Moscow, 2009

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Contents

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Foreword Elvira Nabiullina

Publisher’s Welcome Derk Sauer

The Russian Labyrinth — an introduction Christopher Graham

What Russians Think about Foreigners Vladimir Pozner

Investing in Russia Alan Broach

Managing Russian Teams Brook Horowitz

Russia — Its Laws and Bureaucracy Carol Patterson

Hiring, Retaining and Firing in Russia Luc Jones

Negotiations in Russia Stuart Prior

Russian Business Behaviours Cynthia Gordon and Christopher Graham

Beyond Moscow and St. Petersburg Joel Lautier

What Makes the Russians so Russian? Michele Berdy

You, Russians and Money Stuart Lawson

Socialising with Russians Frank Ebbecke

The Essence of Russia: Devushki, Zhenshchiny, Babushki Paolo Casciato

Expatriate Life in Russia — a practical view Erica Fursova

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Foreword

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On behalf of the Ministry of Economic Development of the Russian Federa-tion, I would like to welcome the readers to the book “Russia for Beginners. A Foreigner’s Guide”.

In the last few years, Russia resolved the main task ahead, which was to de-velop an institutional basis for market economy and post-crisis reconstruc-tion of industry. To ensure strong macroeconomic stability, a system of basic legal norms was implemented and regulatory institutions, which ensure func-tioning market relations between economic entities, were founded. Working in competitive markets such as goods and services, capital and labour re-sources, while reaching high levels of openness, economic integration be-tween Russia and the rest of the world is continuing to improve.

But even in the current circumstances in the international business commu-nity, there is, unfortunately, still some preconceived negativity to relations with our country. The reason is often a lack of proper and authentic information, and for this reason it has become important to develop a full and accurate picture of what goes on in Russia in printed and electronic media alike.

The newspaper The Moscow Times is famous for giving an unbiased and con-sidered evaluation of the situation in Russia. I hope that their English language publication “Russia for Beginners” will give foreign readers the opportunity familiarise themselves with important information about current conditions and perspectives on development of the Russian economy and society.

The issues raised in this book, by authors who all have experience with main-taining business relations in Russia, are sure to be useful, not only for busi-ness people, but also for anyone else interested in our country.

Elvira S. Nabiullina Minister for Economic Development Russian Federation

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Dear Reader,

For those of you newly arrived in Russia, let me assure you that even after twenty years in Moscow a book like ‘Russia for Beginners’, that you have in your hands right now, is a welcome contribution even for old-timers like me.

As you may have found out already, life in Russia is like the beautiful Matryo-ska dolls. Inside one doll there is another one and so on — and nothing is ever quite like it seems.

Making sense of it all can be bewildering and we hope this book will help you navigate Russian life and business.

Don’t let first appearances deter you. What may look hostile and unfriendly from the outside — will turn out to be very warm and friendly once you’ve tapped into real Russian life.

Enjoy reading this book, and most of all — enjoy your time in Moscow.

Derk SauerChairman of Supervisory BoardIndependent Media Sanoma Magazines

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1. The Russian Labyrinth — an introduction

by Christopher Graham

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Christopher Graham is CEO of Education

and Training International Vostok, a Mos-

cow-based company that provides training

services across the Russian Federation. He

also consults globally on Russian intercul-

tural workplace issues.

He has worked in Russia, Georgia and

Azerbaijan for over ten years and before

that ran projects in countries as diverse as

Oman, South Africa and Germany. He lives

in Moscow and London.

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“I took a speed-reading course and read War and Peace in twenty minutes. It involves Russia.”

Woody Allen

How was I to know, I was only in my early twenties and ridiculously naive? She was, unsurprisingly, called Natasha, looked like a supermodel and all she wanted me to do was check the English in an essay she had just finished. The possibility of exchanging punctuation and grammar checking for some sort of er, relationship, was more than I had experienced before.

It was Moscow State University in 1985 and I was visiting a teaching colleague of mine who was seconded there for a year. It was he who stopped my entangle-ment with Natasha’s syntax turning into something nastier, for when I opened the envelope I found ten pages of the most virulent anti-Soviet tract imagi- nable. It would have shocked the most ardent Reaganite neo-con. My friend was used to it so five minutes later we were flushing Natasha’s handiwork down the toilet. It was what I believe is called a honey trap — far too James Bond-like for a simple country boy like me — but the whole incident gave me some determination to go back to Russia. This determination was driven by the mystery, by the allure, by the exoticism and by the very fact that it is so hard to fathom how Russian society works. Oh yes and to find Natasha too!

It took me over 12 years to go back to Russia where I now run a training busi-ness. When I was approached by the publisher to assemble this book, my mind was thrown back to that strange incident so many years ago.

Russia is a mystery, it is still to a great extent a closed society both politically and culturally yet it offers foreign businesses huge opportunities to sell to the local market, to manufacture for global consumption and provide a range

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of services in the ever growing B2B sector. And Russia is also a springboard into what Vladimir Putin calls the ‘near abroad’ — the states of Central Asia, the Caucasus as well as Ukraine and Belarus have huge economic ties with Russia. But still Russia seems to scare people off, is treated with great sus-picion and people have profound reservations about coming to work or open a business here. So why is this?

It’s easy to forget that the USSR only collapsed quite recently and 70 years of East-West animosity will take a long time to dissipate. There is still much mutual mistrust, and recent political events on both sides only serve to un-derline this. Business, of course, always transcends politics but the environ-ment is not always conducive to an open two-way trading relationship, and old enmities seem to live on. It must be said things are not helped by the fact that while the oil and gas revenues have allowed major infrastructure improvement, that there has been major reform of the business, fiscal and labour legal frameworks, is much less obvious to the potential investor or expat employee. In effect foreigners don’t know that Russia is now a much easier place to do business than it was. My own view is that Russians are very poor at self-promotion and PR and this combined with a tradition of cultural, political and economic isolationism means that the positive mes-sages simply do not get out. Getting those messages out is one of the tasks of this book.

The recent inflow of wealth into the Russian economy has had a number of negative side effects that have fuelled foreign reluctance to work with the country. The raised profile of the famous oligarchs in the West with their enormous wealth has given a slanted view of the Russian economy — of course there is a handful of super rich people but there is also a large and growing middle class — all of them avid consumers — and this is one of the messages that does not get out. Of equal disadvantage is the fact that the Western media are keen to suggest that control of oil and gas supplies is used as a political weapon by the Russian administration. Oil has always been part of the Great Game and always will be — the problem is that the perception in much of the world is that Russia is a bully in world geo-politics. Russian negotiating patterns are in fact overtly aggressive at first, but this is often just theatrical — they will always do deals even if the willingness to compromise is not immediately obvious. Again this book aims to analyse and explain this behaviour as well as destroy some of the myths about doing business in Russia.

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So what of this book? It may be easiest to say what it isn’t. It isn’t a travel guide to Russia, nor is it a conventional business guide either. It’s neither a cross-cultural handbook nor a history of Russia. It isn’t a guide to Rus-sian etiquette nor is it a summary of Russian commercial law. In essence it is a bit of all of these things and I hope quite a lot more too. The book has been published to give newcomers to Russia and those thinking of go-ing to the country an insight into what makes the world’s biggest nation ‘tick’. The strength of the book is that it is written by people who have made that journey themselves. All of the writers bar one are foreigners in Russia. Many of them now run successful businesses there — most of them having been in the country some considerable time — yet they still remember what they needed to know and understand themselves when they first arrived in Mother Russia. My brief to the writers was deliberately quite imprecise, they have put their experiences of Russia onto a Petri dish and some very interesting chapters have grown. Many of the experiences recounted are very personal and this adds to their strength I think. Hopefully, this book will have something for everyone.

In common with a number of the contributors to the book, I have worked in several different countries over the years, but Russia has always felt one of the most ‘foreign’. There are a number of reasons for this I think. A good start-ing point perhaps is what the Russians themselves think of us foreigners.

The answer is not at all clear and perhaps the best adjective to describe the Russian relationship with the outsider world is schizophrenic. In Soviet times there was of course a great desire to have access to all the consumer goods that the ‘West’ enjoyed but this was tempered by a feeling that Russia en-joyed moral superiority. This view still persists to this day even though many Russians now have the German cars, iPods and other paraphernalia of 21st century life. Vladimir Pozner’s chapter gives us a fascinating insight into the Russian view of foreigners and shows us how history has led them to the very particular view they have of the rest of us. He reminds us how in the Soviet

Russians do not trust each other readily. If you want your staff to develop and work as autonomous teams, you need to create and maintain mutual trust.

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Union and long before, foreigners had many privileges that were not afforded to Russians — even priority places in restaurants.

“In Soviet times, when people had to stand in line for hours literally for every-thing, suffice it for some minor nobody of a figure to appear and say ‘com-rades, let us through, these are foreigners’, and the queue, no matter how long and long-suffering, would part and let the foreigners through. This could simply not happen in any of the countries I know. I mean, imagine a line of people waiting to get into a New York or Paris restaurant and being told to ‘let the foreigners through’ (!)”

Pozner also quotes the great Russian film director Andron Konchalovsky, who said to Pozner “It’s too bad we’re not green or blue or purple, because if we were, the world would treat us differently.”

I assume that many readers of this book will be business people who have either made or are thinking of making an investment in Russia. Writing as one who has done this, it can be extremely daunting and confusing, and it feels rather riskier than perhaps it is. Alan Broach’s chapter helps to give clarity on the methods and form of investment, the investment law, tax regimes and also a series of insights into the aspects of Russian culture that might impact on your investment decisions. Above all, the chapter shows us that while Russia is a challenging business environ-ment, it is possible to make considered, profitable and safe investments in the country:

“A leading UK company last year asked me the question ‘should we be in the Russian market?’ The answer was ‘No, you should have been in the Russian market for years by now’. To get in now they may well have to pay a high price but, given the positive economic forecasts referred to at the beginning of this chapter, it would seem a price that is still worth paying.”

Business requires teamwork. Effective teams more than anything require a spirit of openness and mutual trust. Brook Horowitz in his chapter starkly illuminates how these key traits are missing from Russian culture and how this impacts on those trying to build and develop teams.

“The fundamental features that would normally be associated with a success-ful team — good communications, trust, collective responsibility, leadership,

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and a conviction that a team is greater than the sum of its parts and that more can be achieved by working together than by not doing so — is lacking in Russian business culture.”

But it is not all doom and gloom. Horowitz goes on to outline approaches to team building that will work in Russia, and in doing so he shows us one of the key aspects of Russian culture. Russians are above all ‘people-people’. If you can grasp that and work with it, you will be a much more effective manager in Russia. As Horowitz says:

“If you can create an atmosphere of understanding about these personal dilemmas, encourage people to talk to you openly about them, even use you as a confidant, you can break through these hierarchical prejudices. Preserv-ing some of the local traditions, such as celebrating or at least congratulating people on their birthdays, and giving flowers to your female staff on Interna-tional Woman’s Day shows a respect and attention for the individuals and the social environment in which you and they live.”

There is a lot of government in Russia, and whatever you choose to do in your time in the country, both at work and at home you will have some encounter with the Russian state and bureaucratic machine. Carol Patterson’s chapter will guide you through the corporate, labour and fiscal codes of Russia with a practical and optimistic touch rooted in real experience. She also gives us tips that we can apply across the board when dealing with the bureaucratic behemoth:

“What is noticeable about Russian laws across the board is that they allow very little leeway to public officials or bureaucrats to exercise discretion. This feature is of course an attempt to eliminate the opportunity (or shall we say the ‘expanded opportunity’) for officials seeking to receive bribes. However this feature also has the result that non-compliant behaviour by a company in the past cannot be officially pardoned or condoned, which leaves many companies in a permanent state of limbo with respect to defects in their docu-ments or title to property.”

Patterson however ends by suggesting that:

“Russian law is more of a work in progress than common law, but it is devel-oping, and it is also legitimate, complex, and largely workable.”

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Luc Jones in his chapter will give people who have never worked in Russia a few surprises — but surprises that you need to know about. He reminds us of the relative newness of the market economy in Russia and the fact that many of the skills that we take for granted simply do not exist in Russia, at least amongst older people. Another thing that shocks people coming to Russia for the first time is, “in many cases people will have reached their position in a much shorter space of time than they would have done back home. We often hear ‘how can this guy be a Director, he’s only 31!?’” People do get responsi-bility very early on in Russia.

Jones also reinforces our earlier point about Russians being ‘people-people’ and how this is vital in staff retention:

“Find time to take a more personal approach to your staff — simple corporate events such as a bowling night, or a weekend away at a ‘dom otdykha’ (an out-of-town sanatorium) does wonders for team building but at the same time lets you find out how much people really like and dislike where they work, and also what people actually want to see from their employer in the future.”

Negotiations with clients, suppliers and most importantly the negotiation of relationships with colleagues, reports and buyers is something that Rus-sians take very seriously indeed. Stuart Prior’s chapter is not just a very prac-tical step by step guide to negotiations with Russians, equally importantly it puts Russian negotiation behaviour into context — this backdrop will help the reader in a variety of workplace situations in Russia. Here is an interest-ing snippet from Prior’s chapter:

“Appearance is very important: dress like a clown, in Russian eyes, and be treated like a clown. For men a business suit with tie, for women, smart attire. As the Russian saying puts it ‘you are met in accordance with the way you dress and are fare welled in accordance with your intellect’.”

As I say earlier on, Russia suffers from bad press internationally and a shroud of mystery. The chapter that Cynthia Gordon and I have written is designed to give our personal experiences of specific Russian business micro-behav-iour in such a way that readers can relate to them immediately and hopefully benefit from them. We have also sought to destroy some of the myths about working in Russia and mention some of the traps that a newbie can easily fall into. Here are a couple of examples:

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“I find that people do not always come to work, how shall I put it, exactly on time in Russia, but they do work very long hours — lots of overtime. It’s intensity, people defi-nitely work very hard here.”

“ ... my experience is that Russians do not want to lose face by admitting they don’t speak or understand English. If someone smiles and says nothing it is likely that they have no idea what you have been talking about. The best way to ensure comprehension is to ensure that written notes are given to people to support what you say. Also to learn to pace and grade your language. Clear and simple without being patronising — a fine line but one you need to strike.”

I mention above that this is not a travel guide to Rus-sia — but it is worth making the point that Russia is a vast country. In 2006 I went to Sakhalin Island — 10.5 hours by plane yet it is still a domestic flight. These huge distances and the extremity of the climate (Russia can be very hot as well as very cold) does make Russians very cautious as well as resilient and resourceful. It also makes for large regional variations in terms of the econ-omy, labour market, local industrial specialisations and infrastructure status and thus the relative attractiveness of different regions for investors. Joel Lautier’s chapter takes a very detailed look at the Russian regions from an investment point of view and emphasises through-out the need to give the modus operandi of the regional government as much focus as purely commercial con-siderations. The chapter looks at the issues in both gen-eral terms and on a region-by-region basis. The Russian regions offer huge opportunities for foreign business people, but as Lautier says:

“When entering the Russian market, it is necessary to be prepared for certain risks connected with doing busi-ness in the regions, first and foremost because there is little working experience of cooperation with foreign

One day Lara went out and did not come back … She died or vanished somewhere, forgotten as a nameless number on a list which was afterwards mislaid.

Boris Pasternak, “Dr. Zhivago”

BYTHE

WAY

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investors. In several places the relationship with Western businessmen has remain unchanged since the 1990s. Moscow and St Petersburg are dynamic and have the same outlook on life as Europe, open and new, using modern business methodology and prepared to adapt to any new experience, but the regions definitely have a less intensive rhythm, and prefer to deal with things in the traditional way. There are different paces and tasks in the regions, people are slower to sense new currents and move to the tune of the busi-ness world.”

Henry Ford told us that history was bunk. He may have been an industrial pioneer but regarding history he was wrong. Russia has had a lot of history, much of it big and bloody. Consider this quotation from the great British his-torian Robert Conquest from the opening chapter of his book ‘The Harvest of Sorrow. Soviet Collectivisation and the Terror-Famine’:

“We may perhaps put this in perspective in the present case by saying that in the actions here recorded about twenty human lives were lost for, not every word, but every letter in this book.

“That sentence represents 3,040 lives. The book is 411 pages long.”

Michele Berdy’s chapter is a history of Russia but not a dry textbook type his-tory. It seeks to link the experiences that Russians have had over the years with their behaviour, habits, customs, assumptions and beliefs today, in short, with their culture. This quotation will register with anyone who knows the country well.

“If you have been robbed, if you are ill, if you are lost, if you car won’t start — no matter what is wrong, the same folks who demonstrate against your country, sneer at your religion, or don’t give you a moment’s consideration in the parking lot, will drop everything and be extraordinarily generous with their time, money, and possessions.”

The relationship between people and their (or other people’s) money is always interesting. Stuart Lawson in his chapter approaches the money issue in two ways. He provides us with a personal pre-departure checklist of what we need to do to get our Russian financial affairs in order. He then goes on to look at the Russian banking system and more specifically to explore how Russians feel about money. A point for all recruiters to bear in mind is this one:

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“It is worth stating that Russian staff do not only seek just a higher salary — the overall package is very important in Russia as are seemingly (but not) obvious things such as being paid on time, being paid legally and being treated decently in the workplace.”

The Russian view of money, and indeed of the capitalist system, is a hard thing to define. The older generation has a somewhat jaundiced view of busi-ness. After all in Soviet times speculators could have had an appointment with a man in the basement with a gun in his hand and this, followed by the uber speculation of the Yeltsin time, has given Russian business a rather complex backdrop. Younger people are more pro-business and many have had much more exposure to it through travel and education. This said, the Russian education system does not yet fully prepare people for the 21st cen-tury workplace; the emphasis being, for example, on economics rather than business studies. The message for foreign staff here as with so many other aspects of life in Russia is: manage your assumptions. Basic knowledge of business, of customer service or of team playing cannot be assumed. It can be developed and moulded to local needs but this takes time and trust.

Frank Ebbecke’s chapter looks at socialising with Russians. The informal business environment is very important in Russia and many key deals are done in restaurants, at someone’s dacha or even in the banya. Ebbecke’s chapter looks at a number of different social environments and indeed at a number of different types of Russians too! His experiences and tips also cover situations such as driving habits:

“On Moscow streets only sheer power reigns — big against small, old against new, rich against poor and they all work together against pedestrians des-perately trying to manoeuvre through the cars parked on the sidewalk or to cross a street.”

Nightlife:

“... Moscow, the unrivalled capital of it all, counts no less than 14,500 li-censed watering holes, kiosks, restaurants, bars, discos, clubs — maybe a world record. Many of them have their doors open 24/7/365 and many of them have high-class live or house DJ music.”

And before you ask, drinking:

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“Everybody should drink at the same time; by the way, avoid raising your glass and drinking just on your own. The later the hour, the more the vodka, the longer the toasts get and the more emotional they become.”

But do bear in mind it’s not all fun, fun, fun — as I mention above, serious business is done with a glass in the hand.

Women in Russia is the subject of Paolo Casciato’s chapter. The USSR made gender equality one of its key tenets but the reality was rather differ-ent. While there probably are more female engineers and doctors in Rus-sia than in other countries, there is also a great deal of gender discrimina-tion in the labour market and stories of sexual harassment abound. Any straw poll I have ever conducted amongst foreign business people has always indicated that it is women they prefer to employ. Casciato looks at different types of women, of different ages and in different types of work-place and we are given clues not just about the role of women, but about Russian society as a whole. In the chapter he touches upon the progress being made:

“Anyhow, the current presence of Russian women in the business context doesn’t fully reflect their value and potential; if you stay long enough in Rus-sia or visit the country frequently you will surely notice a slow but significant evolution with an increasing number of talented women conquering leading and decision-making roles.”

Gender politics are always a minefield and in Russia the mines are very well hidden. One of the key issues is the question of to what extent Russian wom-en want to be part of the ‘Western’ feminist movement. It can be tricky ter-ritory but many women I have spoken to in Russia seem to seek some sort of Russified version of the North American model. The role of women is fast changing in Russia and it will be interesting how the whole issue plays out as the economy develops and the labour market adjusts to the new realities.

Another key question of course is how they manage to run in stiletto heels on the ice...

The final chapter in the book is perhaps the most down to earth and prac-tical. Erica Fursova discusses expat family life in Russia and, based upon both her personal and her professional life provides a very comprehensive

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overview of almost every aspect of living as a foreigner in Russia. She also provides plenty of tips to keep sane, for example:

“You should also work to expand your circle of friends to include not only other expats, but locals as well. It is these Russian acquaintances that will help you decipher their culture, translate your taxicab call, and laugh or cry with you at 2am and remain forever in your memory of Russia. If you sur-round yourself in the expat ’bubble’, this can lead to the ’us vs. them’ syn-drome and unhappiness.”

Fursova is also very honest about crime and violence issues too:

“For a city the size of Moscow the crime situation is not abnormal. Common sense that would apply in any large city should be used here. The acts of violence you read about are rarely random, but are targeted towards specific people. There are regular occurrences of race-related crime.”

The series of checklists in this final chapter should be read with marker pen in hand, “yes, yes, ah no need to do that, hmm, good idea”. I did it myself, albeit nearly ten years too late.

So there you have it. An eclectic book for sure, and one that can be used for ‘dipping into’ to pursue a specific topic as well as reading from end to end to get a broad overview of Russia. Some of the views are very personal and I am aware that, like Russia itself, the book contains several contradictions. Over-all I hope it will encourage people to come to Russia to buy and sell, to make things, to build things and to create jobs. Even if Russia seems daunting at first, don’t give up — stick with it and with a bit of luck, lots of hard work and plenty of relationship building, to misquote Psalm 2�, your cup will runneth over.

There is an old Chinese curse that says “may you live in interesting times”, and the global economic crisis that grips the world as we go to press sug-gests we may be under that curse now. This almost certainly means that some aspects of the contents of this book will be out of date by the time you read them. We have made as many revisions as we can, but in these excep-tional times please bear with us.

2. What Russians Think of Foreignersby Vladimir Pozner

2. What Russians Think of Foreignersby Vladimir Pozner

Vladimir Pozner is a world renowned TV

journalist and author. Born in Paris, he

moved with his family to New York City in

1940, in 1948 to the Soviet-occupied zone

of Berlin and in 1952 to Moscow.

In 1970 he joined the USSR State Commit-

tee for TV & Radio as a commentator on the

North American Service of Radio Moscow.

From 1979, Pozner began to appear on

US network television shows, mainly on

Nightline (ABC).

In 1985-1986 Pozner co-hosted two

“space bridges” with Phil Donahue. Pozner

was promoted to the rank of political ob-

server, the top journalistic post in the USSR.

Vladimir Pozner has won multiple awards,

including two Emmy certificates and its

Russian equivalent, the TEFI award. He

ranks among the most respected people in

the television profession in Russia today.

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The title of this chapter should make the reader assume that Russians, as differing from all other people, have a special “Russian” attitude towards foreigners. This, in turn, dovetails neatly with the general mythology of Rus-sians and Russia being “different” — “a riddle, wrapped in a mystery inside an enigma” (Churchill), the mysterious “Slav soul”, etc.

Now I, for one, have always argued that the Russians are not any more dif-ferent from the English than, say, the Portuguese are from the Swedes, that the so-called Slav soul is not any more mysterious than the German one. I have always insisted that what we have here is a lack of curiosity, a laziness of mind, the absence of any real desire to understand what, for lack of a more sophisticated term, makes the Russian tick.

While this has an ancient history, as testified to, for instance, by the writings of Giles Fletcher the Elder, who visited and wrote about the court of Ivan the Terrible in the 16th century, it was not always the case. Once upon a time (in the 11th and 12th centuries) Russian nobility often married their counterparts from Western Europe, contacts flourished on many levels, specifically trade and culture. But all that came to an abrupt halt with the Tartar-Mongol invasion of Rus in the 1�th century, and for nearly two hundred and fifty years Russia disappeared from the map of Europe. It is almost impossible to assess the extent to which the Tartar-Mongol yoke affected Russia, to what degree it had a formative impact on the Russian character. But what we do know is that when Russia re-emerged, it was no longer regarded as part of what then was considered the “civilized” world, rather, it was seen as a mysterious, threaten-ing, incomprehensible country. Thus, “the foreigner’s” attitude towards Russia was not the same as towards any other country, it was, indeed, special.

Among the many explanations for this, the most convincing, at least in my view, concerns the role played by the Russian Orthodox Church (ROC). There can be no doubt that the ROC was instrumental in throwing off the Tartar-

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Mongol yoke and in uniting the warring and splintered Russian duchies into a single force. It could be successfully argued that the ROC was not only a liberating and uniting force, but was the birth-force of the Russian nation, and that gave the ROC unparalleled standing and power.

But it was also the ROC that declared Russia to be “the third Rome”, it was the ROC that determined the Russians as “the God-carrying people” (народ-богоносец), thereby staking out Russia’s “special” standing and — without stating it in so many words — its superiority over other countries and peoples. It should also be noted, that the ROC was always (and continues to be) pro-foundly anti-western and fearful of “western degrading influence”. This fear of “western contamination”, originally religious in character, gradually seeped into Russian society as a whole and led to, among other things, efforts to isolate Russians from visiting foreigners. The first and perhaps most strik-ing examples of this was the creation of the so-called “nemetskaya sloboda” (немецкая слобода) in Moscow during the reign of Ivan the Terrible. The word “sloboda” is easily translated into English as “settlement”. Getting to the bot-tom of the word “nemetskaya” is far more difficult, but it is worth the effort.

In modern-day Russian, the word “nemets” (немец) means “German”. How-ever, the root (“nem”) comes from the Russian word “nemoi” (немой) — which means “mute”. According to the most authoritative etymological dictionary of the Russian language, initially the word “nemets” meant “foreigner”. Thus, anyone who could not speak Russian was “mute”.

In my opinion, that equation: Does not speak Russian=Mute=Foreigner pro-vides one of the keys to understanding the Russian attitude toward foreign-ers.

But let’s get back to the sloboda. That was a designated part of town where all foreigners (nemtsi, in the plural) were required to live. It was not a question of choice on their part, it was the law. Not only were they forced to live in this special, fenced off and guarded area, but no Russians were allowed inside, unless they had a special pass. The idea was clear: keep “the mute” away from the “God-carrying people”, lest they be polluted, infected by some ter-rible western disease. Mind you, I am speaking of the 15th and 16th centuries, but those of us who remember Soviet times, will recall that all foreigners lived in special buildings, areas guarded by the police and carefully watched by the secret police, the K.G.B. (more on this later).

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From the outset the “nemetskaya sloboda” was a kind of ghetto, but – and this is important — a privileged one. The homes were more spacious, the buildings nicer, there were flower beds, rose gardens, taverns, where one could enjoy a good beer, a good pipe and good conver-sation, the “nemtsi” could enjoy the same lifestyle that they had at home, they could pray in their own church (more often than not, Protestant), and live by their own civil code as long as they stayed within the limits of the sloboda. And — just think of this, those who lived there were tax exempt — and that was just one of the many perks offered by the Russian rulers who, while despising and fearing the “nemtsi”, went out of their way to attract them, needing their know-how and contacts.

Question: How would you feel about people who are (a) inferior to you, (b) can’t even speak your language, but (c) enjoy great privileges (don’t pay taxes) and (d) have much nicer homes and a far higher standard of living than you do?

Envious? Angry? Puzzled? Exasperated?

The more one looks into this conundrum, the easier it becomes to understand what I call the Russian schizo-phrenia in relation to foreigners: they are inferior, but also superior, they are spiritually poor, but wealthy, they don’t envy us, but we envy them, etc., etc., etc.

There are countless examples of this, even among some of Russia’s greatest minds. For instance, when one of the characters in Alexander Griboyedov’s classic play (“Горе от ума”) refers to a “Frenchy from Bordeaux puffing up his chest (“французик из Бордо, надсаживая грудь”), or when Alexander Pushkin wrote “Ты помнишь ли, ах, Ваше благородье, Мусье француз, говённый капитан”, which I roughly translate as “Do you recall, oh your noble-ness, monsieur Frenchy, you shitty captain”, the anti-French/anti-foreigner motive is more than obvious, yet

The secret of politics? Make a good treaty with Russia.

Otto von Bismarck

BYTHE

WAY

The Rus-sian people get so insanely close to each other as friends. Their lives are inter-related so much on an everyday basis.

Mikhail Baryshnikov, Russian ballet

dancer

28

both Griboyedov and Pushkin were brought up in the French tradition, wrote and spoke perfect French.

