Europe to Russia were Austrians to a large extent. Ever since then, total Austrian investments into Russia have been quite significant.

Yet one should differentiate between trade and investments. Trade relations are a type of short-term view. Every year they can change, and we have seen that happening. With all the diplomatic and political discussions between Europe and Russia, we have seen how quickly trade can be changed, even overnight. In turn, investments have a longer timeframe and can endure.

Austrian investments into Russia equal about EUR 5 billion, and it is quite a significant amount vis-à-vis such a small country like Austria. As for Russian investments into Austria, there is surprise in that regard. The largest investor in Austria is Germany which is clear and natural, as Germany is a neighbor, and German business people like to invest in Austria. The total accumulated investments of German businesses into Austria are EUR 60 billion as at the end of 2018. But the second-largest investor in Austria is Russia with EUR 25 billion, ahead of Switzerland, and then come other countries including the US. The interest of Russian industry and companies and also the political interest in Austria is quite extensive and it shapes relations between Russia and Austria. There is an extensive interest on both sides.

Russian investments in Austria are primarily made by big companies such as Sberbank, Gazprom, Lukoil, Metafrax and VTB Bank. Yet there are also around 500 other Russian companies or Austrian companies owned by Russian individuals or entities. This is a significant number.

As for Russian people living and working in Austria, this is another surprise because there are more than 30,000 Russians living and working in Austria. This comprises quite a substantial community which also shapes relations between Austria and Russia.

This demonstrates that Russian people and companies feel comfortable in Austria. They do not enjoy special privileges, and Russian people and investments are subject to the same conditions as Austrian companies. One may call them favorable, but we simply maintain an open attitude, and they are dealt with like Austrians.

There is only one point to be made. Of course, Russian people who want to stay and to work in Austria need a so-called Red-White-Red Card, which is a permit to stay and to work. It is similar to the American Green Card. This requirement does not only apply to Russians but also to Americans, Chinese, Japanese and anybody else who is not European and does not come from an EU member state. They all need this Red-White-Red Card. This is the only bureaucratic turmoil, because obtaining this Red-White-Red Card is sometimes a bit lengthy. But again, there is no differentiating between the applications of a Russian national, or an American individual, or a Japanese person. You can again call it favorable, but I call it normal.

Apart from the cooperation with Russia in the supply and distribution of raw materials, what are the primary areas of interest in Austria?

From the point of expectations, any investments from Russia are welcome in Austria. This is a general statement. Currently, the companies mentioned beforehand represent the oil, financial, gas and banking sectors. There are investments in tourism and real estate and there are also investments in sales and trading companies in order to reach out to the rest of Europe. As long as there is some advantage for Russian interests, we would like to see such investments. What we don’t want to see is someone investing and losing his money, but as long as there is a mutual advantage, it’s great.

There is one point in Austria which can be seen as its strength. I refer to its capabilities in research and development. Austria spends over 3.17% of its GDP on R&D. Within the European community, it is ranked second. Number one is Sweden, number two is Austria, number three is Germany and then comes the rest of the world including the US. Last year, this 3.17% equaled EUR 14 billion spent in Austria on R&D. This money comes from various sources. One third is from the government to the R&D companies in Austria. The second third comes from Austrian companies, and the third part comes from foreign companies carrying out R&D in Austria. This is something we have been aiming at for years: foreign companies coming to Austria to do research, to become involved in applied product development and to use the capabilities of the Austrians to provide solutions. And this is something that we would like to also see more of from Russian companies. I mean coming to Austria to conduct R&D and leverage the capabilities we have.

Perhaps this is wishful thinking, because as long as these political discussions are going on, maybe the Russian side will be hesitant to reach out and do R&D outside its own borders and I can understand that. However, the Austrians are ready to do that and to support these activities of the Russian companies.

Are you optimistic about the prospects of bilateral cooperation?

I am absolutely optimistic about bilateral relations in various areas. Earlier this year, our President met your President in Sochi and they signed a protocol which aims at closer relationships in scientific and business work. There is something that we call a Mixed Commission. Every year members of the governments and administrations from Russia and Austria meet, alternately in Austria and Russia, in order to discuss how to improve the business ties between the two countries. Since I am a member of this Mixed Commission, I know that serious discussions are held there and I know that it helps to improve the situation. The Austrian political side has repeatedly expressed the fact to the rest of the world and to Russian authorities that despite the fact that Austria is a member of the European Union and despite the fact that it is bound to follow the decisions of the EU, Austrians do what they can within the current framework to increase mutual trade and investments.

Have you made many useful contacts when attending the Innoprom Fair in Yekaterinburg?

From the point of view of boosting incoming investments into Austria, I met many Russian companies interested in internationalization, and internationalization is of utmost importance for Russian companies in order to be exposed to international competition and in order to test their competitiveness. By testing your competitiveness, you simply get better and know exactly where and how to adapt to be internationally competitive. Now we see a number of Russian companies following this idea, and they are open to develop the European market. Though the majority of such companies are small and medium-sized entities now emerging in Russia, this strongly raises hopes that the Russian economy will improve.

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