sky

Current News

LUNA Cryptocurrency Collapse: Is The End Near?

14 May 2022
Actual, Cryptocurrency, Investment
, , ,

The downfall of LUNA shook the crypto world. With most cryptocurrencies plunging more than 50%, billions of dollars have gone into thin air. Fear and uncertainty have taken the place of confidence as noticeable in the investment behaviour in the cryptocurrency market. How could this meltdown happen and what are the consequences?

 

LUNA

The cryptocurrency LUNA is associated with TerraUSD (UST). UST is a stablecoin which entails that there is an algorithmic $1 peg governed by underlying code. UST is inherently different from the other stablecoins like Tether and USD which are both backed by real-world assets such as bonds. UST has no real-world assets are merely relies on the algorithm. To maintain the $1 peg, the UST algorithm stabilises to create and burn tokens of both UST and the linked crypto LUNA. However, due to the extreme market volatility, UST has been unable to maintain the peg and dropped to 12 cents according to data from CoinGecko. Further, the Terra blockchain, which is the operating chain for UST and LUNA, had problems processing transactions twice in less than 24 hours.

Due to the inability to maintain the peg, LUNA plunged to $0 from more than $100 in the last months. This decline in price in UST – and therefore LUNA- has resulted in a meltdown in the crypto market. Even while the collapse of UST only lasted for several hours to regain the $1 peg, billions of dollars in value have been erased and the largest cryptocurrency bitcoin dropped 15% for the week, a level not seen since late 2020.

LUNA price (USD) in the last 7 days. Derived from https://coinmarketcap.com/currencies/terra-luna/

 

Compensation                                      

Bitvavo, a big trading platform, compensates investors after this disaster. The prices are equal to the prices of the pause on 13-05-2022 at 8:20. This pause was needed to create a plan to further stop the devaluation of the stable coin. Binance, the world’s largest crypto exchange temporarily delisted UST and LUNA but reversed this decision after Terra announced resuming new verifications on the blockchain and halting direct transfers.

Fear

The LUNA / UST situation resulted in panic and insecurity in the crypto market. In combination with the higher inflation and interest rates that have caused a sell-off in the global stock market, the cryptocurrency market seems to be related to the stock markets and manifests in a loss of more than 50% value in most cryptocurrencies. The growing fear and growing levels of inflation decrease the trust and investment in the crypto market. According to Vijiay Ayyar, the vice president of corporate development and international at crypto exchange Luno, in the crypto market “it’s normal to see bounces amounting to 10-30%”.” While “these are normally bear market bounces, testing previous support levels as resistance”, even the largest of cryptocurrencies such as bitcoin may not be sustainable or be able to bounce back. As  To long-term feasibility of cryptocurrency needs to be further explored – focussing on the environmental impact of the mining of these coins.

 

Conclusion

Cryptocurrencies as investments bring the known risks of (heavy) value fluctuation. However, as seen in the LUNA case study, the value of your assets can rapidly drop to a point of no return. KSI, a well-known Youtube, lost $2.8 million in his LUNA investment making his coins virtually worthless.

For more information about personal advice regarding international business advice, tax situations or consolidation, Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.

4 trends your business should pay attention to in 2022

17 Mar 2022
Current news, Europe

4 trends your business should pay attention to in 2022

business trends 2022

Every year, companies have to deal with predictions and challenges regarding global business. One of the well-known elephants in the room is the pandemic, affecting all companies. Next to the virus, other national and international trends keep organizations busy. How can your company respond to current global events? What type of strategies should you carry out to strengthen your brand and market position? We take a closer look into four business trends in 2022 – Data security, e-commerce, hybrid working and sustainability – and share insights on what your company could carry out for the near future.

1. Data security – Often overlooked, but crucial for your brand image and consumer trust

Consumer trust will make or break your brand image, especially how your company ensures data security. When people think of data security, they will most likely think of protecting data against risks, preventing data loss, and ensuring that data will not be misused or fall into unauthorized hands. Your company website should consist of a legal notice regarding your cookies and how your company protects the data of customers and website visitors. However, many companies tend to overlook the importance of detailed measures against data theft. In recent years, cybersecurity risks have been escalating globally. The question “How do I prevent hacking and data breaches?” turned into “When will data breaches happen?”

