Moscow Proposes A Russian Trading House in Cuba
By Chris Devonshire-Ellis
Moscow has proposed opening a Russian trading house in Havana with the participation of the Cuban state corporation CIMEX and is waiting for a response from the Cuban authorities in the next few days. The announcement was made by Boris Titov, head of the Russia-Cuba Business Council on Friday (January 20). Titov is the Chairman and main shareholder of the Russian Abrau-Durso Group of Companies, specializing in fine Russian wines and other luxury products.
Titov recently discussed the issue with Cuban Deputy Prime Minister Ricardo Cabrisas, and Minister of Foreign Trade and Investment Rodrigo Malmierca in Havana, itself following Inter-Governmental discussions last month on the back of the Cuban President Miguel Diaz-Canel’s official visit to Moscow in late November.
Titov said that “The Russian side is now working very hard to take our economic relations with Cuba to a new level. In turn, the task of the business council is to breathe the energy of entrepreneurial initiative into these relations.” Titov noted that the Russia-Cuba business council includes many Russian companies that are interested in promoting their products in Cuba.
“Our proposal is to create a Russian trading house in Havana, with the participation of CIMEX, which would become the sole wholesale importer of products and independently determine prices on the retail market. In the coming days, we are expecting a reaction from the Cuban government,” Titov explained. The business ombudsman pointed out that “banking support will become very important” for the work of the Russian Trading House
“One of the proposals concerns the creation of a new settlement system in which the accounts of all trading participants would be included. Not only a clearing center, but, by and large, an organization with a banking license, the main task of which is to significantly reduce the volume of cash payments. And, of course, we will have to deal with lending, leasing, and factoring. It is very difficult to develop without financial instruments.” he stressed.
Cuba’s Foreign Trade Minister Rodrigo Malmierca, in turn, promised to provide full support to the project. “We are working to ensure that Russian investments in Cuba are subject to special protection. Despite the difficulties with liquidity, we can provide this joint venture with special treatment so that it does not have to repatriate its income.” he said.
Other developments indicating bilateral trade will show substantial future improvement are that Cuba has joined the Eurasian Economic Union as an Observer nation – a status that will allow it access to other EAEU member states and ultimately, sign off a Free Trade Agreement. The EAEU is also discussing the establishment of a Special Economic Zone at Mariel Port. This will be attractive to Russian and Cuban manufacturers looking to export to other LatAm markets. Direct flights between Russia and Cuba recommenced late last year.
Cuban cigars are also highly popular in Russia, which unlike European and American cities has not introduced any smoking bans in bars, clubs and restaurants. Specific cigar lounges such as the Casa de Habanos outlet in Moscow have proved popular, with manager Riad Bou Karam saying Cuban cigar sales in Russia are strong. Cuban Rum is also popular in Russia with bespoke Rum-only bars such as St. Petersburg’s St.Martins Bar offering a huge variety of Caribbean Rums, cocktails and cuisine.
Unlike the initial post-Soviet years when expensive but vulgar was the vogue, Russians are now seeking out quality first and foremost, and especially while under sanctions, with Cuban cigars long hailed as the best. Prior to the Soviet times, Imperial jewelers such as Faberge made exquisite cigar cases and boxes for the Russian elite.
Bilateral trade figures are relatively small between the two countries at about US$250 million per annum, with 80% of that in Russia’s favor. Typical Russian products exported to Cuba include transport and power equipment, while Cuba exports sugar products, fruits and rum. Given the development of Russian investment into Cuba, the increase in tourism, and export trade development, it can be expected that Russian investments into real estate and support businesses for Russians in Cuba will begin to accelerate. It also appears that American businessmen with a penchant for quality Cuban cigars will be faced with having to purchase them in Moscow, with such cigars effectively having become a double-sanctioned product.
During these uncertain times and with sanctions in place, our firm helps Russian companies relocate to Asia. We also provide financial and sanctions compliance services to foreign companies operating in Russia. Additionally, we offer market research and advisory services to foreign exporters interested in doing business in Russia as the economy looks to replace Western-sourced products. For assistance please email email@example.com or visit www.dezshira.com