In Soviet times, when people had to stand in line for hours literally for every-thing, suffice it for some minor nobody of a figure to appear and say “com-rades, let us through, these are foreigners”, and the queue, no matter how long and long-suffering, would part and let the foreigners through. This could simply not happen in any of the countries I know. I mean, imagine a line of people waiting to get into a New York or Paris restaurant and being told to “let the foreigners through” (!).

I remember standing in line at Sheremetyevo airport many years ago, wait-ing to proceed through customs. Suddenly a porter came pushing through. “These are foreigners!”, he loudly announced, as if that was sufficient reason for them to avoid queuing up like the rest of us poor slobs. And sure enough, fast on his heels came a group of five or six people who, by their expressions and body language, demonstrated supreme indifference to the fact that they were jumping the line. As the lead person was about to move past me, I stepped in front of him and said in Russian “Vstan’tye v ochered’” (“get in line”), to which he responded in perfect French “Je ne comprend pas le russe” (“I don’t understand Russian”). This was not his lucky day: I was born in France of a French mother, and French is my mother tongue. So I told him and all his buddies in pure Parisian to get the fuck in line, in response to which he started pushing me. I warned him that, should he push me again, “je vais vous casser la geulle”, I would literally “fracture his kisser”, at which point one of the group said “Laisse tomber, Jean” (loosely translated, “give it a rest, John”), and the French contingent proceeded to retreat like Napoleon from Moscow.

During this entire exchange the line had been silent: not a single person had supported me. But now people crowded around me, smiling, nodding their ap-proval, thanking me. I had rarely in my life been so angry and disgusted. “What’s the matter with you people?”, I yelled, “why didn’t you protest?”. I got no answer, just a kind of very uncomfortable silence, with people looking down at their shoes, avoiding my eyes. “If that’s the way it is, then it serves you right, stand in line like a herd of sheep and let every foreigner in town spit on you. That’s what you deserve!”, I yelled and, since my turn had come around, walked over to the customs official. He had witnessed the whole scene. He looked at me and said: “You know, it’s really not their fault”. “Really? Then who the hell’s fault is it?”. “Read up on Russian history”, he replied, “try Soloviev and Kluchevsky,

29

that should help”. I nodded and promptly forgot that advice. But I kept being a witness to what I had already experienced in the airport: time and time again I would see a line of people waiting for a table in a restaurant, and foreign-ers being waved through. Through personal experience I knew about the hard currency stores for foreigners only, the theater tickets reserved specifically for foreigners and, generally speaking, that in all cases foreigners were given pref-erential treatment. In that sense Russians were second-class citizens in their own country, something they seemed not only to accept, but not even resent.

Many years later I finally got around to reading the works of both Sergey So-lovyov and Vasili Klyuchevsky, something I highly recommend to anyone inter-ested in Russian history. One of the issues that Klyuchevsky brings up in great detail is that of the “Variaghi”, the Normans who, according to some, actually founded Rus, that is, brought together the different Slav tribes that lived in what is today Central Ukraine and Russia proper, and laid the foundations of what would many centuries later become the Russian state. I am not about to discuss the historians’ views on this subject, but it is worth keeping in mind that even to this day there is a great divide between those who contend that Russia was in fact the creation of non-Russians (Normans) and those who fu-riously deny any such thing and insist on the country’s “purely Slav” origins.

Perhaps it is in that ancient past that one should look for the roots of the split among Russia’s intellectual elite with “slavophiles” on one side and “wester-nites” on the other (while that terminology is no longer used today, the split is quite evident, with the former uniting under the umbrella of “patriotism” and the latter hoisting high the banner of “liberalism”). Perhaps, it is also into that past that one should look for the ROC’s characterization of Russia many centuries ago as the “Third Rome, never to be followed by a fourth”.

In short, the Russian attitude toward foreigners has ancient roots, and while it has been colored time and time again by political and ideological consider-ations, it has been a constant, part and parcel of what might be referred to as the “Russian mentality”.

***

Having lived in the USSR/Russia for the better part of fifty years, and being, in Russian eyes, a “westernite” (as well as a westerner – after all, I was born in France and spent my formative years in the United States), and having experi-

�0

enced the Russian attitude toward foreigners on a very personal level, I have, not surprisingly, given this question much thought which has led me to certain conclusions concerning what I would call the typically Russian view of foreign-ers. While I shall attempt to describe it, I must clearly and unequivocally state that this is neither more, nor less than a personal assessment, indeed, one with which a great many people will not agree and find fault with. Be that as it may, here goes.

For the typical Russian there are two kinds of foreigners: those they look down upon and those they look up to. The former are all “non-western”, a multitude of races and ethnicities that include the yellow and the black, Arabs, Latinos and the “small peoples” of the Far North. They are all considered inferior. They are not envied. In certain cases they may be seen as a threat (the Chinese). No matter how high their standard of living and/or economic successes (Ja-pan, South Korea), they don’t quite make the mark.

The latter are Europeans and Americans. As I noted, they are looked up to, but the more I think about it, the more I have to admit that the relationship is far more complicated. What Russians know — even if they will often not admit it — is that their American and European counterparts live better than they do. This relates not only to personal living standards, but to the quality of life: freedom, liberty, self-respect, independence, rule of law, etc. In that sense, Russians suffer from a strong inferiority complex that makes itself felt in many subtle and not-so-subtle ways. Let me give an example.

Should the Russian national football team lose a game to, say, the South (or North) Korean team, there will be a national sense of outrage because “we Russians are better than they are”, better not as football players, but better as a nation, we have no business losing to inferior people. One might ask: What about losing to Brazil (“Latinos”)? Ah, but that’s different, because Brazil is the best football nation in the world, it is better than France, or Italy, or Eng-land, it’s an exception to the rule, it changes nothing in our attitude towards Brazilians in general. Should the Russians lose to, say, Spain, it is seen as being disappointing, but not outrageous. But should Russia win, the reaction is one of euphoria, because the win is more than a victory, it is proof positive that we Russians are NOT inferior to westerners, in fact, we are SUPERIOR.

And this, once again, takes us back to the teachings of the Russian Ortho-dox Church as it victoriously emerged from two and a half centuries of the

�1

Tartar-Mongol yoke: Russians are the God-carrying people, a special nation, neither Eastern nor Western, a people with a special destiny unlike any oth-er. When that outlook is preached over centuries and becomes part of the national character, but then clashes with a reality that seems to contradict it (if we are unique and superior, why do other peoples live better than we do?), it cannot but lead to a kind of mentality that typically expresses itself in what I call an “all points defense” outlook. Speaking from a Russian view-point, one can say that we see that Russia lags behind Europe and America in just about every aspect of what is generally accepted as living standards. But we “know” that can’t be true, because we Russians are “better” than they are. So we have to find a way to counter that challenge. We must find an argument that supports our view and proves that we are right. One of the ways we do that is by using the “spirituality” card: while the Western world is “materialistic” and “money-grubbing”, while it is not “humane”, we are a “spiritual” people, a “caring” nation, for which material wealth never has been, nor is a priority.

I have had endless and, I guess, pointless, arguments concerning this sub-ject. When the “spiritual” spitball (excuse the baseball analogy) has been thrown at me, I have said: “Oh sure. In most American cities you will not find a corner curb that does not have an incline for baby carriages or wheel chairs, most buses are fitted out with a special automated platform that will lift wheel chairs or baby carriages on, nor will you find a public toilet without a special cubicle for the handicapped, or a parking lot without an area for physically challenged drivers. In Russia those things simply do not exist. We rarely, if ever, see people in wheelchairs on our streets — not because they are non-existent, but because they can’t get out of their homes: the elevators are too small and the steps are too narrow and too high. But we, of course, are terribly spiritual, as differing from those money-grubbing Americans.”

What I get in response is anything from a sheepish smile to a furious retort about being a “russophobe”.

When speaking English, never assume that you have been understood. Russian do not like losing face and admitting in front of colleagues that they have not understood English would risk that happening. They are likely to just sit there and say nothing!

�2

Then there’s the “we are more humane” argument.

In that case I like to tell the story of the Zeelow Hights.

In April of 1945 the Soviet Army was closing in on Ber-lin. Blocking its way were the Zeelow Hights, a series of hills turned into a fortress. The Soviet military command proposed to bypass that area left and right, take Berlin and after that, should it be necessary, return and wipe out “Fortress Zeelow”. That, of course, would mean tak-ing Berlin only toward the end of May. But the Supreme Commander-in-Chief, Joseph Stalin, said “Nyet!”. Berlin, he said, must be taken on May 1st, the International Day of Workers Solidarity, thereby confirming the infallible teachings of Marxism-Leninism. And so an all-out attack was launched on the Zeelow Hights, and they were taken — at the cost of �00,000 Soviet lives. Just think of that. Three hundred thousand lives – and probably well over a million widows, orphans, childless mothers and fathers. And this when the war was almost over, when countless lives could have been saved. Then compare this to how the Allied Armed Forces fought in Europe — razing enemy strongholds to the ground through artillery and air force bombardments and only after that sending in their infan-try, thereby saving as many lives as possible.

Which of those two approaches would you call more hu-mane?

I remember the reaction of many of my Russian friends to the movie “Saving Private Ryan”. The whole idea of sending a group of people to save the life of just one indi-vidual was something they could not really comprehend. In some it caused admiration (“Just imagine caring that much about one human life, how great!”), in others – dis-gust (“Just imagine risking the lives of a whole platoon to save one jerk!”), but the salient point is the common understanding that nothing of the sort could happen in Russia.

Russia needs a strong state power and must have it. But I am not calling for totali-tarianism.

Vladimir Putin

BYTHE

WAY

��

Perhaps the bottom line is that Russians believe themselves to be different from all other people. In some cases that is a source of pride, in others – a source of discomfort. But the belief is there.

One of Russia’s most intelligent film producers, Andron Konchalovsky, once said to me: “It’s too bad we’re not green or blue or purple, because if we were, the world would treat us differently”.

I asked him to explain.

“The West expects us to act like they act. They go after us all the time, they keep criticizing us — and you know why? It’s because we look like them. If we looked different, they would get off our backs. Take the Chinese. Does the West go after them for their not being democratic, for not living up to western standards? No. And why not? Because the Chinese look different. I tell you, our problem is that we look like westerners, but in fact we are not, we are dif-ferent”.

This is not an uncommon view.

I will leave it at that, but not without one concluding remark. While it is true that the average Russian’s attitude towards foreigners is complex and often negative, it is, in my opinion, no less true that westerners have a complex and mostly negative view of Russians. This, too, has historical roots. So we are dealing with two prejudices that play off each other, a fact that should not be forgotten.

3. Investing in Russiaby Alan Broach

The Dow Chemical Company in Russia

In Russia since 1974, with over 150 employees, Dow offers basic and performance plastic and chemical products to a wide range of industries. The company built a STYROFOAM™ extruded poly-styrene insulation boards production plant in Chekhov and formed the Russian joint venture Dow Izolan in the Polyurethane Systems business which is building a new state-of-the-art production plant in Vladimir. www.dow.com

Alan Broach is a partner in the tax and

legal department of Pricewaterhouse-

Coopers in Moscow.

Alan began his career in the Inland Rev-

enue department of the British Govern-

ment and then moved to the accountan-

cy profession. Alan first made partner at

a medium-sized firm in London in 1986.

From 1988 to 199� Alan worked as a tax

partner at Deloitte in London. In 199�

he took a break from the profession to

work in the music industry and children’s

television. Alan first came to Russia in

1997 to produce a large scale music

event in Red Square and moved there

full time at the beginning of 2005.

�7

This chapter was written before the global economic crisis and at the time of submission the full effect of this remains unclear for Russia.

If you are a foreign businessman reading this in a very expensive hotel bed-room in Moscow or St. Petersburg it probably means you have come to Rus-sia to work on your existing investment in the country or to look at new op-portunities to invest.

I have been living and working in Russia since 1997 and, in that time, have seen enormous changes in the country. Some good, some not so good, but on the good side is the opportunity to invest and the returns that can be made from that investment IF you get the investment right. Sadly, there are plenty of examples of companies who got it wrong here. Some of them are household names.

One important factor to bear in mind is that, from an investment perspective, everything here is relatively new. The current economic regime only began when Russia climbed out from the rubble of the economic crash of 1998 and the increase in oil prices that followed from 9/11. The Russian Tax Code only came into effect from the year 2000 and the whole Tax Code is contained in one volume (and it’s much smaller than most of the Harry Potter novels).

In one of its more inspired moves, Russia adopted a flat tax system (initiated by President Yeltsin though President Putin enacted the legislation after he took office) in the year 2000. The standard tax rates are low with personal income tax at 1�% and corporate profit tax at 24% (though the effective rate can be higher). The standard rate of VAT is 18% but there has been much discussion about lowering this, despite the inflationary pressure this may cause. The rates may be attractive but whether the flat tax system does boost economic performance while also providing improved tax revenues

�8

has never been satisfactorily proved in Russia due to the distorting effect of oil prices and the massive tax take from that sector.

Sadly, while the tax burden in Russia may be lower than elsewhere in terms of rates of tax, this is more than made up for in terms of burdensome admin-istration. The frequency and detail of filings, tax audits and the difficulty of claiming VAT repayments should not be under-estimated.

One final positive tax point is that Russia now has a fairly comprehensive tax treaty network and withholding taxes are low or none whatsoever in many cases. Basic international tax planning usually involves using Cypriot or Dutch holding companies. The decision as to where the holding company is situated is normally down to the investing company’s policy or where man-agement and control can be more effectively demonstrated. Going back to the crash of 1998; this wiped out the savings of a lot of what was then the emerging middle class, destroyed faith in the banking system and left Russians with a very short term view. Make the money, get it in cash and get it out of the country is still an attitude that one finds, even after al-most 10 years of relative stability. My wife, until very recently, drew out all her salary in cash the moment she got paid (and under Russian Labour Law salaries are paid twice a month) even though she banks with the local office of one of the major international banks.

In business one still finds that making a quick profit is often regarded as more important than building long term shareholder value. Even the Rus-sian banking system shows signs of this. A client (a long established Russian company) was recently looking to take on substantial debt for a major mod-ernisation program with a pay back period of 11 years. No Russian bank was willing to look at a loan over more than a �-year period.

So what is the current investment climate like in Russia? Even a brief perusal of economic and corporate metrics shows that Russia’s investment credentials are robust. It has the third-largest foreign exchange reserves in the world, bud-get and trade surpluses, a growing middle class and a government stabilization fund projected to hit $255 billion in 2009 and which is earmarked for infra-structure projects. If you have ever driven anywhere outside the main cities you will know how badly infrastructure needs to be improved. For example, it is still impossible to drive on paved roads all the way from Moscow to Vladivostok.

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Perhaps more importantly, the Russian Central Bank has sufficient funds to back the entire Russian banking system.

According to forecasts provided by Daniel Thorniley of The Economist Intel-ligence Unit, Russia can look forward to GDP growth of between 5% to 8% per annum until 2012, private consumption growing 10% per annum, a fairly sta-ble exchange rate, unemployment around 6% and a predicted to be declining inflation rate (though this still remains a primary concern in Russia). Add to this the relatively low levels of government and corporate debt (public debt to GDP is forecast to be 1% by the end of 2012 with foreign currency reserves at $550 billion) and profitable companies whose earnings were growing at around �0 percent a year (though that level of growth now looks unlikely to continue, at least in the short term), a financial sector that seems to have relatively little exposure to sub-prime lending and stock valuations that are among the cheapest in the emerging-markets universe, and the investment case for Russia would appear to be complete. Some might claim that, in in-vestment terms, “Russia is just an energy play, there’s nothing else”. This may have been true in the past but now there is evidence of strong growth in many areas. At the moment, to the fore are food and beverages, retail, consumer goods, banking, real estate, construction, mobile telephony, aero-space, mining, metallurgy, automotive, industrial products and IT (adapted from the Economist Intelligence Unit).

What is impossible to judge now is the effect of the liquidity crisis on the Rus-sian economy. A credit squeeze remains the biggest threat to the Russian economy.

But in Russia there is always a “but”. But it would be true to say that many major Russian corporations still struggle to provide the levels of transpar-ency and corporate governance that a western investor in a publicly quoted company might expect to see. A small personal story may serve to illustrate this. A good friend of mine is a translator who specialises in corporate re-ports. She was engaged by a major company to translate the corporate governance section of their annual report. This was a lengthy essay about how socially and environmentally responsible the company is, fulfilling all its obligations to the State and its citizens etc. When my friend asked to be paid she was made to wait for over three months and was then paid in cash, off the books, no records etc. The irony of this was evidently not apparent to the payer.

40

It would be impossible to write about investing in Russia without touching on the subject of corruption. In recent surveys Russian citizens have con-sistently rated corruption as one of the biggest problems affecting Russia today, ahead of poverty, crime and health issues. There is no arguing that the scope of the problem is massive. A survey in late 2007 found that two-thirds of Russians believe corruption cannot be rooted out of the system and 28 percent reported that they had personally been affected by some form of of-ficial corruption within the previous year. A 2007 study by the Russian NGO “Against Corruption” estimated that up to one-fourth of all the money Russia spends each year on state orders is stolen. Anyone who has driven in Russia and committed a real or imaginary traffic violation will have found a traffic cop willing to settle the matter unofficially.

Last year PwC published its 2007 Economic Crimes Survey, the fourth such undertaken by the firm. The survey found that across the globe 4�% of com-panies had been victims of economic crimes in the previous two years. In Russia that figure was 59%. Bad in itself, but also up 10% from the 2005 survey. The average direct cost of economic crime in Russia was $12.8 mil-lion (up from $�.1 million) and this is more than five times higher than the global average. The most widely reported crime was asset misappropriation but corruption and bribery were perceived to be the greatest threat by the 125 Russian companies surveyed (51% felt they had lost an opportunity be-cause of a bribe paid by a competitor). Maybe somewhat optimistically, only 15% of companies felt that they will be likely to be subject to corruption and bribery in the next few years

There are some positives from the above. The fact that companies are now willing to even report economic crime is a step forward (in the 200� survey not one company was willing to report an incidence of economic crime) and the reasons for this may include:

• A greater awareness of economic crime within organizations.• A growing desire for transparency (often inspired by a desire to access capi-

tal markets).

Get out of Moscow. The pace of life is very different and you will get a snap-shot of the ‘real’ Russia.

41

• A decrease in the stigma attached to reporting fraud, no longer perceived as a taboo subject.

• The introduction of more stringent controls and risk management systems, which enable companies to detect more cases of fraud.

The survey also pointed out that size of companies is a factor. In Russia com-panies tend to be much larger in terms of workforce. �1% of the Russian com-panies surveyed had more than 5,000 employees, compared to 9% globally.

The third bullet point above hints at a cultural difference when comparing Russia to other countries, in this case in terms of whistle blowing. This cul-tural difference also comes through in other ways. I remember attending a seminar a couple of years ago for chief accountants. In Russia these are nearly always middle aged women. A young auditor from one of the Big 4 was giving an example of a “fraud” that had been uncovered at a client. The fraud consisted of a supplier giving the accounts payable clerk some modest gift to move the supplier’s invoice to the top of the pending payments pile. The storm of derision that came from the assembled chief accountants when the auditor (a young and maybe rather naive American guy) stated that this was an example of blatant fraud will live long in the memory. The meeting broke up in some considerable disarray.

So corruption exists and it would be foolish to pretend that it does not. The question then becomes what can you do about it? Another way of putting it is can you run your business cleanly and, if so, what does that do to your business model? For SEC listed and other companies that have FCPA (for-eign corrupt practices act) type legislation this is a minefield. Many Russian businessmen will tell you bluntly that they cannot operate cleanly (e.g. im-port goods paying proper levels of customs duties) as this will make them uncompetitive. In my experience most businesses can run cleanly and can flourish, though there are exceptions. One client (a UK listed company) was looking to buy a company that operates throughout the CIS (Commonwealth of Independent States, what is left of the old Soviet Union) but one part of the business wholly relied on government procurement and it was felt that this part of the business could not be run in any way that was acceptable for a UK quoted company, so it was excluded from the deal.

Will it change? There is a Russian expression which translates roughly as “we hoped that things would be better but it turned out as always”. Russian

42

humour tends to be on the dour side. Well, the President has made tackling corruption a priority and has made many comments about this. On May 19th he declared that fighting corruption “calls for a comprehensive series of measures and not piecemeal solutions.” He laid out three broad components of what he described as his “national plan for fighting corruption,” including “inten-sive modernization of our laws,” making state contracts and tenders “transparent” while improving the business climate generally, and “introducing an anti-corruption code of behavior” that will improve “the atmosphere in society in general.”

“Corruption has become a systemic problem, and we therefore need a systemic response to deal with it,” Medvedev concluded. The following day, Medvedev an-nounced that he would begin his effort by trying to clean up the courts. Only time will tell how far this will go.

On an every day level I would say that bureaucracy is more of a problem than corruption but corruption does lead to some massive distortions. A European client was looking at investing into a clothing business. The Rus-sian company was building a new warehouse facility in the north of Moscow. My client asked to see the budget for the new warehouse. Everything looked normal apart from the budget for connecting the warehouse to mains services (gas, electricity, water, mains drainage) and to build a 40 meter access road. My client suggested that an extra 0 must have been added to these costs but the Russian company advised that these are the normal lev-el of “facility” fees that have to be paid.

From a corporate investment point of view Russia can be looked at as having two disparate sectors, those in which Multi National Corporations (“MNCs”) can fully participate and those in which they cannot (the recent-ly announced “strategic sectors”). In the first sector (where MNCs are free to invest) there is a huge amount

The way the business things work in Russia is you have to meet people, you have to go through a certain amount of etiquette and busi-ness things are done just simply by a shake of the hand and wheth-er they like you or not.

Marc Almond, British musician

BYTHE

WAY

4�

of activity in pretty much every sector (retail, property and manufacturing leading the way) and this activity is now being ramped up by the long awaited arrival of Private Equity funds. In truth, most of the big Private Equity players only have small outposts in Russia (if that) but this seems set to change. In some sectors, however, it now seems that there may be very few “quality” targets left to go for.

In the strategic sectors MNCs have to tread more warily as they are only al-lowed to own a part of the business and have to work in partnership with a Russian company.

When I talk to clients about their plans for Russia what we are normally talk-ing about is either investment in a start up (perhaps in conjunction with a local partner) or making an acquisition.

Let’s examine the start up option first. Many companies start off their busi-ness in Russia by setting up a non-commercial rep. office or a branch. These, typically, have a small number of staff, a general director (often, but not always, a Russian) and a chief accountant. The primary business activi-ties are to operate as a sales/marketing and customer support function. A non-commercial rep. office and a branch are often regarded as synonymous but are not, in fact, the same. The non-commercial rep. office cannot trade (make taxable profits) while a branch can (and is therefore liable to corpo-rate profits tax in Russia), but they both have to be registered with the tax authorities and file returns (of which more later). Just to add to the confu-sion, some rep. offices do trade and are regarded as “commercial rep of-fices”. Though, technically, no such thing exists under Russian law, the tax authorities may accept filings on this basis. A rep. office or a branch belongs to another legal entity and therefore this legal entity remains liable for the debts etc. of the rep. office/branch. If the legal entity is foreign this means that it will be liable in Russia for any misdeeds etc. of the local branch or rep. office.

When a company reaches a certain scale of operations (one client was run-ning a non-commercial rep. office with over 150 staff, which was seen as pushing the envelope somewhat) it usually decides to take the next step and form a corporation of some type. The reasons for this can be many. Limita-tion of liability, concerns about PE (permanent establishment) issues for the “parent” company, the need to register trademarks or obtain certain operat-

44

ing licences (including the right to import goods in own name) and the desire to start selling locally are among the usual reasons.

Russian corporate and business law is fairly similar to US and UK laws in many ways. In Russia there are presently � types of corporation that can be used. A Limited Liability Company, or an Open or Closed Joint Stock Com-pany. They are commonly referred to by their Russian acronyms. OOO is the acronym for a limited liability company (sometimes also called an “LLC”). A closed joint stock company is a “ZAO”; an open joint stock company is an “OAO”.

The OOO (LLC) is most commonly used when the Russian entity is 100% owned by another group company (though please note that a Russian com-pany cannot be a 100% subsidiary of another 100% subsidiary. The logic for this restriction is hard to fathom but the problem is easily avoided). This type of company has the least burdensome statutory obligations and is regarded as the most flexible. Technically the company does not have shares (and therefore falls outside Russian securities legislation) but has “units” which relate to the relative contributions of the “participants” who may not exceed 50 in total. The main reason that an OOO may be unsuitable for (say) a joint venture is that, at each year end, a participant has the right to leave the com-pany and receive fair value for the return of his/her participation by refer-ence to the financial statements. The minimum charter capital of an OOO is 10,000 rubles (approx. $425).

A closed joint stock company (ZAO) is very similar to a UK limited company and an open joint stock company (OAO) has similarities to a UK plc. The main differences between the ZAO and the OAO are that the ZAO cannot have more than 50 shareholders, shares in a ZAO cannot be publicly traded, exist-ing ZAO shareholders have pre-emption rights, there is no requirement for publicly filed accounts for a ZAO and the minimum charter capital for a ZAO is 10,000 rubles (the same as an OOO). It is therefore obvious that, if you are planning an IPO you have to be an OAO. The minimum charter capital for an OAO is 10 times larger than for a ZAO.

It seems likely that legislation will be introduced fairly soon which will abolish the ZAO company and all limited liability companies will take on the charac-teristics of an OAO. Investors would then be left with a choice of a limited liability company or a single form of joint stock company. One peculiarity

45

of Russian corporate law is that only one class of ordinary share can exist, though different classes of preference shares can be issued.

Assuming that you have now decided on what type of legal entity you want to use, who the shareholders will be etc. can you start your Russian activities? Not just yet. First you have to register and to start the registration process you need quite a few ducks lined up, including a local “authorised” person to do all this. Only when you have the ducks lined up can you start the process and from there it can take up to six weeks to achieve registration. Further, if you need a licence to undertake your business, this will add to the time. I normally advise clients to expect it to take at least � months for the registra-tion process, get bank accounts opened etc. Unlike in say the UK there is no separate registration process for tax and “companies house”. The moment of registration with the tax authorities is effectively the moment when the company becomes alive and can start to do things in its own name.

So now let us assume that you have got your Russian operation set up and registered, bank account open and a framed copy of your operating licence is on the wall next to your official photograph of the President. Now what? Well the next issues usually involve the bringing in of expatriate staff. These come in two forms, visa related and contract structure.

In October 2007 the Russian Government stiffened up the visa/work permit regulations considerably. Up to then the rules had been largely flouted and many people lived and worked full time in Russia without the appropriate visa and work permit. Under the new rules anyone who lives and works in Russia full time (there are different ways at looking at this, but any definition would include spending more than 90 days out of any 180 days in Russia) needs to have a work permit and work visa.

One of the documents you need to submit to obtain the work permit is an employment contract with a local Russian entity. Please note that Russia does not recognise the concept of “secondment”. If you work here “full time” you should be employed here full time. It gets better. Under your Russian employment contract you should be paid twice a month in rubles. It is not as bad as it sounds. Many banks offer a dual account facility. For example, when I get paid a certain percentage of my ruble salary is immediately converted into US $ and transferred to my US $ account. From there I can use internet banking to send $ to wherever I want. Mind you, internet banking is not free

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in Russia. Most banks charge a fee of 1% to 1.5% of the transaction value for bank transfers.

To those who complain about the new visa regulations I would simply point out that Russia is only copying what other countries do. Try being a Russian who wants to live and work in Italy and you will see what I mean.

Let’s turn to the other scenario, where you are looking to make an acquisi-tion in Russia. What are you likely to find? Well you are unlikely to find many “bargains”. Most of those were snapped up a long time ago and the credit crunch has not really shown any signs of having any significant impact in Russia (yet).

As mentioned above, the market for acquisitions really divides into two parts, those companies whose activities fall within the strategic sectors and those which do not. So what are the strategic sectors and what are the restrictions? The law putting all this into effect was signed by then President Vladimir Pu-tin on the 5th May 2008. There are “42 sectors where foreign investment will be restricted, such as nuclear energy, natural monopolies, exploration of strategic mineral deposits, aviation, space and other defense-sensitive in-dustries” (The Moscow Times, 6th May 2008). The law mandates that private foreign companies will need authorization to purchase more than 50% of a Russian company in one of these “strategic” areas. The legislation further requires that foreign state-controlled companies obtain permission from the commission of Russian economic and security officials in order to buy more than 25% of a Russian company in an industrial area either controlled by the Russian state or tied to state interests.