 

What can you do when cybersecurity risk prevention is impossible? The answer to that is to ensure that your company is well-prepared to take the necessary actions when it happens. Think of how you will bring the news to the outside world and what resources you have to limit the damages and solve the issue as effectively as possible. If companies want to be well-prepared for data challenges, investments in data security are the norm.

cyber risk

Global Connect Admin heavily invests in data security. Our customers are international companies, as well as private equity families. To ensure that their data is protected to the best of our ability, we secure the highest level of data protection. If you have any questions regarding how we do this, or if you are looking for professionals that can take care of your cybersecurity risks, do not hesitate to reach out to us.

2. E-commerce – Booming, however…

With the high level of convenience for customers, whether B2B or B2C, it is no surprise that e-commerce is booming. Global sales rose to 16.4% during the pandemic and continued to grow further. E-marketers predict that 22% of the global retail sales will increase to 22% by 2023. While e-commerce is booming, e-commerce companies will take a hit due to the economic barriers against Russia. Companies either choose or are forced to discontinue business with Russia, and freight costs will further increase with the rising oil and gas prices and limitations of no-fly zones.

 

E-commerce companies now have to choose alternatives to limit shipping costs and rising prices. For example, many companies tend to move production to Europe instead of Asia or choose green options regarding freight. Your company must communicate with your consumers at moments like this. Tell them what your 2022 actions are and what these mean for the consumer’s wallet and shipping. The good news is that your company is not the only one affected by global issues. The bad news is that if you do not take any action regarding current international events, the competition will eat you.

e-commerce

Have you thought of your short and long-term company strategies? Global Connect Admin assists international companies worldwide and has experience with various industries. If you are looking for distribution centers or would like international tax and VAT professional assistance, please get in touch with us. We would gladly help you with finding the best solutions.

3. Hybrid working – The new future

Remote and hybrid working is nothing new, but it is no secret that the global pandemic sped up the process of moving away from the office as a workplace. Compared to 2015, almost every company can now call itself (somewhat) experienced in hybrid working. While the pandemic heavily affected the global economy, it also proved that employees do not need constant supervision to perform well and be productive.

 

The main challenge with hybrid working is communication. What works for team A might not work for team B. How do you ensure that employees feel engaged and communicate well with each other, whether there is a lockdown or not? One solution is to establish clear ground rules regarding the workplace.

hybrid working

Since 2015, Global Connect Admin has experience in remote and hybrid working. To create the best hybrid workplace plan for your employees and your company, you need to analyze productivity and employee benefits. Many companies also tend to overlook what is possible in the legal aspect: Can employees work from any place they want to, or will your company experience insurance issues? If you have any questions regarding hybrid working, you can always reach out to us for tips and tricks.

4. Sustainability – Consumers find it essential, but do companies think the same?

Consumers went from requesting companies invest in sustainability to demanding it. The sustainability trend means that no matter the size of your company, you need to innovate your products and services for the greater good. More companies are now investing in green energy and sustainability projects. Meanwhile, international tax authorities are now also demanding sustainability reporting.

 

Recent years show that many international companies are already taking some actions regarding sustainability. For example, they switch diesel company cars to electric ones and invest in hydrogen projects. Meanwhile, the scarcity of Russian oil and gas further forces governments, companies and households to invest in different – more green – energy sources and solutions.

 

Sustainability goes further than thinking about how your company can impact the carbon footprint: you must now also think of society as a whole. If you only focus on, for example, your innovative products and services, you are only telling half of the story. Actions speak louder than words, so ensure to listen to your shareholders and customers and then implement the proper steps they want to see.

sustainability

Global Connect Admin has experience in sustainability reporting regarding international groups. We assist companies with, for example, XBRL reporting. With XBRL software, EU-listed companies can effectively link their data to sustainability information (such as the ESEF taxonomy). Our employees are highly experienced in consolidated annual reporting and will gladly assist you and your team.

Conclusion

Whether global trends enhance or challenge your business, you have to take action for the short and long-term. Even small-sized companies that are only locally active are affected by international developments. The real question is, what can your company do to act accordingly? Your answer depends on which industries your company is active in and what type of products and services you offer. However, one thing is for sure: You need the right tools, expertise and resources to ensure that your business continues to prosper. Take the right actions and communicate accordingly, and you will come a long way.

