Party over, oops outta time!

I am stunned, stupefied, and saddened by her quick decent into her
present position. At the opening of the summer, all was beautiful, all
was happy, all was well. As the summer progressed, the activity
increased. We all worked more, played more, lived more! July witnessed
the grand peak of summer, with Moscow reaching an amazing crescendo of
movement. Then, as summer faded, so did the sun, the warmth, and the
organization of Russia.

August came in with a furry, a blunt instrument of destruction, it
did not spare a soul. First, with swiftness unknown before, it destroyed
Russia’s domestic banking industry. Next, the national currency fell to
the blows, and then the government, fighting to the end, succumbed to it
all. There we were, without banks, money, or a government, then my
company merged with another, and all hell broke loose.

Now I sit here, on a train to Finland (again), going north to get out
of the rain. The hard rain of bad news, empty store shelves, and
personal disappointments. I am beside myself, with frustration,
aggravation, and depression. What has happened to the country that I
love so? Where has she gone? What is this empty shell that I am left
with? When will her beauty return? And if I may dare ask: will it ever
return?

I am a lost soul now. I feel so fortunate to have known the Russia of
the summer, and her memory will be with me forever. I am also fortunate
that my passport is blue, with that single-headed eagle on the front. I
can do this; I can take a train to Finland to get out of the rain.

Others, my friends and colleagues, are not as lucky. Now, more than I
have every felt it before, there is a desperation among the Russians who
have tasted the decadence of the west. Like a blind man who sees the
light, they do not want to go back into the darkness they knew before.
The eternal darkness of endless Russian winters spent without the warmth
and light the western way of life can bring.

Can I even begin to comprehend what my Russian brothers and sisters
feel? Can I dare to know what life under careless Czars and Politburos
was like? Life in a country where leaving your house can be a life
changing event, and rarely a positive one at that? Where the very act of
writing this web page would have given me a one-way ticket to hell?
Where people had thick steel doors, not for protection against thieves,
but the men who drove black Volgas and took your loved one away at 2am.

Now imagine that world ending, and that you are free to walk the
streets, even criticize the men in the black Volgas, to their faces, and
leave your country at will. One day you see, for the very first time in
your life, a VCR, a camcorder, a pair of Nike’s. And then you own these
things, these material possessions that your parents, and their parents
before them, had only dreamed of owning. You take vacations in Italy,
Japan, and America! You see Dallas, not as a TV show, but with your own
eyes. Your very soul tastes freedom for the first time. Can you even
imagine?

Now, try to imagine this whole dream, desire, and reality come
crashing down around you? I have seen sadness now, true, to the soul,
sadness. I want to cry with them. I can feel the sadness, the pain, and
the end of the dream.

Its over, it’s all over.

Business Week November 16, 1998

THE PARTY’S OVER. SO WHY NOT PARTY?

By Patrica Kranz

Not so long ago, Eric Jayaweera and his compatriots balanced 80-hour
workweeks with nightly drinking and dancing stops at Moscow’s clubs. An
American, Jayaweera, 29, was a researcher with investment bank MFK
Renaissance, a big player in Russia’s high-flying financial markets. He
mingled at the Jazz Cafe with Russian rock stars and leggy models from
Red Star Agency. Lesser guests paid a $500 membership fee, but Jayaweera
merely flashed his Renaissance business card at the doorman. “Money
didn’t matter at all. Morale was sky- high,” he says.

No more. On Sept. 11, Jayaweera was let go, and three days later, he
was back in New York. MFK Renaissance is crashing along with Russia’s
markets. And it’s far from alone. Virtually every investment bank,
accounting firm, and real estate brokerage in Moscow is slashing staff.
Entrepreneurs are closing shop and going home, multinationals scaling
back. “Our world has been turned upside down,” says Buck Wiley, 32,
who left Moscow in October after five years as an investment adviser.
Some 25% of Moscow’s 40,000 expats are gone. The rest are in shock,
their euphoria at working in an exotic boomtown replaced by anxiety over
the future.

The remaining expats cope by partying hard. The Jazz Cafe,
Chesterfield’s, Papa John’s, and other popular bars are still crowded.
Many foreigners feel their days are numbered, and they’re trying to make
the most of the time left. Camaraderie has become the key to
survival–drinking with friends beats drinking alone. The markets are so
dead that still-employed bankers and brokers, who once worked until 10
p.m., now take off at 4 p.m. to work out at trendy Gold’s Gym.

To be sure, there’s some frenzy in the merriment. It’s unnerving to
be invited to three going-away parties a week. Vinlund, a moving
company, says orders to move foreigners back home tripled from August to
October. “We’re getting as good at saying goodbye as Clinton is at
saying he’s sorry,” says one still-employed American. The expatriate
exodus is so swift that the My Place Cafe is trying to drum up business
by giving 40% discounts to those who vow they’ll be in Moscow for at
least six months. Wiley hosted his going-away bash at a down-home bar
where bare electrical wires hang from exposed-brick walls. The owners
had planned a posh club but lost all their money when the ruble crashed
in mid-August. They opened the half-finished club anyway, calling it the
Crisis Club.

BIG DEALS

For Wiley and other expatriates, the past two years were heady. Boris
N. Yeltsin’s reelection in July, 1996, gave a sense of long-awaited
political stability. Foreign investment boomed. Foreign bankers,
brokers, and consultants crowded into Moscow. MBAs in their 20s did
million-dollar deals. The stock and bond markets boomed, with everybody
getting dizzying returns. Expats moved into company-paid $4,000-a-month
flats with views of the Kremlin and bought fresh caviar by the kilogram
at black-market prices.

“Expats had it all–well-paying and interesting jobs, jet-setting
European lifestyles, the stimulation of having some of the most dynamic
people in the business world around us constantly, and a social life
dictated by our work- hard and play-hard personalities,” says Jessica
Adelman, 23. When the markets were booming, there was a big demand for
expats such as Jessica, who spoke Russian. Adelman worked in Moscow’s
pharmaceuticals and real estate industries for two years until returning
to Washington, D.C., in October.