Some believe that this cuts off more than 50% of the Russian market to out-side investors but there are still plenty of opportunities and many interna-tional players are in these sectors. Again, Russians believe that they are only doing what other countries do (e.g. the USA) protecting what they consider to be important industrial sectors.

Outside the strategic industries it is more like the wild west. Sometimes it seems almost everything is up for grabs such is the “desperation” of foreign companies to get into the market. Those that are coming in now are often finding they may have to pay a premium. One recent acquisition was made by Barclays of a Russian bank called Expobank. According to some analysts

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Barclays appeared to be paying over the odds. One com-mented “it looks like they are paying a big number, but you have to keep it in perspective of the size of the group. It has strategic rationale and shows the direction they are going,” Frits Seegers, head of consumer lending at Barclays said that Barclays seeks to be become “one of the leading retail and commercial banks in Russia.”

The Barclays/Expobank story neatly sums up the puzzle that exists in Russia today. Many MNCs feel that they have to be in the Russian market. To get into the market MNCs would seem, from some viewpoints, to be paying over the odds.

In discussions with a European manufacturing client looking at acquiring in Russia, I commented that there did not seem to be many other obvious buyers for the tar-get, and the target has fairly substantial indebtedness, so why not wait a while and watch what happens? The price may fall? This idea was immediately rejected by the client who stressed that the number of suitable targets in Russia is very limited, they are concerned that a Rus-sian buyer or PE firm may step in, the Russian acquisi-tion is just a stepping stone to a plan to build much larger production facilities, so they need to buy now and pay market price now. The possibility of a future reduction in valuation was not a significant enough factor to justify the risks in delaying.

Assuming that you have found something/someone you want to buy, the usual process here is to move to a let-ter of intent (this can come under many names but they usually add up to the same thing). These can be binding (though be careful of “bidding” high and trying to nego-tiate down, not a good tactic here) but subject to legal, financial and sometimes operational due diligence, or non-binding where the price may be more relatively ac-cepted as indicative. Exclusivity periods can be negotiat-ed but they are often quite short (though often extended

Nothing is impossible in Russia but reform.

Oscar Wilde

BYTHE

WAY

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if due diligence is delayed because of problems with ob-taining information from the target).

Having agreed on a Letter of Intent, the next step is usu-ally to instruct law and accountancy firms to conduct due diligence. Without wishing to sound overly dramatic, the findings derived from this work can be very alarming for buyers who are not familiar with the Russian market and the way business works here. Perhaps the best place to start in trying to explain this is by reference to some re-cent remarks by President Medvedev in which he said that “Russia is a country where people don’t like to ob-serve the law. It is, as they say, a country of legal nihil-ism”. If you have observed Russian driving standards you will already know how true this is. Some people believe that this attitude emanates from the Soviet era when the only way of getting something “extra” was to buck the system.

Whatever the origin of this attitude, the manifestation of it is very plain to see when undertaking due diligence work. In the legal field it is not uncommon to find com-plex corporate structures with any number of offshore entities, strange SPVs (special purpose vehicles) whose ownership and purpose are very opaque, property titles not properly acquired/registered, leases not with the right parties, trademarks not properly registered, con-tracts not signed etc.

Most of these problems can be resolved given time and effort on the part of the vendor but, if property was im-properly acquired at first instance this is a tricky one. Under Russian laws that have been in existence since the early 1990s, privatised land should have been made available through an auction process. However, in very many cases, there is no evidence of any such auction process having taken place. Often it seems that the land was simply assigned to a well connected politician or businessman. The problem then is what to do about this?

The Dostoevsky in Russia is very alive.

Ben Kingsley, British actor

with a Russian mother

BYTHE

WAY

A single death is a tragedy, a million deaths is a statistic.

Joseph Stalin

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Sadly there seems to be no way of retroactively correcting this defect and, usually, buyers have to take on this risk if they want to acquire the business.

In other countries you might take the view that, as a buyer, you would be protected by indemnities and warranties in the purchase agreement. In Rus-sia I would “hesitate for an eternity” before suggesting that this would be a good idea. One area in which Russia needs to improve considerably if it is to continue to attract the levels of inward investment that it has seen in the past few years, is the legal system. This subject has been a focus of President Medvedev’s comments since his inauguration. For example he said “Private property is a vital structure. It forms part of a fundamental set of human rights. If we don’t learn to respect and protect it the way it is done in the whole world, we will continue living in backwardness and desolation” and “One of the key elements of our work in the next four years will be ensur-ing the independence of our legal system from the executive and legislative branches of power”. In the meantime just about the only meaningful protec-tion for a buyer is a holdback of part of the purchase price, which is hardly an ideal situation for vendors or purchasers.

Looking at financial due diligence the situation may seem just as worrying. Quite often Russian companies run two sets of books, usually referred to as “Statutory” and “Management” accounts. This system, which thankfully is becoming somewhat less common, exists to minimise tax liabilities through what are euphemistically called “tax optimisation” schemes. Compared to other matters that commonly come up in due diligence (like black cash sala-ries, unofficial “dividends” and unrecorded sales) this is normally the big-gest problem investors have to deal with. One of the problems that Russian companies have with this is that, because of the above structure, the statu-tory accounts do not provide information they can use to actually manage the business. Hence they also need “management accounts”. The statutory accounts are kept in RAS (Russian accounting standards) because the tax authorities require this. The management accounts are often kept in excel spreadsheets, on a cash basis (so figures include VAT) and take no regard of legal entity. In other words they show the trading position of the whole busi-ness on a cash basis regardless of which companies are making sales and incurring costs.

So how do investors cope with this? Perhaps the first thing is to get over the cultural shock. One of the lessons I have had to learn is not to be blasé

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about this and remind myself that just because I have seen this many times, you may not have. The approach that is normally taken is to try to understand the busi-ness in two ways. Firstly the legal structure and secondly the way the business actually operates (including flow of cash and goods). If you can reconcile these then the next step is to see if you can reconcile profit as reported in the statutory accounts to management accounts. If you can do that (assuming that there is some confidence that sales have been properly recorded) you can normally ar-rive at an adjusted EBITDA (earnings before interest, tax, depreciation and amortisation). From there, with some adjustments for debt and working capital, you can get to a valuation (see below) and negotiate a price.

Having done all of the above the next step may be to work out what it is you are actually proposing to buy. Like most countries the choice breaks down between a share purchase as opposed to an asset deal, or a combination of the two. Again, as in most countries, the vendor usu-ally wants to sell shares (often the holding company is in an offshore jurisdiction with Cyprus being the “tradi-tional” location for Russians) and the buyer may prefer to buy assets. If the target is too “dirty” for a buyer to contemplate buying as is, it is possible to negotiate that the target transfers the business (or the bits you want to buy) into a clean new company. This is generally effective but adds time, as it will take the vendor some months to transfer assets, contracts, licences etc into the new company. However, as Russia has relatively unsophisti-cated laws governing what is called “transfer of enter-prise” this can be an effective method for isolating the buyer from historical tax and other liabilities.

So what are the current metrics used for valuations? Most deals are based on multiples of EBITDA and/or rev-enues. Adjustments may be made for levels of indebted-ness and working capital but the starting point is usually a multiple of EBITDA or revenue. For some time the trend

My dream come true. I heard many stories of Russia and imagined Russian people be-ing myste-rious and cold, but now I know more.

Paul McCartney

BYTHE

WAY

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in EBITDA multiples was upwards. Before the credit crunch hit the average multiple was around 9.5 times EBITDA. Multiples of revenue were also above the “traditional” level of 1. Following the credit crunch levels of M&A activity have dropped and “normal valuation” methods may no longer apply (espe-cially in fire sales). It remains to be seen what multiples etc will be when the market returns to “normal.”

So what does the future hold? Opinions vary but it would seem that valua-tions are being squeezed for those companies operating in sectors where liquidity is difficult to obtain or MNCs and private equity cannot fully partici-pate. To combat this problem some Russian companies were arranging re-verse takeovers into offshore listed entities, giving them additional access to capital and allowing the foreign company access to the Russian market. This, however, may no longer be a viable option.

A leading UK company last year asked me the question “Should we be in the Russian market?” The answer was “No, you should have been in the Russian market for years by now”. To get in now they may well have to pay a high price but, given the positive economic forecasts referred to at the beginning of this chapter, it would seem a price that is still worth paying.

4. Managing Russian Teamsby Brook Horowitz

JTI, a subsidiary of Japan Tobacco Group, is the largest tobacco manufacturer in Russia with a portfolio of more than 30 brand names and 36% market share. The total investment of JTI in the economy of Russia is in excess of more than $1 billion since 1992. www.jti.com

4. Managing Russian Teamsby Brook Horowitz

JTI, a subsidiary of Japan Tobacco Group, is the largest tobacco manufacturer in Russia with a portfolio of more than 30 brand names and 36% market share. The total investment of JTI in the economy of Russia is in excess of more than $1 billion since 1992. www.jti.com

Brook Horowitz is executive director of the International Business Leaders Forum (IBLF) in Russia. IBLF is an indepen-dent not-for-profit business association promoting responsible business practices worldwide. A graduate of Cambridge and Harvard Universities, Brook has had over 20 years’ experience working in Russia.

Brook regularly appears at international conferences and is a regular contribu-tor to International Herald Tribune, The Moscow Times, Vedomosti amongst oth-ers. He is a Trustee of Pushkin House, a Russian cultural association in London.

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A flash of red, a spray of ice, a zigzag of perfect passes, the puck plunges into the back of the CSKA net at the Luzhniki ice-hockey stadium. Meanwhile, at the Bolshoi, the corps de ballet executes a graceful series of pirouettes across the stage in perfect unison. Several time zones to the East, in a cloud of flame and smoke, another Russian-made rocket streams away from the Baikonur launch-pad laden with satellite technologies and the latest space tourist.

Judging by their competitiveness in the arts, sports and sciences, with their military discipline, asceticism and dedication to years of training, Russians’ team-work would seem to be a model to be emulated. But the qualities that underlie some of Russia’s greatest achievements have escaped business management. Here, the fundamental features that would normally be associ-ated with a successful team – good communications, trust, collective respon-sibility, leadership, and a conviction that a team is greater than the sum of its parts and that more can be achieved by working together than by not doing so — is lacking in Russian business culture.

You can see it everywhere: appointments missed, chaotic planning, mistakes, misjudgements, misunderstandings, rows, tantrums, sulking, finger-pointing, blaming others and above all top-down, short-term, decision-making which leaves companies exposed to the vagaries of the market. At the same time, there is a positive side of this spontaneous and often intuitive approach: prag-matic and creative solutions and rapid results (even if not those desired). Yes, things do somehow often come right in the end, but it’s usually by accident, luck or fate, and you certainly can’t plan it, or predict the outcome. Such is the contained anarchy lurking below the surface of many business operations in Russia that it would be fair to ask: “Can teams really exist in Russia?”

The answer is of course yes, but team dynamics are quite different from those in developed market cultures, and in particular the Anglo-American tradition. If in multinational corporations, team skills are highly valued and the subject

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of years of continual training, in Russian companies they need to be created from scratch and are not widely considered part of the array of management processes leading to a more effective organisation. If in US corporations, modern management structures have created sets of checks and balances which encourage an open exchange of ideas, promote lateral communica-tions and push decision-making down, in Russian companies, communica-tion is largely vertical, with decision-making towards the top of the pyramid. If the ultimate goal of a business unit in a Western company is to balance the needs of the customer with the expectations of the shareholder, in a Russian company, teams exist to implement the will of the General Director, who in turn, is in place to fulfil every whim and fancy of the “Oligarch” — one of the handful of tycoons in whose hands have been bestowed by a former “Tsar” billions of dollars of national assets.

As elsewhere, business culture reflects political culture, and it is not sur-prising that the distinctive features of Russia history are writ loud and clear on today’s management practices. Centuries of top down, autocratic power structure, lack of democratic institutions, and a highly bureaucratised and regulated society have taken their toll on the willingness and ability of the individual to take responsibility, and have replaced this with the art of syco-phancy and pokazukha, doing things for show. Eighty years of Soviet power, exercised by a ruthless secret police, have discouraged open speech and debate, and destroyed individuals’ trust in public institutions and, outside the immediate close circle of friends and family, in each other. Decades of forced collectivisation have put paid to any true belief in the value of teams. In the thirties for example, the Stakhanov brigades — “teams” in the mines which encapsulated the aim of the Party to overfulfill the Five Year Plan - were believed in by the people until they were proven to be a lie; and in the seventies and eighties, team spirit was finally eradicated when students were bussed to the countryside na kartoshku to gather potatoes or forced to participate in the subbotnik, the annual neighbourhood clean-up on Lenin’s birthday.

Russians are people-people and if you are to build your team you must take time to create relationships with your colleagues. It may seem a slow process but it will produce real long term benefits.

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The subservience of the needs of the individual to the needs of society have created a culture whereby collective structures — government, companies, groups, teams - are perceived to be at odds with the interest of the individual — so the individual is honour-bound to find every opportunity of gaining per-sonal advantage over the system. Russian literature is full of romanticised examples of the fast-thinking crook, such as Gogol’s Government Inspec-tor Khlestakov, or Ilf & Petrov’s Ostap Bender, who, with charm and humour, fleece all around them and show social institutions up for what they are — a lie. Pragmatism, gaining short-term advantage (if possible personal), playing the game while at the same time undermining it, a preference for form over substance, and a disregard for rational thought, planning, process, collabora-tion, are the characteristics of Russian management. Trust and confidence are in short-supply — towards the leaders, towards employees and above all towards oneself. With over-dominant leaders and weak subordinates, Russian hierarchies comprise both Master puppeteers and their puppets. To make matters even more complex, each individual, at whatever level of the organisation, possesses a healthy mix of both traits which are applied at will depending on circumstances and whom the person is addressing.

Furthermore, there is the simple economic reality of the labour market in Rus-sia which affects the ability to create and cultivate sustainable teams: in the current climate of rising inflation, shortage of qualified managers and a swiftly moving labour market, there is little loyalty to employers: with a high turn-over of staff, teams often do not exist long enough to be able to be formed. And as the economy and companies grow, so do teams within them — there is constant pressure on teams from the constant influx of new employees and organisational restructuring.

It is hardly surprising that in this environment, building teams is a challenge. As a team leader, you may assume that your instructions are understood and will be interpreted and implemented in the spirit in which they were agreed with the team, but unless you take the trouble to check at regular intervals, your project may go in completely unexpected directions. As things go progres-sively off-track, you get pulled into micro-management — every single detail has to be checked and double-checked. Is each team member consulting with the others? Are they working together to find solutions? Do they have a com-mon understanding of the purpose and goal of a particular activity, or is each person just concerned with their own piece of the puzzle? And at what point can you, the leader, withdraw from giving instructions and pull out from the

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daily “knocking of heads together”, allowing people to take the initiative and move forward together under their own momentum? Can you stop “fire-fight-ing” and get on with defining broader strategy and longer-term goals? How can you create a self-motivated team which can implement the strategy with preci-sion and confidence, and without constant supervision? Where do you start in trying to overcome this bewildering array of behavioural peculiarities?

If you’re in charge of a team in a Russian company, you will need to hone your management skills — but as we shall show at the end of this chapter, these skills are transferrable — they will stand you in good stead for any leadership role you undertake in the future. And you will find these tips useful not just in Russian companies. Although employees within a multinational corporation will be more culturally attuned to international management practice and will have had experience and training in team work, the challenges are similar, if not as pronounced. Finally, if you are a member of a team and your boss is Russian, the advice that follows may be of some use, but frankly you might want to reconsider your position… By the way there are some exceptions to this: there are of course Russian managers out there with considerable tal-ent, experience and skill, but unfortunately for you, at least four of them al-ready work in my team.

The first priority in creating a team is to open the channels of communication between you, the team leader, and your team members. Two Russian jokes (kindly provided by two senior executives I was interviewing recently – inci-dentally I offered them both jobs which I hope they accept before they read this article) encapsulate the inherently conflictual relationship between boss and subordinate in the Russian corporate environment:

From Office Regulations, clauses 1 and 2:1) The boss is always right2) When the boss is wrong, see clause 1 above

Boss to employee: Boris, yet again you haven’t completed that task on time!Employee to boss: Now which task was that? The one which you forgot to set for me? The one which is impossible to implement? Or the one that you didn’t give me a budget for?

The two jokes hint at a number of implied prejudices which reveals a charac-teristic model of manager-employee relations in Russia: the employee is the

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victim, can never win an argument, and the boss, for all his or her power and position, lacks judgement and fairness, and is, quite frankly, an idiot.

To overcome these attitudes, you will need to create a relationship of mutual respect and breakdown the traditional hierarchical relationships. You can start by addressing people properly. In Russian companies, the hierarchy is embodied in the use of the word “ты” (the informal you, or “tu” in French) and “Вы” (the formal “vous”). Russian bosses invariably call their employees “ты” and by their first name. This is not reciprocated: to the employee, the boss is “Вы” and is addressed by the more formal name and patronymic (for example Alexander Petrovich). By using “Вы” and first names in both directions, you can create a more egalitarian relationship while at the same time preserving a certain professional distance.

Of course, if you don’t speak Russian (time to reconsider your position again?), then “you” will do. But formality and informality can be expressed in English by tone of voice and phraseology (“would you please do it?” versus “do it!”). The softness of the order as a request at least suggests a different kind of hierarchical relationship based on self-motivation and willingness rather than compulsion.

Another basis for mutual respect is to show some kind of empathy with peo-ples’ daily lives and concerns. While many Russian employees dislike mixing the private and the public facets of their lives, it is still possible for you to get to know your staff more intimately than you might do in a corporate environ-ment elsewhere. Your employees may not be earning as much as you, may have a long commute on the crowded metro, and will invariably have family problems which will sometimes get in the way of work. If you can create an atmosphere of understanding about these personal dilemmas, encourage people to talk to you openly about them, even use you as a confidant, you can break through these hierarchical prejudices. Preserving some of the local traditions, such as celebrating or at least congratulating people on their birth-days, and giving flowers to your female staff on International Woman’s Day show a respect and attention for the individuals and the social environment in which you and they live.

Counteracting the idea that the boss lacks judgement is a challenge (espe-cially if it’s true). The average Russian employee will be used to a boss who makes rapid judgements without consultation and without detailed knowl-

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edge of the situation, does not bother to explain his rationale and when things go wrong at the end, it’s all the employee’s fault anyway. Since this subjective approach to decision-making is also present in the team member, it is critical to work and explain not only how you have reached a decision, but the whole concept of process management, and to help each individual to find a meth-od of work which helps them meet their targets and the broader goals of the organisation. If you just throw tasks onto employees without doing this, they are completely lost. Most employees have had little training or experience in the formal aspects of management and they do not have paradigms of how to deliver results. So clarity and transparency are critical: how you reached the decision, and what the role of each member of the team is. You have to set the example you want your team to emulate.

For example, one member of my team could not cope with his workload. We finally listed all his projects, how much time and money each would involve, the benefits to the organisation and the risks. This cost-benefit analysis not only helped us to establish that he’d taken on far too much work, but also that much of it was of low impact for the organisation. Above all the exchange between us gave him a methodology for organising his own work, under-standing the process, and created a common language with which we could communicate with each other. Inputs and outputs, scorecards, dashboards, KPIs are useful tools to create clarity of intention of the leader and a sense of responsibility and ownership of the employee. Ultimately they help to raise the confidence of the team member that he or she is doing the right thing, provide an objective measure of performance, and remind both boss and em-ployee of the mutual obligations they have taken towards each other. Above all, in the process of introducing these management tools, the team leader takes on a completely unusual role in the Russian environment: that of coach or teacher.

How can you avoid the prejudice that the leader is unjust or unfair? Listen carefully, consult with the team, and do not jump to conclusions — that’s a good start. But what is your reaction when things go wrong? The Russian model is to shout, reprimand or intimidate: a number of top leaders have cul-tivated a nice line in the silent “put-down”: the cold withering stare and the threatening, whispered reproach. But what is the alternative? Somewhere in Russian management culture, there is a view that a too humanitarian, toler-ant reaction from the boss is a sign of weakness, or that the boss does not view the employee’s mistake as very serious.

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I am not sure that there is a single right solution — you probably need a range of responses appropriate for each situation, and experiment with what works. Losing your temper in an uncontrolled way rarely works, but a note of impa-tience or a sharp retort, when used consciously can bring your message home. Apologising for making a mistake can be another excellent way of breaking down the employees’ prejudices about their managers — and showing that we are all fallible, and all learning from each other. But above all, it is impor-tant to mean what you say: for example, if you threaten sanctions, then carry them out. By the same token, reward good performance with small tokens of appreciation: awards, bonuses, training (preferably abroad), and the very effective (and inexpensive) technique of celebrating an individual’s achieve-ment with the rest of the team. It is critical that this appreciation should be sincere, not manipulative. Incidentally, you will notice that people do not know how to take praise. Whether it is because employees are not used to it or because it’s also considered inappropriate to be immodest, they look em-barrassed, squirm around, and never consider to actually acknowledge the praise: the “it’s my job” attitude prevails, rather than “it was a team effort” which would be the more typical answer in a Western corporation. That again demonstrates certain truths about Russian attitudes towards their work and their colleagues. In any case, give praise where it’s due.

The other part of creating a team concerns establishing strong working re-lationships between the members of the team. As I pointed out earlier, hori-zontal relationships do not come easily. Each employee is trying to get above the other, when things go wrong there is no hesitancy to point the finger at a colleague. There is little sense of personal responsibility, delegation, no sharing of information or ideas, and a marked preference for upward and downward communication via the team leader, rather than with each other. Especially in a fast-moving small office, with high stress and an entrepre-neurial spirit, relationships can become frazzled. Colleagues are unwilling to compromise, and have little experience of polite debate. Agreeing to dis-agree is not a typical outcome. It is here that the spectre of the Master Pup-peteer fully reveals itself in each employee.

How can you encourage dialogue between these closet prima donnas? First of all it is essential to explain, repeatedly, why such a team approach is impor-tant — to make faster decisions based on more accurate information about the market. Part of the challenge is to instil a sense of values within the group: more can be achieved by working together; support your colleagues and they

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will support you; explain concepts of integrity, responsibility and loyalty. That can be done through explanation, but also by facilitating a discussion amongst team members by not immediately intervening in an issue, even when asked. Advise them, guide them, but hide your view until your team has reached con-sensus of its own accord.

How you set up the physical office will do a lot to show your commitment to horizontal communications. In designing your office, you will come under un-told pressure to give each member of staff an individual office. Resist it! Take the open plan model, and stick to it. It may be counter-cultural and counter-intuitive for your colleagues, but it’s the only way to break through the prefer-ence for vertical relations. If you need to preserve some sense of hierarchy, or if you feel that some distance is required, precisely to encourage your team to find solutions together, put yourself in a “fish-bowl”. But frankly, if you want to breakdown the barriers, it’s best to be in a single office all together.

It’s also critical to introduce new team members properly — in the extremely fast-moving business environment, it is easy to ignore the induction process. Investing some time in a group introduction to the new colleague, nominating someone to look after them, encouraging individual meetings between the new and existing team members, and communicating a clear understanding of the functions of each person, including the new hire, will help to avoid a lot of tension later on. Indeed this is a good example of where the team leader should micromanage.

Weekly team meetings are a common practice in companies, and are often used as a method of reporting on results. Consider using the team meet-ing as a means for exchanging creative ideas, and making sure that team members really are talking to each other…and listening. The hard thing about team meetings is that all those underlying tensions come to the surface, and each person tends to show up the poor performance of the others. Setting a clear agenda, involvement of each member of the team and good facilita-tion are critical. The somewhat destructive, introverted, energy needs to be focused outwards on future challenges and goals rather than dwelling too long on past mishaps. And the biggest challenge about the Monday morn-ing team meeting? You’ve guessed it — getting the team members there on time. Lateness is endemic in Russian society — and here you are faced with the biggest challenge of all: how to create a team when most of the team are absent for your weekly team meeting. The excuses are legendary: “delayed at

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the dacha”, “traffic”, “recovering from the party on Saturday (!) night”, “have to go to the bank”, “I worked so late last night” — such imagination, such creativity! Would that it were channelled into getting to work on time! Short of firing someone (have you lined up the replacement?), I have never found a way of dealing with lateness in Russia. Appealing to individual responsibility towards others, emphasising the selfishness of such behaviour, even punish-ment through written warnings — none of this works because being on time is a concept deeply embedded in a fundamental respect towards social con-ventions, one’s colleagues and oneself — all of which are markedly absent in Russian society. And the solution to poor attendance at the Monday morning team meeting? Move it to Tuesday afternoon!

Multinationals all over the world spend a lot of time and money on creating a corporate culture, many use the same techniques that they use in their home country. I am not convinced that the standard solutions work in Russia (actu-ally I am not sure they work anywhere outside of headquarter operations!). The self-congratulatory declarations (“you were hired because you are the best”, “we’re the tops”, “we make life better”) will not hold much attraction for individuals that are the products of a society that has just emerged from decades of Soviet propaganda, and are more likely to be taken as self-par-ody than a genuine attempt to create a feeling of belonging. I would per-sonally urge restraint on this kind of over-the-top macho jollity. A lower-key approach, focusing on individuals, values, process and results is likely to be more effective than the messianism of some multinational corporations. Just get the team together over dinner, or take them on an outing to a theatre or concert — these are as good a way as any of creating a team. People need to get to know each other as people, not as functionaries of the global corpo-ration — that is ultimately what will create a successful enterprise.

I would put the emphasis on training — there are a number of external team-building consultants around — mostly people with psychological training — and these events take place outside the office, perhaps in one of the pensionats in the beautiful countryside surrounding Moscow. They all provide more or less the same kind of product: a generalised analysis of the “types” in the team based on a survey. It may be a bit simplistic, but the important thing is the message it delivers to the members of the team — that we are different and that we have to recognise these differences and modify our own behaviour in order to work successfully together. So the team training can help to build lateral relations, improve communication and help develop tolerance and the art of negotiation.

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The exercise shows the concept of process management in action, it is usually quite fun, and it helps to build relationships, or at least to overcome some of the tensions that come up in a pressurised working environment.

What is less fun for your employees, and certainly would not contribute to building a team spirit, is if you organise it over a weekend or other holiday. That kind of sacrifice may be alright once a year, but not too regularly. The sanctity of the dacha and the family really cannot be overestimated. I once resolved this issue by inviting the spouses and children of the team to join the team training. We did one and half days of team-building with just the team, then the families joined us for day two. At first it was difficult — nobody was used to the situation, but the children made friends immediately, and that eventually brought the team together.

Companies all over the world are increasingly inclined towards “active” team-building, especially for senior management: the CEO of Nestle in Russia re-cently took his top management team on a successful climb of Mount Ararat in Armenia. Russian companies go even further and have developed some en-thusiasm for “extreme” team-building — anything from sending the team to the jungle in North Korea and making them find their own way back to Moscow on a shoe-string budget, to fighter jet flying. Such “games” all need to be profession-ally designed for the specific team (and presuppose a certain level of physical fitness of team members — remember that the average life expectancy of Rus-sian men is 57 and heart attacks are the number one killer). However, some of these exercises — the completely ridiculous paintball is a good example — are used as a military metaphor for team building and leadership. I fundamentally disagree that war is an analogy for competition and that there are qualities that one gains from extreme battle zones that are applicable in business. Even if there are, I do not believe that these are the qualities that enlightened business leaders should be emphasising in a society which needs to shed its militaristic past. That is simply delivering all the wrong messages.

If you want to emphasise the qualities of leadership, team-work and com-munication, another approach is to focus the team on “out-of-the-box” social projects. My own experience of this came when I was working with GE several years ago. Every biannual meeting of the 250-strong sales and marketing team would involve repainting a school or refurbishing an old peoples’ home or some such project. To get people to work on a project for which no one has had any training, in quite unfamiliar circumstances, and often in a foreign

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country, required people to quickly learn new skills and to break down com-pletely the usual communication barriers. Apart from giving the employees a new experience of working in teams, there were the other advantages — for the project beneficiary, a transformation of facilities that could only be dreamt of; for the employees, a feeling of doing something useful for less privileged people; for the company, enhanced relationships with local authorities and communities, and some positive headlines in the press; and, above all, a more motivated and friendly team at the end of the day.

