Denmark

Russian-Danish trade is characterised by an annual turnover of US billion with a steadily growing negative balance for Russia (in 1995 it was US million, in 1996, US million, and in 1997, US million). This is explained by a decrease in Russian exports, primarily fuel and lubricants, chemicals and fish. At the same time, imports are increasing due to energetic efforts of commercial ventures on the Russian side, as well as the expansion of export transactions by Danish companies to Russia and assimilation of the Russian market using elements of the Danish export promotion system. An exception to the above trend is 1998 due to a drop in the rouble rate. However, this gives no reason to believe that the negative balance in Russian trade with Denmark will become a trend in the next few years.

Russia's share in Danish imports accounts for 0.9%. This figure puts Russia in 19th place among Denmark's foreign trade partners.

The volume of Russian exports gradually decreased throughout 1996 and 1997 due to a drop in the export of crude oil and petroleum products (by 37.4%), organic chemical products (by 72%), ferrous metal products (by 63.1%), meat, fish and shellfish products (by 84.6%), oil-producing plants (by 53.6%), and chemical synthetic fibers (by 97.7%). Only deliveries of the first three items had a perceptible quantitative influence on the figures for Russian exports. Moreover, there was an increase in deliveries of several export items: ferrous metals (by 12.4%), sea products (by 18.5%), wood pulp and finished articles (by 26.4%), fertilisers (by 67.6%), non-organic chemicals (by 278%), alcoholic beverages (by 134.7%), clothing (by 53.6%), sugar (by 8.9%), natural and synthetic fur (by 24%).

Requests by Danish companies for certain kinds of metal-cutting lathes, as well as steel structures and ship hulls, are worthy of note.

In 1997, raw materials were still the main Russian exports to Denmark: crude oil and petroleum products, 45.06%; fish and fish products, 17.39%; coal, 6.66%.

The main Russian imports from Denmark are (in per cent of total imports in 1997): meat and meat products, 31.2; machinery and equipment, 12.86; grain and grain products, 10; dairy products, 4. The steady increase in Russian imports noted during the past few years were also maintained in 1997 due to an increase in the import of meat and meat products (by 50%), grain and grain products (by 28.7%); fish and fish products (by 35.8%); animal fats and vegetable oils (by 102.6%); cosmetics and toiletries (by 164.8%). Characteristically, purchases of the first two items had a perceptible quantitative effect on the increase in Russian export volumes. Several imported items decreased in volume: alcoholic beverages (by 28.5%), meat, fish and shellfish products (by 5.7%); canned vegetables (by 73.9%).

In order to prevent a decrease in the cost indices and improve the pattern of Russian exports, Russia needs to stimulate its own production of commodities it imports (60% of imports from Denmark constitute foodstuffs) and implement measures practised throughout the world for supporting export. In particular, credits, insurance of export loans, granting of government guarantees, financing of an export promotion infrastructure (information, consulting, marketing), as well as raising the role of Russia's trade missions as centres for coordinating the efforts of ministries, departments, regions, and business circles abroad to promote Russian exports.

The annual trade turnover between Russia and Denmark in 1998-2000 will remain within the limits of US billion. Any growth will be due primarily to an increase in Danish shipments to Russia. Deliveries of traditional Russian export goods do not have any serious chance of growing in the next few years. Shipments of timber, cardboard, paper and chemicals could be increased if regular efforts are made on the Danish market (the creation of a dealer network, warehouses, active advertising, etc.).

Much more effort and resources will be required to promote Russian machine-building products on the Danish market. The best prospects are for instrument-making and optics, as well as for the development of cooperative deliveries for shipbuilding and capital construction.

According to estimates of the Danish government and business circles, political and economic risks have increased in Russia, particularly after the events of September 1998. Denmark considers Russia an expensive and difficult country for business development with a high level of crime, primarily in the economic sphere. Difficulties connected with tax legislation, patent and trade mark protection, and other negative factors only compound the problem.

However, a certain number of Danish businessmen are of the opinion that the positive aspects in Russia are beginning to outweigh the negative, and the time has come to search actively for partners. According to the economic information department of the Danish Industrial Confederation, the Russian market will expand 3- to 4-fold in the next 10 years, but contacts with Russian organisations and companies should be developed now.