Cracks started appearing last fall, with the financial crisis in
Asia, falling oil prices, and doubts about Russia’s commitment to
reform. The stock market sank. Government debt ballooned, and ruble
reserves plummeted. On Aug. 17, the government issued the coup de grace:
It defaulted on its domestic debt, devalued the ruble, and prohibited
Russian banks from making payments on foreign loans. Western banks and
investors lost billions. The default put old guard, Soviet-style
bureaucrats back in power. The expat party is over; the Communist Party
is making a comeback.

Of course, it’s hard to feel too sorry for the hotshots who came for
easy money and, in some cases, “easy” women. Says one investment
banker: “There were a lot of overpaid, sub-30 millionaires running
around Moscow. All of a sudden, they got wiped out.” For many young
men, Moscow had been a fantasy come true. They considered young Russian
women more exotic than American females and to be untainted by tHe
women’s liberation movement or religious scruples. Many hung out at the
Hungry Duck bar, notorious for its ladies’ niGht, when young females got
sloshed on free beer and jumped onto the bar for an impromptu
striptease.

NAIVE

But others were dedicated Russophiles with a sense of mission: They
thought they were helping Russia become a “normal” country with a
democratic system and rule of law. Now, their dreams are shattered. The
new Russia seems just as corrupt as its tsarist and Communist
predecessors. “We knew it was a hoax when officials devalued the
currency to buy their banker friends a little more time to get their
money offshore,” says one American banker. “We were naive,” says
Wiley. Even die-hard supporters of reform lost faith when Anatoly B.
Chubais, a key leader, admitted he lied to the International Monetary
Fund about Russia’s budget as a ploy for more money. Adds Adelman: “The
Russian crisis exposed Russian capitalism and the Russia of the ’90s as
nothing more than one of the most ubiquitous phenomena in Russian
history–the Potemkin village.”

Young entrepreneurs, too, are shattered. Stacy and Rick Komendera,
both 28, came straight from Tulane University to Moscow in 1992. They
formed their own company, USA Apteka, to sell Western over-the-counter
medicines in Russia under their own label. Annual growth exceeded
20%–until this August. They had sold hundreds of thousands of dollars’
worth of medicines to Russian distributors on credit. When the ruble
crashed, the value of these receivables plummeted 30%. On top of that,
many of the distributors are asking them to give further discounts or
write off the debts completely. “In three weeks, we saw all of our five
years of hard work disappear,” says Stacy. Now the couple is deciding
whether to start over or head home.

Russians take a more blase attitude. A people who have endured more
than their share of crises, they have a word for the combination of
depression, melancholy, nostalgia, anguish, and boredom being
experienced by many expats: toska. Moreover, they–and some expats–see
an upside. Rents are dropping. Restaurants and clubs are cutting prices.
“The crisis thins out the expat herd to those people who really care
about Russia and are not here just to party. It’s still wacky, with a
melancholy feel,” says Earle W. Pratt III at management consultant A.T.
Kearney Inc.

Like Camelot, Moscow had its shining moments. For me, it has been the
beat of a lifetime. I have covered coup attempts, Russian robber barons,
and the rise and fall of Russia’s tumultuous capital markets. Never
again will I get scoops from people I meet dancing in a club at 3 a.m.
I, too, grieve for the loss of a way of life. But even more, I’m angry
at the Russian elite for wasting the past seven years. They blew a
unique opportunity to create a better life for all Russians. Capitalism,
even democracy, are now discredited concepts. Unwillingly, I have become
as much a cynic as the average Russian. Yet like many expats, I have a
love-hate relationship with Russia. At the first signs of a recovery,
many of those who fled to London and New York will be back. Expats call
it the boomerang syndrome. After Moscow, life in the West is too boring.

The New York Times Dec 7, 1998

Nightlife Continues After the Iceberg

By Vijai Maheshwari

Regulars from Moscow’s nighttime demimonde call it ‘Kafe.’ Mick
Jagger, who popped in four nights in a row while here on a concert tour
this summer, referred to it simply as ‘Jazz.’ By whatever name, the Jazz
Kafe, which is Russia’s trendiest nightclub, seems to be one of the
country’s few crisis-proof businesses.

The mighty banks whose gleaming ziggurats dominate the Moscow skyline
are half-empty these days. Both the ruble and the once-bullish Russian
stock market are in free-fall, and Western business executives are
rushing for the exits of one of worst emerging-markets disasters of
recent years.

But at the ultra-hip Jazz Kafe, the economic meltdown and the onset
of a cold, harsh Russian winter is just another conversational
ice-breaker. ‘What crisis?’ said Boris Lifshits, a young entrepreneur,
who was guzzling a $10 Corona. ‘There is no crisis until the Jazz Kafe
empties out.’

Young women in tight-fitting designer clothes shook their Wella-conditioned
hair all around him, to the beat of stomach-twirling acid jazz in the
intimate lounge-sized club, which occupies the basement of an academy of
jazz near Moscow’s Tretyakov Art Gallery. Men in retro leather gear or
Hugo Boss jackets mobbed the bar for drinks costing more than the
average monthly pension. It was early on a Friday evening in November,
just days after Russia asked the West for emergency food aid, but the
club was more packed than the Moscow metro at rush hour.

Outside, clubgoers without membership cards – which can cost as much
as $500 – shoved each other in the sub-zero temperatures, hoping to get
past the doormen. On the street behind them stood more Mercedes, BMW’s
and French-made Cabriolets than at a Russian mobster’s funeral.

‘There’s a small group of people who are going to party, no matter
what,’ said Sin Lazarovich, 32, the Jazz Kafe’s co-manager. ‘Where was
Coco Channel doing during World War II?. Not sitting home and sulking.’