It is true that employee engagement projects or team volunteering are al-most unheard of in Russian business (the resistance stems no doubt from the collective memory of the enforced subbotnik), but there are some good examples, mostly from multinational corporations. One of my favourite ex-amples is the experience of Johnson & Johnson Medical, which used its top-management training session to reformulate its policy towards employment of disabled people. The team spent a day analysing the challenges — mostly overt and covert discrimination and poor physical access. Over the course of a week, they consulted with a number of experts and disabled people, and created their pro-disabled policy which is now being implemented. Not only did Johnson & Johnson manage to overcome the usual obstacles to hir-ing disabled people within their own company, they set an example which is now being followed by many other companies. I would submit that painting a school has far more practical benefit than paintball — in terms of use of resources, social benefit, and team-building.

One more opportunity to enhance the team is to provide advanced training in Microsoft Office applications. Most people in international companies pick up the techniques on the job, but in Russia, the overall capabilities of staff in us-ing the software are quite poor. Ultimately the appropriate use of the informa-tion technologies is yet another tool to enhance the clarity and speed of com-munications between team members. Whether it is training in how to produce PowerPoint presentations, or manage excel spreadsheets and databases, or write clear emails — all these skills will enhance communications internally and will have a huge benefit for the quality of business operations generally.

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As we come to the end of this overview of managing Russian teams, you may well be justified in asking — is all this effort worth investing in? After all, with

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the quick turn-over of staff in companies, the risk is always that the moment you finally succeed in creating your Dream Team, it will be decimated by your top communicator being poached by the competition. And why not just resort to the fiat and diktat management techniques practised by Russian manag-ers, or the iron-fisted discipline that achieves the spectacular results in the arts, sport and sciences and that seems to be so predominant in Russian management culture? After all, those companies seem to be thriving without these new-fangled management techniques from abroad.

The answer to that question depends fundamentally on where you — as a team leader — stand with regard to your company’s and your personal mis-sion in Russia. If you’re in it for the short-term — you were posted to Moscow but you’re looking forward to your next assignment in two years to Rio de Ja-neiro — you are unlikely to understand why you should take the trouble to invest in teams in a cultural and economic environment that is fundamentally hostile to them. Anyway, it’s not your job to change the business culture of an entire society — it can’t be done quickly and it won’t help your quarterly figures. If that’s your view, then by all means adopt local practices: you might get some results (you might not) and the quicker you succeed (or do not suc-ceed), the quicker you will get moved out. Oh, and don’t worry too much about the mess you leave — your successor will deal with that.

However, if you understand your and your company’s role to create a longer-term, sustainable business in Russia, and to make some kind of contribution to the social and economic development of the society in which your company is making a substantial investment and profits, you will take a different atti-tude. You will find that well-functioning teams breed loyalty, and people will be willing to stay to be part of them, even if there are potentially more attractive offers elsewhere. And even if the best people leave, they will have learnt from you and the successful team you created management skills which will raise the overall business standards in Russia. From their experience of working in a well-run team, your former colleagues may even spread these practices even further: they will contribute to the creation of a new culture of respect, trust, collaboration and self-confidence which will finally begin to erode the fear still inherent in a formerly repressive society which brow-beat their par-ents and grandparents.

As a team leader in Russia, you will have to develop a mix of the best practices of modern management and some of the more old fashioned techniques of

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the command economy. You will want to push the decision-making down, but will still have to plunge in and out of micromanagement; you will need to con-sult with employees, but take firm decisions based on your own judgement and intuition; you will be both personal advisor and disciplinarian; coach and dictator. Too dominant, you destroy the team; not dominant enough, you lose direction.

Ultimately, these leadership qualities, and the challenges and solutions to building teams which we have discussed, are not so very different from any-where else — in Russia the contrasts are just more pronounced. Most large companies, the big multinationals, despite their rhetoric of individual empow-erment, somewhere in their make-up, secretly rely on hierarchy, control, bu-reaucracy and ultimately fear to deliver the results to the shareholders. Your role, as a leader in such companies, is to implement the policy of the com-pany despite this — to do that you have to destroy the hierarchies and the silo mentality, and harness the creativity and energy of your team members by giving them the skills and confidence to work together to share and imple-ment your vision, without undermining the integrity and effectiveness of the broader corporation.

And this hints at the real long-term benefit for the leader in building effective teams in Russia. What you personally learn from your experience of manage-ment in Russia will stand you in good stead wherever you work. That unique mix of skills, of being able to deal with some of the greatest management challenges in business today will enrich the managers, colleagues and em-ployees who come into contact with you throughout your career. If you suc-cessfully create teams in Russia, you will have made an important contribu-tion to both your company’s success and the long-term development of a nation. At the same time, you will have acquired leadership skills which are applicable elsewhere in the world, because if you can do it in Russia, you can do it anywhere.

The author would like to acknowledge useful insights into Russian management prac-tice from Arjan Overwater, Managing Director of Future Considerations (www.futureconsiderations.com) and former CEO of Unilever in Russia; Anna Zelentsova of IBLF Russia; and his wife Eugenia Kompaneetz. The views ex-pressed in this chapter are the author’s own and do not necessarily reflect the views of International Business Leaders Forum.

5. Russia – Its Laws and Bureaucracyby Carol Patterson

Baker & McKenzie was the first international law firm to open an office in Moscow in 1989. Over the last 20 years we have built a reputation in Russia as a reliable and experienced legal advisor that helps leading international and Russian companies navigate the maze of regulatory require-ments. Today, we have one of the largest legal practices in Russia with more than 150 qualified lawyers in our offices in Moscow and St. Petersburg. www.bakernet.com

Carol Patterson is the managing partner of the Moscow office of Baker &McKenzie law firm, and co-managing partner of the CIS offices of thefirm including St. Petersburg, Kyiv, Baku and Almaty. She has worked asa lawyer in the Moscow office since 1990, with the exception of four years, from 2000-2004, when she worked in the Toronto office of Baker & McKenzie.

Before and after going to Dalhousie Law School in Halifax, Carol did undergraduate and graduate studies in Russian history and language — half a year in Moscow in 1979 at the Pushkin Language Institute and a year in London in 1980 at the University of London.

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Every second reform initiative for Russia, sponsored by the West in recent years, aims to improve the legal system and “rule of law” here. As a Canadian lawyer who has worked in Moscow at the Baker & McKenzie law firm for most of the past 18 years, I am often asked by visiting government and profes-sional delegations to discuss the Russian legal system and ways in which it could be improved. It can of course be further improved, but my overwhelm-ing conviction based on years working here is that there are few countries that have achieved as much in overhauling their legal system, most notably introducing many laws aimed at facilitating business, in as short a time as Russia.

The purpose of its laws, the reasons for a large bureaucracy, and the impor-tance of the state in Russia now, as in the past, have always differed from those in the UK, North America and the common law societies created there.

My introduction to Russian (then Soviet) law came when I arrived at Sherem-etyevo airport in February 1979 as a recently graduated law student, one of twelve Canadians arriving for a four months’ student exchange program in Russian language. In retrospect, we were flying into the nadir of the era of Soviet “stagnation”. We were introduced to law and order, Soviet style, before we even left the airport. In searching the luggage of the arriving Canadian students, the customs guards found four identical Russian language bibles in four different suitcases. Our little group was marched into an interrogation room, together with our beloved 55-year old language and literature professor. He was a Soviet World War Two war hero who had been teaching at Dalhousie University in Halifax on a ground-breaking exchange with the (then) University of Leningrad. Three or four hours of intense interrogation and intimidation in a language that was beyond the reach of our six months’ intensive language training ensued. The officials were threatening to charge us all with “anti-So-viet conspiracy”. In the end we were allowed to leave the airport to start our four-month stay with only a very stern warning.

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The next morning when we arrived at the chilly language institute, our mentor Victor Sergeievich, who had visited most of our homes in Canada, stood at the blackboard and wrote that we had “killed” a six-month old child. The “child” was the period we had spent together with him at our Canadian university preparing for our great adven-ture in Russia. He left us to go back to Leningrad with the command “don’t kill”.

After this diatribe, the lawyer within me was raging — could this system not distinguish between naiveté of students who had been told that a Russian bible would be a valued gift and a concerted conspiracy? Where was the criminal intent? How could you call this a conspira-cy? How could religion be illegal? These were my angry thoughts at the time.

However, fear was instilled in us all that first day — we couldn’t help but realize that we had arrived at a place where law and order was heavy-handed and could be applied arbitrarily and with impunity. Indeed, a few days later, we were still adjusting and reacting to our new cir-cumstances, we had a further shock. Unbeknownst to the rest of us, one of the girls still had a bible, which had not been discovered at the border. Afraid to leave it in her room, she was carrying it with her, including on our first visit to the great Lenin Library. The terror that she felt on discovering we would be searched before leaving the li-brary to ensure that no books were being removed, led us into the women’s washroom in a tense and almost hys-terical effort to tear up and flush down the toilet the last remnant of our “anti-Soviet conspiracy”.

The “bible incident” aside, once having left the confines of the airport it quickly became apparent to us that rules and regulations were everywhere, together with armies of bureaucrats to enforce them. And not just bureaucrats — “citizens” in the form of little old ladies on the streets and in the buses were equally ready to tell you what to do.

Russia has shown it’s not above the temp-tation of using some bargaining power or blackmail. It shows that if there is a way to get some political-economic advantages from a temporary weakness of your partner, the Russians will use it.

Daniel Gros, economist

BYTHE

WAY

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In winter, you had to wear fur hats, scarves and mittens at all times, and not doing so would result in multiple chastisements from passengers in the buses and Metro en route to the institute. In summer, which arrived that year with ferocity in the last week of May, we quickly learned after fierce verbal attacks that you could not wear shorts into the store to buy some scarce Western soda pop. Everything that we would do without thinking about it in Canada seemed to be forbidden in Russia. Gruff, angry orders were the order of the day.

My enduring lesson of the power of the Russian bureaucrat came at the hands of the woman who worked at the “service bureau” in our university hotel. While as foreign students we did not have access to the special food stores that were then the only reliable source of many fresh fruits and vegetables, we did have one perk. The service bureau, which we could use, was a source of incredibly hard-to-come-by tickets to the Bolshoi Theatre, and other Moscow theatres. While our conversations among ourselves centered on recounting the miracles that could be found in Canadian grocery stores, we were not starving for culture.

Having seen the now legendary Vladimir Vysotsky playing “Hamlet” at the Taganka, I noticed that “Hamlet” was again playing and was determined to buy two tickets for my new Russian friends, who were dying to go to the perfor-mance. I ordered the tickets from the woman working in the Service Bureau, and returned confidently several days later to pick them up on the day of the performance. The same woman who had taken my order was there, and I presented rubles and asked for my tickets only to be met with a barrage of scolding, criticism and scorn. Of course she could not give me the tickets, for I had not followed the rules on pre-payment, it being implied that it was unthinkable that I could have failed to understand all these requirements. This was so unexpected and I was so upset at the prospect of disappointing my friends that I burst into tears. Amazingly, the tears prompted an immedi-ate change in attitude from the stern, shouting service bureau tyrant, who began comforting me, poor little “rabbit”, and assuring me that, there, there, she had the tickets after all, and she would sell them to me. Stifling my anger and swallowing my humiliation, I paid the money for the tickets, and escaped. I realized that the “service ethic” that ruled at the Service Bureau was this: they were in total control. If you showed due deference to their authority, and remained “human”, you would be shown human kindness and consideration. If you asserted your rights, you would get nowhere. If you lost your temper, you would be treated with contempt.

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After four months of indoctrination in this rigid, alien and sometimes terrifying regime, we were counting the days to our return to comfortable and forgiving Canada. Had you told me when we left tearful friends behind and boarded the plane back to Canada in June 1979, that my recently-obtained Canadian legal education would be put to use in future by living 18 years in Moscow working for an international law firm advising foreign companies eager to invest in Russia, I would have thought you were doing something else unimaginable in Russia then — smoking dope!

My vivid memories of life in Moscow in 1979 as a foreign student have in-formed my subsequent experiences here — in an overwhelmingly positive way. However deplorable strange or foreign the state of “rule of law”, “bu-reaucracy” or however heavy-handed the “state” might seem on a bad day in the Russia of the 2000s, it is incomparably better than what preceded it.

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Change that I could not have imagined, did take place, and finally the news reaching Canada from Russia in the late 1980s about perestroika seemed to merit inquiry. When I arrived back in Moscow in August 1990 to start work as a foreign lawyer advising foreign companies investing in Russia, there were two laws of relevance to the foreign businesses that were our clients – the USSR Joint Venture Law, and the Regulation, governing representative offices of for-eign companies. That was all we needed to know in that first year or two.

We worked from the outset with Russian lawyers, but there was only a very small pool of bilingual lawyers, most of whom had been trained for the diplo-matic service and were serving in the Ministry of Foreign Affairs. In those early years, the best “lawyers’ lawyers” we encountered were not English-speaking, but were advocates in the colleges of advocates that provided legal services and primarily criminal defence services to directors of state enterprises. Law-yers with a conception of the concerns of foreign companies as they began to invest in Russia, had to be trained, rather than found.

The first company law was passed by the USSR government not long before it dissolved, and it was followed by a Russian Federation decree setting out the required features and general governance for a Russian joint stock com-pany. Within a few short years, Russia enacted not only a comprehensive Joint Stock Company Law, but also a fully revamped Civil Code, a Bankruptcy

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Law, a Land Code that allowed land ownership, a Tax Code, a Competition Law, a Trademark Law, laws regulating lending and mortgages, and many other commercial laws. At the same time, the profession of law increased in importance and prestige, and the law faculties began to attract the best students.

For example, as both foreign and Russian companies began to carry out share acquisitions and property development, and enter into financing arrange-ments, the role of the lawyer expanded. I first noticed this trend at work when advising a multinational company that asked us to carry out an extensive due diligence exercise on a privatized consumer goods plant on the Volga river. Our team, which included accountants, engineers, and lawyers, began meet-ings with our counterparts in the plant. The general director of the plant — as was common — was an engineer, and had advanced to his position from the production side. The finance director, or chief accountant was a very powerful and respected person in the organization. However, our requests as lawyers for all the legal documents – the privatization plan, the right to land use, and evidence of ownership to the building, and all the corporate protocols for deci-sions taken by the company had to be referred to the “jurist” — who was not a very senior executive in the company, as a glance at the pay scales clearly showed. In this case during the course of our investigation and the negotia-tions, the jurist’s role in the company increased, to the extent that he was included as a member of the first board of directors of the post-acquisition company. In all cases where an acquisition was contemplated, the Russian privatized companies which had used lawyers more as clerks than senior executives, upgraded the job of the jurist to legal counsel, or hired outside counsel, as the role of the lawyer became more critical.

In 1990, when I came back to Russia, I anticipated that the role of the foreign lawyer would be a short-term role — that we would find qualified Russian lawyers and phase ourselves out. And, indeed, in the early years of Baker & McKenzie’s building an office, I found a superb mentor in Russian law, but he came from the “advocatura” side of the profession, and was not an Eng-lish speaker. What happened in actual fact, was that the development of the new laws, and the influx of investment created its own demand. Ambitious talented university entrants began competing for admission into the law fac-ulties and made law the most desired profession, in contrast to a generation earlier, the most talented people were going into engineering, geology, and other applied sciences.

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The result has been that my firm, which relied in the first five years of its foun-dation on experienced Western-trained lawyers from UK, US, Canada, Ger-many, France and the Netherlands, all of whom had Russian language skills to varying degrees, was soon a recipient of newly-graduated Russian lawyers with language skills. We sent our lawyers on training program exchanges to our bigger offices in Chicago and London, and to do graduate degrees in law in the US and the UK. During the 1990s and early 2000, there were many US and UK-government sponsored exchange programs which invited Russian law graduates to study for a masters’ law degree abroad. There is a group of hundreds of highly qualified talented lawyers — all graduates since 1990 of the legal system who learned the new laws in law school — working at the highest levels of responsibility in major Russian companies and the very many international law firms which recognized the importance of Russia and opened. Based on my own informal survey, most of these newly-minted lawyers have highly-educated parents, but they were diplomats, engineers, chemists, geologists, academics — not lawyers. THE CORPORATE LAWThe privatization program of the early 1990s, while imperfect and much criti-cized, was the real motivating force behind developing Russia’s corporate law. Thousands of joint stock companies were formed from state enterprises within the space of one or two years thanks to the Privatization Law framework that was set up, and to the administrative zeal of Anatoly Chubais. More re-cently he has pushed reform through Russia’s power sector, and is now lead-ing the state nanotechnology initiative. Almost every state enterprise became an open joint stock company with freely tradable shares. A significant bloc of the newly-issued and tradable shares in each new company was issued to the employees of the former state enterprise. A smaller bloc of shares was avail-able to the senior managers of the enterprise. Some shares in each company were earmarked for acquisition by the public through conversion of privatiza-tion vouchers into shares of privatized companies. In some of the enterprises, a 20% share package was earmarked for acquisition by foreign investors in special investment tenders which required significant capital investment.

There is no question that the privatization rules were confusing, contradic-tory, and somewhat arbitrary. Unquestionably, the end result of privatization was that it allowed, in many cases, an enterprising and “connected” group of Russian managers to acquire the most strategically important state enter-prises. Nonetheless, the basic company principles that were introduced just

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prior to the privatization era were given practical meaning through the imple-mentation at thousands of privatized companies. These company principles and laws were recognizable to Western lawyers and Western companies, and largely resemble the limited liability company and joint stock company provisions of European and North American law. The “model charter” of the newly-privatized Russian companies established the concept of limited liabil-ity, successor company liability, fiduciary duties of directors, rights of minority shareholders, and imposed requirements of super-majority for most impor-tant corporate decisions.

Stakeholders were created overnight at each enterprise, and employees were included in the original stakeholders. We were able to participate with our clients in what seemed as groundbreaking adventures on behalf of early investors. One notable example was a multinational tobacco company, which just after privatization entered the Russian market by buying shares in two privatized cigarette factories in Russia through participating in the privati-zation share tenders. Special investment conditions were imposed for its acquisition of a 20% stake, but it also acquired additional shares through purchasing directly from the employees. In signing up share purchase con-tracts at the plant after the general director gave a speech urging employees to sell as it was for the benefit, it seemed to me as if we were participating in history.

The legacy of the privatization rules are still being addressed in recent changes to the Russian company law. A provision introducing rules for “squeezing out” minority shareholders in circumstances where minority shareholders in total own less than 5% of the shares of the company was introduced quite recently. The first beneficiaries of this law are majority shareholders in companies that still retained minority shareholders who were employees or purchasers from employees. As lawyers working in the ‘90s we worked on the first share pur-chases from employee shareholders in open joint stock companies. Now we continue to work for these investors to finish their acquisition by helping them implement buyouts under the new provisions.

Limited liability of each individual company is widely recognized. A reasonable carve-out to limited liability was introduced in the Civil Code and amendments to the companies’ law excepting circumstances where a shareholder has the right to issue mandatory orders to management could be held jointly and sev-erally liable with the company.

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Corporate governance quickly became an issue in Russia following the priva-tization stage with several minority shareholder disputes gaining prominence. Just prior to the Enron scandal breaking in the US, there were numerous law reform projects, and several legislative amendments aimed at making the directors and owners of Russian companies more accountable to sharehold-ers. The sanctions in Russian law do not come from the same foundation, nor do they have the same emphasis as in Western law, but they exist. In Russian law, the general director and the chief accountant of the company are legally responsible for the accuracy and correctness of the company’s financial ac-tivity, and answer under criminal and corporate law for defaults.

In Russia in the 1990s, foreign investors introduced the “due diligence” pro-cess — a common law concept, and one in which the directors of public com-panies owe a duty to investigate diligently any investment opportunity before making the investment on behalf of the company. The initial response of Rus-sian general directors was suspicion and determination to protect their “com-mercial secrets”.

In one case, after the usual frustrating first morning of arriving at a former mili-tary-industrial plant in the Russian heartland, my lawyers and our colleagues, the accounting firm team, were encouraged by the arrival of a member of the board of directors of the publicly-listed American multinational that we were working for. All of our simple requests for information about the company’s suppliers and distributors and number of employees had been stonewalled by the Russian general director on the grounds that they were “commercial se-crets”. The American director had traded with the plant during the Soviet era, was known to management, and was warmly greeted by them. Thanks to his arrival, we were invited to a lavish display of Russian hospitality, zakuski, and vodka by the general director whose charm and hospitality was suddenly on display. Over the vodka toasts, the American director gave a textbook perfect description of the purpose of a due diligence exercise. He made it quite clear to our host that his own integrity and his fiduciary duties as a director were at stake, and that without a report from independent legal and accounting con-sultants giving full information on the Russian company, he would not under any circumstances be able to recommend purchase of the shares in the com-pany. The information was forthcoming, and the transaction went ahead.

Certainly until a few years ago, collecting due diligence about a target compa-ny meant traveling to remote parts of Russia visiting the company and sitting

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in the general director’s, or chief accountant’s office, inspecting records and talking to them. The discussion usually first focused on lengthy explanations of why the information was needed. Due diligence was not a routine matter it had already become in the West where much of the information was available through public sources and data rooms provided the rest.

Now in Russian acquisitions, due diligence is accepted and online data rooms are common. More information is available through public sources and regis-tries. Indeed, the debate on due diligence has to some extent switched to the point where sellers are now using disclosure of information to put the onus back on the purchaser. They are taking the position that they have disclosed all problems to the purchaser, so that fewer representations and warranties by the seller should be needed. There is still some lingering distrust of the due diligence process, especially with respect to Russian competitor companies that request due diligence before making a bid to buy. This is to some degree warranted. While it is typical for confidentiality covenants to be put in place, which are enforceable; non-compete clauses and non-solicitation clauses, they are widely judged to be completely unenforceable under Russian law.

A legal debate which hasn’t yet ended is whether transactions should be doc-umented under Russian law or foreign law. Certainly if there is a foreign party to the transaction, it is long-established under Russian law that foreign law can be chosen as the governing law of agreement, with a few exceptions (in-cluding purchase of real property in Russia). However, provisions of the agree-ment that would be unenforceable under Russian law, will still be unenforce-able if they need to be enforced by a Russian court in Russia — for example, non-compete or non-solicitation clauses.

English law is recognized — even in transactions between Russian companies — as being more predictable and more flexible, and therefore is widely used now as a norm in documenting Russian company and share acquisitions, and in any cross-border financing. Recently there has been talk by the government of further developing Russian law norms, so that Russian law would be more frequently chosen to govern company acquisitions, but this is still in the future. Russia has passed legislation to regulate insolvencies. However, although a Bankruptcy Law was introduced as early as 1992, when Russia was seeking to comply with International Monetary Fund regulations — it has not yet been successful in countering some of the imaginative — and fraudulent — restruc-

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turings of assets that took place after the financial crisis of 1998. This may be especially relevant as the prospect of business failures looms again in the af-termath of the subprime mortgage crisis. It is my experience that Russian law tends to follow form over substance to a greater degree than Western law. This is true in the area of bankruptcy law, where the review of questionable transac-tions involving insolvent companies is more rigid and formulaic than Western bankruptcy laws, which tend to allow assumptions of intent to defraud credi-tors to be inferred when that is the ultimate result of a transaction.

Taxation law and the observance of the tax laws have greatly improved in Rus-sia in the past decade. Flat personal income tax of 1�%, and reduced taxation on corporations for social taxes for employees has been successful at largely eliminating the elaborate schemes to avoid paying tax by both parties. It may be that some social fund contributions will be reintroduced in future.

What is noticeable about Russian laws across the board, is that they allow very little leeway to public officials or bureaucrats to exercise discretion. This feature is of course an attempt to eliminate the opportunity (or shall we say the “expanded opportunity”) for officials seeking to receive bribes. However this feature also has the result that non-compliant behaviour by a company in the past cannot be officially pardoned or condoned, which leaves many com-panies in a permanent state of limbo with respect to defects in their docu-ments or title to property. For example, if a mining or oil and gas company has not met a production quota in its license by a particular deadline, that non-compliance is almost impossible in reality to cure, and it continues as a potential reason to revoke the license. While the authorities do not in fact revoke licences on such grounds in the majority of cases, there have been highly-politicized situations where such technicalities have been used to re-voke licenses, or de-register companies (i.e. if their working capital does not meet prescribed minimums).

Another unsettling phenomenon is that Russian sellers in a transaction un-derstandably have a better knowledge of where the skeletons are hidden in their company, and have been known on rare occasions to use a pre-existing problem which they had known of (for example, a non-compliant privatization) to seek to have subsequent transactions declared invalid after the money has been paid by a foreign investor. The usual result is a lawsuit after the transac-tion is closed, which results in more money being paid by the investor. This is another argument for careful due diligence.

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Foreign employers starting operations in Russia — especially if they are from the US — are in for some shocks in the area of employment law. While the Labour Code has been considerably amended since Soviet era, it still is highly protective of employees. Termination for cause is considerably more difficult than in most Western countries — in order to support dismissal for petty theft or fraudulent expenses, a criminal conviction against the employee would first have to be pursued successfully. The written documentation required of reprimands for chronic tardiness or absences, or bad behaviour far exceeds the requirements of the West. The non-compete and non-solicitation clauses that are typical in Western employment contracts are, as such, unenforceable in Russia. Often Western employment contracts will require that an employee devote his for her full efforts to the job, while under Russian law employees cannot be prohibited from holding other jobs.

As might be imagined, in circumstances where Russian rules and regulations tend to be unreasonably rigid and detailed, and are often contradictory, it is sometimes impossible for an individual or company to perfectly comply with all the applicable rules and regulations. Whether cause or effect, the Russian attitude towards the rule of law and the strict applicability of each law, rule and regulation to the individual tends to be less than totally respectful. The result — take the traffic and parking rules for example — is that almost every one de-cides that they will take their own individual decision as to the degree to which they will comply with the rules and regulations. Coming from Canada, where traffic rules tend to be obeyed and most citizens would think twice about get-ting a parking ticket, but where there is also much less regulation, the anarchic attitude of Russians towards traffic and other rules and regulations is notice-able. Upon further acquaintance with the rigidity and detail to which matters are regulated in Russia, the attitude becomes somewhat understandable.

One of my earliest lessons in the differences between lawyers’ approaches in Canada and in Russia came when registering a representative office for a Canadian company which realized early on the opportunities that Russia pre-

Use the Metro in Moscow or the other cities. It is cheap, quick and even with only simple Cyrillic, easy to use.

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sented as a market. It began sending sales representatives to Russia to forge distribution links in the mid-90s, and, as the orders started rolling in, they commenced preparations to open a representative office. Establishment of a representative “liaison” office to test the market and report on opportunities is the first step taken by many companies. This is the first introduction for most foreign companies to Russian bureaucracy and the volume of paperwork and notarization required to do anything. The in-house lawyers of the company lo-cated in Canada were soon bogged down in getting multiple powers of attorney and board approvals, numerous company foundation documents, all of which had to be certified or notarized, and then authenticated by the relevant provin-cial government authority body, and finally further authenticated by the Rus-sian embassy in Canada. This is a complicated procedure called legalization, which is still required for Canadian companies proving their documents in Rus-sia, although most countries together with Russia have somewhat reduced this burden by recognition of the apostille stamp. That was the work that had to be done in Canada. Once we received them, they had to be translated into Russian, with the Russian translations being notarized. It then appeared that there were some inconsistencies between the letter of recommendation that a Canadian bank was prepared to give, and the rigid wording which was the only wording the Russian accreditation authorities were prepared to receive. In short, the process for this Canadian company to put its documents in order for registration in Russia took four to five months.

Meanwhile, the company’s salesmen were significantly more adept than their lawyers, and had already moved to Moscow, where they had rented apart-ments, and office space, and were busy negotiating distribution contracts and networks. When we were finally in a position to submit all the necessary documents for the accreditation, a dilemma arose. Requested documenta-tion included information about the date of establishment of the company’s representation in Russia. Full disclosure of the months of activity that had already taken place would clearly result in strict monetary penalties being im-posed, as there was a clear prohibition from opening an office before receiv-ing formal approval. The authorities had no discretion to overlook, condone, or “legalize” the early opening. We were concerned, as their Russian lawyers that disclosing the early opening would only ensure that the company’s pres-ence in Russia would begin under a cloud of fines and possibly more serious sanctions. This is an example of a typical dilemma arising under Russian law, with its heavy documentary requirements, which foreign newcomers have trouble adjusting to.

