Russia is open for Israeli business, says expert

There is more business cooperation between Israeli start-ups and Russian companies than most Israelis realize. That cooperation, quiet as it has been, has benefited both countries enormously

Officials of Ariel University Center and the Skolkovo High-Tech center speak at a panel in Tel Aviv during last year's Skolkovo Innovation Conference in Israel (Photo credit: Courtesy)

Officials of Ariel University Center and the Skolkovo High-Tech center speak at a panel in Tel Aviv during last year's Skolkovo Innovation Conference in Israel (Photo credit: Courtesy) 

Westerners, among them Israelis, sometimes get nervous when they see Cyrillic, recalling childhood stories of the “red threat” that would, if left unchecked, take over the world. But that thinking is out of date, according to Anna Moshe, an Israeli attorney who specializes in linking Israeli hi-tech companies to Russian companies. Today’s Russia is as capitalist as any other western country and, most important for Israel, is very anxious to work with local start-ups and established companies to help develop Russian industry, while aiding their Israeli partners with access to markets they might never have been able to reach.

“I recently completed a merger and acquisition (M&A) deal between an Israeli medical device company with cutting-edge, next generation technology and a St. Petersburg-based company, one of the largest in the world in its field (the privately held company preferred not to be named). The Russian company got a lead on its competition using the new Israeli technology, and the Israeli company gained access to customers it wouldn’t have been able to get in 20 years of operation,” states Moshe.

If the notion of an Israeli start-up being acquired by a Russian company seems strange, then you’re behind the times, Moshe told the Times of Israel. The deal she was involved with was not the only, nor the largest M&A arrangement between an Israeli start-up and a large Russian corporation. It is likely that many more deals will come through in the coming months.

Accompanying Russian President Vladimir Putin on his visit to Israel this week were about 400 top government, industry, and education officials, an entourage that necessitated the King David Hotel closing its doors to private guests. The Russians were here to make deals, and Moshe is certain that at least some of them were successful.

One of the areas of extensive cooperation between Israel and Russia, perhaps surprisingly, is aviation technology, said Moshe. “The Russians have very high hopes for their civilian plane manufacturing industry, and they have used Israeli technology extensively in planes manufactured in Russia. They are trying very hard to compete with Boeing and Airbus, and have been developing models that compete very favorably with offerings from those companies in design, safety, technology, and price.”

It is a rarely discussed cooperative effort, but Moshe has been involved in numerous deals between Israeli avionic components, service, and software companies, and Russian plane manufacturers and technology firms. “For example, one of the Israeli companies working closely with Russian manufacturers provides software and services throughout the cycle of a plane’s construction, an integral part of civilian aircraft manufacture today. A second company produces a hardware component essential to measuring avionic safety parameters. There are many more such examples,” Moshe said.

No government approval is required for deals such as these, said Moshe – even though Russia might be considered as more of a security threat to Israel than the US or western European countries. “But safety is important to everyone, and avionics technology is important for safety. There’s no reason why Israeli companies should not close such deals,” said Moshe. “As far as I know, there are no special security laws that apply to Russia. Any military or security-sensitive technology that would have to be vetted before export would be vetted no matter where it was to be used. . .”

If anything, she added, it is Russia that places cautious limitations on what can be imported, especially in the area of computer security and cellphone technology, fearful that viruses could be surreptitiously slipped into secure networks that would compromise security. Of course, any deals made at a government or military level would require regulation and protocol, and probably significant red tape – but when it comes to doing business on the civilian level, said Moshe, the Russians have cleaned up their act, and have as open a market and process as one would expect to find in most countries.

Speaking at a press conference with Putin Monday, Prime Minister Benjamin Netanyahu mentioned that over half a million Russian tourists came to Israel in the past year. Many of them, said Moshe, were “medical tourists,” coming for medical treatment and checkups, highlighting another major area of technology cooperation between the two countries. Medical devices, medical services, biotechnology – Russia is interested in all of them. Last year, Russia set up an advanced technology center, Skolkovo, located outside Moscow, which is working with Israeli companies in numerous areas, particularly medical and biotechnology. “For Russian citizens and Russian companies, Israel is the place to go for medical care, and for medical technology.”

Anna Moshe has been working with Israeli companies seeking to do business with Russia for over a decade and, according to her, there have been no “untoward incidents.” But that hasn’t stopped many potential deals from not coming to fruition as some Israelis balk at the thought of working with Russian partners. Can you really trust them? Yes, in theory. The laws today – two decades after the fall of Communism – are all “westernized.” But it’s just a front; in order to get anything done, you have to dole out a lot of “baksheesh,” as they used to call it, and you can be sure that a Russian “oligarch” billionaire can match whatever you can afford to shell out, thus “claiming” your patent or intellectual property as his own.

That, said Moshe, is the stereotype – and it is akin to the stereotype that she often comes across when she tells people abroad she is from Israel. “People are always asking me how I deal with the constant terror, bombs and missiles falling all around,” even though, as all Israelis know, such incidents are relatively rare, especially in the center of the country. “It’s the same thing with fears of IP theft by Russians. If a deal is done properly, there really is nothing to fear, certainly not more than there would be with a deal in any other country. The Russians certainly have an incentive to play by the rules because they know that neither Israel nor any other country will work with them if they violate internationally accepted patent rules” she said. “And they are very, very interested in working with Israel.”

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