In October 1974, a young Sicilian graduate in Russian studies arrived in the then Soviet Union to spend six months researching the economic reforms of Catherine the Great. Forty-three years later, Antonio Fallico still hasn’t packed his bags.
As chairman of Banca Intesa in Russia – a position he has held since 2003 – Fallico is deeply knowledgeable about the country’s history, but has also become an expert on its future.
And it is one that he believes offers vast opportunities for companies in Europe and beyond. “Not only is Russia a huge market in its own right, but it is also the key to markets from Belarus to as far away as China,” he says.
With the complexities of international sanctions – imposed in 2014 in response to Russian actions in Ukraine – this is a fast-changing place to do business. “I knew immediately that this country was of huge interest.” he says. “That is why those six months have lasted so long.”
“Patience, courage and realism must continue to inform dialogue on a company as well as institutional level”
Antonio Fallico, chairman of Banca Intesa in Russia
Banca Intesa in Russia – part of the Intesa Sanpaolo Group – has had representative offices in Russia since 1973, when Banca Commerciale Italiana (one of the banks that merged to form Intesa Sanpaolo) was the first to arrive.
“We are the bank of reference for all Italian companies operating here – and for the biggest Russian companies,” says Fallico. Underpinning this is the bank’s unwavering focus on nurturing excellent relationships. Intesa Sanpaolo has never shied away from Russia. “We have always – within the rules, of course – invested here.”
Last year Intesa Sanpaolo beat some of the world’s biggest investment banks to win the role as consultant on the €10.5bn sale of a share of oil giant Rosneft.
“This builds trust and confidence for Italian companies,” attracted, says Fallico, by exciting investment opportunities in a number of key sectors.
With growth of more than 3 per cent for the past three years, the agri-industrial sector is of particular interest. “Russia has moved from being a net importer – before sanctions – to one that is looking, where possible, to produce these things itself.” This, Fallico points out, creates openings for Italian products to be manufactured in Russia.
“SMEs are adapting to a new situation. Having exported to Russia, they are now producing here,” he says. The development of ‘With Italy’ business, as opposed to the export of ‘Made in Italy’ goods, is significant.”
Also of particular relevance are possibilities in the infrastructure, energy and technology sectors. “These are vital to Russia’s development plan. Technology is a priority as Russia becomes a digitalised and diversified economy,” says Fallico.
The World Bank’s 2016 Doing Business index places Russia in 40th place, a significant climb from 124th in 2012.
Fallico is optimistic. He cites nine consecutive months of growth (with GNP predicted at 2 per cent this year) and inflation at 2.3 per cent (down from double digits in the early 1990s). Industrial production is growing at around 4 per cent annually, with 5 per cent growth in agricultural production.
“Foreign investment is arriving,” he says. “From January to today we have direct investments of around €9bn and significantly higher portfolio investments.”
Diversification – from reliance on the energy sector – is clearly an exciting prospect for international business. “There is real determination, the governance is serious, there have been specialist funds for industry and so I am confident GNP will continue to grow,” he says.
The impact of sanctions, of course, cannot be ignored. “Russia has lost out enormously – around $50bn – but the countries that imposed sanctions, European countries in particular, have certainly lost more, probably over $100bn,” he states.
Despite the challenges, Italian exports in the first six months of 2017 stand at €3.8bn. “Trade is growing again because of the vitality of the Russian economy and also because Italian companies have not been discouraged by sanctions and gone away. They have all stayed in the market.”
There continues to be a special relationship between Italy and Russia, says Fallico. “It is an organic attraction. The Russian people have always been drawn to our culture and country and, from an economic point of view, Russian leaders see Italy as a natural ally with a complementary economy.”
Commitment is required to reap the benefits of doing business with Russia, says Fallico. “Patience, courage and realism must continue to inform dialogue, on a company as well as institutional level.”
The Russia of today is, he says, very different to the country he first encountered in 1974. “It is full of possibilities and we are ready to grab them with both hands.” For now, then, there is no sign of that initial six months coming to an end.
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