In the Context of Russia: Brexit

As the UK and EU continue to wrangle over Brexit, EM spoke to people on all sides of the debate to understand what Britain’s departure from the EU could mean for Russian businesses.

Scenario I: Business as usual
Russia is not an EU member state, so current trade agreements and bilateral relations with the UK will not change. The EU is Russia’s biggest trading partner, accounting for 46% of Russian foreign trade ($249 billion) in 2015
. The UK, however, makes up a small proportion of this and separate trade will continue, therefore there should be no profound effect.

Scenario II: Russia looks good
Diplomatic relations between Britain and Russia have always been complex, and tensions escalated last year with the Skripal poisoning. However, Brexit is such a dominant and divisive issue in the UK that Russia is no longer a hot topic, which could lead to a slight relaxation in bilateral tensions.

Scenario III: The end of EU sanctions?
Some sources have suggested that Brexit could mean a softening of EU sanctions against Russia. The UK has been one of the stronger advocates of sanctions, so when Britain is no longer a voice at the EU table, there is a hope that the argument for sanctions will weaken and perhaps sanctions could even be lifted. However, it seems that is a distant hope, as the strong voices of France and Germany are still both are in favour of sanctions. 

Scenario IV: More business opportunities?
Currently, the EU insists on financial transparency as part of its anti-corruption regulations. As a result of scrutiny over sources of funds, in recent years, it has been harder for Russian businessmen to buy property in London or conduct some business. No longer beholden to EU regulations, Britain’s economy may be desperate for business and liquidity, leading to more relaxed regulation and creating more opportunities in the UK for Russian business.

Scenario V: Potential increase in tensions with the US and China  
The City of London will no longer have EU backing on its market liquidity
, and will therefore need to look elsewhere. This will likely be to the US, rather than to Russia, which will further encourage Russia’s “turn to the East”, working with China and emerging markets in Asia. It will be interesting to see how this all plays out on the world stage amid the US-China trade war. Will Russia and Britain be stuck in the middle?