Russia occupies a prized perch in the Top 20 world economies by Gross Domestic Product (GDP) in 2017, according to the International Monetary Fund. This makes it an attractive destination for telecommunications companies, global retailers, and other companies trying to tap into this largely untapped market. Consider this from the UK’s Doing Business Guide:

“The Russian telecommunications market showed strong development in recent years and is expected to grow further. The mobile communications segment takes about 44% of the overall market share, replacing fixed-line communications. The development of 3G and 4G networks will bring new growth opportunities for the market. Future market development is triggered by the increase in internet and data transmission services as well as value-added services.”

That adds up to opportunity, and Russia has been gradually becoming easier to do business in. According to the World Bank’s “Ease of Doing Business” index, Russia had risen from No. 62 on the list in 2014 to No. 35 by 2017. However, before you get too cheered by that number, it’s a little misleading when it comes to telecom deployments.

The Challenges of Doing IT Business in Russia

Despite growing headway by the Russian government at easing onerous rules that stifle international investment, challenges remain. While importing shirts or stuffed animals or coffee beans has become easier, the government has not rolled out the welcome mat in the same way to international telecoms. There is a lot of concern, justified or not, about encryption equipment and potential subterfuge.

“Manufacturers of telecommunications equipment… have reported serious difficulties in obtaining product approvals within Russia.”

The report goes on to say: “Laws in the information technology (IT) sector have made it more difficult for U.S. technology companies to provide goods and services in the Russian market.”

Still,  the Russian technology manufacturing sector hasn’t caught up with some of the major overseas purveyors. That has, in a sense, forced many Russian companies to use foreign companies for their telecom needs, even though it runs counter to official government policy.

The Russian Minister of Communications and Mass Media Nikolay Nikiforov acknowledged as much in a speech to the State Duma in 2015: “In the majority of cases, Russian operators use foreign telecom equipment. Conditions of financing and supplies of such equipment very often force operators to choose foreign products.”

International Telecoms Face Both Opportunities and Missteps

So where does that leave international telecoms wanting to do business in Russia? The answer: In a very delicate spot where opportunities are ripe, but missteps can be costly.

Russia has been actively trying to upgrade its homegrown telecom sphere and encourage local companies to buy locally. In fact, just last month, Russian telecom giant Micron announced its intention to replace all of Gazprom’s imported telecom equipment. That can be seen as an ominous sign to international telecoms seeking to do business in Russia.

"The implementation of the project will ensure import substitution of all communication equipment used and planned for use in the networks of PJSC Gazprom and its subsidiaries, as well as a significant increase in the gross regional product in five to eight years," the publication said.

So it is against this sometimes chaotic backdrop that international telecoms are working against in Russia. In light of the challenges, it’s especially important to make sure you’re following all the rules and regulations and dotting all your i’s and crossing all your t’s before jumping in.

Despite all the uncertainty and attempts by the government to regulate telecom importers, market forces may ultimately carry the day, leading to opportunities for foreign telecom deployers.

The most important aspect of trying to get your telecom equipment into the Russian Federation is to partner with an Importer of Record who knows the rules, paperwork, bureaucracy, and even customs officials. We covered the importance of finding an IOR in depth here.

How to Import Your IT Components Into Russia

Here are three other key points to remember when trying to import IT components into Russia:

1. Abide by the Yarovaya Package

In 2016, President Putin signed into law a series of anti-terrorism measures that go into effect this year, some of which directly impact telecom companies. Servicers are now required to furnish encryption keys to law enforcement agencies upon request after Russian President Vladimir Putin signed the Yarovaya package of anti-terrorism amendments. The amendments include provisions requiring telecommunication service providers to furnish encryption keys to law enforcement agencies upon request.

Effective July 1, 2018, the Yarovaya Package also declares that Russian telecoms and Internet Service Providers (ISPs) to store all customers’ telephonic and electronic content for six months. It also mandates ISPs to keep records of all transmitted communications for one year and telecoms for three years. How that impacts foreign telecoms remains to be seen, but we recommend that you follow the Yarovaya rules to avoid problems down the line.

2. Offer Something Not Offered by a Domestic Russian Company

When importing telecom equipment, Russia will mandate swapping out components with homegrown versions if available. But with telecom services, you can increase your chances of success by offering something not available by a Russian company. Do your homework and add a twist, a vertical service, or another add-on that can’t be obtained locally.

3. Partner With a Local Company

This is so important on so many different levels, even if it means working out revenue sharing.  The reasons for this are myriad. But if you’re importing IT components, you’ll have more latitude if you are working with and benefitting a Russian company. Here’s why:  

• You’ll be partnering with people who know the language, the customs, and the bureaucracy.
• Your import components will have a far better chance of clearing customs if there’s a clear Russian connection to the product.
• The largest companies are partnering up. For example, Chinese telecom Huawei is collaborating with Russian telecom Rostelecom for deploying high-quality Wi-Fi networks in Moscow. A partnership like that has a far greater chance of success, and such a partnership can be replicated among companies large and small. Importing equipment for a deal that is clearly benefiting a Russian company will go much more smoothly.

So when planning to import electronic equipment into Russia, there’s a lot more to consider than just customs and clearance — there’s a whole package of steps to take. If you follow them, you have a chance at a lucrative stay in Russia.