Sources

Modern Shipper – The World Bank – BusinessToday – The World Financial Review

What you need to know before expanding your Dutch business to Germany

10 Mar 2022
Europe, Germany, Netherlands
,

What you need to know before expanding your Dutch business to Germany

Doing business in Germany from the Dutch point-of-view

Doing business in Germany

Anyone who first enters the European market will quickly discover that every European country is different. The Netherlands and Germany are major international players and share a long trading history. Every year, Dutch entrepreneurs enter the German market but often with a Dutch frame of reference. Is this way of doing business effective, and how can a Dutch company prepare for the German market? Grenzhoppers, Internationales Netzwerkbüro, STRICK and Klaar Voor DE Start examine how to appeal to German customers and create awareness of Dutch companies in Germany.

Economic connections and differences

The Netherlands and Germany have strong economic connections with each other. Therefore, it is no surprise that Germany is the most important sales market for Dutch companies. Compared to other trading partners, such as Japan, neighboring Germany is very close. Nevertheless, successfully entering the German market requires intensive preparations for the Dutch neighbor. Germany is a large country, with significant differences in language, culture and regulations. While it is self-evident for most Dutch companies to be active internationally, it is more self-evident for German enterprises only to be nationally active. This activity is often challenging for Dutch companies: How can a Dutch company excel in the German market? On the other hand, this also has advantages: the physical distance is small, and the German business culture is more apparent than the international business culture.

 

German companies often sufficiently benefit from the German national market. Despite this, Germany remains a top location in Europe. According to the UK comparison portal, Nimble Fins, the country ranks highly in the business climate, trust in the rule of law and economic health. In addition, foreign companies have many options for applying for subsidies. Nevertheless, foreigners should be prepared for the individual characteristics of the German member states. Each Member State has its own culture, dialect, customs and economic specialization.

The first step: Find and understand the differences

Being aware of corporate and intercultural differences greatly benefits Dutch companies entering the German market. Consider, for example, the separation of work and private life. German business people like to see their life as a role play, based on hierarchy. At work, they show expertise. They let go of the professional role at home, and the personality comes to the fore. In the meantime, it is much more natural for Dutch business people to show personality at work as well. Conviviality takes you far in Dutch business life. With this knowledge, you can already imagine how a business meeting can go when a Dutchman and a German start a conversation without prior knowledge of each other’s culture.

In general, the Dutch want to appear sympathetic and demand a comfortable working environment. Germans like to appear competent and demand respect in the workplace. While the Dutch want to have fun with and at work, Germans often find it a challenge to deal with the self-relativization and self-irony of the Dutch. Germans often want to hear concretely how the problem is being tackled, while Dutch are quickly satisfied with a “We’ll get this sorted out, so don’t worry.” As a result, the Dutch often approach German customers with ‘promises’ such as “We deliver this product the fastest.” If this promise is made, German customers will want to see clear proof of why your company is the best, based on facts, not feelings. Dutch consumers respond better to storytelling, so keep this in mind to be very precise in your communication with German consumers. As a result, Germany experts advise against copying Dutch business plans to the German market, as this generally causes miscommunication.

Management style Netherlands Germany

Leistung schafft Vertrauen … Performance inspires trust!

business communication netherlands germany

Expanding to Germany or starting a business in Germany requires intensive preparations, but it is certainly possible to achieve success. Be prepared to be patient and assume that the achievements will be long-term. One way to make your company, products and/or services more attractive to the German market is to set up a gmbH. With this ‘camouflage method,’ you can effectively build a German identity and attract customers and partners.

 

In addition, your company must comply with German laws and regulations. As mentioned before, these are different than in the Netherlands. As a Dutch company in Germany, your business will be negatively affected if you do not comply with the rules. You will not only run into problems with the German authorities; German consumers and companies will also not trust your company and will not want to do business with you until the distant future. So make sure that the general terms and conditions (Allgemeine Geschäftsbedingungen) are correctly formulated, tailored and legally valid.