Mr. Lazarovich, a Serb who was a club promoter in Belgrade during the
late 80’s and moved to Moscow two years ago, said the ruble’s nose-dive
has not ‘wrecked the high,’ of the so-called Golden Youth, the sons and
daughters of the former Communist elite. They constitute a signifigant
part of his clientele. (For several months after the club opened last
year, foreigners were barred because they were not considered stylish
enough.)

In Moscow today, young models are still being given new cars by their
flush boyfriends. or ‘sponsors,’ as the men are known here. ‘Someone
handed his girlfriend the keys to a Cabriolet the other day,’ Mr.
Lazarovich reported.

Around 5 A.M., the party swung into high gear. A lissome young woman
climbed onto the mini-stage near the bar and began undressing in an
impromptu striptease. Revelers crowded around and jousted with one
another to peel off her clothes, while the deejay pumped up the volume.
Some of the men shoved American $100 bills at her, chanting ‘davai,
davai,’ – ‘more, more.’ Within minutes there were three near-nude women
on stage, and the tension had reached such a peak that when someone
popped a bottle of Veuve Cliquot, the crowd let out a collective shriek.

‘When things like this stop happening, I’m out of here,’ Christophe
Charlier, a French-American banker from the brokerage house Renaissance
Capital, said. His company has laid off 30 percent of its work force,
but he is hanging onto his job. ‘The quality of life has not changed
yet,’ he maintained.

The Jazz Kafe is not the only night spot that’s been twisting and
shouting its way through Russia’s financial crisis. A new disco named
Gallerie, decorated with naugahyde couches, a granite-topped bar and
prints of the Austrian expressionist Egon Schiele, is buzzing on
weekends, attracting a cocktail of models, bohemians, bankers and ‘biznismen.’

It’s a sharp contrast to the disgruntled lines that snake around
banks that have declared insolvency, or harried shoppers at the markets
counting their kopecks. Most of the men at Gallerie – Russians, except
for a smattering of foreigners – dress in dark European suits and seem
to have money to burn. ‘No one knows what they do, and no one asks,’
said Victor Gelman, a young television producer, taking in the scene.
‘They’re making money somehow, and that’s enough.’ It is these shadowy
men – a potpourri of Russian and foregin yuppies, children of the elite
and mobsters – who are subsidizing Moscow’s Saturday night fever.

One concession to hard times has been the scrapping of cover charges
at many clubs. And this has encouraged the newly unemployed, with no
offices to report to the next day, to come out to party, especially on
weekends, dancing until the metro opens at 6 A.M.

‘I was fired from the advertising company I worked for a few weeks
ago,’ said Masha Kuznetsova, who was at the Jazz Kafe dressed in a tank
top, navel ring and tinted pink glasses. ‘So what? I’m not going to stay
home and eat sausages, am I?’ She maintained that Russians are whooping
it up even more now that the Russian Titanic has hit the iceberg.

‘It’s our Russian soul,’ she said. ‘We turn to vodka in times of
crisis.’ With shots of vodka promoted at a post-crisis discount of $1 at
many clubs, the revelry actually seems to have gone up a notch. Call it
the last days of Pompeii. At a recent bash in a raw, plaster-strewn
space that was to have been an upscale cigar bar until funds ran out,
actors dressed as bums and panhandled the crowd, while models handed out
papyrosi, cheap handrolled cigarettes. ‘Our mood and the mood of the
economy are not necessarily in sync,’ said Masha Repina, an anchor with
the Russian television station NTV, who was at the Jazz Kafe. ‘Moscow
was getting boring for a while; now its exciting again,’ she said.

The Jazz Kafe has had no need to adopt an anti-crisis theme; it
continues to be Moscow’s hottest club a year and a half after it opened.
Some compare it to Studio 54 in its heyday. The designer Alexander
MacQueen held a private party there the night before mounting a show of
his fall collection for Givenchy in a Moscow Metro station last winter.
The Pet Shop boys have drifted through on visits. There was even a
sighting of Leonardo Di Caprio during a recent trip to Moscow.

The Serb managers, Mr. Lazarovich and a fellow Belgrade transplant,
Vladimir Ostojic, work the crowd, handing out membership cards to the
bold and beautiful of Moscow. They recently branched out to open a cafe
and fashion boutique near Red Square, despite the hard times. Even more
gilt-edged than the Jazz Kafe, it features uniformed waiters and a high
degree of Euro-snobism – no beer and no American-style coffee are one
the menu.

The intent is to make ‘Dorian Gray envious,’ boasted Mr. Lazarovich.
Not to mention the masses of Russians struggling to survive. But for the
few Muscovites who have made the Jazz Kafe the focal point of their
lives, they are in no mood to scale back yet.

‘These people can’t go back to drinking around the kitchen table,’
said Mr. Gelman, the television producer. ‘They might have lost their
jobs, but they haven’t lost their social status. And that’s more
important for us.’

Washington Post October 20, 1998

The End of Innocence Abroad In Russia, Jobless
Young Americans Face Economic Reality

By Daniel Williams

MOSCOW: They no longer sit at computer terminals watching gleefully
as stocks skyrocket or woefully as they crash. Their cellular phones
have fallen silent. They rarely take wild nights out anymore at dance
havens called Bells or the Hungry Duck, or swig beer at Rosie O’Grady’s.
They’re scanning the globe for new opportunities.

London, maybe, or New York, now that their Moscow world has died.

They are the scores of young foreign professionals, many of them
Americans, who abruptly lost their jobs during Russia’s economic
collapse. Their despair, of course, pales beside the gloom of Moscow’s
fledgling middle class, which saw a dream of stability and prosperity
vanish. But the demise of the Generation-X go-getter is nonetheless a
landmark that has laid bare the thinness of Moscow’s entry into global
capitalism.

