It’s fair to say Russia is hardly out of the news at the moment and there may be a sizeable number who say the country – and its ebullient President Vladimir Putin – quite like it that way.
From taking a hardline stance on the Syria crisis, to hosting what appear to be the sensationally expensive Winter Olympic Games in Sochi next year; from the extraordinary case of Edward Snowden, currently granted residence in Moscow, to hosting the G20 summit in St Petersburg, Russia is dominating world news to an extent I haven’t remembered in years.
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That dominance of the news agenda has now extended to the auto business, which, despite taking a bit of a downward trajectory of late, has now overtaken Germany as Europe’s largest car market.
Underlying growth prospects look reasonable as a burgeoning middle class demands ever more parity with ‘the West’ and as overseas OEMS collaborate with Russian partners such as the established giants of AvtoVAZ and GAZ Group.
One glance for example at Daimler unit, Mercedes-Benz Rus, shows net profit increasing year-on-year to RUB3.1bn and revenue up 23% to RUB53bn – with number such as those it’s easy to see why foreign manufacturers have consistently eyed the country as ripe for development.
Equally, the infamous Decree 166 specifying local production, has also led to significant employment opportunities, not least based around Russia’s major automotive clusters such as those in Kaluga, Sverdlovsk and Nizhny Novgorod.
Take this from head of automotive sector in the CIS, William King, who told me: “Decree 166 is absolutely entrenched and from the OEM point of view, the government provided a lot of incentives. Progress is being made.”
But as well as domestic success, a clear goal would be to export vehicles from Russia not only to established markets, but also to regions of the world with historical ties to Moscow.
To that end, I was struck this week when I heard GAZ Group is to deliver 330 PAZ-32053 chassis to Cuba by the end of this year, with Havana planning to start its own production of buses on the base.
But this is isn’t even a first foray into the warmer waters of the Caribbean – GAZ has already delivered 210 PAZ-32053 chassis to Cuba and plans to deliver 120 PAZ chassis more by the end of the year.
The Cuban bus based on the 2013 PAZ chassis will be known as the Diana and the Cuban partner will ensure the warranty and maintenance of the buses. PAZ will supply spare parts to Cuba.
Clearly, with the current and punitive embargo by the US on Cuba, a dispute now 50 years old, Havana is looking for as much business as it can garner.
The image of glorious pre-revolution Chevrolets, Plymouths and Buicks, gliding up and down Havana’s famous Malecon waterfront, may be one any tourist treasures to take home, but for the people of this resolutely Communist island, it is the more humble bus that forms a crucial part of the transport landscape.
PAZ cooperated with Cuban partners in the development and organisation of the Giron bus based on PAZ component case and indeed, around 15,000 buses based on the PAZ-672 chassis were produced in Cuba between 1970 and1980.
“The cooperation with the Cuban side is one of the development stages in GAZ Group’s export strategy,” says GAZ Group president, Bo Andersson.
Such business is a clear indication of the strong ties that have endured between Russia and Cuba since the seismic upheavals associated with the end of the Soviet Union.
Oil and heavy machinery, even Ladas apparently, used to cross the Atlantic from Russia, while the island’s staple of sugar, in the guise of millions of tonnes of the sweet stuff, made a welcome return journey to colder climes and it appears at significantly increased rates above the market price.
Russian Prime Minister, Dmitri Medvedev’s visit to Havana earlier this year rekindled ties between Moscow and Cuba after years of relative stagnation, as he himself concedes in an interview carried on his website with the news agency, Prensa Latina.
“If we compare today and the 1990s, our relations with Latin America used to be much more inert,” he said. “That was caused by our domestic issues: we were barely able to sustain our own development.
“We have to admit honestly that relations with other nations demand an economic potential, they demand political will and commitment. But those times are long gone. New times have arrived, our contacts are wide-ranging, and this is especially true of Cuba, which is dear to the heart of every Russian.”
So much for sentiment but the executives at GAZ Group and indeed those at Russian Railways (RZD), which has acquired 75% of PSA Peugeot Citroen’s logistics subsidiary, GEFCO, for EUR800m (US$1.05bn), do not probably go in for too much of that sort of flannel.
And a little bit of the reasoning behind that major cash outlay by RZD comes in the guise of comments made to me by the huge railway operator from Moscow as to why they bought 75% of GEFCO: “It is innovation that counts – it is a question of integrating technology in Russia,” says an RZD spokesman.
Such an exchange of know-how might not seem immediately linked with the Russian export of bus components to Cuba, but it lays the foundation for perhaps a wider restablishment of business ties with the still fiercely-Communist Caribbean island.
There are rumours of new energy finds off Cuba after initial forays proved inconclusive, with Russian oil company Zarubezhneft, thought to be starting drilling next year.
As Russia continues to grow its extraordinary energy power domestically, it is also eyeing foreign cooperation and where better than the old bulwark against the US in the Caribbean.
Buses may be just one cog in Russians coming back, but if reports are to be believed, Cuba also wants a railway line to cross its not insignificant territory and why not RZD to jump in?
Edward Snowden himself almost made it to Cuba – the fact what was thought to be his seat on the 12h Aeroflot flight to Havana was empty proved hugely frustrating to the posse of journalists trying to get an interview with the elusive American – but it gave the island yet another hefty dose of cold war intrigue.
Russia’s resurgent economic power and historical links put it in a very strong position with Cuba and it seems many businesses are lining up to take advantage.
As Medvedev points out: “Cuba – is dear to the heart of every Russian.”