 

Once the first steps have been taken in Germany, the communication to the German market must be formal, detailed and correct. Germany experts recommend avoiding language errors, avoiding conflicts, addressing others by their last name and using precise language. Be tactful, honest, trustworthy and kind. Also make sure that there are German-speaking employees active in your company, as Germans prefer to do business in their language. Understanding the German language and culture prevents projects from missing out due to language problems and intercultural differences.

Communication is key

Approaching customers and partners takes time and effort, but the road to a good deal can be long and tiring if you don’t adhere to the business values and standards. An effective way to build trust and shorten the path to decision-making is to keep meeting reports (Kaufmännische Bestätigungen). The Dutch like to arrange business over the phone, but Germans find it more pleasant to do business by keeping written notices. Has a price been agreed, but one party says €15, and the other says €11? Then it is a matter of looking back at the review reports since the price is written in black and white. With these written summaries, you carefully check the agreements, and immediate (written) action can be taken if people disagree with the content.

 

In the end, Germans prefer to choose what they already have and prefer to be on the safe side. Ultimately, the boss makes the final decisions, and only these will be accepted and executed. Changes take time and require patience; a Dutchman who prepares properly and accepts this will eventually reap the benefits.

Meeting etiquette Netherlands Germany

Global Connect Admin is a Dutch company with German influences and customers. We mainly focus on companies that are active internationally. While our managing director is German, he chose the Netherlands as his head office, because of its international nature and attractive corporate culture. While we speak the international language, we also understand national company languages, including Germany. As a Dutch company, if you have questions about the German market or would like assistance with international business as a German company, do not hesitate to contact us. We are happy to help you and your company on the way.

Sources

Grenzhoppers – Internationaal Netwerkbureau – STRICK – Klaar Voor DE Start – Nimble Fins

Intercultural differences between West and East: A closer look into the Russian negotiation style

03 Mar 2022
Current news, Europe, Germany, Netherlands, Russia, United States
,
Russian negotiation style

Intercultural differences between West and East

A closer look into the Russian negotiation style

No secret that the west and Russia clash with different views and styles of communication. When taking a closer look at the intercultural dimensions of Hofstede, for example, you can already see vast cultural differences. What does this mean for your business communication? What should you be aware of when negotiating with the West and the East?

Keld Jensen and Michael Gates spoke about the Russian negotiation style and how to prepare for intercultural communication. Keld Jensen is an expert in negotiation, trust and behavioral economics. While he is a managing director of a listed Scandinavian company, he has more than 30 years of experience in international management, negotiation and communication. Michael Gates, managing director of CrossCulture, is an international expert on cross-cultural management. They wanted to share the Russian negotiation style with their expertise and background and gave insightful examples of why Europe and Russia often misunderstand each other.

Before we continue, we would like to share a disclaimer. The main goal is to educate, not to generalize, the Russian business culture. It is like the saying that all Dutch are direct: while this is generally true, very indirect Dutch also exists. Furthermore, we wish to give insights on the intercultural differences between Russia and the West, not to justify the actions of Putin.

Russians tend to trust 'the individual' rather than 'the system'

Gates stated that trust is an issue in general. Furthermore, there seems to be a gap in trust in every culture, especially when you take a closer look into ‘official’ and ‘personal’ trust. It is a long-time dilemma: If your friend commits a crime, will you lie in court to save them? In some countries, such as Russia and Korea, the answer is often “yes.” Yet, in other countries, such as Sweden and Finland, the answer is often “no.” These answers have to do with whether the people trust the system or the individual.

"I win, you lose"

When taking a closer look into negotiation, Russians tend to find winning the most important outcome. Gates stated that the Russian culture includes obsessions with strength and power. However, when you compare this obsession of strength to, for example, the United States, the Russian Federation tends to be more passive and patient, like Asian cultures. So if Russians tend to wait for the other party to speak first but want to ‘win,’ how do you prepare for negotiations?

Try to find a third way of negotiating instead of seeing negotiations as positional with a win-lose or lose-lose situation. Instead of acting from your frame of reference, try to understand the other party. What are the characteristics? How can the flow of communication go smoothly?

