Russia and Poland trade more than insults

By bne IntelliNews March 14, 2011

Jaroslaw Adamowski in Warsaw -

Dmitry Medvedev's ice-breaking visit to Warsaw in December, the first official visit of a Russian president to Poland since 2002, was expected to open a new chapter in the often-troubled relations between the two neighbours. And indeed, within months of Medvedev's visit, a deal that could be the first in a series of new Russian ventures in Poland was sealed, while Polish investors are lining up to set up production facilities in at least 10 regions of Russia.

Since it joined the EU in 2004, Poland has weighed heavily on Russia's relations with the bloc, often slamming the Kremlin for human rights abuses and its hawkish foreign policy in what it calls its "near abroad". However, after last year's election of Bronislaw Komorowski as Poland's president, replacing the nationalistic late president Lech Kaczynski, hopes were high in Warsaw that the change at helm would pave the way for a more effective dialogue with Moscow, on top of boosting the flow of Russian capital into the nation's economy.

Then on February 7, Russian-British car maker Intrall Rus signed a letter of intent with the Polish Information and Foreign Investment Agency (PAIiIZ) and regional authorities to set up a car plant and a research and development centre in Szczecin, in the country's north-western region of Zachodniopomorskie. Construction of the plant is expected to commence in late 2011, while the first vehicles should come off the production lines by 2014, company officials said. The factory will make a range of commercial vehicles, vans and pick-up trucks for both domestic and foreign markets. Intrall intends to create up to 600 new jobs in Szczecin.

The latest venture by Intrall, valued at about €270m, represents the biggest Russian investment in Poland in years, despite Russia being ranked as its sixth largest export market and the second largest importer from Poland, according to data from the Polish Ministry of Foreign Affairs.

The Polish government is reportedly likely to provide a grant to support the investment, which is Intrall's second attempt at establishing itself in the local market. In 2003, the company acquired the troubled Daewoo Motor Poland car factory in Lublin, but it was forced to halt production four years later.

But the investment flow is not just one way. On March 10, Andrzej Zygmunt, first secretary of the Polish Embassy in Russia, was reported by RIA Novosti as saying during a meeting with Smolensk First Deputy Mayor Sergei Maslakov that Polish investors are interested in setting up production facilities in at least 10 regions of Russia, because it's more profitable to manufacture goods for the Russian market on Russian territory than import them from Poland.

Though the level of accumulated Polish investments in Russia is rather low at present, a mere $600m, Zygmunt said Polish business activity in Russia is growing every year, with the embassy receiving 3,000 applications from Polish businessmen wishing to set up operations in different parts of Russia. He said Moscow and the region surrounding it account for about 50% of Polish imports, with rest going to the regions of Smolensk, Kemerovo, Chelyabinsk and Sverdlovsk and others.

Automotive hub

According to Anatoly Leyrikh, chief executive of Intrall Rus, the carmaker has been long planning to invest in Poland, and was particularly interested in launching its latest venture in the Zachodniopomorskie region. The convenient locale of the region, which lies at the crossroads of transport routes connecting Western and Eastern Europe, and its positive investment climate have played a decisive role in sealing the deal, he said. These factors, as well as the presence of highly-qualified engineers, "create proper conditions for establishing a research and development centre where we will design the majority of our new cars," Leyrich said at the signing ceremony on February 7.

Hopefully, the latest project by Intrall could lure other automotive investments to Poland, also from across the eastern border, industry analysts say. They also point out that there is a potentially strong demand for cheaper, locally-built commercial vehicles in Poland, and Intrall's cars would likely fit into this niche.

Poland is home to 16 out of a total of 41 vehicle and engine plants located in the EU's emerging European member states. However, one major preoccupation of Poles is the growing competition the country's automotive industry faces from other automotive hubs in the region, such as the Czech Republic, Slovakia and Hungary. "Poland's latest car plant was set up back in 2000. Since then, all major manufacturers have chosen to invest in neighbouring countries," says Wojciech Drzewiecki, head of Samar, an automotive market research firm based in Warsaw. "If Poland wants to foster new automotive investments, the government should focus on encouraging investments by leading manufacturers... but also on strengthening the domestic market. Domestic sales account for less than 3% of Poland's car output, which is far below the level expected by potential investors."

Recent data from Samar confirms that Poland's automotive industry is chiefly export-oriented. In 2010, a total of 799,255 passenger vehicles rolled off the local assembly lines, down 4.1% from the year earlier, including some 533,455 units which left the production lines at the country's largest production facility, the Fiat Auto Poland plant in Tychy. Of these, approximately 97.4% were exported, Samar says.

In Poland's light commercial vehicle (LCV) segment, the disproportion is just as apparent. Last year, some 87,986 LCVs were made at Volkswagen's factory in Poznan and Fiat's plant in Tychy. According to Samar, nearly 96.7% of the aggregate output by the two OEMs (Original Equipment Manufacturers) was intended for export. "With such high dependency from foreign markets, it will probably be long before Poland's automotive market reaches stability," says Drzewiecki, adding that this weakness is echoed in the way the country's monthly car sales often fluctuate wildly from month to month.

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.