For a time, ambitious foreign businesspeople could come to Moscow,
land a job in international business, win a good salary, perhaps live in
a luxurious apartment and ride in a chauffeur-driven car. Their youthful
swagger and bacchanalian zest for nightlife added a dash of color to the
Moscow landscape.

It was all a mirage, some veterans concluded. ‘I have to
consider that my life for the last three years was unreal,’ said
Kristen Burton Steiner, director of equity research at Epic Russia, an
investment banking firm that folded last month. ‘The growth here
was not based on fundamental soundness but infectious sentiment.’

Steiner’s Moscow career was typical of the experience of many
Americans who came during Russia’s stock market boom. She arrived in
1994, part of the second wave of foreigners to hit Moscow. It was a more
experienced and better educated group than the first wave, which
consisted in part of the ‘expat loser,’ who, as the joke had
it, could hang out a sign that said ‘Will Speak English for
Food’ and find work.

Ann, educated, smart, and gone.

Steiner, 35, had worked in the United States, studied business in
France and saw opportunity in Russia. After three years of economic
chaos, the ruble had begun to stabilize and investments flowed into the
country. Corporate headhunters sought her out. She held four jobs in
three years. ‘The more experience you got, the more job offers
came,’ she said.

The first tremors of disaster emanated from last fall’s East Asian
financial crisis, although the brokerage industry in Moscow seemed to be
in a state of denial. ‘The party line was, if you didn’t have
exposure in Asia, you were fine,’ recalled Rebecca Baldridge, a
colleague of Steiner who joined and got fired by Epic — only a few
weeks after being laid off by Rinaco Plus, an investment firm.

As this spring’s steady decline turned into summer’s free fall, gloom
struck the foreigners along with layoffs and sudden company closures.
‘Everybody was cutting back by 20 percent or reducing salaries by
40 percent,’ Baldridge said.

Of 101 companies surveyed by the American Chamber of Commerce, more
than a quarter have laid off workers — mostly in retail and investment
businesses. ‘In some ways, the business community feels it has been
hit by a neutron bomb and we have all been irradiated,’ said Scott
Blacklin, president of the chamber. ‘We all live day to day, but in
30 days, 60 days, 90 days, some are going to die.’

Corporate headhunters say demand has plummeted in just about every
business: investment banking, pharmaceuticals, telecommunications,
chemicals. Some executive search companies have started to offer
retraining programs to replace their shipwrecked primary business.

‘We’re snowed under with resumes from job applicants. Many are
well qualified. But right now, for instance, I have only two clients
looking for personnel. I used to have hundreds of requests,’ said
Natalia Toumashkova, who owns the Acapella agency. She is offering a new
consulting service — not on how to hire but how to lay off employees.

Foreigners, like their Russian counterparts, faced the problems of
having lost money in Russia’s banks, which have refused to pay off
depositors despite frequent promises and steps by the government to pump
rubles into the accounts. Several foreign charities report having their
accounts frozen in Russian banks. Stanford University closed its
five-year-old Moscow campus because, with banks closed, it was unable to
find a way to pay for supplies, rent and services.

The Depression-like atmosphere has even begun to infect a nightlife
that earned the city a reputation as a hedonistic expatriate heaven. The
Starlite Diner, an all-night hamburger place once full of foreigners
with their briefcases and Russian models with their long legs, now
offers a ‘crisis menu’ to keep customers coming.

Some bars and discos have closed. The Hungry Duck, home to marathon
happy hours and sweaty amateur strip performances, cut prices;
Chesterfield Cafe, heavy on tequila and billiards, reduced its hours.
You can get into Papa John’s bar and disco free by saying the password,
‘I’m a friend of Papa.’

The turnabout seemed unimaginable a year ago, when Russia’s stock
market was the world’s fastest-appreciating, and Russian officials
barnstormed the United States promising investors guaranteed returns.
‘This is the end of the world as we knew it,’ said
Steiner. ‘There were lots of nights spent at home with brownies and
drink. Lots of my friends have disappeared.’

Steiner said she is committed to staying in Russia and believes she
can hold out while looking for a job at least until January. Baldridge
has heard there might be something in London, but worries that because
investors are pulling out of Third World countries from Asia to Brazil,
her services might be unmarketable. ‘It’s discouraging. I feel all
I worked for has crumbled,’ Baldridge said. ‘Does anyone
really want an expert in emerging markets?’

Moscow Times December 8, 1998

CONFESSIONS OF A RUSSOPHILE: It’s the Real Thing,
Or Is It?

By Jean MacKenzie

I’m becoming a bit of a downer at parties. While I used to adhere to
at least some of the rules of politesse, I now have an unfortunate
tendency to sit in a corner delivering dire pronouncements on the state
of Russia. Soon I may have to stop watching television or reading
newspapers altogether, which may put a crimp in my journalistic career.
But the idiocy floating around these days is getting to be just too
much.

The parliament voted to put the statue of the architect of the Red
Terror, Felix Dzerzhinsky, back on Lubyanskaya Ploshchad. The communist
State Duma speaker wants to bring back labor camps; people are freezing
to death in Kamchatka and starving to death in Ulyanovsk. Lawmakers are
calling for the death of the Jews, democrats are being slaughtered and
the oligarchs are too busy trying to cover their assets to do anything
about the dire state of the economy. What a country.

At an early Christmas gathering last weekend I spread doom and gloom
along with the eggnog. There were a few neophytes there – you can always
tell them by the bright eyes and innocent smiles, the earnest comments
on how ‘interesting’ Russia is.

‘Relationships are so much more real here,’ said a young
Brit called Angus, still in the first flush of infatuation with Moscow.
‘In London or in America, people smile and talk to you, but they
don’t know you. Here it is so much deeper.’ I remember with an
inward wince saying this sort of thing myself, years before being
mangled by my all-too-‘real’ entanglements with Russia.

There was Fedya, a slick operator and New Russian wannabe who somehow
managed to get me to take him to the States for a month, buy him a new
wardrobe, a VCR and a stereo, and who then dumped me on our return
because Americans were ‘too materialistic.’