Negotiation styles

Important factors to know before you start negotiating with Russian enterprises

Geographically, Russia is divided into European Russia and Asian Russia since this country shares its land borders with sixteen countries. Therefore, it is no surprise that the Russian business and negotiation culture is European and Asian. While Russia is relationship-based like Europe, there are vast differences. For example, Russia is more passive and has much patience for doing business. As a European company, if you wish to make it big in Russia, you can only do so by having an extensive Russian network with solid relationships. When European companies negotiate, there is already a level of trust, namely the expectation that the other party also wishes the best for you. In Russia, this is no such thing; Business people tend to be more cautious and want to know what is in it for them.

The start of the negotiation: Be prepared to start strong

When your company starts negotiating with a Russian counterpart, they will most likely ask you first to tell what you think. Afterward, you will most likely hear a form of resistance due to the high level of cautiousness and suspicion. So you might wonder: How do I deal with this? How do I have a healthy negotiation with a partner who does not entirely seem to trust me? Well, Gates stated that you must be strict with Russians.

Russian governments and companies prefer hard power over European ‘soft power.’ To fight pressure, you need to respond with force. Negotiating expects to recommend starting your Russian business journey small but steady. Be well prepared, and expect matters to start slowly. Just as starting doing business in Germany, it takes time for the market participants to trust you fully. If you are working with trial and error, make sure not to do business with life-changing parties that negatively affect your business.

During the negotiation: Mirror and hold your ground

Negotiating and doing business in Russia is a long-term process with much pushing and pulling. It also often happens that Russians have different perceptions of truth. Just as in Korean culture, it is allowed to tell white lies. The views on white lies are often the biggest barricade between European and Russian business; being aware of this will benefit you during negotiations.

Russians tend to be cautious listeners interested in European enterprises, yet also suspicious. Russian culture is full of emotion. However, they do not show emotion and prefer apathy over empathy. You can see this in the way Russians smile. In the Netherlands, it is not uncommon to see people do small talk and smile while doing business. In Russian business life, smiling is seen as a form of intelligence. So actually, if you are communicating with Russian business people, and they never smile at you: See this as a compliment, not an attack. And if you smile, make sure to let your Russian counterparts know it is a form of politeness and trust from the west. Are you unsure how to act? Play it safe and secure by mirroring your negotiation partners.

Finishing the negotiation: Be patient and respectful

As seen in the infographic at the beginning of this article, Russia has a high level of power distance. In general, Russians have different views on trust based on system and personal levels. However, one thing is clear: If you want negotiating to go well, you must have a person in charge that is powerful and a true leader. Russia’s business style is very autocratic.

If you want to finish the negotiation on a positive matter, be sure to build and maintain a close relationship with the CEO and the people the CEO fully trusts. You will find that the process will go much quicker, and the level of trust gaining to go much faster.

 

Jensen shared a clear overview of steps to take during negotiations, namely:

-Replace if necessary. Does the personal chemistry not work as intended? Do not be afraid to replace negotiators on both sides.

 

– Silence is key. If you are unsure how to react to certain provocations, respond by silence.

 

-Do not be afraid to delay the negotiations. Think long-term.

-Be clear in your communication. Choose precise formulations and provide an alternative when necessary.

 

-Empathy works in the west, apathy in the east — play along with your negotiator. Do not be afraid to think from a different mindset than you usually do.

 

-Ask questions to make the other party feel heard and show that you respect them.

 

-If you have no other option, fighting is more effective than giving in.

Conclusion

In the end, Russian organizations that are internationally active will be less challenging to negotiate with than Russian-only enterprises. Currently, doing business with Russia is not recommended due to international sanctions and actions. We hope to show that it is easy to misunderstand other cultures. If you have any questions regarding your international business, please do not hesitate to reach out to us. We will gladly assist you.

Sources

Keld Jensen – CrossCulture

Webinars to enhance your business reporting

01 Mar 2022
Company Updates, Current news, ESEF, IFRS, XBRL

Webinar series: Enhance your business reporting with XBRL and IFRS 16

In March 2022, Global Connect Consultancy will host various webinars regarding business reporting and IFRS 16 leases.  These webinars are all free to join.

If you have any questions, please feel free to contact us.

Global Connect Consultancy webinars

Actions speak louder than words: How authenticity enhances your brand

24 Feb 2022
Current news

Actions speak louder than words

How authenticity enhances your brand

Authenticity gap

Time and experience show again and again that actions speak louder than words. Think of brands in general: Which brands stick to you and why? Companies often underestimate and overestimate the expectations of consumers and stakeholders. What do they actually experience? How much is your brand aligned with its reputation?

