Putin receives French business leaders despite tension over economic ties

More than a dozen French businesspeople were received at the Kremlin on Thursday, in an effort to promote economic ties between France and Russia. The visit was also an attempt to reassure foreign investors in the light of several recent arrests, including that of a French banker jailed in mid-February.

Bosses from Total, Société Générale, Air Liquide, Renault and Auchan all visited Moscow, underlining the importance of French economic ties as one of Russia's key partners and main foreign employer.

However, the spectre of sanctions, in place since 2014, and the arrest of American investor Michael Calvey, founder of private equity firm Baring Vostok, and his French colleague Philippe Delpal, have undermined the economic relationship between the two countries.

Calvey had been a long-standing defender of investments in the Russian market, and his jailing has shaken many foreign investors.

The Baring Vostok founder was accused of being a key player in a fraud worth some 33 million euros, although Calvey pleaded innocence. Calvey managed to swap his jail cell for house arrest, but Frenchman Delpal was not so lucky and remains in detention.

Undermining the business environment
Pavel Chinsky, director of the French-Russian Chamber of Commerce and Industry, said that Delpal's fate should be addressed. “Our mission is to stop this fire before the entire business climate is destroyed,” he said on Wednesday in an interview with RFI.

The boss of French startup BlaBlaCar was a notable member of the business delegation visiting Moscow. The car-sharing platform has been present in Russia since 2014 and counts some 20 million users. Baring Vostok is a significant investor in BlaBlaCar, which raised some 21 million euros in funding in 2016.

An agreement was signed between Russian sovereign funds, the French public investment bank Bpifrance and Orpea, a French business involved in the management of retirement homes. The contract is worth some 200 million euros for the construction of a number of retirement homes across the country, according to the Russian media.

Commercial ties between France and Russia plunged in the wake of the first round of sanctions imposed on Moscow in 2014 over the crisis in Ukraine. Russia responded by sanctions on a number of European food products.

However, trade has recovered somewhat since the imposition of sanctions, reaching more than 13.7 billion euros in 2017, against 11.8 billion euros one year earlier. France and Germany are the two largest sources of European investment in Russia.

Main foreign employer
France is notably the largest foreign employer in Russia with more than 500 French businesses operating in the country, employing some 160,000 people, according to Business France, the agency for promoting foreign economic investment.

The energy sector is of particular importance to French businesses. Total has joined the Russian firm Novatek to undertake extensive gas exploration projects in the Russian Arctic. And Engie is one of the five European firms developing the Nord Stream 2 offshore natural gas pipeline with Russia's Gazprom. The project has come under fire from the authorities in Washington.

“In Russia, Total has demonstrated that it can lead very big projects, worth billions, without resorting to the dollar or violating sanctions,” said Patrick Pouyanné, Total's CEO, in an interview last week with the Russian daily RBK.

Retail and distribution companies also have a strong presence in Russia with the supermarket chain Auchan, the sportswear company Décathlon and DIY shop Leroy Merlin. In the banking sector, Société Générale holds a considerable stake in Rosbank.

The auto sector is also strong for French players with Renault controlling Russia's biggest car manufacturer Avtovaz, known for its Lada series. While Peugeot parent company PSA has a plant in Russia in a joint venture with Mitsubishi.