Almost as ‘real’ was my brief fling with Venya, a
self-proclaimed great writer, who spent weeks chatting me up, and, just
when things were getting interesting, absconded with my car.

Then there was my close friend Nadya, who calmly assumed I would be
willing to smuggle $15,000 to New York for her, and showed up at my
house with the cash five minutes before I was to leave for the airport.
The relationship suffered grievously when I declined.

I sometimes feel like I’m dragging my friendships around like Jacob
Marley’s chain, and it was all I could do to keep from rattling my
burden and shouting ‘repent’ at poor Angus. But I just smiled
noncommittally,nobly refrained from dumping my eggnog and my cynicism on
his head , and went in search of another victim.

I found one in the person of a young American lawyer, who tried
valiantly to defend Russia from my bitter onslaught. ‘But it’s such
an ancient culture,’ she insisted. ‘It’s like China, or
India.’

Ancient? There was almost no literature here until the 19th century.
And whatever culture the country managed to accumulate has been
systematically destroyed. Russia has been periodically reinventing
itself since at least the time of Peter the Great, throwing out the old
to impose the new. How do you hold on to culture in that environment?

She tried again: ‘But the Communists.’ Oh, no, not that
again. What would we do without the Communist scapegoat? The Communists
were not conquerors or invaders. They did not materialize from Mars to
victimize a helpless population. The Communists were Russian, and the
nightmare system they created was merely the embodiment of the twisted
dreams of the lowest rungs of the Russian narod, or people: revenge on
anyone who was better educated, better dressed, better off.

Remember the Russian ‘Robin Hood’ in Yaroslavl? He burned
down 25 ‘New Russian’ cottages, because he couldn’t stand the
rich, and is being heralded as something of a hero. I can’t quite
understand what destroying so much property did for the area’s poor.

It’s like the old anecdote about simple Vanya, who catches the magic
golden fish. The fish says, ‘Put me back and I’ll grant you one
wish. But whatever you ask for, your neighbor will get twice as
much.’ Vanya thinks and thinks, then says ‘Oh little golden
fish, please poke out one of my eyes.’

The lawyer looked at me, shook her head, and said, ‘So, you’ve
been here for 10 years. Why?’ I sputtered, shook my head, and was
silent. Why, indeed? ‘Because it’s interesting,’ I burbled.
‘Because relationships are so much more real here. And the
culture.’

My chain rattled faintly in the distance.

Johnson’s Russia List, 17 Sep 98

Battle Fatigue: Fed Up and Fearful, Western
Executives Bail Out of Russia

By A. Craig Copetas

MOSCOW — Neil Burchell is a chaos manager. His job: to navigate
grocery giant Del Monte Foods Inc. through the riptide of Russia’s
economic maelstrom.

‘The rule for success and survival in this environment is to
trust nobody, believe nobody and realize absolutely nothing is
predictable,’ says Mr. Bruchell, Del Monte’s exhausted managing
director in Russia.

If his prescription for a healthy business built on suspicion, fear
and loathing sounds bewildering, your company probably doesn’t belong in
Russia these days. Even before the country plummeted into financial
turmoil last month, Western business success here could only be created
by executives who had the chutzpah to guide their companies through one
of the world’s most chaotic markets — one plagued by systemic
corruption and trapped in a twilight zone between those who barter for
cabbages and those who run hedge funds.

Yet the very Western executives who are equipped to handle the job
have also become casualties of the country’s current fiscal dysfunction.
Emotionally and physically drained, executives like Mr. Burchell are now
succumbing to battle fatigue. They are cutting their losses and, in many
cases, running.

‘There’s still excitement to help rebuild Russia, but the real
talent is tired and scared of the corruption,’ says Nathalie Behar,
chief Russian strategist at executive-recruitment firm Russell Reynolds
Inc. ‘There was always a very shallow pool of executive talent that
understood the cultural mechanics that contributed greatly to the
meltdown. Now they no longer want to live here — no matter the
money.’

That spells serious trouble for Russia at a time when the country
desperately needs all the economic help it can get. With the country in
default and its banking system in tatters, the need has seldom been
greater for seasoned managers who can generate business in an economy
driven more by rumor than by reality.

Yet Ms. Behar and other recruitment specialists are finding few
talented takers. ‘I have a perhaps $650,000-a-year package to
manage a Western firm in Russia,’ explains Ms. Behar, who has in
the past filled senior management posts here for such multinationals as
Coca-Cola Co. and Proctor & Gamble Inc. ‘The salary is payable
anywhere in the world, and the client absorbs all school fees, quality
housing and as many trips out of the country as the candidate would
like.’

What Ms. Behar is looking for are a few good executives like Charles
Bausman, a 34-year-old veteran of the Russian management wars. But Mr.
Bausman is heading in the opposite direction. Mentally exhausted and
’emotionally alienated’ after 11 years of running businesses
in Russia, he’s leaving Moscow for Manhattan, he says, because he feels
like Lawrence of Arabia: ‘I’ve been riding with the Bedouins for
too long.’

Mr. Bausman’s gallop through recent history here has been both wild
and successful. An American who speaks fluent Russian, his adventure
began in 1988, as a consultant to many of the foreign firms seeking to
take advantage of Mikhail Gorbachev’s era of glasnost and perestroika.
Since then, Mr. Bausman has advised everyone from former Russian Finance
Minister Valentin Pavlov to the DeBeers diamond conglomerate.

He also launched closely held Post International, a highly successful
cargo company that each month ships more than 10 metric tons of express
mail and commercial goods out of Russia. But a few days before Russia’s
financial crisis erupted, Mr. Bausman sold out to his Russian partner
for an undisclosed profit and bought a ticket home. He suspects a
‘huge exodus’ of foreign executives will follow him by the end
of this winter.