It is not uncommon to see brands either accidentally perfectly hit the mark or completely misread the room (with the room being the needs and desires of the customer). When brand messages jar with what people feel, experience, and believe, we call this the ‘Authenticity Gap.’

What is the Authenticity Gap?

The Authenticity Gap is the alignment between customer expectations and experiences. Since 2012, FleishmanHillard, one of the advisory labels of Omnicom PR Group, has been studying the authenticity between consumers and brands. With decades of experience navigating these gaps, FleishmanHillard and Omnicom PR Group assist organizations with authenticity in branding. In these ten years, they have researched 80 Dutch companies from various industries and interviewed 1000 consumers.

 

If you want to brand correctly, you need to be aware of your company’s level of authenticity. To fully enhance your branding, you have to keep up with the evershifting brand expectations and learn how authentic voices impact customers, partners and stakeholders the most. Long story short, to more authentically engage with your audiences; you need to judge your level of authenticity, discover where improvements can be made and compare yourself with your peers.

The authenticity gap

The consumer is the key to success

To understand and act on your gap between stakeholder expectations and their actual experiences, you can benefit from discovering what drives them. The Authenticity Gap study shows Nine Drivers of authenticity. These drivers act as a framework to give insights on customer benefits, society outcomes and management behaviors. The key takeaways of these Nine Drivers are:

Management behaviors
Customer benefits
Society outcomes

Enhance reputation

Companies often make one common mistake: They only predominately talk about their products and services. By doing this, they only tell half of the story consumers want and need to hear. To tell the whole story, companies need to share their impact on society, including what the management thinks and does. For example, creative accounting used to be a trend but is now seen as tax evasion. Simultaneously, putting ‘celebrity CEOs’ at the forefront used to boost the image and reputation of a company. Nowadays, companies need to put their management teams at the front, providing clear information on their views and strategies regarding climate change, cyber security, and data privacy. If the management is unclear in their messaging, this will negatively affect trust, transparency and image.

 

The Authenticity Gap studies show that companies tend to overperform on lesser important drivers while underperforming fundamental drivers. Every industry has its own important set of drivers, yet every organization should pay attention to the authenticity gap.

How to narrow the gap

According to the research of FleishmanHillard, 65% of Dutch informed consumers believe that a company’s credibility (compared to its competitors) depends on the transparency of company behaviors and impact on society and the environment. While drivers differ per industry, results show that brands in all sectors fall short on expectations on better value, customer care and environmental care. If you want to narrow the gap, you need to think of your company’s position in authenticity.

 

The answer to closing the gap between your company and society is challenging but not impossible. Consumers expect companies to be part of the solution to societal and environmental issues. This means fewer promises and more solutions. Therefore, your company should:

 

-Provide a diverse, inclusive and equal work environment

-Listen to the needs of customers

-Share corporate actions against climate change

-Be transparent regarding data privacy and cyber security

 

No matter the company size and industry, the need to listen and respond to consumers’ needs and desires never changes. There is a reason why consumers seem more demanding: Companies often act as some form of role model when it comes to consumer issues. Thinking of the bigger picture often results in better strategic decisions and fiscal growth.

 

We at Global Connect Admin know what you can expect when it comes to authenticity in financial management positions. We have a long history and extensive experience in assisting companies worldwide with the organization of annual general meetings and administrative board meetings. Simply call or write to us, and we will gladly work together with you to see how to close the authenticity gap in international management.

Sources

Omnicom PR Group – FleishmanHillard

The freezing tensions between the EU and Russia: And how this affects your business

11 Feb 2022
Current news, Europe, Investment, Russia
, ,

The freezing tensions between the EU and Russia

And how this affects your business

Russia EU tensions

Whether you represent a company, political party or government, actions tend to have consequences. While many hope to see the year 2022 as the year of healing, both economically and culturally, past tensions are throwing mud in the water. Conflicts that affect the bilateral political dialogue between the European Union (the EU) and the Russian Federation (Russia) are not new, yet it is still considerably unclear what will happen next. Will the EU citizens sit in the cold and the Russian citizens without certain necessary goods? Or will we be able to celebrate warm holidays and further enhance international trade?