8�

In Canada, form follows substance. This is true in terms of both “good” behav-iour and “bad”. If a company is trying to comply with the rules and can explain its technical defaults, they will in most cases be pardoned. If a company is intending to transfer its property and defraud its creditors, the substantive effect of the action will be examined, and judged accordingly. In Russia, the question will most likely be determined by what the documents say. There is a concept of “sham transaction” in the Russian Civil Code, and of “sham bank-ruptcy” in the Russian Bankruptcy Law to address this, but nonetheless the level of proof to prove a sham and undo the transaction is quite high.

Russia as a growing and emerging economy, like many such emerging coun-tries around the world has high consumer demand, and a “gray market” for the full range of consumer products has grown up. Competition is fierce, sales are high, and prices are “accessible” to the Russian consumer. The majority of the consumer goods on sale have been manufactured outside of Russia. Many of our clients are manufacturers of such goods — leaders globally in the market for their particular product. Many of these companies have been asked over the past years by their Russian distributors to fill purchase orders for goods by delivering them outside the Russian border. These goods have subsequently been imported into Russia by the Russian distributor company.

In importing a wide range of goods, Russian distributor companies have been doing a wide range of things — depressing the price at the customs point to avoid paying higher customs, or — in some instances in the early 90s — in-flating the price at the customs point in order to export more currency (and profits) from the company. Ingenuity is high and the schemes all vary.

What has been constant is the customs, and more recently, the anti-monop-oly authorities’ attempts to crack down on such practices. There have been increasing instances of requests to foreign companies in a given sector to provide information on their prices, sales, and distribution practices. In many instances, the head office of the foreign company is faced with a confusing ar-ray of conflicting stories from Russian distributors, and competing demands for information from Russian government authorities.

The State Customs Authority regulates cross-border imposition of customs duties, with a role as well in ensuring that goods imported into the country are compliant with the health and safety regulations (have “certificates of compli-ance” where required) and are not counterfeit goods. Rospatent regulates

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protection of intellectual property rights — both trade-mark and patent rights. The Ministry of the Interior com-bats commercial crime. The Chief Prosecutor ensures the proper functioning of the law enforcement authorities.

Quite a few multinationals have found themselves caught in an array of competing requests, even in circumstances where they have implemented changes in their supply practices against the requests of distributors and are shipping directly into Russia. Once an investigation has been opened, it is unpredictable when and where it will end up. With one client that was caught in the cross-fire of various Russian government authorities investigat-ing its trading partners, we were defending inquiries on numerous fronts, with complications and costs mount-ing. Discussions with various authorities in attempts to explain and resolve the situation had failed — seemingly inexplicably, as a clear mistake had taken place. Hoping to give the client our very best advice, and the benefit of our accumulated knowledge and expertise, I consulted with my Russian colleagues. They argued convincingly that no Russian bureaucrat was going to take the respon-sibility of halting an investigation, no matter how obvious the mistakes were. We concluded that political interven-tion would be required for sense to prevail, and that the political intervention would have to be coming from a very high level.

It was with some trepidation (and acknowledgment of our inability to solve the problem just through legal proceed-ings and reasoning) that I presented our recommenda-tions to foreign general counsel of the large company. As expected, this analysis was met with disbelief. Certainly the intervention of the president or prime minister or Canada, US, or UK would not be required to solve a com-mercial matter of several million dollars, general counsel insisted. We agreed that this was ludicrous, but that we were just trying to convey the particular Russian reality applying to their case as we saw it. The investigations

Russia should sup-port global-ization. The Internet can develop in Russia in a very speedy way.

Anatoly Chubais, Russian business

leader and politician

BYTHE

WAY

A good citizen owes his life to his country.

Russian proverb

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dragged on. Luckily, shortly afterwards a major international political meeting was taking place, and in the preliminary exchange of questions about prob-lems of trade and investment between Russia and the other countries, our client’s problem was brought through legitimate channels to the attention of the government. The problem was then, promptly, solved. Sense and justice prevailed, but at a level far removed from the day-to-day workings of the bu-reaucracy. CONCLUSIONYes, Russia is different. The political, and consequently the legal system and culture are different from Western Europe and the common law countries.

But Russia has made enormous progress — the introduction of wholly new laws encompassing every law required for operation of business, followed by a series of correcting amendments which followed the implementation of the new laws, once the problems had been identified in practice. The various companies laws, securities laws, competition law and practice, insolvency regimes, tax code, property laws, Civil Code and Labour Code — these have all been implemented and improved. The process of rapid development con-tinues.

In practice, in courts, or in disputes with the government authorities on appli-cation of rules, sense prevails and results are obtained, but often after a be-wildering array of documentary and registration requirements. It is possible to comply with the spirit, and with 99% of the letter of the law in most instances in Russia today. And of course, non-compliance with the spirit of the law will expose you to liability — here in Russia as anywhere else in the world. If it wouldn’t fly in Toronto or New York or London — it won’t fly here. The reason-ing might be different, but the result will be the same.

Russian law is more of a work in progress than common law, but it is develop-ing, and it is also legitimate, complex, and largely workable.

Bear in mind that during the winter months there is very little sunlight. You and your colleagues are thus very susceptible to Seasonal Affective Disorder (SAD) and the clinical depression that goes with it.

6. Hiring, Retaining and Firing in Russia

by Luc Jones

6. Hiring, Retaining and Firing in Russia

by Luc Jones

Luc Jones is a partner, and head of the Technology & Natural Resources Depart-ments, in Antal Russia Recruitment Company. He is a British & Canadian Citizen with a degree in Economics & Russian from the University of Ports-mouth, UK (1991-1995). Luc joined An-tal International in 1998 in Warsaw and moved to Moscow in early 2002 to grow the Technology team throughout Russia and key CIS countries, notably Ukraine, Kazakhstan & Uzbekistan.

Luc is a native English speaker, com-pletely fluent in Russian with an excellent level of (Quebec) French, Polish & good Spanish.

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Your people are what make up your organisation anywhere in the world. Your product or service, brand and image all come a distant second. Without your key staff, your company is nothing.

For the uninitiated, Russia may appear a difficult place to do business, but if you invest the time to understand what is necessary to get it right, the rewards are limitless. Here are some crucial tips on hiring, retaining, appraising and firing for those new in town.

HIRING: Russia is different, but not that different!

The Russian Federation has been riding the wave of an economic boom, and the likely effects of the credit crunch are currently hard to determine here. The Russian economy is highly dependent on oil, gas and other raw materials, yet is not hugely reliant on a sole trading partner. With prices for Russia’s exports at an all-time high and showing no signs of declining, this is fantastic news for investors as both companies and people who have money to spend in all areas of the economy. Although some lost money (and confi-dence) following the Rouble default during the summer of 1998, eight years of continuous growth and stability under Vladimir Putin have put the country back on its feet again, as well as on the world stage. From a hiring perspec-tive, the key difficulty lies in the fact that the market is growing at a faster pace than people themselves are developing, which has created an acute skills shortage.

Don’t forget that you are in a country that recently emerged from three gen-erations of communism. Skills that are second nature to us did not exist for 70 years, and consequently nor did many professions. Job titles today such as Sales Executive, Marketing Director, PR Manager, and HR Specialist are relatively new, and although the younger generation will have adapted quick-

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ly, those brought up when the Soviet Union was a command economy have struggled to adjust.

Many of the requests that we receive are to find customer-facing salespeople. Russia does not really have a ‘sales’ culture, so to speak. Selling was seen an evil of capitalism, and something that 20 years ago could land you in jail for ‘speculation’! Sales is still viewed by many as a dirty word, and proactive selling is still uncommon here. Partly due to the strength of the economy, good can-didates know that they are in demand, and consequently when attending an interview will often expect you to sell your company, and the vacancy to them, rather than the other way around. An interviewer asking the question “why do you want to work for us?” is likely to be greeted with the reply “I don’t”!

Begin an interview with a brief introduction of yourself, the company, the vacancy and your plans, talking it up. Many interviewers start off cold, and then warm up if they like a particular candidate, by which stage it can be too late. Better to start positively and be open - until you make a written offer you haven’t committed yourself at all. Remember that you are looking to hire the same people as your competitors and this includes Russian organisations that can often out pay international firms.

Expect candidates to be very ‘matter of fact’ about their previous experiences. Even salespeople are unlikely to boast about how they broke their sales target for the past three years, or discuss their biggest deals, and sometimes it feels like you have to drag relevant and necessary information out of people!

Don’t be surprised if candidates tell you in detail about their second higher education and other abilities, even if these are not particularly related to the job in question. Education has always been highly valued here and people believe that this is what you want to hear!

Despite Moscow being Europe’s largest city, the level of English (particularly spoken English) is surprisingly poor. Once you venture outside of Moscow & St Petersburg, the situation is even worse, resulting from a general lack of practice coupled with teaching methods that focus on reading and writing. Avoid falling into the trap that many foreigners do when hiring, which is to give preference to a good candidate with excellent English over an excellent candi-date with a conversational level of English. Remember that in most cases, the majority of the person’s daily duties will be conducted in Russian, and English

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is often only needed internally within the organisation. It is far better to judge a person on what you actually need them for.

Be prepared for employees to discuss their salary with their colleagues and friends. Putting a paragraph in their contract forbidding this is a waste of time as it is completely unenforceable (Russian labour law overrides all employ-ment contracts) and the same goes for any other non-disclosure or non-com-pete clauses.

Don’t expect to save money when hiring people in Russia. Salary levels are on par with the UK in certain professions and in many cases people will have reached their position in a much shorter space of time than they would have done back home. We often hear “how can this guy be a director, he’s only �1!?” And this is the case. However, many people (and companies for that matter) tend to inflate their job titles, so a sales manager is not actually a people manager, but rather an account manager and a chief accountant may in fact be the only accountant in the company! It is perceived that the more senior your job title, the more seriously you will be taken, so therefore some companies respond to this by having a policy of allowing employees to put a more senior title on their business card than they actually are within the organisation — especially if they are in a customer-facing role. But be sure to stress that they know where they actually stand internally!

If your organisation is a large one, it is worth mentioning how long you have been on the market, how many employees you have, which clients you work with — Russians are generally fairly risk-averse and prefer the security of a large, stable company. If you are fairly new on the market, you will almost cer-tainly have to pay more to get a ‘ready’ person, but you would be well advised to discuss your commitment to the Russian market, and plans for growth.

Be aware of candidates quoting their salary as ‘net’ meaning net of taxes — this either means that they work for a company who don’t pay full taxes (still fairly commonplace, although changing slowly) or their employer quotes it to them in this way. Just multiply the figure by 0.87 to get the gross amount since Russia conveniently has a flat rate of income tax at 1�%. And assume that the figure given is monthly, which is the norm in Russia.

Notice periods are short in Russia — the legal requirement is two weeks — so this can work in your favour (you don’t have to wait forever for your choice

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candidate to start working with you) or against you (there is little hand-over period once someone does hand in their resignation). However, there is usually a degree of flexibility on all sides depending on the circumstances.

Try to keep the interview process as concise as possible, preferably no more than three rounds of interviews. Com-panies who have say “we like this guy, but we need to wait a few weeks for a senior regional director to come to Moscow and meet him” are more than likely to lose the candidate. There is an expression in recruitment ‘time kills deals’ and with candidates coming onto and off the mar-ket within a space of a matter of weeks, not months - your star person will have found another job long before then!

RETAINING:This is as important, if not a more important point, than actually hiring people in the first place. Spending time, ef-fort and money bringing someone good on board is point-less if they jump ship less than a year down the line. Gen-erally cash is king so your star employees are less likely to make any proactive moves to look at other opportunities if they feel that they are well paid, so this means keep-ing track with current salary trends — easier said than done with things moving as quickly as they are — and persuading head office that regular pay rises are justified. Your global/regional CFO may need some convincing that this is necessary, but it should be possible to achieve this without breaking the bank — just stress that the replace-ment cost is likely to be much higher!

Often it is better to overpay someone slightly to bring them on board, if they feel underpaid, they are more likely to consider a move rather than concentrate on the job in hand.

Ask employees what additional benefits they consider to be important — many international companies (es-pecially German firms) give a pension to all employees,

If you don’t know how great this country is, I know someone who does; Russia.

Robert Frost, American poet

BYTHE

WAY

9�

although this is unlikely to ever be a deal winner — especially given that the average life expectancy of a Russian man is currently 59! Far better to offer private medical insurance to the employee — and possibly to the spouse and even children, which is generally inexpensive, but seen as a real perk, avoid-ing the Soviet-style hospitals & clinics.

Russians love to study and learn new skills, so do continually stress your com-pany’s commitment to training & education right from initial interview stage, throughout their time with you. This is probably the most crucial non-cash ben-efit that you can offer, apart from perhaps flexibility and understanding when an employee needs to take time off to sit exams connected with their MBA, or second (or even third) degree — even if it is not connected with their particular job! Some corporations (especially the larger ones) have successfully tied key employees in by offering to pay for all or part of their additional education but on the basis that if they leave before completion, they must repay the amount in full. Others have even offered loans/mortgages on a similar basis.

Stress that the grass isn’t always greener, and many who do leave regret it — here we have a strong, but informal alumni club of ex-employees whom we invite along to corporate parties (especially at Christmas), many of whom said that their time with us was the most memorable of their career, what a great school we were for them, and how sad they are that they left. Naturally we spread this message to existing staff! In many businesses people who do leave, go to join clients (or potential clients), which results in new business!

When we interview people and ask candidates why they are possibly looking to change their job, one of the biggest gripes is that they see no career growth. Admittedly some are unrealistic about how quickly they can move up within the company structure but if you spot someone with potential, talk through a career plan for development with them, and stick to it (so long, of course, that they keep to their side of the bargain). There is considerable kudos amongst Russians as to have many people you have reporting to you — many are desperate to be people managers, although this is often amongst those who have never tried!

Bottom line — people leaving you is a fact of life, get used to it! More impor-tantly, don’t take it personally — if other companies want your people that means you have good people to take which means that you are certainly do-ing something right!

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APPRAISING:Like everyone in the world, everyone likes to feel loved, appreciated and use-ful. Under communism everyone was effectively guaranteed a job and in the law of unintended consequences, very few were worried about ever losing their job! With this safety net having now disappeared, insecurity has ap-peared which probably explains why there is almost no market for contrac-tors, interims and temps in Russia — virtually everybody is hired as a perma-nent employee.

Job (in)security may be less of an issue at the moment, although it will no doubt be at the back of the mind of anyone who survived the 1998 crash! Whether your company has a formal annual/quarterly appraisal, or whether it is on a less formal basis, do make the effort to praise anyone whom you feel is doing a good job for you.

Do take a more personal approach — if you work for an International organi-sation, do speak to people lower down in the structure: senior Russians (es-pecially if they work for a large local structure) prefer to keep their distance from the majority of subordinates so more junior staff will welcome the oppor-tunity to speak to senior people as it will be quite unexpected.

Find time to take a more personal approach to your staff — simple corporate events such as a bowling night, or a weekend away at a ‘dom otdykha’ (an out-of-town sanatorium) does wonders for team building but at the same time lets you find out how much people really like and dislike about where they work, and also what people actually want to see from their employer in the future.

Take it on board and act on it!

FIRING:It is never a nice thing to have to do, but regrettably a necessity. At the risk of sounding like a labour lawyer, make absolutely sure that you do everything 100% by the book. Russia may come across as a place where you can ‘get things done’ without having to follow all the rules, but when it comes to firing, this is one area where it pays to follow the rules.

The Russian labour code is heavily weighted in favour of the employee. OK, France this is not, but it is worth bearing in mind that if an employee takes you to court and you haven’t followed the procedures to the letter, he or she

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will win. Period. And this could mean payout of up to seven months’ salary for the employee, plus fines for the company in question — not to mention the hassle involved, not to mention any bad publicity.

Fortunately there are numerous points that can make life easier. Do consult your HR & legal departments on all matters, even if you consider them to be trivial — bosses who fire an employee in a fit of rage are likely to end up the losers in this particular situation! Document in writing any misdemeanours (such as lateness or absenteeism) and keep them filed.

Whereas in the West we tend to have a social security number (or similar) for tax purposes, in Russia every employee still has a physical labour book, which is signed and stamped every month by your company’s chief accountant. If someone is fired, a note of this is made in the book (regardless of the circum-stances) and since nobody wants such a record, the best policy is to agree with the employee in question that things unfortunately aren’t working out and that if they sign this resignation letter and accept a month’s salary — or some negotiated figure — then that’s it. And this works in the majority of cases.

Also on your side are practices such as moving someone sideways (or even demoting them) which are perfectly legal in Russia. However, our experience generally shows that if an employee isn’t happy with their job and is under-performing, they themselves will initiate the process and look for another job. Many will simply resign before they have even found another job!

But small ‘off the record’ talks with an employee whose performance or be-haviour is not up to scratch are an initially good way of informally letting the person in question know that you are aware of the situation, and you expect to see a change.

However, I hope and believe that in this exciting market, you will be doing much more hiring than firing!

Learn a bit of Russian — even if just the ability to read Cyrillic — it will make your life so much easier.

7. Negotiations in Russiaby Stuart Prior

7. Negotiations in Russiaby Stuart Prior

Stuart Prior has a thirty-year career as diplomat in the New Zealand foreign service. He was the New Zealand Ambas-sador to Russia 2003-2006 with concur-rent accreditations to Ukraine, Kyrgyz-stan, Uzbekistan and Kazakhstan.

Stuart has also been a university lecturer in Russian politics, history and literature. He speaks English, French and Russian.

Based in Moscow, in 2007 he estab-lished New Zealand consulting company Prior Group specialising in promoting

business between New Zealand, Russia and the Commonwealth of Independent States (CIS).

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FOREWORDThese notes are offered as a guide to help you as a foreigner living and working in Russia to succeed as a negotiator or contribute to the success of your company or team’s negotiations with Russians, whether they are with private business or with the public sector. They are based on my personal experience of Russia (and the Soviet Union before it) over three decades. Having worked in the public sector of a distant western country — New Zealand — for thirty years I moved to the “dark side”, establishing my own company Prior Group in 2006 to promote business with the new Russia. Why? Because of the amazing opportunities for contributing, via business, to the development of this exotic, great country whose future shape mat-ters to the world. I hope that the picture that emerges from these notes is that of a country of present promise going through an understandable and essentially normal processes of change. It is an exciting time to be here in Russia — it is hard work but it can also be a lot of fun. This is a country with the “wow factor”!

INTRODUCTIONRussia today is a true negotiators’ paradise. It is a “can do, must do” society, rather than a “can’t do, won’t do” society, and the question constantly asked is “why not?” rather than the negative “why?” But everything has to be ne-gotiated. Positions in the economy have to be fought for and won, defended, given up, fought for again and again, as the economic battles ebb and flow. If it sounds like a “peaceful war” — that’s what it is. The negotiating process provides as many ups and downs, twists and turns, tests of mettle — and tests of metal — as a negotiator could possibly wish for. It gives wonderful insights into Russia and its peoples. You will have the chance of eyeball-to-eyeball confrontations with proverbial “bad cops” and subtle and elegant ne-gotiations with proverbial “good cops”. The funny thing is, they almost always are singing from the same song sheet. You will learn that there is almost certainly a “good cop-bad cop” genetic marker that sets Russians apart.

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The good news is that to do well in Moscow, and in Russia, gives the visitor professional and personal skills and knowledge that will transfer to any envi-ronment in the world. The good news is that everything is possible and that you can be as good as you can be. The bad news is that pretty well everything is hard and success in negotiations, as well as in life with the Russians gen-erally, does not come easily. You can’t come to Russia, hit the ground run-ning and expect to be doing the big deals immediately (not unless somebody else has set them up for you). The big deals will come — but only after a lot of hard work and thorough preparation, maybe after two to three years, or more. Then it’s time to move quickly: “Russians take a long time to saddle up, but ride very quickly.”

The bad news is that it is not a zoo but a jungle out there. The good news is that seeing a real Russian bear — both of the literal and metaphorical variety — in the wild is a unique and unforgettable experience. The good news is that you should never be bored — Russia will guarantee you a roller coaster ride that will exhilarate and appal. But Mother Russia does not discriminate — this is the reality for Russians as well as the reality for you as a foreigner living in Russia. Don’t forget: if it’s hard and uncertain for you, it’s harder and more uncertain for the locals. This is a country living on the edge.

Russia demonstrates the energy of what I like to describe as constructive anarchy. Moving at the rapid pace of a flying BRIC (the acronym coined for the dynamically developing economies of Brazil, Russia, India and China), the Russian economy provides for every level of negotiator: from the trainee, wet-behind-the-ears novice, to the seasoned multinational negotiators and traders in all types of goods and services. Within Russia you will meet every form of commerce — ancient, modern and post-modern — practised every-where from humble stalls to huge and sophisticated malls and high fashion stores, which rival anything in the world. It’s an economy on steroids dem-onstrating the powerful, not to say earthshaking drive, of a mighty Russian rocket lifting off from the Baikonur spaceport. The Russian economy thrusts forward with a mixture of refinement and brute force — it may not be pretty — but it is effective.

For contrarians who believe in the true, untrammelled, unmitigated forces of capitalism, Russia provides a haven, probably, alas, only temporary, from the management gobbledegook and political correctness that bedevil creativity and innovation in other, more mature economies. Here success is measured

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in profits and failure in bankruptcy. Nobody has time to write stacks of inter-nal strategy and policy documents which serve only to deplete the world’s forests and hasten global warming.

PREPARATION FOR NEGOTIATIONEnvironment ScanningPreparation for the Moscow assignment includes recalibrating one’s mental compass. I have found the following Russian work of great help in under-standing who the Russians are and, therefore, how to prepare mentally for negotiations.

My indispensable guide to the Russian mentality and business practice is the 18�0s novel by Nikolai Gogol “Dead Souls”. Don’t be put off by stories of blockbuster Russian novels that take years to read. This one is under 1000 pages long, so, as Russian novels go, it’s a quick and easy read. Even after nearly two hundred years, this is one of the keys to modern Russia. Admittedly a bit light on the Russian “soul”, it is a brilliant exposition of Russian business types who you will find to be alive and well in the 21st century.

No matter what one’s role or purpose in Moscow, it is essential to learn as much about Russia, its peoples and its history as possible before embarking on your assignment here, let alone negotiations. If you can learn something of the language, too, that is a bonus. Personally, I fell in love with the Rus-sian alphabet when I was at high school, and was lured by its fascinating letters into the literary, cultural and historical world of Russia, without ever making progress as a linguist. The spoken language is not the only medium of communication — as every negotiator knows. Context really does matter. Russia is a political economy going through a period of intense and rapid change. Once you get to Moscow you will be sinking or swimming in the tor-rent (sometimes as a result of flash flooding which is far from unknown dur-ing a summer downpour). On-the-job learning is exhilarating, but stressful and forewarned is definitely forearmed.

Russia is the sum of all that it has met — and it has met a lot. Over centuries of human history its space has been crisscrossed by peoples from East and West, pretty well all of whom have left their traces. The space occupied today by the Russian Federation is as rich and diverse in its peoples and cultures as any area on earth. Russia is not only the bridge between Asia and Europe.

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It has pathways to the Middle East and the Mediterranean, with all the rich business histories and traditions of those trading cultures.

Not surprisingly, business in Russia pulls together many and varied ele-ments of domestic and foreign business cultures. “Mentality” is one of the key Russian business concepts. The Russian way of looking at business is varied, sometimes in the extreme. “European face but Asian mentality” is a useful way of approaching the task of understanding. But this is far from the whole story. For a start, it leaves out the element of passion: Russians are a passionate people. Yes, they know how to make money and how to keep money, but they will often do things against their monetary best inter-est because they want to do so. For example, protecting honour and saving face can combine in interesting ways in Russia. “Don’t get mad, get even” does not always apply to Russians: getting mad and getting even can be very satisfying.

Human and Social FactorsOver several decades of working with, and observing Russia, I have come across some key human and social factors which bear on virtually any nego-tiation. Where people live and the historical and other forces that are shaping them give a guide to where they are going.

First, and most obviously, size: Russia is BIG. It covers about an eighth of the world’s land surface. It has more kilometres of borders – nearly 58,000 km, both land and sea – than any other nation on earth. Laid out in one line its borders would circle the earth one and a half times.

Russia has a remarkably SMALL population for its size: just over 140 million people. It is only the ninth largest country in the world in terms of population. Two consequences of this stand out: the fear that Russia must protect itself from the potential greedy encroachments of other more populous nations hungry for its resources and its land; and the feeling that Russia is still a pioneering nation in which man battles against the implacable foe that is nature to wrest a living.

Nature is not a benign, under-control force. It is wild and elemental — like Russians themselves. Russians living in Siberia, east of the Ural Mountains, find themselves in man-made island cities adrift in an ocean of land, experi-encing some of the harshest climatic changes on the planet.

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The effects of the huge changes forced upon Russia when 70 years of Com-munist experiment collapsed in ruin, are still profoundly affecting Russia’s peoples. The changes can only be measured in generations. Not surprisingly, there is a major cultural divide between those who grew up and found their careers in the USSR where things were dull but certain, and those who are growing up in the new Russia, which is anything but dull but also anything but certain.

The Second World War continues to figure hugely in Russian popular con-sciousness — as it should, given the colossal sacrifices made by Russians and other peoples of the Soviet empire. Whatever the politics, people suf-fered dreadfully, and the impacts, notably on demographics, are still with Russia today. It is an important indicator of how Russians see their na-tion that Victory Day (9 May) is celebrated as far-and-away the most im-portant Russian national holiday. Nor should it be forgotten that Russia won against the odds — something any foreign negotiator would do well to remember.

The restoration of religion in Russia since the Soviet collapse is a true won-der of the age. The restoration of the Russian Orthodox Church brings back to Russia the heart and essence of its culture. At the same time, Russia re-mains a country tolerant of religion. Notably, it can be regarded also as a Muslim country — 20% of its population belongs to this faith. Social change is continuing at speed. What is happening in society is a vital process. A new social contract is emerging. There are, inevitably and sadly, losers as well as winners: the country does not have time for tears. But there is already a significant, increasingly confident middle class, of well-educated and aspirational people, with middle class values. Many have had to make the transition from make-believe Soviet government employment (“we pre-tend to pay you, you pretend to work”) to the real-world business economy. Flexibility of mind, and of hand, is notable in the biographies of those who have climbed to success in the new Russia.

Ask your colleagues which restaurants and bars they go to — not only will you have a real Russian experience but you will probably save money too.

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And, finally, contact with the outside world is contributing to change by bring-ing in a veritable torrent of new experiences and exposure to different ways of living and different ways of doing things. All this is so recent: “future shock” is here and now. Only since 1991 have all Russians had the right to travel freely beyond Russian borders. Familiarity with foreign cultures and foreign languages for those who went to school before the collapse of the USSR is still quite limited. As a guest in Russia for several years now, I know that it is impossible to take knowledge of outside customs and practices for granted. But you can’t get them across by preaching and looking down at Russians because they don’t know. You have to demonstrate in your person and be-haviour, preferably with a degree of subtly and humility, how things should be done. I have found that Russians soak up new knowledge like sponges, adapt the parts of that knowledge useful to them, sometimes in surprising ways, and move on quickly to new learning. It’s an impressive process to watch.

Government and BusinessTellingly, it is business that is driving the changes in the Russian political econ-omy and in society as a whole. Business is itself an elemental force. The Gov-ernment finds itself riding the economic tiger. Only recently, and thanks to huge rises in international prices for energy and commodities and a programme of re-nationalisation of key energy and mineral resource assets, has the Govern-ment started to enjoy a secure enough revenue stream to be able to reinvest in the country and its people. Even so, the Government is limited in its ambition: it is trying to assist with hand-ups, but it cannot support a “hand-out” culture.

It has not yet found a mechanism for equalizing wealth distribution which, after the fire-sale privatisations that many Russians regard as the whole-sale pillage of former state-owned resources and the economic disorders of the 1990s, is extreme by any measures: Croesus himself would blush at the squillions of dollars some oligarchs possess. At the same time, Russia has no dynastic wealth. What it does have is a handful of immensely and somewhat more not-quite-so-immensely wealthy people. Some of these are doing their level best to maintain the tilted playing field, which enabled them to accumulate such wealth and to create dynasties to prolong their wealth. Others are committed to facilitating positive social and economic change by developing their businesses in Russia.