‘Westerners hang on too long in Russia,’ Mr. Bausman says.
‘They get tired of slogging away.’

Much of the exhaustion, he maintains, stems from the helplessness of
seeing delinquent activity erode Russia’s economy. ‘There’s just a
huge underworld of corruption,’ he says. ‘It can’t be
quantified in a ledger book, so our reaction is to act like it’s not a
contributing factor of consequence. … Sure, there are success stories,
but there was a more powerful surge of dishonesty that overwhelmed the
success and caused the crisis.’

If that sounds exaggerated, just listen to Michael Mears, a Russian
business historian and former director of the U.S. Commerce Department’s
office in Moscow. ‘It’s politically incorrect to come right out and
brand Russia a corrupt society,’ he says. ‘The result has been
a parade of Western economists and businesses either unable or unwilling
to change the character of Russian business and government.’

These days, the ranks of the unwilling are swelling. ‘I’m just
tired of the system,’ says Peter Martin, chief executive of Peter
Martin Associates, a U.S.-based consulting and public-relations firm for
media clients in Russia since 1990. ‘Many of us tried to break the
criminal pattern, but the government and the Russian private sector
never offered any rewards for zero tolerance of economic crime.’

Of course, somebody has to do the job of building Western business
here, no matter how distasteful. ‘Deal with it,’ advises
Thomas Shannon, vice president of the global strategic consulting firm
Bain & Co. ‘Corruption remains an unfortunate reality of this
market.’

The trick, Mr. Shannon suggests, is to ‘outsource the
corruption.’ That’s exactly the advice that Bain’s 20 consultants
give to clients. ‘We suggest that Western companies take on a
Russian partner who can handle all the black activity,’ he
explains.

That kind of brutal realism, Russian experts say, may be the only
antidote to a contagion that has plagued Russia ever since Peter the
Great. ‘The chaos caused by corruption is systematic and as natural
as breathing in Russia,’ says Jonathan Sanders, a noted professor
of Russian history and a founder of the Harriman Institute of Advanced
Russian Studies at Columbia University in New York. ‘Western
financiers mostly failed to incorporate endemic corruption into their
business plans.’

The trouble, of course, is that the unpleasant business of
outsourcing corruption often leads to a moral ‘churn’ inside
Western executives — and a resulting rapid turnover of personnel. When
an executive realizes that blackmail and payoffs are a conventional
component of business here, ‘then the executive wants to leave
Russia,’ Mr. Shannon explains. ‘He’s tired, burned out. But
the head office — which sees Russia as the largest untapped market in
the world — makes the institutional decision to send the next guy in
and see what he can make of the situation, and the cycle starts all over
again.’

Del Monte’s Mr. Burchell isn’t ready to pack his bags just yet. But
he is putting his operation on hold and has instructed his London office
to warehouse all products destined for Russia. ‘They have a shelf
life of one year,’ Mr. Burchell says. ‘I hope that will be
enough time.’

Like most Western executives working here, Mr. Burchell is unwilling
to divulge many details about Del Monte’s Russian operation. But he does
acknowledge that he’s having trouble attracting top talent to the
country at a time when they face ‘losing over 50% of their salaries
to devaluation, the specter of nationalized industry, bankruptcy,
capital control, exchange-rate control and hyperinflation.’

Not all of the emotional churn among Western executives here involves
corruption per se. Some of it flows from the visceral feeling that the
West’s willingness to bankroll Russia was itself immoral, like paying
off a blackmailer. Just ask Bob Brown, a Nebraska-born representative
for U.S. scientific instrument-maker Transgenomic Inc. who lives in the
southern Russian city of Saratov.

‘Russia looks to default on over $100 billion — the largest
single credit loss ever taken by the international banking
community,’ Mr. Brown says incredulously. ‘Don’t tell me the
West didn’t know this was going to happen. Our conventional wisdom was
to write off any loss as payment on the peace dividend for Russia’s
nuclear disarmament. Well, enough of that: It was blackmail.’

Some of the churn flows from old-fashioned fear, too. Anxiety and
underworld threats, says Ms. Behar of recruitment firm Russell Reynolds,
have made Western executives nervous about forcibly reproaching the
Russian government about corruption and compelling lawmakers into
enacting enforceable anticrime legislation. ‘The fear of government
complicity in the mafias is but one of the reasons executives don’t want
to come to Russia,’ she says. ‘These issues matter intensely,
and their impact on one’s professional and family life is
paramount.’

‘I can negotiate anything,’ Ms. Behar adds. ‘But I
can’t negotiate fear.’

That fear has helped Lee Timmins build a thriving business. As vice
president and managing director of Texas-based real-estate developer
Hines International, Mr. Timmins is busy building walled and guarded
upscale communities. By the end of 1999, his firm expects to have 685
rental homes, priced from around $80,000 to $144,000 a year. ‘I
have three rules on doing business in Russia,’ he says.
‘Concede the fact you’ll make big mistakes; life here costs money,
and accept brain damage.’

Fear has also sent Western firms with interests in Russia scurrying
back to the drawing board to find a more workable management model, says
David Bechhoffer, a vice president at Bain and specialist in emerging
markets. ‘Crisis management, strategic management — you name the
system, it’s been thrown out the window,’ Mr. Bechhoffer says.
‘Global business is data-driven, analytical in approach. At the end
of the day, people are rational. Nothing is rational in Russia.’

Or perhaps it just follows a logic that most Westerners can’t grasp.
‘Western businessmen would have made far fewer mistakes had they
… spent more time studying Russian literature than they did Russian
stock-market reports,’ says distinguished Russian author Solomon
Volkov.

Mr. Volkov’s point is well taken, says Julie Rasmussen, the president
o the Russian division of Mary Kay Cosmetics and a graduate of the
Harriman Institute. ‘It’s absolutely critical for managers to
understand Russian culture, but more often than not they’re
clueless,’ says Ms. Rasmussen, who heads a firm of 230 employees
whose salaries depend on 65,000 women freelancers networking cosmetic
sales throughout the former Soviet Union.

