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Ikea to Resume Russia Expansion, Says Officials Obeying the Law

By Maria Ermakova

Aug. 27 (Bloomberg) -- Ikea’s Russian chief said the world’s largest furniture retailer will resume plans to open stores, ending a freeze on Russian investment, because local officials started to adhere more closely to the law.

In Russia, bureaucrats are “starting to follow the different laws that exist,” Per Kaufmann told reporters in Moscow today.

In June, Kaufmann said the Swedish company would halt future investment until “key issues” affecting operations were resolved as it struggled to gain approval to open a mall in the southern city of Samara. Ikea believes it will resolve that difficulty and continue with other Russian investments, Kaufmann said in an interview before his speech.

“Even though we have problems in Samara, we still have 12 stores here,” said Kaufmann, 53, who has been in charge of Russian operations since January 2006. “Of course it’s difficult to do business here, but not impossible.”

Ikea has faced at least four disputes with authorities while opening outlets since entering the country in 2000. The company hopes to open the Samara mall this year, Stefan Gross, chief in real estate in Russia, said in an interview today.

The retailer on June 30 agreed with Russian officials on changes to the project, paving the way for the outlet to open almost two years after it was built. Difficulty in getting the local administration’s approval related to “differences between the built mall and the original project,” Irina Johansson, public relations manager for Ikea Real Estate in Russia, said then.

Store Delays

The company had to postpone the opening of an outlet in the Siberian city of Novosibirsk in 2007 after local authorities required the company to build road links. An outlet in Nizhny Novgorod was closed in December 2006 for the holiday season after Emergency Ministry inspectors found more than 800 fire- code violations at the premises.

In December 2004, officials blocked the opening of an expanded store in the Russian capital minutes before the start of the ceremony, citing danger created by the location of Ikea’s parking lot above a high-pressure gas pipeline.

Russian sales account for four to five percent of Ikea’s total and are the company’s fastest growing, said Kaufmann.

The government is aiming for 1 percent economic growth in 2010 after a contraction of 10.9 percent in the second quarter of this year. The economy is heading for its worst annual performance since the 1998 default on $40 billion of domestic sovereign bonds.

“We have been waiting since December for the crisis to hit us, but then it hasn’t really hit us,” Kaufmann said.

To contact the reporter on this story: Maria Ermakova in Moscow at mermakova@bloomberg.net

Last Updated: August 27, 2009 11:11 EDT

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