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Cablegate: Challenges of Doing Business in Russia: Visa Regime Changes

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RR RUEHLN RUEHVK RUEHYG
DE RUEHMO #1676/01 1631443
ZNR UUUUU ZZH
R 111443Z JUN 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 8570
INFO RUEHLN/AMCONSUL ST PETERSBURG 4984
RUEHVK/AMCONSUL VLADIVOSTOK 2869
RUEHYG/AMCONSUL YEKATERINBURG 3212
RUEHHE/AMEMBASSY HELSINKI 3359
RUEHTL/AMEMBASSY TALLINN 2742
RUEHRA/AMEMBASSY RIGA 5401
RUEHVL/AMEMBASSY VILNIUS 3145
RUEHWR/AMEMBASSY WARSAW 2328
RUEHNY/AMEMBASSY OSLO 1724
RUEHKV/AMEMBASSY KYIV 0252

UNCLAS SECTION 01 OF 02 MOSCOW 001676


SENSITIVE
SIPDIS

FOR CA/FO, CA/VO, CA/FPP, EUR/RUS

E.O. 12956: N/A
TAGS: CASC CVIS PGOV RS
SUBJECT: Challenges of Doing Business in Russia: Visa Regime Changes

Ref: (A) 07 Moscow 4974
(B) 08 Moscow 0218

1. (SBU) Summary: Late last year Russia implemented a new visa
regime which limits foreigners with business or humanitarian (i.e.,
students, missionaries, and individuals traveling for scientific,
cultural, or sporting activities) visas to a 90-day stay in any
180-day period. Standard work permits, however, allow one-year,
multiple entry work visas. As a result, more and more U.S.
businesses are opting for such permits, which are subject to
region-specific numerical quotas. Because the Moscow-region quota
was recently reached, employees of some U.S. businesses have been
unable to obtain a visa. The Government of Russia (GOR) has told
companies that it plans to temporarily increase the quota in the
next few months. Companies have noted that the same problem will
arise next year unless GOR makes the quota increase both substantial
and permanent.

2. (SBU) None of the companies interviewed believed the visa regime
changes were particularly unfair or designed to push western
businesses out of Russia. Nor did the companies interviewed claim
they were specifically targeted by GOR in any other way. The
complaints about doing business in Russia faced by both Russian and
non-Russian firms were more about corruption and the overly
bureaucratic regulatory framework. End Summary.

Russian Visa Regime

3. (U) In late 2007, the Ministry of Foreign Affairs (MFA)
announced changes to the Russian visa regime (Refs A and B).
Previously, holders of business and humanitarian (i.e., students,
missionaries, and individuals traveling for scientific, cultural, or
sporting activities) visas, similar to the U.S. B-1/2 visa, were
allowed to stay up to 180 days at a time in Russia with the option
of continual renewals. In October of 2007, GOR limited holders of
business or humanitarian visas to a 90-day stay in any 180-day
period. In essence the changes mean that foreigners with these types
of visas are limited to no more than 180 days per year. When the
rules were clarified in January 2008, GOR explained that the rules
did not apply to work permits, which allow employees of foreign
businesses to obtain one-year, multiple entry visas. In order to
obtain a work permit, an applicant must have a contract with an
employer that is registered with the Russian Federal Migration
Service.

4. (U) When these changes were announced, some U.S. citizens
expressed concern about the difficulty of continuing their Russian
operations under these restrictions. The majority of complaints have
arisen from missionaries, students, small businessmen, and
consultants. These categories of visa applicants are either
ineligible for a work permit or cannot afford the time and expense
of obtaining one. Most large, well-established companies are already
using work permits. Applying for a work permit can be a lengthy
process, requiring the company to obtain employment authorization
and the employee to have an approved physician certify that he or
she is free of tuberculosis, HIV, and leprosy, among other diseases,
and is not a drug addict. However, the primary concern with work
permits relates to the quotas for applicants from outside the
Commonwealth of Independent States. GOR only issues so many of these
per year for specific areas of the country (the figure for the
Moscow region is 105,000) and holders of a work permit in one region
may not work more than a specific number of days in another region.

Effect of Changes on U.S. Businesses in Russia

5. (SBU) The direct effect of the changes on large U.S. corporations
has been minimal because most employees already had work permits.
Such companies often employ a large staff devoted to dealing with
work permits and visa issues. An executive with Topcon, a U.S.
subsidiary of a Japanese corporation, involved in the global
positioning systems industry, said renewing work permits is
relatively easy when you understand the process, and takes only a
few weeks. In general, companies entering the Russian market do not
find the process for obtaining work permits particularly
burdensome.

6. (SBU) The primary difficulty with work permits are the quotas -
GOR issues only so many per year. According to recent media

MOSCOW 00001676 002 OF 002


reporting, the quota for the Moscow region is 105,000. As greater
numbers of businesses apply for work permits, the annual work permit
quota will be met even earlier. Already some foreign corporations
have been unable to obtain work permits for their employees. Procter
& Gamble (P&G), for example, said that it has eight employees
stranded in the U.S. because the work permit quota has been filled.
They were told that GOR plans to offer a one-time increase in the
quota in the next few months. In the mean time, P&G has said it will
use business visas (subject to the 90-day rule) as a temporary
solution. The difficulty with such visas is that employees are
unable to open bank accounts, sign leases, and enroll their children
in school. An executive with P&G also said he knew that there are
over 20 employees of TNK-BP in a similar situation.

7. (SBU) The difficulty with work permit quotas will likely
increase. The booming Russian economy and the burgeoning middle
class are likely to draw more and more foreign businesses to Russia.
United Airlines, for example, intends to begin offering direct
flights between Moscow and the U.S. in October of 2008. Unless GOR
dramatically increases the quota for work permits, demand will
continue to outpace supply, which may limit the entry and expansion
of U.S. and other international firms in Russia or require them to
have a predominantly Russian staff.

8. (SBU) Comment: The MFA has maintained that the changes to the
visa regime were designed to harmonize Russian visa regulations with
those of Schengen countries. They apparently were not intended to
limit or prevent U.S. businesses from operating in Russia. The
numerical quotas, however, particularly with respect to Moscow,
ultimately may have such an effect. In line with our previous
reporting on this issue, we will continue to closely track these
issues and monitor the effects on U.S. businesses. End Comment.

Russell

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