President Trump has said he wants to see major economic deals with Moscow and is in advanced talks to put some together. But how viable a partner is Vladimir Putin’s Russia, its economy weakened by years of Western sanctions, its population falling and the prospect of aggressive state intervention rarely far away?
Optimists in the White House point toward a new era of cooperation between the two countries if a deal can be made to end the war in Ukraine . Even if Europe isn’t fully on board with a settlement, it might still offer opportunities, especially in the extraction of minerals critical to the tech industry or oil and gas, the thinking goes.
But once a magnet for foreign businesses, today’s Russia isn’t offering a strong investment case.
Despite its resilience during the Ukraine war so far, its resource-dependent economy is now slowing under the weight of runaway inflation, sky-high interest rates and Western sanctions. Even if the U.S. were to lift some sanctions, Europe is unlikely to follow suit, leaving Russia a compliance nightmare for international companies.
A church is reflected in a window of a closed Louis Vuitton boutique in the GUM department store in Moscow, Russia March 15, 2022. REUTERS/Evgenia Novozhenina TPX IMAGES OF THE DAY
An unpredictable business environment in Russia, where asset seizures by the state have become the norm, would also deter foreign investors. The Russian economy, meanwhile, has become critically dependent on China , and any returning Western company would face stiff competition with entrenched Chinese players.
“There will be no economic normalization between the U.S. and Russia for years to come,” said Maria Shagina , senior fellow focusing on economic sanctions at the International Institute for Strategic Studies, a think tank. “Lifting sanctions isn’t going to change the fact that the political and economic life in Russia has dramatically transformed.”
Trump spurred talk about the kinds of deals that could be on the table when on Monday, the third anniversary of Russia’s full-scale invasion of Ukraine , he said he was in serious discussions with Putin about “major economic development transactions” between the two countries. Later, the Russian president confirmed that Moscow was ready to offer cooperation deals to American companies.
In particular, Putin offered the U.S. joint projects exploring the country’s rare-earth metals deposits, just as the Trump administration is trying to clinch a deal for Ukraine’s deposits of critical minerals .
According to the U.S. Geological Survey, Russia has the world’s fifth-largest reserves of rare earths, which are used in everything from electric vehicles and phones to missile systems. But Russia’s share of global rare-earths production is less than 1%, held back by lack of infrastructure and refining capacity. Many of its rare-earth deposits are located in remote and difficult-to-access environments, such as Siberia and the Arctic regions.
Russia’s ruble strengthened Tuesday after Trump’s comments, taking its gain against the dollar this year to more than 30%.
The viability of such investments might not be the point, however. What matters to Russia’s leader is securing the territory it has claimed in Ukraine, ending American sanctions and weakening the Western alliance .
“Putin understands that the most important thing for Trump is to announce a big deal, he knows that it doesn’t matter whether it will ever be realized,” said Janis Kluge , an expert on the Russian economy at the German Institute for International and Security Affairs. “It would cause deep divisions in the West. Putin likes what he sees from Trump so far, and he wants to use the opportunity to permanently damage the trans-Atlantic alliance.”
In other sectors, any returning Western companies would find a radically changed Russian economy.
Boosted by oil sales and military spending, Russia has weathered the strains of the protracted war better than many observers predicted. But under the hood, the war has amplified economic imbalances. It fueled untamable inflation and led the central bank to raise interest rates to 21%, a historic high. At the same time, it set off a labor crunch as working-age men flee the country, go to the front or work at military factories, adding to Russia’s demographic problems.
Facing these growing pressures, the economy has begun to slow down in recent months and the central bank expects growth to fall to 1%-2% from around 4% last year. Longer term, Western sanctions limiting Russia’s access to international markets and cutting-edge technologies have hampered the country’s outlook, analysts say. Russian businesses are also likely to be anxious to regain access to the Western financial system, enabling them to move money around the world with ease again.
The war has also unleashed a reversal of fortunes for Western business in Russia.
Following the collapse of the Soviet Union, Western firms quickly moved into Russia, eager to capitalize on its transition from communism to capitalism. They brought American fast food, automobiles and fashion to a generation previously familiar with scarcity. For middle-class Russians in cities such as Moscow and St. Petersburg, brands like Starbucks and Apple iPhones became ubiquitous.
But the U.S. never developed a significant economic relationship with Russia. Even before the invasion of Ukraine, the U.S. exported goods to Russia worth just over $6 billion, roughly the same as U.S. exports to Egypt.
“Russia and the U.S. never really had a very close economic cooperation,” Kluge said. “The U.S. is a competitor of Russia on world energy markets. And now there isn’t much real economic potential that could be developed.”
Over the past three years, thousands of Western companies from McDonald’s to IKEA have exited or curtailed operations in Russia. Some have tried but been left badly bruised, such as energy major BP , which reported a roughly $25 billion write-down but is still stuck with a stake in Russia’s state oil producer. Some U.S. and European pharma and retail companies and banks such as Italy’s UniCredit and Austria’s Raiffeisen have remained despite trying to exit from the country.
As the war in Ukraine dragged on, the Kremlin took greater control over the economy, carving up assets in ways not seen since the post-Soviet privatizations of the 1990s.
Many assets, including Western ones, have been redistributed to loyalists of the regime. It is unlikely that Western companies would easily get back their assets if they return, analysts say.
“Economic lawfare against foreign firms has been on the rise, nationalization has increased and a new Russian economic elite has emerged,” Shagina said. “From the Kremlin’s perspective, you don’t take away an asset from a regime loyalist to give it back to the previous owners.”
In recent days, Russia’s deputy prime minister has said Moscow will retain preferential treatment for domestic manufacturers and require returning retail chains to open up shop in regions of Ukraine seized by the Russian army, according to state media reports.
Going back to Russia would also present a compliance headache for American companies even if Trump lifts sanctions on Russia given that European countries, Canada, Japan and others will likely keep them in place. On Monday, the European Union approved a 16th package of sanctions against Russia.
“Assuming EU and U.K. sanctions remain in place, the risks for banks and multinationals will still be very high,” said Edward Fishman , a former State Department sanctions official. “If the U.S. were to unilaterally lift sanctions, we’d see a major push in Europe both to bolster enforcement.”
Trump himself is another factor fueling unpredictability, analysts say.
“Any company that returns to Russia today can’t be sure that Trump won’t change his mind tomorrow and sanction Russia again,” Kluge said.
Significantly, U.S. firms would face another challenge in regaining their foothold in the Russian market: China.
Beijing has bought up Russia’s oil and sold it everything from electronics to washing machines to tractors. China-Russia trade hit a record high in 2024, at over $244 billion. Chinese companies have become entrenched in many sectors in Russia. More than half of newly sold cars in Russia are from China.
If there is something of immediate value for American investors, it is Russian oil. The country is in the top three producers along with the U.S. and Saudi Arabia, and former industry executives said companies will be eager to stake a claim to oil-and-gas resources such as those around Sakhalin Island in Russia’s far east.
But even oil presents some formidable hurdles. The chaotic way in which major Western oil companies left the country in 2022 might deter them from sinking billions of dollars into Russia soon. Exxon , for instance, accused the Kremlin of expropriating its stake in a huge project at Sakhalin a few months after the invasion.
Write to Georgi Kantchev at georgi.kantchev@wsj.com and Joe Wallace at joe.wallace@wsj.com