Joint ventures. At present, Denmark is working on approximately seven investment projects for Russia, however, the problems caused by Russia's financial and economic crisis since August 1998 will most likely postpone the implementation of these projects until 1999.

Danish companies are also willing to participate as contractors in investment projects to be implemented in Russia. The most promising in this field is cooperation with Danish power engineering companies.

The Danes are showing interest in building wholesale warehouses and small retail outlets in Moscow and the Moscow Region.

Contacts have been established in Denmark by the Tver Regional Administration to discuss a possibility of renting technical equipment for the light and food industry based on requests from Russian small businesses.

Danish companies believe that the best form for investment projects is joint Russian-Danish (and not exclusively Danish) funding, which is, however, for the most part not feasible for the Russian side due to its lack of hard currency. There is also a possibility of carrying out joint projects in the area of alternative energy sources. In particular, the management of the Vestas concern (which is in control of over 20% of the world market of wind power installations) expressed their willingness to consider a possibility of 50% financing of a pilot project for building a large wind park in Russia.

The largest Danish company, FLS, is also potentially willing to look for foreign investors to modernise twelve cement plants in the Moscow region, which would lead to a four-fold increase in their productivity and a ten-fold reduction of the discharge of toxic agents into the atmosphere.

Most Russian-Danish joint projects envisage selling the products manufactured within Russia. However, according to the Danes, some commodities (for example, wind power installations) could later be exported to CIS markets.

A memorandum drawn up at the second session of the Intergovernmental Commission Council focuses on cooperation in rendering Danish technical assistance to Russia. For example, an agreement has been signed between the Russian Nuclear Ministry and the Emergency Department of the Danish Interior Ministry which envisages deliveries of Danish equipment to Russia in the amount of 1.5 million Danish Kroner, and technical issues have been settled for the signing of a similar agreement between the above-mentioned Danish department and the Russian Emergency Ministry (for 3 million Kroner).

Cooperation in the production, transportation and refining of oil and gas is being discussed by Russia and the Danish DONG concern, as well as the use of Danish experience in shipment of goods to Russia's Arctic regions with the help of the Royal Arctic Line sea transportation company controlled by DONG.

A promising line of cooperation is Danish consulting services rendered in the field of environmental protection and transportation involving various European and national foundations for assistance Eastern European countries in financing these projects. The Russian trade representation in Copenhagen has good business contacts with consulting companies working in this sphere, in particular, Ramboul, NNR and Kovi Consult.

In addition to transportation services, Danish companies are also rendering consulting services in construction and design, as well as in drawing up regional economic development programmes. In particular, industrial development plans for the Komi Republic (building a municipal infrastructure, electricity and energy supply, the environment, the training of specialists) and a Norilsk-Dudinka railway modernisation project have been developed, as well as a comprehensive conversion programme for St. Petersburg defence enterprises.

The Danish Business Service centre has gone into operation. It is engaged in marketing broker services in establishing contacts, translating documents, booking hotels and providing transportation.

Several joint ventures have been founded in Russia with the participation of Danish capital. The largest of them are the following: Stimorol Chewing Gum (95% share of Danish capital), Rechidan (freight shipments), ZP-Scandinavia (sea shipments), Sabras Rus (compressors), Shalkuna V. P. I. (timber processing), and Kar-Ko Rus (potato products).

Four joint-stock companies with Russian capital are registered in Denmark.

The equity capital of A. F. N. Ole amounts to 1.2 million Kroner. All shares belong to Nafta (Moscow). This company engages in the export and import of oil and petroleum products and related business. The company's sales of 2,800,000 tons of oil and petroleum products in 1997 amounted to US million.

The company was registered on 23 November 1978. The equity capital of Dana Maskin (former Dana Belarus) amounts to 18.2 million Kroner. Avtotraktorexport owns 94.5% of the shares and Jumo Plant (England) owns 5.5%. The company is engaged in trade, industrial production and repair, as well as the technical maintenance of agricultural machinery and machine-tools in Denmark and elsewhere. The company's trade turnover in 1997 reached 10.2 million Kroner, with a gross income of 3.1 million Kroner. Twenty-eight tractor-trailers, 12 pieces of machinery for manufacturing feed mixes and 67 machine-tools were sold.