There’s inevitably tension and sometimes confusion because of interrela-tionships between the private and public sectors: Government needs busi-

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ness, but business does not always need Government. The Government gets involved in business through state-owned corporations, and private busi-ness cries foul. Business needs run ahead of Russian law, which can be slow and clumsy in response. Smart business people deliberately try to run ahead of Russian law to gain unfair benefits. Smart bureaucrats seek to pressure businesses to swell the coffers of “social funds”, and so on.

Russia is dominated by central and regional bureaucracies, which have swelled in size as post-Soviet responsibilities have decreased. Although Rus-sia is far from the only country in which Homo bureaucratus has enjoyed a profitable revival in recent decades, the ability of bureaucracies, and indeed the need of bureaucracies, to seek nourishment and sustenance from busi-ness remains very real. Given the often pitiful wages of workers on the public payroll, this is understandable.

For its part, the Russian business sector is dominated by mega and big busi-nesses, both public and private. In the foreign press the granddaddy of them all, the Russian gas giant GAZPROM, has become a virtual metaphor for a King Kong type of “Russia Incorporated”. That said, new depth is starting to appear in the economy as the medium and small business sectors start to show life and to fight for a place in the economic sun.

Not surprisingly, medium and small businesses find the going hard. My per-sonal experience, however, is that there are some very tough and very healthy small to medium Russian businesses which have survived everything that the Gods and their fellow men could throw at them through the 1990s, and which are now on impressive growth paths.

Both big and small businesses share a common trait – no middle manage-ment. There is no need to “empower” middle managers because decisions are taken at the top.

In the negotiating theatre…Negotiating is a very serious business for a Russian because just about ev-erything requires negotiation. I suspect, again, that there’s something genetic in this and that most Russians are simply born to negotiate. That may help to explain why negotiation is still a rather conservative business. There is a lot of theatre in any negotiation – and Russians are a truly artistic bunch (not for nothing have Russian culture and arts had a major impact on world culture).

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Not for nothing is the premier theatre in Moscow — and Russia — called the Bolshoi or Big Theatre. This means that you need to be aware of several fac-tors which will help set the stage in the Russian negotiating theatre.

1. The Relationship Factor (Who Does What to Whom, and Why)Understanding against whom you are negotiating is a critical part of the nego-tiator’s brief — and this requires attention to the relationship factor. There are two concepts, which I have found to be the keys to determining who holds the cards in any particular negotiation. These are: “kto kogo” (kto kaVO), the sense of which is “who does what to whom”; and “kto za kem”, the sense of which is “who stands behind whom”. In short — who is really calling the shots? These phrases indicate that interrelationships and networks of obligations, formal, and informal are vital parts of the structure of the Russian political economy.

They also show that the results of any negotiation have to be approved by the real power — so your task as negotiator is to be sure of who that real power ac-tually is. Sometimes, what seem to be very small negotiations can be referred to a power that is very, very high up in the Russian political and economic sys-tems. Finding out where power lies in any given situation is a key task.

This requires an ability to understand something of the make up of Russian society. Russians immediately understand who is who in their own society. It is more than a question of pecking order (junior versus senior). To an outsid-er thinking of the old USSR as a socialist and classless system, finding that today’s Russia has become stratified can be quite a shock. While Russians may not immediately understand relationships in a delegation of foreigners, they will expect the foreigners to understand relationships on the Russian side. Failure by a foreign delegation to understand, to be aware of, or to prop-erly acknowledge the presence of a key Russian decision maker is one of those mistakes which can come back to haunt you.

Bear in mind, too, that the company you keep in Russia, and the company you are seen to keep, can influence the way Russians look at you. If you associ-ate with one group of business people, for example, you may find yourselves unable to associate with other business groups because their relations are, shall we say, frictional.

It’s easy to understand, incidentally, why business and politics share a simi-lar “family” approach in today’s Russia. Those in the political circle need to

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be trusted absolutely, as do those in the business circle. The leading politician and the leading businessman (or, very exceptionally, woman) have to provide examples of successful behaviour to those below them and, often, to support the pyramid of supporters who are beholden to them in one way or another, not the least financially.

I mentioned before the “Good Cop — Bad Cop” routine. I’ve seen it often enough, in all sorts of situations, to know that the simplest technique like this is often the best: it works a treat with unaware foreigners. I have a suspicion that the routine is taught to Russian children from the very beginning, at kindergarten, like ballet.

2. The Fear FactorA factor that relates so closely to the relationship factor is fear.

For a Russian negotiator (unless the negotiator is at the top of the decision-making tree) referencing decisions “upstairs” is critical. Usually there is a little room to ma-noeuvre from an agreed brief, but only a little. Any Rus-sian negotiator in my experience knows that it’s “turkey today and feather duster” tomorrow if he or she gets it wrong — carrying the can, Russian style, means that you can’t weasel out of responsibility by holding up screeds of employment contract.

A word of advice: “Shock and awe” is definitely not a strategy any foreign negotiator should try on a Russian in Russia. The “fear thing” is something you should leave to Russians.

But there is another aspect of the fear factor, which could offer you a real potential upside: Russians can be fierce enemies but they also make fierce friends. So, if you get Russians on side with you, they will help you against fel-low Russians who might be inclined to see you and your company as a tasty hors d’oeuvre.

We, Rus-sia, are prepared to work with others. I am convinced that stability and security in Europe cannot be considered without tak-ing Russia into ac-count.

Boris Yeltsin

BYTHE

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3. The Potemkin FactorA key task for the negotiator is to get at the truth – with whom are you ne-gotiating and what resources do they have. Finding out what lies behind the façade is one of the key preparatory tasks for any negotiation. Whether it was fair or not, the legendary 18th century Prince Potemkin (PaTYOMkin), favourite of Empress Catherine the Great, has given his name to a particular feature of Russia — “Potemkinism” (PaTYOMkinism). This is the art – and it can be an art — of presenting a picture for a visitor that is far from the truth. I know of several cases where representatives of foreign companies have come to Russia and been shown factory premises, transportation and other properties said to belong to a potential Russian partner, only to find, after they have signed up to a contract, that it was all a façade.

Related closely to “Potemkinism” is the concept of “pokazukha” (pakaZOOkha) – manipulating statistics and other factors (in mini-Enron fashion) to give a glow-ingly optimistic picture. This is a carry-over from the times of the planned Soviet economy when economic statistics bore little, if any, relation to reality, and ev-erybody knew that the economic emperor really did not have any clothes.

There’s something else about concealment. Make sure that when you are in Moscow you take a drive into the “elite” areas, such as the famed Rublevs-koe shosse, the “Beverley Hills” of Russia. Your jaw will probably drop at what you will see in terms of huge houses and shops and stores stocked with the finest goods the world has to offer, money no object — and remember, none of this was here 15 years ago. But you can only guess at what lies behind the high all-concealing walls of gated communities. That’s the way Russians like it, for security, privacy and a host of other reasons.

So there are other Russias, and other stories, behind walls, literal and figura-tive. You have to work them out. How Russians live and how the Russians you meet and work and negotiate with live are important questions. Sometimes it is a truly “Looking Glass” world which you will find behind the façades. Other times, it is homes of good people full of warmth and humanity. Russians are brilliant at working out what the real story is. I suspect that this trait, too, is a genetically based second nature. Russians can be brilliant at obfuscation when they want or need to be.

For a foreign negotiator to get it wrong, there could be consequences, both reputational (so you weren’t clever enough to see??), and material (what did

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you buy???). A Russian businesswoman colleague described to me (only slightly tongue-in-cheek) the following ideal Russian transaction: a Russian merchant steals a crate of vodka from a factory, sells the crate of vodka to a foreigner, and, having received the foreigner’s money, drinks the vodka with his friends and delivers ownership of bottles and crates to the foreigner.

4. The Smoothing FactorOne of the most interesting, challenging, and in some ways hardest to de-fine, factors is one which I call the “smoothing” factor. I don’t know of a Rus-sian term that accurately covers this, from an outsider’s perspective. It’s not bribery or corruption — that is something else and is defined and under-stood in Russia pretty much as it is defined and understood in the world at large. It is the way in which decision making and processes are smoothed and made easier through networks and relationships (family, school and uni-versity friendships, business contacts, hunting-shooting-fishing contacts) which have obligations and favours offered and favours returned. The factor involves remembering key anniversaries of the great and the good, the birth-days of employees lower down, and higher up, of providing gifts on important Russian holidays (flowers and chocolates to women on Women’s Day, vodka for men on Armed Forces Day), of presenting formal gifts at meetings, and small gifts to people who have assisted.

It is the Chinese concept of guanxi in a Russian variant. Or, to put it the other way, the Russian smoothing factor has a Chinese variant, known as guanxi. You need to learn what to do and how to do it in a way that fits with your own business values and ethics. A ballpoint pen with your company logo is not always the most thoughtful and considered small gift. Equally, a painting by Monet is probably a gift outside the scope of your gift budget for a top client — so think in terms of a ticket to a football match. Leave the really elaborate present giving to the Russian side — they know the tribute which is due to those identified in Factors (1) and (2) above.

5. The Personal FactorIt continues to amaze me how personal, and personalised, Russian busi-ness and politics are. The reason is understandable: the grand institutions of state that help to depersonalize the process of government and provide stability through times of political chance are still evolving. Business is actu-ally very conservative in its emphasis of personal virtues. Strong personal relationships, rapport, integrity and trustworthiness are vital qualities for

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business success. The ability to do a deal on the shake of a hand is still important.

Who you are and what your personal values are do matter. There is both an art and a science involved. Coming across as a serious and responsi-ble interlocutor involves in part demonstrating that you are not the sort of person to get up the Russian nose. You want to pitch your behaviour just right — and that, as I have suggested, requires homework. If Russians are uneasy in your presence, this will spill over into the negotiation, to your dis-advantage.

6. The Foreign FactorMany Russians are still unsure about foreigners and Russians of an older generation — particularly those living outside the sophisticated metropoli-tan areas such as Moscow and St Petersburg — can be quite surprised to bump into foreigners just wandering about the streets. Working with for-eigners remains a novelty for the great majority of Russians. How foreigners behave and how to behave towards foreigners are important questions for many Russians.

You as a foreigner therefore have the chance to represent, in your person, your country — a truly representative role, which is not confined to diplo-mats. Putting people at ease from a cultural point of view can be a key factor in a successful negotiation.

And, of course, on occasions, you can use the fact that you are foreign to your advantage: a shrug of the shoulders, a helpless look and a plaintive “I don’t understand, I’m only a foreigner” can get you round the occasional awkward situation. 7. The Allied FactorI have left probably the most important factor until last: finding a Russian partner and ally is critical to your success in Russia. So from the very first days in Russia you will either be working with existing partners and allies or seeking to find new ones. The fact that Russian vultures are circling over your head as you cross on to Russian soil for the first time is nothing personal. In the private sector, today’s Russian partner and ally is far from the maligned and derided “fellow traveller” of the Cold War era. As an individual, he, or she, can be as good and strong a partner as any you will find, anywhere. But

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what you need to look for is the best, and that now means companies with top individuals. You learn who these are through doing your homework and talking around. In the public sector the political and bureaucratic ally can be found through more traditional mechanisms, such as your own diplomatic mission in Moscow.

THE NEGOTIATIONWaiting in the wingsThat brings us to the negotiating theatre itself and to the point of negotiation, the on-stage performance. As in warfare, thorough preparation is a key to eventual success. Never be lulled into forgetting the basic facts: this is not an equal combat. You are in a strange country and are fighting on foreign ground: the odds are not in your favour.

As you wait in the wings go through your mental checklist. The first task is to be accepted as a serious and credible negotiator, interlocutor or potential partner. First impressions will count. The quality of your preparation will mat-ter. Respect for your negotiating partners is essential. Know that they will have done their homework — including intensive research on the internet to cross-reference and check who you are, and whom you represent.

To help put you in the right frame of mind, I suggest that you carry a few men-tal “flash cards” and shuffle through them before you step into the spotlights on centre stage. Some of my own “flash cards” are:

– Rome was not built in a day (coincidentally, Moscow thinks of itself as the “Third Rome”): nurturing business relationships in Russia takes time – you should allow three years;

– show humility — you are guests in Russia;– show a readiness to listen and to learn;– revisit assumptions about Russia — it’s not all bears and vodka and mafia

and oligarchs. It’s a real country with real people facing real problems in real time;

– forget the PC approach that participation is primary and success second-ary: the Russian default approach is “win-lose”;

– understand that the written agreement is in fact a memorandum of under-standing, to be renegotiated at a time of the Russian side’s choosing;

– the most successful Joint Venture can be a failure in profit terms (people enjoy working together and commiserate together);

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– the most unsuccessful Joint Venture is likely to be the most successful in profit terms (but the pressure to squeeze out the foreign partner becomes irresistible);

And– the first negotiation of the first deal is the hardest. Keep at it and success

will come;– big deals follow small deals — if you have got the trust in working together

from the first deal.

TimingFirst, a very practical matter: when coming to Russia for negotiations, or when thinking of negotiations in Russia, check the calendar: make sure this is not a holiday time. The best times for concentrated attention are when people’s attention is concentrated on work. Broadly speaking, the Russian business and political cycle follows a regular and civilised pattern:

1 September – 24 December: the start of the working year, schools and ter-tiary institutions return, frenetic political and economic activity.

25 December to 11 January (approximately) — wholesale evacuation to sun-ny places in the south to escape the autumn browns and greys and muck and slush.

11 January – �0 April — busy, busy and even more busy.

1 May – 15 May (approximately) — spring holidays, time to visit the dacha (country house) and remember what sunlight is.

16 May – �0 June — busy, busy and even more busy (schools and tertiary institutions finish up).

1 July – �1 August — the summer migration.

I recall more than one delegation from my own country that sought to es-cape the southern hemisphere autumn by asking for business programmes in Moscow in the first week of May. Most, but not all, understood that visiting Red Square, admiring St Basil’s, watching the buds swell on the trees and the grass grow in Moscow’s delightful parks was not a substitute for the negotia-

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tions which they were seeking: they rescheduled to a more convenient time for their hosts.

Translation and InterpretationDon’t neglect translation and interpretation. This is not something to think about at the last minute and it is not a job for amateurs (hey, my driver knows a bit of English, may be he can help out…). While more and more young Russians speak and are comfortable expressing themselves in a foreign language, or foreign languages, the great majority of senior deci-sion makers do not and are not. Many understand English, but in formal situations are not comfortable about using it. The inability to communicate smoothly and effectively can doom any negotiation. Make sure that you have your own interpreter, somebody who is experienced in your language field, and somebody who will be on your side. If you don’t have an in-house resource, find somebody from outside. The best cost money — but you will seldom make a better investment. Meet them beforehand and give them time to “tune their ear” to your voice and accent and to get to know your team or delegation.

Consider also how to use your interpreter to advantage. If you have not worked through an interpreter before, find out how best to do this. This includes clar-ity and logic of thought and speech on your part, speaking in “blocks”, to allow the interpreter to convey your meaning. Make sure that you have someone on your delegation — if not you — who can follow the discussion in the Russian language. This does not have to be word-for-word, but it does have to be good enough so that you know the tone and content of what the other side is saying and the undercurrents in their delegation. Remember to make sure that the Russian side knows this in ad-vance. I have seen cases in which Russians have spoken in Russian among themselves laughing at the opponent delegation, confident that their jibes are not being understood. For a foreigner, being laughed at is no laughing matter. Arriving– Unless you are meeting the Russian equivalent of the Lord High Execu-

tioner it’s OK to arrive 10-15 min late. Everybody knows that traffic is grid-locked in Moscow and St Petersburg. And if it’s another city, well, that city will be trying its best to show that it is as advanced in its gridlock as the

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others. But there’s always another excuse up the sleeve: the leader of your delegation. Provided he or she is senior enough, they are never late, only “detained on other business”.

– But it is a good idea to have one of your party (if you are the leader) phone ahead just before the appointed time to say that you will be a bit late. Saying that you expect to be there in “ten minutes” will give you about �0 minutes’ grace before your hosts start to get worried.

Dress Pay attention to the way you are dressed and groomed for your first meet-ing. Appearance is very important: dress like a clown, in Russian eyes, and be treated like a clown. For men a business suit with tie, for women, smart attire. As the Russian saying puts it “you are met in accordance with the way you dress and are farewelled in accordance with your intellect.”

Before Going on StageNos morituri te salutamus: This is a last chance to focus your mind and to repeat some useful sayings:

– A fool and his money are soon parted.– Easy come, easy go.– Empty vessels make the most noise.– Fortune favours the brave.– Patience is a virtue.

ON STAGEGreetingGreeting before seating is the way to think of it. Your delegation leader makes introductions on a hierarchical basis. Greetings are traditional: handshakes for men but not in all cases for women. Some Russians will still kiss a wom-an’s hand to be gallant or just nod and smile.

SeatingThe leader of your team or delegation sits in the middle of a table facing the leader of the Russian team and usually at the invitation of the Russian lead-er. Other delegation members flank their leader. Russian delegation leaders usually invite members of their delegations to speak — don’t be surprised if only one person talks on the Russian side.

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MeetingExpect the first meeting to be conservative, serious, with not much in the way of smiles. It’s a nice touch, and usual Russian practice, to have country flags on the table. It reminds both parties that it’s serious business. Think of it like the first engagement of sumo wrestlers: you are sizing each other up, trying to understand each other and trying to establish a basis of trust and proving that you deserve to be in the same ring. You want them to respect you and you must respect them. This is the “fierce” part. It is their country and their country’s honour facing your country. Remember, what you want is to add “friend” to the “fierce” part. Remember, too, the Russian side will be sizing you up, working out the key relationships in your delegation or team, and identifying your weak spots and strong points.

With your side facing their side expect the first meeting to proceed through well-defined phases: a welcome by the host; introduction of members by the lead negotiator who should be the most senior person present from each side; statement of purpose of meeting and agreement on agenda; working through the agenda; conclusion of negotiation; summing up. There can be refreshments, lunches, dinners, holidays, and sleepless nights in between, but the pattern is pretty well standard, no matter how big or how small the issue being discussed.

Some BEs:– Be serious at first, then relax as your opposites relax. You don’t want to

be seen as a “cloud in trousers” (one of my favourite Russian expression), but neither does your counterpart want to be seen as a “cloud in trousers” either.

– Be very clear about what you want to achieve and what your bottom lines are. Have a Plan A and a Plan B and a Plan C. Negotiating against a time deadline is not a good idea – give yourself wriggle room. Don’t back your-self into a corner by “having a plane to catch”.

– Be ready for loquacity, you may need it. If you have somebody on your side with the gift of gab (if it’s not your leader) they should get the floor at some stage: Russians love long speeches.

– Be prepared for plain speaking — by some standards Russians can be brutally frank, coarse and blunt. Sometimes it’s better for your interpreter

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not to tell you what was actually said! But you do need to know the tone of discussion.

– Be prepared for the lunch or dinner — the toast — the drink. These can be rather stiff and formal occasions, with awkward pauses. If the Russians like you, and you have established rapport, then they can be a great way to relax and do business and get to know you better. Russian hospitality, if they like you, really is something else. Probably there will be vodka, certainly among an older generation (“Vodka — Connecting People” — a great tee-shirt slogan). But don’t be surprised if there is wine or even only fruit juice on offer. Modern busi-ness practice can be quite abstemious.

– Be prepared for toasts: to each other’s country; to friendship between nations and peoples; to women (this is almost always a winner – it’s usually the third toast and men are upstanding for this); to cooperation; to business cooperation; and so on.

– Be prepared for humour. Have some good jokes or an-ecdotes handy — self-deprecating humour is particu-larly good in my experience. Russians are very funny. Black humour is dominant. One of the great Russian toasts I have heard recently — at a meal during ne-gotiations — pronounced with a broad smile in the direction of the foreign delegation but not translated from Russian was: “here’s a toast to the success of our hopeless enterprise” (In the given instance, it was a hopeful enterprise and the first stage of the deal was successfully done.)

– Be prepared for invitations to private lunches and din-ners — since these are a sign that they like what they see of you and want to know you better. Understand and value the privilege and importance of being invited to visit the private apartment or country home (dacha) to meet family, which is a sign of great trust in you.

It always goes badly for Russia. It’s bad when we don’t have money and bad when we do.

Irina Yasina, Russian journalist

BYTHE

WAY

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– Be alert to the possibilities afforded by the “last two minutes” — the one-to-one walk away from a room, out of earshot, with the leader of the Rus-sian side, to convey some information in private. I have often found that the real substance of a discussion, the real breakthrough idea for a nego-tiation or business deal, has been conveyed in the last two minutes of a meeting as I have escorted senior people to their cars.

– Be ready with a pen and paper to draft something. Russians love paper, documents, stamps and signatures. Putting something in writing signi-fies achievement and progress. But remember — what matters is not the actual words, but the signature at the bottom of the paper because it is the stamp of authority of this person that shows to other Russians that you have done, or are doing, serious business. So don’t make the mistake of thinking that you can catch the Russians on fine wording — the deal is done by people on a handshake, and behind the handshake is trust. Equally, don’t yourself be caught by lack of clarity on the deal that you are shaking hands on! Remember that crate of vodka.

– Be prepared for failure — if at first you don’t succeed, persistence stands a good chance of paying off.

– Be prepared for success — be ready to move quickly. Deals can vanish in the blink of an eye — there is likely to be no second chance.

– Be true to your word — deliver on promises and follow up on undertakings: follow through is a critical success factor.

– Be generous: have a decent gift to present to the head of the Russian side, and have souvenirs to present to others in the Russian party at the end of the meeting.

CONCLUSIONFinally — no matter what you do, no matter how well you prepare, in the end it is often luck (or, as the Russians say, “fate”) which makes for a successful out-come. This is not a counsel of despair. As I have found, a good negotiator can often make his or her own luck. So, GOOD LUCK — and hold on for the ride!

8. Russian Business Behavioursby Cynthia Gordon and Christopher Graham

Cynthia Gordon was invited to MTS

in January 2007 to be vice-president

— chief marketing officer.

Cynthia graduated with a B.A. in Busi-

ness Studies from Brighton University

and prior to joining MTS, from 200� she

was vice-president of Business Market-

ing at Orange. She also worked at ACC

International (AT&T), British Telecom and

One to One (T-Mobile).

Cynthia started her career at Unilever

on a management trainee scheme with

brand management of major mass-mar-

ket brands.

She is a Freeman of the City of London

and a Member of the Worshipful Com-

pany of Marketers.

Christopher Graham’s profile is

on page 10.

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Cynthia Gordon and Christopher Graham came to Moscow with very dif-ferent companies. MTS employs over 25,000 people, while ETI Vostok em-ploys around 90. This chapter is the product of a series of conversations between the two writers in which they reflect upon their experiences as foreign senior managers in Russia. Through a series of verbatim dialogues, quotations and comments it outlines their assumptions about the country before coming to Russia, observations on Russian management style and corporate structure and the changes in their own styles that they have ad-opted in order to operate more effectively in the Russian working environ-ment.

BEFORE RUSSIA — SOME ExPECTATIONS At the time of writing Cynthia has been in Russia for 24 months and since Christopher has worked in and out of the CIS for twelve years, her memories of what she expected before arriving in Russia are a little fresher. One of her initial feelings was that of fear, and it seems that this is a common feeling amongst newly arrived executives in Russia. Cynthia’s fear was simply that of the unknown — a normal enough reaction, but Christopher points out how many newly arrived people have a really deep rooted fear of physical violence — they really think that they will be gunned down in the street or kidnapped so that their companies will have to buy them back. The reality is that Russia is not significantly more dangerous than most other global locations and in fact a lot safer than many. When it comes down to it, Russia has very bad press in the West — yes, there is organised crime, but it will not affect you unless you make some pretty stupid decisions about the way you do business.

In short, if you use common sense in business and on the streets, Russia is a perfectly safe place to do business, different from home, mysterious even, but safe. As Cynthia says, “the idea that it’s dangerous here is complete non-sense and I think it’s a wrong perception shaped by the media.”

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On her list of pre-departure concerns, Cynthia mentions the weather: “I thought the weather would be really difficult. But it’s not at all. There’s no such thing as bad weather, there’s only bad clothes.”

In fact the weather itself is not challenging even if your work takes you out to Siberia — as Christopher says, “life in Russia is geared to cold weather and you really don’t notice it.”

There are, however, two weather-related issues that are worth looking at. The winter season yields very little sunlight in much of Russia and this lack of sun very simply makes people depressed. SAD is now recognised as a syndrome in Russia but large numbers of people — and this includes foreign managers — are probably clinically depressed through much of the winter. The purchase of a SAD therapeutic lamp for yourself before leaving home may be a wise thing to do.

The other climate-related issue is that the tough conditions seem to produce endurance and stamina in Russians, but also a feeling that they can’t con-trol things, that whatever they do in politics, at work or with life in general, everything is beyond their control. This is a deep-seated trait in the Russian psyche and Christopher mentions that one of the biggest challenges in his years running an SME in Russia has been to try to turn the ‘can’t do’ culture into a ‘can do’ culture. Introducing new ideas, concepts and approaches can take longer in Russia than in other cultures. It is, as he says, “necessary to show that this CAN work in Russia — to fight the pessimism and feeling that we can’t change things with practical demonstrations that new approaches can work here. Russia is a nation of engineers and clear proofs and exam-ples that your initiatives do work are vital to encouraging change.” Patience in this will pay off — rushing and trying to force change will not.

There is no doubt that the Russian language presents its own set of problems and Cynthia says that, “the language of this company [MTS] is Russian so the first time you sit down at your PC and you see 98 per cent of your e-mails are in Russian and you cannot recognise the names ... that was a big shock.”

Even if you come to work for, say, a British or Italian company you will still be in the tiny minority of non-Russian speakers, so some way of coping needs to be constructed. Clearly most corporations employ small armies of interpret-ers, but do be aware that the quality varies a lot and if your work is highly tech-

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nical do ensure that the interpreters have the necessary academic background. Equally, if you have never been interpreted before, do be aware that you need to speak in clear sentences and allow time for the interpreters to collect their ideas and express them to the other party. Long, rambling, jargon-ridden sentences with no thought breaks for the interpreters will not work. In short, give the interpreters a chance to do their jobs.

The standards of English amongst Russians are rising all the time but as Christopher says, “my experience is that Russians do not want to lose face by admitting they don’t speak or understand English. If someone smiles and says nothing it is likely that they have no idea what you have been talking about.” The best way to ensure comprehension is to ensure that written notes are given to people to support what you say. Also to learn to pace and grade your language. Clear and simple without being patronising — a fine line but one you need to strike.

I WISH SOMEONE HAD TOLD ME THAT …Christopher has worked in and out of Russia for 12 years or so — he reflects here on some things he wishes he’d known before he arrived.

“I simply had no idea how well educated people are — the USSR had its faults but the education system was not one of them. People will often have two educations — a first degree in, say, physics and then a second one in law or something equally unconnected. My first driver in Baku was a genuine rocket scientist — worked on the Mir project — what a waste of talent.”

There is a contradiction, however, in that in 21st century Russia, at least in Moscow and the larger metropolitan areas, there is an acute skills shortage, especially for young managers in the 25-40 age range (notably in ar-eas such as banking and hospitality). This is causing huge wage inflation as companies outbid each other to

Today’s Russia is not to be compared with the Soviet Union of back then.

Angela Merkel

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Courage: Great Rus-sian word, fit for the songs of our children’s children, pure on their tongues, and free.

Anna Akhmatova, Russian poet

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get key staff. The contradiction is caused by the mismatch between what schools and universities teach and what employers need, and until there are fundamental changes in the educational system there is no obvious way out apart from increased immigration. The political mood is probably against this.

“My image of Russians was cold, poker-faced and unemotional. I could not have been further from the truth. Russians are very much ‘people-people’ — they are emotional and sensitive and, most challenging for me is the fact that they bring their emotions to work with them. They take things very per-sonally.”

The implications of this revolve around the fact that staff appraisal systems often need to be adapted in order to be effective in Russia. The HR team and line managers need to make it clear that it is a professional appraisal of the individual as an employee and not as a person. It can otherwise be a very negative and demotivating exercise.

“I knew there was a lot of bureaucracy in Russia — it was one of the cor-nerstones of the USSR as far as I can see — yet I did not realise quite how challenging it would be to deal with. I think it may be easier for big firms with more clout and more manpower than for SMEs. It can be cripplingly time-consuming and feel so very pointless.”