‘The IMF now tells us it just found out about corruption.
Please!,’ Ms. Rasmussen declares. ‘You just don’t come here
unless you understand and thrive on Russian chaos. Otherwise, you get
eaten alive.’

Boston Globe October 5, 1998

Russia’s Middle Class Falls with Ruble

By David Filipov

MOSCOW – Amid the carnage caused by Russia’s economic collapse – the
billion-dollar losses incurred by foreign investors, the worldwide shock
waves and the deepening domestic turmoil – lies a less obvious, but no
less significant, casualty: Moscow’s middle-class dream.

Tens of thousands of urban, upwardly mobile Muscovites suddenly have
found themselves out of work, and more are set to follow. That is far
more important to the mood of the country than the foreign adventurers
who have lost their well-paid jobs and the high-flying oligarchs who
have watched their financial empires crumble.

The people who not long ago provided a ray of optimism in this
long-suffering country have suddenly fallen under a deep spell of gloom.

“I felt so confident; I knew would happen tomorrow; I could make
plans. … I could afford more and more,” said Natalya, 25, an
executive at a public relations company that was booming weeks ago but
now is about to go bust. “I got so used to it that I still cannot
accept that this is no longer the case.”

Even before the crisis, Russia did not have a middle class in the
American sense of a stable, prosperous majority. Crime, corruption,
political squabbling and bureaucratic inertia have sapped efforts to
reform Russia’s economy and have left much of the country no better off
than they were under communism.

But what Russia did have, especially in Moscow’s booming economy, was
a gradually growing class of young professionals who subscribed to many
of the values of the middle class in Western countries.

These Russians found work at private companies that were prohibited
in the communist system, but which flourished after the Soviet collapse
in 1991. They earned salaries that allowed them to spend their money in
ways that were unavailable to all but a few elites under communism.

Unlike generations of Muscovites before them, but like their
counterparts elsewhere, these Russian yuppies had hard evidence that
with professionalism, hard work and dedication anyone could write their
own ticket to a better life.

They dreamed of a Russia one day integrated with the league of
stable, prosperous democracies, and they saw themselves as a big part of
that future. Many Western policy makers and commentators bought into
that dream, predicting the inevitable expansion of Moscow’s middle-class
values to the rest of the country.

But the dream vanished on Aug. 17, the day the Russian government,
facing bankruptcy, devalued the ruble and defaulted on its foreign and
domestic debts. The ensuing panic froze the country’s biggest banks,
instantly wiping out the savings of millions of people, halting business
across nine time zones and bringing in a government that is toying with
the idea of bringing back the state-controlled economy of the past.
Moscow’s optimistic young generation of professionals was left its first
taste of failure and an uncertain future.

‘It’s a very important psychological defeat. We thought we were
the masters of our own destiny,” said Lena Porman, 28, whose job as an
importer of fine French wines dried up overnight as the plunging ruble
made imports too expensive. “We thought everything we dreamed of was
just around the corner. Now it’s hard to say what will happen.”

Porman had a plan that was based on the idea that people would always
pay good money for someone who could tell a $2,000 bottle of Chateau
Mouton Rothschild 1961 from an ordinary Bordeaux. She saved and invested
wisely, or so she thought, until her earnings disappeared on Aug. 17.
She thought she would soon be able to afford a new apartment, and
someday start a business of her own. And Porman, like a dozen other
young Muscovites interviewed for this story, firmly believed that Russia
had a stable and irreversible market economy.

They thought so because Moscow’s economy boomed despite the street
fighting in 1993 and the war in Chechnya, despite the wage and pension
arrears suffered in most regions outside the capital since 1995, and
despite the recent political instability caused by President Boris N.
Yeltsin’s shaky health.

“We are used to having a sick czar, to hearing gunfire, but this is
totally new,” said Sergei Lysakov, 24, the deputy editor of Russian
Financial News, an agency that supplied business news to financial
companies working in Moscow. Right now, most of those companies have
shut down, and Russian Financial News is likely to follow them. Lysakov
was making $1,500 a month, over five times the official average Russian
wage. He just bought a new apartment, which he has spent most of his
money on furnishing. Now, he faces unemployment, or, if he can latch
onto a job, a huge pay cut.

This comes as a shock to people whose lives have only improved over
the past few years: people like Stas Ivashkevich, 27, who steadily
worked his way up from the housekeeping department at a Moscow hotel in
1993 to assistant manager at a new Holiday Inn that was supposed to open
outside the capital this year. Now the project has been put on hold, and
Ivashkevich’s job is in doubt.

“We are used to living freely and having money, we are used to the
idea we can go to the store and buy jeans,” Ivashkevich said. “It’s
hard to imagine standing in line for toilet paper.”

There are no toilet paper shortages in Moscow yet. But other
certainties he has grown accustomed to have disappeared in the crisis,
such as a steady paycheck. Ivashkevich’s employers are paying him only a
portion of his salary. Most companies that have survived have begun
cutting staff and slashing salaries and benefits – a practice no
American middle-class workers would stand for.

But few Muscovites who have jobs dare challenge their employers. One
reason is that most professionals are paid a portion of their salary
under the counter, as part of employer schemes to avoid payroll and
income taxes. Another reason employees keep their grievances to
themselves is the uncertain job environment.

An estimated 200,000 professionals have been laid off in Moscow, and
indications are that more layoffs will follow. At a recent job fair in
the capital, securities analysts and auditors who had been pulling down
salaries in the mid-five figures lined up for work in factories, the
city bus system or in other state-owned entities that offered wages of
about $100 a month.

Anyone who has a job spends his time worrying how long he will keep
it.