At the moment, the company is not engaged in the sale of tractors and agricultural machinery manufactured by CIS countries. Machine-tools are sold through direct contacts with Russian manufacturing plants, usually with payment by installments within 3 to 6 months. In 1996, the company began selling tractor trailers made in the Czech Republic and Italian machinery for manufacturing and distributing feed mixes on the Danish market, and since 1997 trailers made in Lithuania. The company provides pre-sale support and sells machine-tools and agricultural machinery through a dealer network consisting of a total of 34 dealers. In 1997, due to financial difficulties, the company had to sell its real estate and lease its administrative building, workshop and warehouse.

The capital of Lukoil International amounts to 1 million Kroner. The founders are Eurodek Copenhagen and Lukoil International (Ireland). It is engaged in the export and import of goods and services primarily relating to oil and petroleum products.

The RCAC joint-stock company was registered in December 1996. One hundred percent of the shares belong to the Inter-Regional Cooperation Assistance Committee. It is engaged in the export and import of various goods and services, as well as in the promotion of foreign economic ties between the Russian regions and Danish companies. In 1997, the company conducted no major business operations.

Inter-Governmental Russian-Danish Council of Economic Cooperation. The Council was founded under the Agreement on the Development of Economic, Industrial, Scientific and Technical Cooperation of 26 October 1992. Two meetings were held. A third meeting is scheduled for autumn 1998. The Russian side proposed the following questions for the agenda: Danish humanitarian and technical aid; Danish investments in the Russian economy; specific problems in economic interrelations – custom, fishing, training of specialists; development of scientific and technical cooperation; additional measures for the diversification of business relations.

The sides have agreed to delegate the Council's routine issues to working groups, which will meet no less than twice a year. There are plans to form the following permanent working groups: agriculture and foodstuffs; industry; environmental protection; trade; construction; transportation and customs issues; scientific and technical cooperation; quality control and certification.

In order to raise the efficiency of the Russian side of the Council, regional representatives have been invited, primarily from the North-West of Russia, to assist in the work. The results of the second session of the Russian-Danish Council and the responses from Russian regions and the Danish side demonstrate the benefits of this cooperation.

Regional cooperation. By virtue of their geographical proximity, the North-Western regions of Russia are traditionally viewed as priority regions for Danish-Russian cooperation in a wide range of different spheres.

Denmark is participating in the financing and development of several international technical assistance projects in the Kaliningrad region within the framework of the UNIDO and TACIS programmes. Danish experts participate in drawing up stage 1B of the UNIDO project of restructuring the region's economy.

At the beginning of 1992, Denmark announced its willingness to support Russia in providing housing for servicemen withdrawn from the Baltic states. In July 1992, the Danish Foreign Minister announced the allotment of 50 million Kroner for carrying out a housing construction pilot project. This cooperation project envisages housing construction and professional training of Russian servicemen withdrawn from the Baltic states. The project envisages the construction of 25 farmsteads and 70 residential houses, as well as a field factory for the manufacture of building structures in the Lodeinopolsky district of the Leningrad region. In June 1997, the main complex was put into operation.

For several years, the Novgorod region has been actively expanding cooperation with Denmark. In 1995, Dansk Tyigegiunrni Fabrik signed an agreement on setting up a facility for Stimorol Chewing Gum packaging on vacant production space provided by the Spektr company. For this purpose, Russian-Danish Stimorol Chewing Gum private company was founded with an authorised fund of 99 billion roubles, in which the Danes own 95%. The third stage of waste treatment units in Novgorod has been built with Danish financial assistance; the project costs US,000. The question is being reviewed of financing and reconstructing the first and second stages.

Delegation visits. In 1996, Danish Prime Minister Poul Nyrup Rasmussen (February) and Foreign Minister Niels Herveg Petersen (July) made official visits to Russia. On 18-20 November 1996 Danish Days were held in Moscow and Nizhny Novgorod. The official Danish delegation consisted of representatives of 50 companies and organisations. In February 1997, Yevgeny Primakov visited Denmark. On 17-19 November 1997, Danish Days, in which 37 Danish companies participated, were held in Moscow and St. Petersburg. At the end of March and beginning of April 1998, Danish Agricultural Days were held in Moscow and Krasnodar.

In June 1996, during Yevgeny Primakov's visit to Denmark, a Joint Working Programme of Cooperation between Russia and Denmark for 1998-2000 drawn up by the Russian Foreign Ministry was discussed.