The bureaucracy is indeed daunting and no amount of complaining by foreign business people is going to make it go away. In terms of easing the pain, the best approach is to submit your plans and requests in writing first, ideally to a named individual whom your research indicates will be helpful. Being foreign does mean that generally you can aim ‘higher’ up the bureaucratic ladder and see senior people more quickly, so take advantage of this. Equally, do remember that ‘nyet’ may not mean ‘no’ — it just as likely means “please approach this in a different way.”

“I suppose I thought that the USSR was dead and that was that. But the real-ity is that it has left a very powerful legacy. I wish I had thought more about how it would make people behave; make them cautious about standing out from the crowd and make them generally untrusting. These characteristics are easily discernable in Russian society and have an influence on how peo-ple operate in the workplace.”

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SOME OBSERVATIONS ON RUSSIAN BUSINESS BEHAVIOUR Cynthia Gordon has worked in Russia for just under two years, but she has worked in the telecoms sector in the UK for a substantial period of time. Here she reflects on some Russian business behaviours.

TYPES OF COMPANY “I didn’t realise when I came but I was quickly told there are two types of Rus-sian companies. There’s the Russian-Russian company and the Westernised Russian Company and I would say MTS is a more Russian-Russian company in terms of a lot of our working practices. I say it as well, because I think people should be proud of being a Russian company and quite often people see it as a negative thing; I see it as a positive thing because it’s the heritage and strength of the company as well. In short we are loud and proud of the fact we are a Russian company.”

THE SCALE AND PACE OF BUSINESS“I would say of the differences I notice firstly would be pace. The pace of the business is much faster here than in Western Europe — a lot of information comes to you very quickly and you’re asked to look at it quickly and make decisions quickly. I don’t know if it’s the nature of this management but the pace of the business is very fast here.

We make a lot of use of video conferencing — when we do board meetings, you would be connecting to countries one after another so, yes, the pace definitely.”

INFORMATION OVERLOAD“Another difference is information overload. I think you’re expected to syn-thesise a lot of information, so the volume of information as well is high. A lot of stuff and it goes very quickly and you get into the rhythm of things as well because you think, “wow, ten board papers”, a lot of information on each slide, “how am I going to cope with that”, but then you get into the rhythm of things. I thought you might be seeking information but if anything you’re seeking what’s the gem within all of the information.”

PLANNING“The planning environment is different here as well, like the history of the GOSPLAN (Gosudarstvennyi plan, the USSR state planning function) and things like that. I think people are very into having plans, schedules of meet-

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ings. We have a system of functional planning that defines everything we do, so planning is a much stronger function and I’ve seen the benefits.

The thing that I’ve seen is it’s such a big company and country that your ideas cannot get translated unless you have quite a formal structure. There’s clear decision making: we set up the project team, orders are issued etc. Unless you have that system, it doesn’t get down to the person in the field.”

ORDERS AND CLARITY“The size of the country, the geography is so very important here - there was a great meeting/event that brought it home to me. I was with our CEO for Russia and we went to Sochi and we went to one of the stores and we had just got new advertising and I asked, “Why is all the point of sale material in stores different”, and he said it was because, “You have not issued an order to tell them to change it”. I think that’s the nature of the thing because the distances are far and people need that clarity.

That said, I would not say people need to be told or even ordered what to do, but I think they need clarity such as “this is the company’s policy and guide-lines” and that’s it. ‘Order’ implies that you cannot push back when in fact I’ve seen more rebellion here than I’ve seen ... people really … you push back to the CEO, more so than I would have seen in Orange.

Equally, things really get done. I think that’s the other side of the benefit of the order system — you issue an order and it gets done. I know when I go back to the UK you miss that sort of clarity knowing definitively it’s going to be done.”

THE GENERATION ISSUE“The other thing is the youth here - typically you would see a much younger management team than you would see in the West. It’s to do with the fact there are not many 45 to 55 year-old people who have had commercial experi-ence. But then you realise that people are growing up — it’s as if their business

Remember money is not the only driver for Russians when they are job hunt-ing — conditions of employment and the range of benefits offered can mean much more.

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experience is really celebrated because they are put into positions young and learning very, very fast, so you would have to change your assumptions about what is an experienced person. It’s definitely five to eight years younger than in the UK - most of the management here would be 25 to �0s, early �0s.”

WORKING HOURS“I find that people do not always come to work, how shall I put it, exactly on time in Russia, but they do work very long hours — lots of overtime. It’s intensity, people definitely work very hard here. People are more ambitious because they really want to get somewhere and give more, that’s the other thing I would say, that people expect more to be given to them in Western Europe, whereas here there is more of a desire to get more and “I’m willing to invest more to get there”.”

BUSINESS STRUCTURE“The whole corporate structure if I compare to Orange and Vodafone, is very similar. The big difference is the regionalization of the business. So, for ex-ample, in Russia you would see macro regions then within that, smaller re-gions. If you looked in France you would not have that.

There’s much more variation, we have different pricing levels, and to some degree different services. It’s almost like Moscow is a different country in a way to the rest of Russia.

The biggest thing I would say is what you would see in head office functions and then profit and loss business commercial functions and that’s the same that you would see at Orange or Vodafone or whatever, there is that organi-sation. And I think there’s the same level of decentralisation as well in fact possibly even a little bit more, that those business units are responsible for the revenue, the commercial targets and fulfilment.

We have three business units that are responsible for the financial targets — they have an awful lot of autonomy to decide how they go about those targets.”

CELEBRATIONS“The celebration of festivals is amazing. For example birthdays — you can see grown men weep when they’re given these terribly flowery birthday cards. In the UK if it was someone’s birthday you might say happy birthday but that’s it.

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I mean, it’s nice. Also the festivals, like women’s day and men’s day. Here we created a Russian army buffet and breakfast and gave the men special hats and things like that and had posters about the army up. The gift buying on birthdays, it probably wouldn’t be acceptable within the framework in the UK.

We have a — what’s the word — process of when it’s a board members’ birth-day, we all go out together with them and we have toasts and you say some very personal things and it’s very open, engaging and warm and you weren’t expecting it. I thought Russians would be colder and more business orien-tated, so definitely I’ve been really surprised about the amount of warmth and personal interest people have in you.

A great example is my boss. When we first came to visit Russia he organised a couple of weekends, like tours, met up with us at the weekend, to celebrate — to make sure you were well. My current boss — he’s a doctor — he rang me when I was ill and said, “Is there anything I can do because I know lots of doctors”, and it would be something you just wouldn’t get.”

STRONG LEADERSHIP“I think one thing I’ve changed is to be a much stronger leader. Because you see Putin with his shirt off while everyone laughs at Tony Blair when he takes his shirt off but I think people admire that strength of leadership.

Particularly in the UK or across Europe, you have to be very careful about how strong a leader you are. I think the thing that I’ve changed the most is the visible signs because I’ve realised you talk in an authoritative voice, it’s the words you choose and how you pitch it. You realise people see democracy as a weakness so you have to be very strong.

I was quite surprised about how strong people were and leaving no room to manoeuvre and it’s just you realise that it’s a facade almost, a role you have to act up to. People respect it and people want it. I’m not naturally somebody who would use orders or things like that, that level of formality, but undoubt-edly I’ve learnt it’s the only way to get things done. To have the impact across the organisation because of the size of the business and the geography and all those things.

I think the other thing that I’ve done that’s changed the organisation is going out into the business, to the regions. Instead of having formal meetings, I like

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going to the retail shops, going to the call centres, sitting down with more junior people and have it more as a weekly working meeting rather than a formal session.

People can be surprised and you can sense people’s lack of comfort and the tendency to call you “Madam” or something but you have to make it clear — “talk to me as a normal human being”.

We have a programme about visiting the stores where senior staff go and serve the customers.

I think that’s impacted the business, much more of those working meetings and things. I think the other thing, I’ve become less patient — I’ve realised that you have to really drive very hard.”

SMILING“I have adjusted. I realised six weeks in I was smiling too much and people were a bit disconcerted. It’s seen as insincere. When a Russian does smile it is a great moment and it shows you have made a real bond with that person.”

COMMITMENT“I think that after you’re here six months and people are realising you’re here long term and accept you, it becomes a lot easier after that. I think the fact you have come to work for this company and not seconded, that’s a big differ-ence. People seem to appreciate it very much when I say that I as a foreigner have committed to running a business here. People want commitment and will treat you with greater respect.”

Be very careful about making comparisons with ‘home’. Russians know very well that the infrastructure in Russia is bad — although improving — and do not need foreigners to point this out to them.

9. Beyond Moscow and St.Petersburgby Joel Lautier

For over 14 years, Strategy Partners has been assisting Russian and foreign multinational corpora-tions in achieving leadership and sustained growth through the efficient use of intellectual, financial and material resources. Strategy Partners is also the leading advisor of the Government of the Rus-sian Federation, as well as its regional administrative bodies. www.strategy.ru

9. Beyond Moscow and St.Petersburgby Joel Lautier

For over 14 years, Strategy Partners has been assisting Russian and foreign multinational corpora-tions in achieving leadership and sustained growth through the efficient use of intellectual, financial and material resources. Strategy Partners is also the leading advisor of the Government of the Rus-sian Federation, as well as its regional administrative bodies. www.strategy.ru

JOEL LAUTIER was born on 12 April 1973 in Scarborough (Canada) to a Japanese mother and a French father. A French citizen married to a Russian.

He has lived and worked in Russia since 2006, when he joined Strategy Partners. Since 2007, he has been the direc-tor of International Development at the company.

Prior to his career in Russia, he was a prominent professional chess player, the winner of more than fifty national and international tournaments.

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If you are considering the possibility of investment in Russia, then remember that there are many major cities in Russia, besides Moscow and St. Peters-burg, which also have a long and rich history, and where there is already infra-structure in place, both for running a business and for living comfortably. But together with this, it is important to keep in mind that the Russian regions are different. The regions differ according to their distance from the centre (you will need two hours to drive from Moscow to the neighbouring regions Tula and Kaluga and nine (!!!) hours to fly to Vladivostok), the availability of resources and infrastructure, quantity of population, quality of human capital and many other parameters. This inevitably influences the attractiveness of the region for conducting business. That said; all Russian regions have posi-tive and negative characteristics from an investment point of view.

The positive may be in the form of rich natural resources, an already devel-oped basic infrastructure (energy, transport and land), relatively developed industrial basis; sufficient cheap, qualified labour resources, relatively dense population (which guaranties wide access to the consumer market), large amount of tourist attractions — both natural and historical.

Negative factors for planned investment in the Russian regions may be high administrative barriers, physical obstacles to accessing resources, ineffec-tive economic structure (a large quantity of people occupied in unproductive industries), low production in a majority of industries or low level of develop-ment in business enterprise.

Our company has for many years worked with the regions, and we have often worked out a strategy of development in the regions at the request of state organs and realised projects in the area of strategic planning for commercial companies concurrently. Thanks to this we are able to combine the evalua-tion of a particular region’s investment potential from two perspectives —

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from an administrative point of view and from a business point of view. Using this experience, we have worked out a system of evaluating the investment attractiveness of a region based on several parameters:

Financial parameters. Does this region offer some preferences or other fi-nancial incentives for investors? For example:

• Are there special economic zones in the region which provide certain privi-leges for investors?

• Is the regional administration ready to cover part of the investors’ expendi-tures on infrastructure, human resources, etc.?

• Does the regional administration have some powers to grant any tax advan-tages and preferences?

• What is the experience of other companies with the administration’s man-agement of tax collection?

• The level of cost for operating in the region

Conditions for development of the sector. What are the competitive advan-tages of the region which are critical for sector development, including:

• Are there qualified human resources and educational institutions that cre-ate qualified talent pools?

• Is it possible to find available land suitable for construction of the plant?• What is the level of logistical infrastructure providing access to consumers

and suppliers?• What is the state of the energy infrastructure and its effectiveness (electric

energy, gas etc.)?• What is the quality of water sources?• What is the experience of other companies in your and related sectors in

the region?• What is the extent of trade union influence?

Regional authority’s reputation and effectiveness. Are the executives of the administration ready for open cooperation with investors?

• Is there an open attitude and interest in cooperation with foreign investors?• How accessible is the head of the region?• Are there clearly formulated priorities for regional development for the next

10-15 years?

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• What is the general level of competence (can the administration’s staff in-teract with investors on a professional level)?

• What is the situation with the regional legislation system and law enforce-ment in the region from the experience of other investors?

• The level of corruption

Living conditions in the region. Is it possible to create comfortable conditions for foreign managers and their families in the region? Here what matters is:

• Availability of housing and conditions • Ecology• Crime, in particular towards foreigners • Quality of public health services and infrastructure• Leisure and cultural facilities• Educational institutions for children from foreign families (English medium

schools)

Several cities across Russia are ahead in, at least, a few of the characteristics mentioned above. These characteristics are present in several dynamic, de-veloping cities, which are not always noticed in traditional ratings of Russian towns – Irkutsk, Krasnoyarsk, Novosibirsk (Siberian Federal District), Yekater-inburg, Chelabinsk (Ural Federal District), Krasnodar, Rostov-on-Don (South-ern Federal District) Nizhniy Novgorod (Volga Federal District), Murmansk and Arkhangelsk (North-Western Federal District).

We have outlined below some more specific information about each of these towns and regions.

Irkutsk. Located on about the same latitude as Warsaw and Berlin, it is a five-hour flight from Moscow. The city celebrated the �45th anniversary of its foun-dation in 2006. The capital of the Irkutsk region, which covers 770,000 square kilometres (4.5% of Russian territory) with a population density of �.6 people per kilometre (1.9 % of the Russian population). The region measures 1500 kilometres from north to south, and 1�00 kilometres from east to west.

Irkutsk region has enormous potential for developing all branches of the economy, and investment has grown quickly in the last few years. Before this, the majority of development was in the high-tech machine sector. For exam-ple, Irkutsk Aeronautical factory has for several years filled orders for Airbus.

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In this region, many of the major projects in Russia have been realised in pro-duction of raw materials and construction parts for the solar energy industry and also a number of projects concerned with mineral deposits and the build-ing of a centre to enrich uranium.

The priority area of development is the drilling for oil (Verkhnechonsky oil-gas field), gas (Kovyktinskoye gas field), lumber production and gold mining (one of the world’s largest gold deposits was found in Sukhoy Log in the Irkutsk region).

There is a high level of human capital in Irkutsk. It is one of the major scientific centres in Siberia. For the 600,000 inhabitants, there are 15 universities, 42 institutes with different specialities, in addition to a branch of the Russian Academy of Science. Ten academic institutes form the Irkutsk Science Cen-tre, SB RAS (Siberian Branch of the Russian Academy of Science) and five institutes represent the Eastern-Siberian Science Centre, SB RAMS (Siberian Branch of the Russian Academy of Medical Sciences). The city is ranked num-ber three in Russia for the amount of students per 10,000 inhabitants.

The region is known throughout the world for Lake Baikal, a gigantic crescent that marks the border between East and West. The reserve of freshwater in Lake Baikal represents 20% of the world’s reserve of surface freshwater. In December 1996 the lake was included in UNESCO’s world heritage sites. Baikal and the area surrounding it, has enormous development potential as a tourist destination. Until recently the local administration did nothing in this sphere due to concerns about disturbing the fragile natural balance. But it is completely possible that in the near future this will be re-examined. In 2008 the Baikal pulp and paper plant, which was the greatest ecological threat to the lake, changed its recirculation scheme. The dumping of manu-facturing bi-products was stopped, however at the same time the company was suffering massive losses, which lead to large-scale job losses. At the moment this is a problem thoughout the entire region. Obviously the devel-opment of the tourist industry may become an alternative way to solve the problem of unemployment.

There is another advantage that Irkutsk has to offer, at the moment in the Priangarye area an industrial belt is being created, one of the projects that will allow the realisation of potential mining operations. Traditionally, the develop-ment of the mining sector has rapidly benefited the population.

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In addition to this, the Russian Railways are planning the North Siberian railway, which open possibilities for new mining operations connecting four regions in east and west Siberia, Khanty-Mansiysk autonomous district, Tomsk Region, Krasnoyarsk Region and Irkutsk Region. The forthcoming new railway lines are a real asset that will raise the attractiveness of investment in the whole region considerably.

Favourable to the development of economic ties, with a geopolitical and geo-economical position and enormous natural resources potential, the Irkutsk region may be-come an integrated link between Western countries and the Asia-Pacific region.

Krasnoyarsk is located in the very centre of Russia – in Eastern Siberia, four hours by plane from Moscow. Kras-noyarsk is the capital of Krasnoyarsk Region, the second biggest region in size in Russia. Established in 1628 as a prison by Cossacks, it was given the status of a city in 1690 when Siberia was finally united with Russia.

On the evaluation of many experts, with whom we agree entirely, Krasnoyarsk region’s first advantage is its highly effective management both in the region and in the city. Objectively speaking, this is one of the strongest admin-istrations in Russia, mostly thanks to the Governor Alex-ander Khloponin.

The leadership of the region has accumulated an enor-mous amount of experience in governing this enormous territory (in size, Krasnoyarsk region is second only to Yakutia) and in cooperation (in 2005 Evenkisky and Tai-myrsky autonomous regions became part of Krasnoyarsk region). The administration is positioning Krasnoyarsk as a city of innovation, partnership and agreement.

Krasnoyarsk has great potential for the development of natural resources, energy resources and a well-devel-

In Russia all tyrants believe poets to be their worst enemies.

Yevgeny Yevtushenko, Russian poet

BYTHE

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oped transport infrastructure. Three important modes of transportation run through this region: The Trans-Siberian Railway, the Federal motorway and the river Yenisey.

This is the last city on the way east that has a population of almost a mil-lion and has high enough (highly adequate) buying power and that has a big, open consumer market. In Krasnoyarsk, �6,700 enterprises are registered, and among them 49� large and medium sized, and of these 121 are indus-trial undertakings. It has been calculated that Krasnoyarsk has the highest position in Siberia in terms of volume of industrial enterprises. Besides the traditional industrial sectors for the region, metallurgy and power generation engineering, everything is ready to develop new productions — production of ideas, technology and projects.

If Krasnoyarsk is compared with other cities, in particular with Novosibirsk, then Krasnoyarsk is, far and away more similar to the rest of Siberia. The struc-ture of the economy in the region and in the neighbouring regions is similar; there are great reservoirs of raw materials; transportation and energy infra-structure and similar corporations conduct business on the territory. On the basis of this, Krasnoyarsk region is an important zone of influence in Siberia.

Krasnoyarsk is a find, a special point of attraction in an area — Siberia — that is already attractive enough to bring in foreign investors. This city is capable of becoming a leader in the technological rebirth of Siberia and open Siberia up completely to the world. And without Siberia there would be no Russia and no Far East. But for this to happen, better quality living infrastructure needs to be constructed. For example, when arriving in Krasnoyarsk, be prepared to have problems with hotels if your visit should occur at the same time as a large conference or a symposium.

In this respect, Novosibirsk (a �.5-hour flight from Moscow) is an atypical Siberian city. The main part of the population was concentrated in the area around the large scientific centre at the time of the Second World War. This determined the current structure of the economy, which is more oriented towards service than enterprises (banking, finance). Novosibirsk, founded in 189�, is the third most populous city in Russia and the largest municipal district (by population). As the centre of the Siberian Federal District, it has consolidated a large population around itself. 1.4 million inhabitants of the city can be supplemented by another 5 million from major areas in a radius

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of 500 km — Tomsk, Kemerov and Barnaul, dependent on the creation of a modern, high speed transport connection, which would open the possibility of a huge consumer market.

Novosibirsk is one of the best cities in Russia to conduct business in. A high lev-el of education and many competent workers, openness to innovation makes for a fertile breeding ground for unique business opportunities, contributing to the emergence of new formations and untraditional business models. For example, “Sibirsky Bereg”, the first company in Russia to produce dry snow, managed to strengthen their own position by grabbing a market segment, and became one of the highest ranked producers in the Russian Federation and CIS. “TOP-KNIGA” is a major wholesale-retail company, leading the book market in Russia. The company started in 1995, and in 2007 had a turnover in excess of $�00 million (12% of the retail book market in Russia) and at the moment the retail chain has more than 500 shops all over Russia. “Inmarko” is number one on the ice-cream market in Russia, both in production and in sales with over 16% of the market. In February 2008 “Inmarko” was bought by Unilever. It’s no coincidence that these companies come from Novosibirsk, where business is based on intellect and not on raw materials.

Yekaterinburg (a two-hour flight from Moscow) has lately been one of the fast-est developing cities in Russia, and a consequence of this is that it has practi-cally robbed the neighbouring regions of its labour force, since people saw the potential of their neighbour.

This is the major transport and logistics centre on the Trans-Siberian Railway Line.

Yekaterinburg was founded as the capital of the Gornozavodsk area; a for-tress factory along the Iset River in 172�. The production power of the Yekat-erinburg factories included two blast furnaces, 14 shear steel works, a white metallurgy factory, steel and anchor factories, canon operating machinery production and others. The basis of production was iron, cast iron and copper. And currently it is a powerful industrial centre, where black and light metal-lurgy is advanced, heavy machines are manufactured and the military and chemical industries are developed.

This is a city with strong educational bases and a highly developed scien-tific community, being the city that has the fourth most scientific centres in

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Russia, behind Moscow, St Petersburg and Novosibirsk. In Yekaterinburg the General Committee — and a significant number of institutes — of The Urals Branch of the Russian Academy of Science is located.

Yekaterinburg is often compared with Chelyabinsk, and where industry is concerned they are a lot alike, although they do differ in specialisation. In Chelabinsk the most developed industrial structure is in machine manufac-turing and metal works, and in addition to this, Alpine skiing courses have recently been created, so as to attract sports tourism. Unfortunately, Yekater-inburg and Chelyabinsk are not in the best shape ecologically.

An absolute advantage of Yekaterinburg is its location on the border between Asia and Europe, which creates prospects for a huge market.

It is important to note that Yekaterinburg is a region with a strong economic position, and holding course for further economic diversification. An example is the creation of one of the strongest media spheres in the country, a result of which is that Yekaterinburg has more television channels than Moscow.

In 2009, a meeting of the Shanghai Cooperation Committee will take place here. Undoubtedly this event means a rapid development of the infrastruc-ture, special arrangements that will improve living standards and ease com-munication: new roads and hotels are already completed and a new airport is in the works.

Krasnodar and Rostov-on-Don (a two-hour flight from Moscow) have the same position in the Krasnodar region, in the south of Russia, as Moscow and St. Petersburg does in the central region, Krasnoyarsk and Novosibirsk have in Siberia and that Yekaterinburg and Chelyabinsk has in the Urals, with one difference — the south is the best place in Russia for the comforts of life.

Thanks to the geographic location, the climate and rich natural resources, Krasnodar region is the ideal place for the development of agriculture, food industry and tourism (for Krasnodar and Rostov-on-Don, first and foremost, business tourism). On the Black Sea coast, in the west of the region, there are popular holiday resorts and health spas, which attract over 100,000 tourists from all over the world annually. The major competitive advantages of the region are access to marine transport routes: the port of Novorossiysk, which is the biggest commercial operator in Russia, is located at the intersection of

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international transport corridors, which connects the Russian Federation to the Mediterranean, the Middle East, Africa, South and Southeast Asia, North and South America. In connection with this, one of the priorities for business development in the region is logistics.

The Krasnodar region has many opportunities for quick economic diversifica-tion, from traditional agriculture and the food industry to the service industry. In the near future this region may emerge as a “Russian California”, where, just like its American counterpart Silicon Valley, high technological companies will be centred. It might be worth investigating if this could lead to the reloca-tion of academic human resources from Siberia to the south of Russia. For example, many computer programmers from Tomsk expressed an interest in moving to the Krasnodar region, because they, as creative people, wished to be involved in innovative projects.

The centre of Krasnodar region is the city of Krasnodar, which is the unof-ficial capital of the area around the river Kuban. The city was constructed beginning in 1794. Now it is a dynamically developing city with an excellent educational base and a strong food processing industry.

Krasnodar has over a million inhabitants and a determining factor in this is the amount of economic migrants from other places in southern Russia, Ukraine and countries in the Caucasus. The population in Krasnodar consists of 90% Russians, �.�% Armenians, 2.8 % Ukrainians, 1.1% Adygesians and 2.8% other nationalities. Krasnodar has become an important North Cauca-sian centre for interregional socio-economic development, both for the popu-lation and for investment in major businesses (banking centres, international and domestic trade networks, service spheres etc.)

Located on the right bank of the river Don, Rostov-on-Don is in the very centre of the southern Russian transport lines, providing access to the three seas — the Black sea, the sea of Azov and the Caspian sea and direct contact with the whole European part of the CIS, Transcaucasia, the Middle East and the

The Russian view of time is similar to that in many Latin cultures — meetings will rarely start or end on time nor will people always arrive at work punctually.

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Mediterranean. The city has four railway lines, two federal motorways, an air-port and a cargo port. From the airport it is possible to fly to �2 destinations in Russia, five CIS capitals, and abroad.

All sectors of economic development are well balanced and have a great potential for growth. The city is of interest to foreign companies: both “John Deere” and “Day” have already opened production here.

Any talk of the south of Russia must necessarily include the subject of the Caucasus. Obviously many foreign investors worry about the close proxim-ity of Krasnodar region to the problem areas, but in recent times the federal government has taken steps to stabilise the situation, and has created whole programs to aid development and increase the attraction of investing and liv-ing in the regions close to the Caucasus. Amongst these issues there is also a huge tourist potential here — considering the quality and quantity of re-sources – that can only be compared with Baikal or Altai, but with the added bonus of a warm climate.

Nizhniy Novgorod (a one-hour flight from Moscow) stands out with its excel-lent location, historically located in the middle of a huge consumer market. As far back as the 19th Century, on the opposite bank of the river Oka, the big-gest open-air market in Russia was situated, which meant that the economy in the area grew quickly. Nizhniy Novgorod is the fifth most populous city in Russia with 1.� million inhabitants. In a radius of 500 km from the city, 4� mil-lion people live, and within a radius of 1000 km from the city 84 million. This means that investment in any type of business directed at satisfying the con-sumer demand is possible as well as services, large scale consumer goods, logistics, etc.

Nizhniy Novgorod is one of the oldest cities in Russia, founded in 1221. It is the capital of the Volga Federal District, the centre of Nizhegorosky region and the assumed capital of the Volga-Vyatsky economic region. The region is currently developing excellent infrastructure and a high level of education among the population. Here there are over 500 higher education establish-ments and affiliates. The region is not a special economic zone, but the lead-ership has created a favourable investment climate. There are more than 100 enterprises working with foreign capital here. With the participation of foreign partners, several major projects have been started, like the construction of a pulp and paper plant of the Finnish company Stora Enso. There are actively

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working subsidiaries of the European Bank for Reconstruction and Develop-ment, which are working within credit for small and medium businesses.

The transport infrastructure includes an international airport, passenger and cargo ports, a powerful railway centre, which allows the idea of extending the trans-national corridor to Nizhniy Novgorod to be put into practice and makes the region attractive for tourism. Murmansk and Arkhangelsk (a two-hour flight from Moscow)

Murmansk is an important city in the world, located close to the North Pole. More than that, it is one of Russia’s major ports. The deep-sea, ice free, Mur-mansk port is strategically very conveniently located, beyond it lies the ocean. This is a major advantage over other ports, like the Black sea port or the Baltic port, because in order to enter the ocean from these, it is necessary to cross the territorial waters of a foreign state.

Murmansk is a young city, founded in 1916, although it was planned as early as in 1870’s, and not very big with �00,000 inhabitants (56th place in Rus-sia).

All prospective development is connected to freight transport. If the project planned to make Murmansk a deep-sea trans-shipping centre is realised, it will give a jolt to develop the rest of the region. Firstly, Murmansk is the closest port to the off shore gas field recently discovered. Secondly, a trans-shipping centre in Murmansk will promote a revival of the North Sea route. Revival of the movement in this through passage is a topical issue for both business and government, since if global warming gathers momentum; the Northern route will be more actively sailed. Murmansk region is in close contact with Krasnoyarsk region, which is of mutual benefit. Apart from this, Kazakhstan is currently searching desperately for a corridor from China to Europe and North America, and a shipping centre in Murmansk could very well be the key. This may be the start of the realisation of many projects, the development of industry and an increase in the attractiveness of investing in the region.