“It’s the waiting that gets to you,” said Oksana Pevnaya, 21, an
accountant with the struggling Russian oil major, Yukos, who was
recently laid off. “After a while, you don’t work. The last month,
everyone was waiting for the bad news, drinking a lot of coffee and
thinking about being unemployed.”

Pevnaya got the ax on Aug. 27, 10 days after the crisis began, when
her whole department was called to a meeting where their boss gave them
the news.

In a way, she was lucky. Some of the firings over the past few weeks
have been much messier. One brokerage announced firings by reading the
unlucky employees’ names over an intercom. At another firm, workers
checked their voice mail to find a message notifying them that they were
unemployed. The news magazine Itogi reported that often, workers have
shown up at their jobs to find their offices sealed shut.

Merciful as it was, Pevnaya’s firing put a damper on her plans for
this fall to get married to Maxim Nechayev, 21, a sales manager at the
Moscow office of German consumer goods giant Bosch/Siemens. So far,
Nechayev still has his job – Russians have rushed to buy consumer goods
as their faith in the ruble evaporates. But his plans to seek a career
in a multinational auditing firm are on hold. So is that big honeymoon,
and the apartment the two hoped to buy; instead they will squeeze into
her parents’ apartment. And the big victim is the young couple’s belief
in the stability of their young lives.

“It turned out to be an illusion,” Nechayev said. “You can’t trust
the government, you can’t trust the banks. Nothing will ever be the
same.”

Moskovskiy Komsomolets 2 October 1998

‘Abortion Victims’ Anamnesis of the
Middle Class

Article by Yelena Yegorova:

• Date of birth: 1995-1996
• Quantity: about 30 million persons–as a rule, urban dwellers.
• Professional composition: top managers, bank employees, small and
  medium-size business owners, ordinary functionaries, ‘shuttle
  traders,’ journalists.

• Income: between $270 and $2,000 a month per family member. Almost
  80 percent have savings in banks.

• Distinguishing signs: mobile telephone, car–Skoda, Opel, or DEU
  (that is, between $10,000 and $20,000), famous Western brandname
  quality clothes.

• Abilities: vacations abroad, visits to restaurants, educating
  children in private schools, attending gyms and fitness centers.

• Complaints: high income taxes, weak legislation in the area of
  small and medium-size business, lack of bank–and most important,
  mortgage–financing.

Such is the patient’s medical history. And the diagnosis is simple:
After 17 August, the patient is more dead than alive. Bankrupt banks
have buried the money and the possibility of paying off clients from
other cities. Potential customers have been left without work and untied
funds. Skilled managers and workers have been fired. But the worst part
is that nobody seems to be planning to treat the middle class. The
anticrisis program being prepared by the government does not contain a
single word about those who only half a year ago were honestly working,
getting regular salaries, paying taxes, and symbolized the democratic
well-being of the country. They seem to have been forgotten.

The middle class has decided to engage in self-treatment. A new
political party, which could be headed by Yuriy Luzhkov–and nobody
else–intends to register in Moscow as early as December. At least, it
was to the Moscow mayor that the movement’s organizers– representatives
of small and medium-size business–intend to turn for support.

In Russia, the middle class and its role in public life have always
been referred to with a certain deal of irony. Now, however, the
skeptics will have to have second thoughts: By the most modest
estimates, the new party can count on the votes of more than 30 million
voters!

Will Russia survive without a middle class? In what situation have
thousands of skilled specialists found themselves at work and at home in
a country ravaged by ignorants and paralyzed by crisis? Final Analysis
of the Victim

The debate over whether Russia has a middle class ended before having
really started… Sociologists, politicians, and journalists were not
destined to exercise their eloquence anymore. Since 17 August, the
question of the Russian middle class can be considered rhetorical. It
might be more productive to discuss, for instance, whether there is life
on Mars…

Some call it abortion. The Kiriyenko government killed an unborn
child, they say. It was already breathing, jerking its arms, and
kicking. The parents were busily preparing for the happy event:

For instance, this summer Gaydar held an international conference on
the topic ‘Formation of the Middle Class in Post-Communist
Russia,’ and Yeltsin said a few encouraging words in his message to
the Federal Assembly. Faraway relatives were hurriedly buying gifts: The
Gallup Institute conducted an extensive study of the demand for imported
consumer goods. The best yogurt from Bavaria, Aunt Asya’s bleach,
Huggies pampers, and hundreds of other goods were flowing to Russia,
equally unneeded by the very rich and very poor, but essential to the
newborn middle class.

Actually, there is also another opinion. According to data from Boris
Nemtsov’s information server (!), this summer 42 percent of surveyed
Russians already unquestionably considered themselves middle class. And
since it is so, who said that there is no such notion in Russian
reality? It is another matter that for a number of reasons our middle
class was terribly far removed from the Western standard.

Let us start from the fact that we all came from ‘April
Theses’ and ‘Anti-During.’ A bank employee, a
‘shuttle trader,’ a public relations agency man, a journalist,
and a secretary all have behind them the same unfinished road to the
Communist future. We went to the same schools, equally disliked farina
cereal and first grade counselor Lenka, and our only property was a
Sever refrigerator and a Vyatka washing machine. That in the end one
started work in a bank and the other selling Turkish consumer goods in
the street, and that by their income level they both can be considered
middle class, is nonsense in the eyes of the Western system.

In developed countries, a baby born in a middle-class family, as a
rule, himself becomes a representative of this social group. Money is
passed on through inheritance, as is the lifestyle: an automobile, piles
of clothes, vacation trips, going to gyms and parties. The mandatory
condition is not only education and a job bringing in a certain income,
but also real estate, which can be purchased on credit. In short, in the
West the middle class is a much more complex notion than in Russia,
where it was decided to measure everything by the presence of money in
one’s wallet. On the other hand, this was indeed the only way to bring
to a common denominator a commentator in the culture department of a
major newspaper and an auto mechanic.

And although sociologists argued over what monthly income guarantees
unquestionable inclusion in this category (Goskomstat [Stat