A delegation of Danish business circles headed by Danish Foreign Minister N. H. Petersen visited Russia on 17-20 November 1997, during the Danish Days held in Moscow and St. Petersburg. The delegation consisted of representatives of 44 Danish companies, as well as of the Confederation of Danish Industrialists, the Danish Chamber of Commerce, the Agricultural Council, the Association of Danish Contractors, the Investment Foundation for Central and Eastern Europe, the Danish Council of Centralised Heat Supply, the Foreign Ministry, and several major Danish banks. The visit was one of the largest in terms of number of participants during the entire period of Russian-Danish economic and trade relations.

During the week of conferences and negotiations, more than 900 meetings between the businessmen of both countries were organised. Within the framework of the visit, meetings were held between the co-chairmen of the Russian-Danish Intergovernmental Council of Economic Cooperation, Russian Science and Technology Minister V. Fortov and Permanent Secretary of the Danish Foreign Ministry Frijs Arne Petersen.

The Russian participants in the meetings acquainted themselves with Danish technology in power engineering and energy saving techniques. The largest number of companies in the Danish delegation presented this direction in cooperation: ABB I. S. Moller, Broen, Brunata, Hydro-X, Danfoss, Danish Power Consult, RDIEE, Tarco Energy and Kamstrup. Large Danish machine-builders were widely represented—Grundfoss, Broen, JIP Kugleventiler, Sabroe Refrigeration, and Elcold Frysere, construction material manufacturers – Rockwool, Nordisk Wavin, Clauhan Project, Logstor Ror and Per Aarsleff, and agricultural products and technology – Persolit Handel, Skare Meat Packers, Foss Electric, and Tetra Pak Hoyer. Environmental protection techniques were demonstrated by the Russian-Danish Institute of Energy Saving and the Danish Council of Centralised Heat Supply. For the first time, world-renowned companies such as CAC, Lego, and Novo Nordisk took part in the Danish Days in Russia.

Contractual and legal base of economic and trade relations. Russian-Danish economic and trade relations are currently regulated by the following intergovernmental agreements: the Agreement on the Development of Economic, Industrial, Scientific and Technical Cooperation of 26 October 1992; the Agreement on Cooperation in Environmental Protection of 11 January 1993; the Agreement on the Encouragement and Mutual Protection of Investments of 4 November 1993; the Double Taxation Agreement of 9 February 1996; the Agreement on Tax Exemption of Resources Sent by the Danish Side for Housing Construction for Russian Servicemen Withdrawn from the Baltic Countries; On Cooperation in Combating Organised Transportation Crime, February 1996; On Comprehensive Rescheduling of the Foreign Debt of the Former Soviet Union (ratified in December 1996, there is no information on its signing); and the Agreement on Partnership and Cooperation ratified by a presidential decree of 25 November 1996 (the Danish side ratified it in September 1996).

Agreements are in effect between Russian and Danish ministries and departments on cooperation in agriculture of 5 November 1993; on cooperation in fuel and energy of 16 February 1994; on Danish material and technical assistance in computerisation of the St. Petersburg tax service; on cooperation and technical assistance in preventing and eliminating emergencies in nuclear energy, including radiation protection; and on cooperation and technical assistance in nuclear power engineering and radiation protection.

The following intergovernmental agreements between the former Soviet Union and Denmark still have legal force in Russian-Danish relations until the signing of new bilateral agreements: the Treaty on Trade and Navigation of 17 August 1945; the Agreement on Payments of 30 May 1959; the Agreement on International Air Traffic of 31 March 1956; and the Agreement on International Vehicle Traffic of 3 December 1971.

During 1997, the following intergovernmental and interdepartmental agreements were also signed: on technical cooperation, 26 February 1997; on cooperation and mutual assistance in customs affairs, 13 August 1997; the memorandum on cooperation in agriculture and fishing, August 1997; the protocol on environmental cooperation, September 1997.

Agreements on combating organised crime, on cooperation in construction; and on cooperation in agriculture and fishing are being prepared for signing.

The Danish side has retained its approach to the crediting and insurance of deliveries of technical equipment, materials and consumer good to Russia. For the purpose of supporting Danish exports to Russia, commercial banks are granting Danish suppliers long-term and short-term loans for financing exports to Russia, and the Danish Export Support Agency insures these loans at request.