Policy dialogues and cooperation are temporarily frozen

The aftereffects of Russia’s annexation of Crimea in 2014 can still be felt in 2022. The world watches Russia’s threats towards a war with Ukraine, unsure if these threats are empty or not. As a result, some policy dialogues and mechanisms of cooperation between the EU and Russia are temporarily frozen. The next question is, will this dialogue continue to freeze shut, or will the two international positions of power allow international defrosting? However, the EU and Russia’s stagnated relationship was not always like this. Both share similar global goals and extensive history in cooperation and trade.

The history of cooperation between the EU and Russia

The European Union and Russia share a longstanding history. Next to cultural, economic and historical ties, Russia is one of the most prominent neighbors in the EU’ neighborhood.’ In the past 25 years, Russia and the EU have exchanged information and cooperated in various international matters. They share bilateral global concerns regarding:

  • Climate change;
  • Migration;
  • Drugs trafficking;
  • Human trafficking;
  • Organized crime;
  • Terrorism;
  • Non-proliferation; and
  • The Middle East peace process.

With Russia’s permanent UN Security Council membership, the country also engages in various selected points of interest of the EU, which was proven by the implementation of the Minsk Agreements. These Agreements were supposed to put an end to the war in east Ukraine. However, while this seemed like a path to peace back in 2014, the tensions between Russia and Ukraine are still very much alive.

The Partnership and Cooperation Agreement (CPA)

In general, the framework of the political and economic relationship between the EU and Russia is the Partnership and Cooperation Agreement (CPA). Since 1997, the goal of this Agreement has been to promote trade, investment, and the development of economic relations between the two parties. However, what started as healthy manure has slowly but surely transformed into a minefield.

In 2008, the EU and Russia started negotiations of a New EU-Russia Agreement. However, this Agreement is still postponed to this day. With the current challenges in dialogue, the two parties can agree that the existing conversation is either limited or non-existent. Like a domino effect, the EU and Russia are heavily involved in international trade, affecting everyone. What can investors and enterprises expect for the future of their company?

Your opportunities in trade, even with the limitations

Societies, governments and businesses are affected by the EU-Russia tensions; that much is clear. The EU and Russia adopted laws, resulting in various import and export restrictions. Since 2012, Russia moved from third place to fifth place as the EU’s biggest trade partner.

Even with the trade restrictions, the EU still remains Russia’s most prominent trade partner. In 2020, Russia remained representative of 5% of the EU’s merchandise trade. This bilateral trade in goods consisted of €174 billion, which is around 40% of Russia’s trade.

Main trade EU Russia

The future of the tensions between the EU and Russia

The EU continues to apply a set of restrictive measures against Russia in response to the Ukraine crisis. As a result, Russia responded with countersanctions. Experts from the Atlantis Council are concerned about the EU’s response to Russia yet state that both parties have various options. The EU should build a common strategic culture in order for European countries to stick together. Simultaneously, both Russia and the Eu are investing in the Transatlantic region for future endeavors. Therefore, it is most likely that the two parties will drive further apart.

Furthermore, in order for Russia and the EU to start an open dialogue again, both parties should look at their strengths and impacts. However, seeing a harmonious EU-Russia relationship in the short term will be most unlikely. While both parties may share similar international goals, they also share different views regarding what is best for them. In this case, the negative highly outweighs the positive.

Company assistance

In the end, Russia and the EU are dependent on each other in one way or another. Just like a neighbor quarrels, only time and actions can tell what the future brings. With the world as a global village, governments and authorities do need to reflect on their position of power: What message will they send out, and what strategies should they entail? One thing we do know is that the current state of affairs will continue to strongly affect international businesses, whether we like it or not.

Are you concerned about your position in international trade? Global Connect Admin has an extensive background and expertise in European and Russian matters, especially regarding international business, financial management and accounting standards. If you require any form of assistance in complex company situations, do not hesitate to reach out to us. Instead of lingering on restrictions, we would gladly review possibilities with you.

Related articles

Sources

The European Union: External Action Service – the European Commission – the Atlantic Council

AlternativerTweet   in 7 hours  T