October 15th, 2015 Simone Brunner, Austrian journalist, interviewed Dmitry Philippov, Managing Partner at GreenLane LLC, a consulting firm that specialises in services to Moscow expats. The material was prepared for Russian Novaya Gazeta, Wiener Zeitung, Austrian state-owned daily newspaper, and German media network n-ost an NGO for reporting from Eastern European countries.

Summary: Based on GreenLane monitoring of the expat movement, Western expat numbers in Russia were down 30-35% in 2014-2015 compared to 2013. Sectoral and financial sanctions blocked capital and certain types of goods to Russia. Many expats who worked in relevant markets left the country. Another factor for expat outflow was rouble plummet from 35-45 per usd/eur to 65-75 per use/eur that made expat salaries nominated in euros and dollars dear to their employers, or insufficient for the expats in case nominated in roubles.

The most politically affected expats were, probably, those who worked (or still work) for Western NGOs. Russia passed legislature that limited or directly prohibited NGOs activity in Russia. On the other hand, sophisticated technical expertise market was less affected. Engineering and tech companies are busy as usual and expat engineers keep coming to Russia.

Export sectors were up (thanks to rouble rate changes) without advertising it. Companies selling via the internet were, generally up 10% in Jan-Sept 2015. Expats who live in Russia for 15-25 and more year, own businesses here and have Russian families - are not going anywhere, they are rather commuting between their western homes and Moscow residencies. Those who have dollar or euro nominated incomes enjoy cheap rouble world.

Current crisis, apart from politics, is a test for healthy financial management and thorough market approach for western companies operation in Russia. Given that, compared to the West, Russia still has very liberal taxation and business immigration laws, open gaps in the market present business opportunities for western medium and smaller businesses.

QUESTIONS & ANSWERS:

(1) Due to some data of Russian migration service, the number of 'Western' expats (from Europe and USA) did shrink dramatically between 2014 and 2015. Do you also see such a trend? Do you also have figures about that (less expats asking for your services, more expats leaving Russia/Moscow etc.)? In one word - do you have data on this?

In GreenLane we service small and medium western businesses in immigration, corporate registrations and related services for a broad array of clients all of whom are western. Most of our clients are either owners of their business or both stakeholders+executives. Yes, we see many expats leaving Russia. We saw a number of our clients move to the U.K., the U.S., Latvia, Philippines, Spain, Cyprus and other countries. And they are not going to return in the near future.The total number of western expats is within 25 000 people or less. Most of them live in Moscow. My estimate of potential market for GreenLane is 1-5k expat individuals.

Russian Federal Migration Service have vast information on expats but they seldom take the trouble to split the data, analyse and explain it properly.For example, they rarely split 'visa foreigners' data by country. Given that China, Middle East and some other, vast parts of Asia have visa regimes with Russia, including them in the picture distorts it significantly.We always have questions after reading FMS published reports.Our monitoring of the situation shows that number of visa applications to Moscow FMS offices was down by 30-35% in 2014-2015 as compared to 2013. Number of Highly Skilled Work Permits and visas issued, not only reduced dramatically, there has also been significant qualitative shift from the West to the East - currently, the applicants are predominantly of Asian descent (China, Vietnam, and other Asian countries). Russian immigration authorities are suspicious and alert about it because declarative procedure of obtaining highly skilled permits and visas opens legal loophole for immigration from Asia.

(2) Are Western companies lesser interested in Russian market?

Yes, Western companies and many western individuals are now less interested in Russian market.Main factors are (i) Crimea related financial sanctions dramatically reduced the amount of money available in the Russian market; (ii) Trade sanctions made many suppliers to avoid exports into Russia; (iii) Rouble's plummet made expats too dear for some of their employers.

The outflow has been happening starting summer 2014. The migration varies by industry sector.

According to our observations among most affected sectors are:

- Financial Services of all calibers (banking, investment banking, wealth management, financial advisory)

- Real Estate (both commercial and residential)

- Agricultural produce suppliers

- Oil drilling services

- NGOs

Top tier, large multinationals and larger Russian companies purposefully reduce their expat headcount.

On the other hand: Engineering companies do relatively well.

Retail, Event, some of consulting and many other businesses - all stay and continue working.

(3) On the other hand, do you see more interest from other regions, from China maybe?

No. We do not work with Chinese businesses or individuals in Russia, for very infrequent exceptions. We do have some Japanese clients though.

(4) Do you offer some 'special programs' for expats who want to or who need to leave Russia?

Yes. Services range from basic (a) switch from work permits to business visas, to (b) parking and liquidation of companies which includes settlements with personnel and the state.

(5) As far as I understand, there are different groups of expats in Moscow - the ones who are here for a long time already (more than five years), and the ones who are here for short-term-period (2-5 years). Are there also the "long-term" expats affected by the current expat crisis? Or is it mainly about the "short-term" expats? Do you see some dynamics/trends?

Expats who stay in Russia since 1990-s and 2000-s years tend to stay in the country and find new jobs. Especially those who are married to Russian citizens and have children. This may sound paradoxically, but GreenLane project pipeline for Russian work/residence permits and citizenship for westerners is pretty full. Short-term expats, especially, those who were here purely on their job assignments in multinationals, leave in larger numbers.

(6) What does it mean for the business environment in Russia, if expats are replaced by Russian workers? Is this a big turnaround in Russian economy? It's a pity to see some of our valued clients leave Russia. It's not accurate to speak of 'workers' though - western expats, usually, occupy top corporate positions. Their departure grants certain promotion opportunities to a certain, limited number of their Russian colleagues. Big turnaround? No. I don't think so. The portion of expats in Russian business was relatively small even during 'the better years'.

(7) Which expectations do you have regarding expats when it comes to the years 2015 and 2016, or in the long-term (until 2020)? Is there anything you can predict or expect?

I wouldn't try to predict anything. I hope that number of expats in Russia will stabilise and gradually increase during next 5 years. A lot will depend on political situation. We would particularly welcome entrepreneurial western individuals who will come to local market with the view to develop their businesses.

Thank you very much for time and answers!

You are always welcome.

GreenLane is a team of professionals dedicated to Immigration, Corporate Registration and Accounting services. We sustain diverse communications of our clients with state authorities and banks in a time and cost effective way.