The basic framework terms of these credit lines, on 1 February 1998, were the following: 7-10% per annum, repayment of loans within five years for technical equipment, and 180 days for foodstuffs.

In its annual review of the risk factors and solvency of various countries, the well-known information consulting company, Dan and Bradstreet, once again gave Denmark one of the highest ratings, DB1b.

In December 1996, an agreement between Russia and Denmark was ratified on rescheduling of the state debt of the former Soviet Union (drawn up on the basis of a memorandum signed between Russia and the Paris Club in April 1996). Russia's debt to Denmark is essentially divided into three parts: the debt inherited by Russia from the former Soviet Union on loans guaranteed by the Danish government and mature now, in accordance with the fourth bilateral agreement on consolidation and rescheduling of the former Soviet debt to Denmark signed in the autumn of 1996 (drawn up on the basis of the declaration signed in April 1996 in Paris on Universal Consolidation and Rescheduling of Former Soviet Debts to the Paris Club); the former Soviet debt to Danish commercial banks through the London Club; uninsured commercial debt and loans to private Russian companies, which amount, according to different estimates, from US to 60 million.

In accordance with the updated version of the balance of payment set forth in the fourth agreement on debt rescheduling, the total amount of guaranteed Russian debt to Denmark amounts to US million, 2 million DM, and 1.1 billion Danish Kroner. Russia's main debt to Denmark should be paid within 25 years with a six-year deferment. The first installment of the principal is scheduled for 20 February 2002. Interest on the deferred amount should be paid annually on a six-month basis (in August and February). The first payments were made on 30 December 1996. Denmark is essentially satisfied with the way Russia is servicing its debts.

Since the beginning of the 1990s, Denmark has been participating in the effort of several international financial organisations for rendering support to the reforms in Central and Eastern Europe. The Danish Foreign Ministry is coordinating all the programmes being implemented with Denmark's participation on a multilateral basis. Programmes are proposed which the Danish Foreign Ministry believes to be of greatest interest to the country's organisations and enterprises within the framework of North European cooperation, including assisting the reforms in Russia.

Council of Baltic Sea states. Cooperation in environmental protection with emphasis on ensuring nuclear and radiation safety is conducted within the framework of the Council of Baltic Sea States (CBSS). A special working group is engaged, in particular, in assisting nuclear power plants in this respect in Sosnovy Bor and on the Kola Peninsula. Several seminars of experts have been held on power engineering and transportation cooperation, as well as a meeting of special prime minister representatives on organised crime, including in the economic sphere.

Denmark has chaired the organisation since July 1997. The Danes are actively in favour of having the CBSS headquarters in Denmark, however, following relevant discussions, they agreed to the headquarters being set up in Sweden.

Council of Ministers of Northern States. The Council of Ministers of Northern States is implementing a Working Programme on cooperation with territories adjacent to Northern Europe. The programme includes several projects, which set forth, among other things, assistance to students and researchers specializing in the North European economy. There are several economic programmes for civil servants. The North Investment Bank and Environmental Protection Corporation NEFKO held negotiations with the Russian Finance Ministry on signing framework agreements on cooperation in using their funds to finance the participation of North European companies in projects which fall into the category of “northern interest” (i.e. they should be important for two or more states) in Russia. Denmark has done a great deal to prepare an Intergovernmental Memorandum on Mutual Understanding related to the opening of an information bureau of the Council of Ministers of Northern States in St. Petersburg. The Danish side is hoping that legalisation of the bureau's status will make it possible to raise the efficiency of the Working Programme in the north-western regions of Russia.

Baltic cooperation. Danish companies are acting as coordinators in several regional projects, in particular, the Baltic Energy Circle (BEC) and the Via Baltika Highway. Contacts with the BEC continued, in which representatives of RAO EES (Unified Power Grid) and its subsidiary companies in the Leningrad, Moscow and Kaliningrad regions participated.

Consultations and design work are going on with respect to Via Baltika. The highway will run from Germany through Warsaw, the capitals of the Baltic states, the ferry crossing to a Finnish port, Finland, Sweden and end up in Denmark (the last three links essentially already exist, so the matter concerns building the Poland-Baltic route). The Russian side, along with the Committee of Senior Officials of the Council of Baltic Sea States, is discussing the possibility of including the Leningrad region and Vyborg in the project. There are no plans to involve the Kaliningrad region in the Via Baltika project.