Arkhangelsk (a two-hour flight from Moscow), is older than Murmansk, it was founded in 1584. Already at the end of the 1580’s Arkhangelsk was at the centre of Russian foreign trade, responsible for 60% of the income in gov-ernmental coffers. Now, Arkhangelsk has the same position as Murmansk,

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although the port is not as deep. This is the main base for oil and gas field de-velopment on the Artic continental plate, as well as in the Barents and Karsky seas, in addition to being the shortest route for freight on the North Sea route, especially when compared with traditional routes from Europe to Southeast Asia.

In Arkhangelsk there is a concentration of the wood preparation, lumber chemical, pulp and paper (Solombalsky pulp and paper plant), fish and micro-biological industries and also machine manufacturing.

In the city, 7,700 enterprises are registered, 2,200 of them large and medium sized. The majority of these enterprises are within the lumber industry, which account for over 40% of the production and industry in the city.

As can be imagined, investing and growing a business in the Russian regions is not without challenges, so we have prepared some advice and cultural background information.

First piece of advice: In any region, it is necessary to be friendly with people; this is especially true of Siberia. In all regions with a harsh climate, which Si-beria has in extreme, there are particular expectations of people. Every new-comer there will ask themselves “am I prepared to go into the taiga with this person?” For this reason people will evaluate a newcomer carefully, for a long time, and if they become friends then it is forever.

In the Urals people are stubborn and very persistent when it comes to achiev-ing a goal. They are highly focused.

When travelling to the south of Russia, remember that the pace of life here is very measured and unhurried and the manner of doing business here reflects that.

The inhabitants of the Volga region have souls as wide as the Volga itself, and this can be seen at first glance. Take time to learn how to create working relationships and conduct business with them.

The climate of the north (Murmansk and Arkhangelsk) compels people to keep an icy calm and philosophical view in any situation. It can take time to create relationships but they will be long-lasting.

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The second piece of advice: If you want to achieve something in Russia — wherever you go, learn to organise long-term relationships with local authori-ties. However, here there are several myths. Firstly that it’s only worth doing business with chief executives — governors or mayors. Bear in mind that a chief executive is vulnerable today and tomorrow he’s gone. For this reason, employees on a lower level are responsible for the realisation of projects — regional ministers, department directors, department heads may survive several generations of city or regional leaders. It’s important to cultivate good personal relationships with them, render assistance to solve urgent prob-lems, practical questions, develop mutually beneficial initiatives and always have a direct relationship with them. They will be grateful for help in preparing documents and presentations. This is an important instrument in long-term work and will allow you be confident regardless of any change of power. By the way, this is what will make you succeed, contrary to what myth number two tells you: that it all depends on money. Build relationships, be helpful to people and money will stay plan B.

The challenges and benefits of doing business beyond Moscow and St. Petersburg When entering the Russian market, it is necessary to be prepared for certain risks connected with doing business in the regions. First and foremost, be-cause there is little experience of cooperation with foreign investors. In several places the relationship with Western businessmen has remained unchanged since the 90’s. Moscow and St Petersburg are dynamic and have the same outlook on life as Europe, open and new, using modern business methodology and prepared to adapt to any new experience, but the regions definitely have a less intensive rhythm, and prefer to deal with things in the traditional way. There are different paces and objectives in the regions, people are slower to sense new currents and move to the tune of the business world.

On the other hand, foreign business people know very little of life in Russia outside the two capitals. Mutual distrust can blind people from seeing the prospects of a beneficial cooperation. For foreigners, the regions are prac-tically unchartered territory, where it is difficult to orient oneself without an experienced guide. And in such a big country getting lost would be a costly mistake. For example it is dangerous to make mistakes in placing a business, it is necessary to look over the area carefully. There can be problems with moving a business from one city to another, if they are located a distance of

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1000 km from one another. Just try to imagine the route: the distance from Moscow to Irkutsk 50�9 km, this is about the distance between London and New York, located on different continents. And Irkutsk is not even on the East-ern edge of Russia.

It is true that Russia is not always kind to foreigners. There are many difficul-ties and many of them are rather scary. But those who are courageous will certainly be rewarded, for them great possibilities have opened up. And the dividends received may fully compensate for the effort put in and even for the unpleasant moments.

To start with, the competition between foreign businesses is far lower in the regions, because there are fewer of them than in the centre. What once looked like a disadvantage may now turn out to be an enviable advantage. While your competitors consider whether it is worth doing business with the regions, you may find a vacant niche to occupy and develop a highly profitable business in a more comfortable competitive environment. The regions of Russia need investment in order to develop their own economy, and for this reason it is inevitable that conditions will arise that will make them attractive for invest-ment. In many regions this has already happened with free economic zones, with tax benefits for investors.

An additional point is that Russia is a country with a growing economy, and the last untapped market on European territory. Beyond lies China, where there is a different culture, a different system of evaluation and different tra-ditions. Russia is definitely a much more accessible partner, with an attitude closer to the European mentality, a high level of education, huge potential and openness towards innovation that makes conditions ready for integra-tion between Russian and Western economies. Western experience will still be in demand here for a long while and may still bring a quick pay-off. Another competitive advantage when compared with China is that you can still find inexpensive intellectual labour and the ability to make unconventional and bold decisions in Russia. At the moment China is associated with poorly quali-fied labour, and consequently with the production of low-quality goods and services, while Russia remains a country with a high level of education among the population.

Russia is open for business; here you can gain immediate access to the mar-ket and to resources. It is the largest country in the world with a population

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of about 142 million people, there is a need for a huge quantity of goods and services.

In addition, through the Russian regions it is considerably easier to gain ac-cess to Russia’s closest neighbours, the CIS countries, open a route to more resources, extending possibilities for developing your business and even new prospective markets. It is in the regions of Russia that the opportunity to de-velop a strategic partnership with the CIS countries may present itself. These countries often have a common cultural space, history and language with Russia. Once they cooperated with Russian regions on a near equal basis, and you can use the connection between them to develop business in the CIS.

And Russia is the country that never sleeps. It’s not a joke, but rather a seri-ous competitive advantage. Because of its enormous size, the country covers 11 time zones, and thanks to this, the country can function 24 hours a day. When Moscow is going to bed, the Far East is already getting ready for the workday. This can successfully be used to optimise work processes, transfer-ring a part of the business by outsourcing.

For those who are still in doubt, this story might be useful: in the middle of the 1990’s the board member of a major European bank, read many nega-tive accounts of Russia and declared that he would never do business in this country. One of his colleagues, who knew Russia well, managed to convince him to go on a trip through several Russian cities. The foreign bank manger saw so much that did not fit his preconceptions of the country that when he returned he began to develop business in Russia, and now the bank operates in many Russian cities. When making the decision to invest in Russia, it is important to understand that there will frequently be a substantial difference between what is said about Russia and how things stand in reality. It is a country with great pos-sibilities to do business. Of course, for foreigners it is difficult to figure out the details of the process, but those who learn it, will receive a real advantage and unforgettable enjoyment.

10. What Makes the Russians so Russian?

by Michele Berdy

10. What Makes the Russians so Russian?

by Michele Berdy

Michele A. Berdy has lived in Moscow

on and off for thirty years. She is a trans-

lator, interpreter, writer and specialist in

communications. She writes a popular

weekly column on language and transla-

tion for “The Moscow Times” and “The

St. Petersburg Times”, as well as book

reviews and feature stories.

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As Russia continues its mad fast-forward acquisition of the attributes of Western life — shopping malls, coffee shops, cocktails, European fashion, TV shows, and so on — foreigners may be forgiven for thinking of Russia as “another European country” and Russians as “like us.” The large cities look, smell and taste like other European capitals; business etiquette is within a familiar range (at least on the surface); and people look, dress and act pret-ty much the way they do back home. Except when — unexpectedly — they don’t. A friend, or colleague or spouse expresses an opinion you think inexpli-cable (if not heinous). Or does something you find puzzling (if not unethical). Or accuses you of the same (if not worse). And you wonder if it’s true, after all, that Russians are enigmatic, mysterious, puzzling human beings whom we foreigners can never understand.

They aren’t. It’s just that behind the familiar façade of daily life and manners, Russians do not share all of the historical, cultural, and religious experiences and premises of Westerners. What seems on the surface as “illogical” be-havior isn’t illogical at all — it is behavior that has been learned to be ef-fective over the millennia, through their culture, upbringing, religion, history and interpretations of history. To understand Russians, you need to know something of their history and institutions.

Physical Russia: History of a Place and the Place of History

At least once every foreigner should travel across the country, preferably by train. That is the only way to truly appreciate the two single most important facts about Russia: the country is huge and situated far to the north. The climate is brutal almost everywhere; the growing season is short; and natu-ral disasters (floods, frosts, droughts, early or late snow) occur with lamen-table frequency. Ancient Russians lived in communities (called mir — now the word used for “world”) that to some extent worked together, shared tools and seeds, and were willing to help — and expected to be helped — in time

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of trouble. The kollektiv wasn’t a construct imposed by the Soviet period; it’s the only way, in Russian historical experience, human beings can survive.

INVASION AS A WAY OF LIFEIt is also worth remembering that the vast Russian land-mass — about one fifth of all the land on earth — is a barely defensible plain. There are few natural barriers to invasion from the West or the East, and over the ages Russia has been attacked from both directions. When not being attacked, the Russian Empire has gone to war against the nations surrounding it and incorporated their lands into their empire.

The first significant invasion occurred in 1224. A Russian chronicler wrote: “For our sins, unknown tribes came. No one knows who they are, nor whence they came, nor what their faith is, but they call them Tatars.” These horsemen from the East — called Tatars in Russia and Mongols in the West — appeared like a bolt from the blue, pillaged and plundered, and then reigned over Russia for nearly 250 years.

Over the centuries, Russia was attacked numerous times by the Mongol-Tartars, Lithuania and Poland, Sweden, France (the Patriotic War of 1812); and Ger-many in 1941 (known in Russia as the Great Patriotic War). Russia fought Great Britain and France in the Crimean War, in 1905 against Japan, and in World War I against Germany. Russia launched wars against Po-land, Sweden, and Turkey and annexed Central Asia and the Far East. Its territory expanded to eventually include Ukraine, Belarus, Estonia, Lithuania, Poland, Latvia, Crimea, the northern and southern Caucasus (including Georgia, Armenia and present-day Azerbai-jan). The Soviet Union invaded Finland, regained the Baltic States and Eastern Poland, sent tanks into Hun-gary and Czechoslovakia, and started a war in Afghani-stan.

I do not rule Russia; ten thousand clerks do.

Czar Nicholas I

BYTHE

WAY

Education is a weapon, whose effects depend on who holds it in his hands and at whom it is aimed.

Joseph Stalin

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In about 800 years, through invasions, treaties, and annexations the tiny city-state of Moscow grew enormously to stretch eleven time zones, gaining territories, nations, new religions and vast natural wealth. But in the national psyche, the devastation of the major incursions against Russia (the Mongol-Tartars, the Poles and Swedes, the French in 1812 and Germans in 1941) have overshadowed Russia’s own territorial expansion. Today it is not un-usual to hear Russians assert that the country has “never invaded another land” or to invoke the specter of enemy encirclement. Certainly this is par-tially the result of political manipulation. But even in this age of terrorist at-tacks and nuclear weapons, when natural boundaries or even conventional armies provide little protection or deterrence, the sense of being a people of the plains, vulnerable to land attack, has remained a part of the Russian collective consciousness.

AUTOCRACY AND DEMOCRACYIf the Russian path from autocracy to democracy was plotted as a line graph, it might look like this: a slow rise towards autocracy from the begin-ning of recorded history peaking in 1547 when Ivan the Terrible crowned himself Tsar (the Russian word for Caesar) of All Russia, and then jag-gedly descending towards democracy over the centuries — with dramatic peaks up to one-man totalitarian control and valleys down to short periods of democratic rule. Russians did not experience a gradual evolution from autocracy to democracy; nor have they ever experienced long and secure periods of majority rule.

However, their history of governance has been, in some ways, remarkably stable: an autocratic leader (called, at various times, the Grand Prince, Tsar, Emperor or Empress, General Secretary of the Communist Party, President) surrounded by a group of powerful men (boyars, princes, noblemen, Polit-buro, cabinet/oligarchs) who have used their privileged position to usurp the nation’s wealth, sometimes fighting among each other or unseating the ruler. Power has been secured by troops loyal to the ruler (the black-clad oprichniki of Ivan the Terrible, the musketeers and guards units of the tsars, the secret police of the emperors, the various security agencies of the Soviet leaders, the FSB and siloviki of today). Power has been shared formally with advisory or elected bodies (Boyar’s Duma, land assemblies, councils of state, Duma, Congress of People’s Deputies, Federation Council) that in reality have had little real authority. Over the ages, the names have changed, but the func-tions have remained remarkably the same.

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Meanwhile, the centralized power has been challenged from “below” — by boyars, by peasant-led rebellions, by noblemen, by workers, by professional revolutionaries, by lone dissidents, by angry crowds, and by small groups of oppositional parties. This opposition has always tried to mitigate the central hold on power and wealth. Oppositional forces and violence grew greatly in the periods leading up to the Revolution of 1917, which led to the creation of the Soviet Union, and once again towards the second revolution of 1991, which broke it apart.

In all of Russian history, there were only three short periods when the country was not tightly ruled by a leader vested with nearly limitless power. Sadly for Russian historical memory, none of those periods was happy.

The first was after Ivan the Terrible’s son Fyodor died without heirs in 1598. The council of boyars elected Boris Godunov, whose reign was marred by crop failures and famines. Rumors swept the populace: Boris Godunov was responsible for the death of Ivan’s first son, Dmitry, and the crop failures were a sign of God’s disfavor. The Poles decided to profit from the instability in Moscow and sent a young man claiming to be Dmitry (called the False Dmi-try) to lead an invasion. From 1605 until 161�, Russia was in chaos: waves of incursions from Poland destroyed the country’s land and wealth; no less than three False Dmitrys took up residence in the Kremlin; and armed ban-dits roamed the countryside. Cities were burned and pillaged, villages and crops destroyed. A third of the population died in fighting, from famine and disease. It wasn’t until the volunteer army led by the merchant Minin and Prince Pozharsky (whose statue stands before St Basil’s Cathedral) drove the Polish invaders from the Kremlin that peace reigned once more. (This is now celebrated on November 4, Russian National Unity Day.) This period of chaos and lawlessness, called the Time of Troubles, has remained a haunt-ing memory for Russians. It is still invoked today to support a strong, even autocratic leader, for the Time of Troubles showed that a strong hand is bet-ter than no hand at all.

The second period of something approaching democratic rule lasted all of eight months. After the last tsar, Nicholas II, abdicated, in February 1917, the Provisional Government was nominally in charge until October 25 when Vladimir Lenin and his followers successfully carried out a coup d’état. The country was at war, the economy in ruins, cities plagued by looting and roam-ing bands of marauders. Workers rioted in the poverty-stricken cities and

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peasants burned down estates in the countryside. There were no mecha-nisms for governance. Every attempt to exert control was challenged by rival “Soviets” (left-wing councils). This short period was not an advertisement for the superiority of democratic rule.

Like the two previous periods, the third period followed the collapse of the government, this time the Soviet Union. By the end of the 1980s, the USSR was literally bankrupt, unable to compete economically and technologically on world markets, and rent by simmering ethnic tensions. The country had ceased to exist de facto by September 1991, when virtually all the republics voted to secede from the Union. It ended de jure in December of that year when the three leaders of Belarus, Ukraine and Russia — the three republics that had founded the USSR — signed papers to codify its dissolution.

Like the Provisional Government, Boris Yeltsin inherited a bankrupt country and wildly dissatisfied population. But unlike the post-tsarist rulers, Yeltsin had the mandate to change both the political and economic structures. There were no bodies of governance in place, no procedures, no traditions; there were, however, stridently and even violently opposed parties to the left and right. On the economic front, there were no wholesale or retail distribution systems or infrastructure, no financial institutions, insufficient transporta-tion and communications systems, no advertising and marketing resources, few office buildings and commercial space. Regulatory laws were contradic-tory or simply nonexistent. Oil was less than $20 a barrel. But time was of the essence, for the increasingly impatient population was demanding change (in the form of food and consumer goods). The process of transforming a poor and backward socialist state into a prosperous democratic and capital-ist society was chaotic, unfair, and cruel. Whether or not it could have been done differently (more fairly, less traumatically) is moot right now. The nation-al memory of those years — to some extent a cultivated, selective memory — is of personal and national financial ruin; endless, futile political battles; the degradation of culture, education, medical care, the armed forces, and national reputation; the criminalization of society; the transfer of the nation’s wealth into a few hands. In short, the first post-Soviet experience of democ-racy was synonymous with instability and decline.

REFORM FROM ABOVERussian leaders have always measured themselves and their country’s eco-nomic development in terms of Europe and more recently, the United States.

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When they judged themselves to be “backward,” they imposed a series of dramatic reforms to “catch up” or, in the famously optimistic phrase of Nikita Khrushchev, “catch up and surpass.” The first great reformer was Peter the Great, who transformed his country from top to bottom, mandating changes in government, currency, calendar, dress, science, education, language, art, the church and society. Succeeding emperors and empresses incorporated various aspects of European governance and society as it suited them. But the next huge reform effort came with the 1917 Revolution, which changed the economic system, eliminated classes and titles, and virtually outlawed re-ligion. Agriculture, industry, education, the arts, and language were reformed and transformed — often by force and at enormous cost to the citizens. The next revolution in 1991 threw out much of the Soviet model, bringing back religion, capitalism, multi-party politics, and economic class disparities.

In each case, reform was intended to bring Russia up to the international standards of the day. It was imposed from above with the support of a rela-tively small part of the population, often without the rest of the population’s assent or knowledge. If the masses were aware of the reform plans at all, they simply hoped that they’d bring greater security and prosperity. The majority of people were unprepared for the trauma of change, and it was this majority that suffered its brutality, be it Soviet collectivization — which brought fam-ine, destitution and loss of millions of lives — or the freeing of prices in 1992 — which wiped out the nation’s personal savings.

EAST OR WEST, RUSSIA IS BESTIn the 19th century, the need for change divided the intellectual elite into roughly two camps: the Westernizers who believed that modernization along Western political, social and economic models was Russia’s best hope for development, and the Slavophiles who insisted that Russia had her own unique path of development, superior to Western models. The Westernizers wanted to import to Russia the notions of legalism, rationality, and a model of governance in which leaders served at the bidding of the people. Slavophiles wanted a return to the (probably mythical) time when there was no opposi-tion between the Orthodox Church and state, between ruler and ruled — to a time when the village mir was a model of cooperative development. While every country develops in zigzags, leaning now to one ideological pole, now to another, in Russia the perception of vying ideologies has been intensified by its geographical position between East and West. This ancient argument is continuing in a new and particularly strident form today.

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LEGACYWhen Russians consider their past and their history, they see lessons that differ in many ways from the historical lessons in other countries. They have an acute sense of territorial vulnerability, despite the size of their country. The harshness and unpredictability of their climate has pre-pared them for the worst and made them skeptical of long-term planning. They see democracy as a messy, destabilizing process that brings wealth and power to a few and devastation to many. They experience reform as a wrenching and disorienting event. They mistrust their leaders and do not feel that they can influence them, and yet they are accustomed to a strong, centralized power. They are used to decision-making as an opaque, hid-den process, which spawns a predilection for conspiracy theories. They are drawn to the Western institutions (independent judiciary, separation of legislative and executive powers, separation of church and state) and yet also entranced by the notion of a system without separation, where a sin-gle “vertical of power” would unite every institution and every citizen. They have a heightened sense of their unique geographical and developmen-tal trajectory, and yet they downplay the uniqueness of other countries. They simultaneously feel superior to all and yet suffer a painful inferiority complex. After centuries of incorporating other nations and peoples, they sometimes succumb to the tug of imperialism and chauvinism, and yet as the descendents of serfs and peasants, the children of people who suf-fered grievously in unjust societies, they do not see themselves as coloniz-ers or oppressors.

METAPHYSICAL RUSSIA: FAITH, RELIGION AND FOLK TRADITIONSLittle is known for certain about the Russian pre-Christian past. No written records have been found, and so scholars have been left with the task of seeking meaning out of the remnants of folk rituals, traditions, tales and shrines. It is not certain if there was one supreme god or a pantheon of gods, and whether or not gods were paired in opposites: good and evil, fertil-ity and death, creation and destruction. We do know that the ancient Rus-sians organized their calendar by the moon and celebrated the beginning of the year in March. They celebrated a spring fertility festival with a burning of a straw effigy, and another spring festival to honor the sun god, Jarilo. At the summer solstice, they had a rowdy celebration called Ivan Kupalo; in mid-summer they honored the thunder god Perun, and in the autumn there was a harvest festival. It seems they also celebrated the winter solstice. Even in the 20th century, peasants revered Moist Mother Earth as a kind

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of supreme benevolent spirit. In addition to gods that either represented or controlled the world around them (fertility, harvest, thunder, rain, sun, fire, and cold), the world of the early Russians was inhabited with a multitude of spirits, sprites, monsters and fairies — some benign, some malevolent — who shared their houses, barns, fields, forests, rivers and seas.

When the early Russians accepted Christianity (starting in the 10th century), they didn’t abandon their old gods. For centuries the Church fought against this dual belief system, but in the end, folk beliefs became interwoven with Christian beliefs and personages. The spring fertility festival became Maslenitsa (Butter Week), the great celebration before the long period of Lent. The painted eggs once exchanged during the festival of Jarilo became Easter eggs. The mid-summer festival of the thunder god was transferred to feast day of the prophet Elijah, who ascended to heaven in a fiery chariot. What could not be subsumed into Christian tradition remained part of folk custom. Healers treated patients with herbs and spells, sometimes invok-ing the Trinity (white magic), sometimes saying Christian prayers backwards (black magic).

THE ORTHODOx CHURCHWhen Christianity came to the lands that would become Russia, it first was accepted among the nobility and urban dwellers, and then spread slowly among the peasants in the rural areas. In 988 when Prince Vladimir was bap-tized, there was only one Christian Church. But starting in the 11th century, the church began to split, with Rome on one side of the divide and the four ancient capitals (Jerusalem, Constantinople, Antioch, and Alexandria) on the other. Although there had been significant differences over the centuries, the rift widened in the 11th century when the Roman Church added the Fil-ioque clause to the Nicene Creed. For people not much involved in doctrinal religious matters, it is not easy to understand the significance of a few words. The Nicene Creed declared that the Holy Spirit proceeded from the Father. The new version of the creed in Rome added “and from the Son,” which, in the judgment of the Eastern bishops, was a logical interpolation that altered the balance of the Trinity. As importantly, the Eastern church leaders insisted that the Pope did not have to the right to change the basic Christian creed without the assent of the other four churches.

Christianity came to the Russian lands from Constantinople at the time when these and other issues were slowly dividing the once united church. Russia

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would come to align itself with the Eastern Church of Byzantium (the former name of Constantinople) through dynastic marriage, tradition and belief. Russians concluded that Rome had “fallen” under the weight of incorrect be-liefs and practices. When Constantinople fell to the Turks in 145�, a chroni-cler wrote: “Two Romes have fallen, but the third stands. And a fourth there shall not be.” The myth of Moscow as the “Third Rome” — the center of the true Church — has held the imaginations of rulers and thinkers in Russia ever since.

CHRISTIANITY EAST AND WESTOver the centuries, significant differences arose between the Christianity in the Western world and the Eastern world. Some differences in practice are immediately visible upon entering an Orthodox church, such as the absence of pews and kneelers, married parish clergy, the sign of the cross made right-to-left, the sanctuary located behind the iconostasis, and the veneration of icons (paying respect to the image of a saint and praying before it). Other differences are doctrinal. The Orthodox Church does not believe in the infal-libility of any person, and there is no “pope” of the Orthodox Church; rather the national churches are headed by patriarchs (also called archbishops and metropolitans) who are all equal in authority. Orthodox Christians do not be-lieve in purgatory, the Immaculate Conception of Mary, or original sin. For them, grace is not a gift, but “uncreated” and present in all that is; salvation is not a one-time act, but a life-long process; suffering is the inevitable lot of humans and part of the process of redemption.

There are also differences of emphasis. In the West, Christianity (both Ca-tholicism and Protestantism) developed with more emphasis on actions in the world; in the East the emphasis was on monasticism and contemplation. The Western church was influenced by judicial ideas and logic; the Eastern Church felt little need to explain the mysteries of the faith. In the West, there is more emphasis on Christ as the “sacrificial lamb”; in the East, it is on Christ “the victor over death.” In the West, Mary is most commonly celebrated as the Virgin Mary; in the East — as the Mother of God.

These briefly described and rather over-simplified differences might seem obscure and irrelevant, but they have a strong, if subtle impact on world views. Russians find the Western positivist and pain-free gospel of prosper-ity and happiness laughable; Westerners find Russians to be fatalistic and passive. But Russians’ harsh climate, their distant and unreadable leaders,

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and the teachings of their faith have taught them that life is hard and full of unexpected suffering, and that there is no short cut to bliss.

THE RISE AND FALL AND RISE OF THE CHURCHBy the time of 1917 Revolution, virtually the entire Russian population of the Russian Empire was Orthodox Christian, led by tsars who were “anointed by God.” Churches, chapels, cathedrals and monasteries filled cities and the countryside with their magnificent golden-crowned structures and filled the air with the sound of bells and the scent of incense and beeswax candles. The population lived by the church calendar, with the social and artistic sea-sons halted during the four religious fasts, and the work week halted for the many religious holidays. But judging by the works of ethnographers and the constant criticism of the clergy, many Russians continued to integrate ele-ments of pagan belief and superstition into their lives. No matter how much parish priests scolded, villagers went to healers and witches, cast spells and tried to protect themselves from the evil eye, put kopecks in the corner to appease the house sprites, and made tribute to Moist Mother Earth. At the same time, they lived by the church calendar, fasted and attended church, went on pilgrimages to monasteries and holy places, and celebrated the sac-raments. In the 19th century, Russian thinkers argued passionately about the Russian peasant: was he a pious believer, or was he a pagan and pro-foundly irreligious?

One of the first revolutionary acts of the Soviet state was a war against reli-gion, the “opiate of the masses.” Within the first ten years of Soviet power, the state virtually destroyed the church: churches and monasteries were stripped of their treasures, which were burnt, melted down, or sold. Churches and monasteries were closed, their structures rebuilt into offices, dormito-ries, warehouses, or stores. Hundreds of thousands of clergy and laypeople were imprisoned and executed. Religious holidays were banned and believ-ers were persecuted. Folk beliefs were ridiculed as backward superstitions. Atheism was the state doctrine.

One of the greatest revolutions of the post-Soviet era was the granting of religious freedoms. Although the constitution separates church and state and guarantees freedom of conscience and religious tolerance, the Rus-sian Orthodox Church has reaped the greatest benefits and become a quasi state church. Up to 90 percent of Russians identify themselves as Orthodox.

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However, 75 years without the church have taken a toll. Few believers grew up in parishes, have studied the faith, or even attend church regularly. Mean-while, folk beliefs have also experienced a revival. Bookshops are filled with tomes on early Russian mythology and practices, and newspaper ads hawk the services of seers, wizards, witches and healers.

LEGACYRussians have always blended folk belief, pagan practices, and Christianity. After several generations of suppression of religion, even self-identified Or-thodox believers dabble outside the faith. Russians are likely to regard su-perstition, astrology, religion, and the occult with open minds. To deal with a problem, they might light a candle in a church, spit three times over their left shoulder, consult a folk healer, read an online horoscope, and divine their fu-ture in a bit of wax dripped into a glass of water. However, even if the details of dogma and practice have not been passed down from their grandparents and parents, the worldview of their Orthodox faith has. They are likely to accept that things happen due to forces beyond reason or beyond human and natural control (“by God’s will” or “by fate”); they accept suffering as a necessary part of life; they are capable of profound humility and forgiveness. But the crash-course in religion has been spotty; they often do not know much about other religions, and it is not unusual to hear Russians describe Protestantism as a kind of minor sect or not know that it is a Christian faith. They are protective of Orthodoxy and resentful of missionaries from other churches in the country. They see their religion as part of their ethnic and cultural identity. Some see the mission of the “third Rome” as part of their country’s unique destiny.

Social Russia: Family, Friends and Clans

ONE BIG, NOT-SO-HAPPY FAMILYIn Russia, family has always been the extended family. In villages, houses were shared by grandparents, parents, their sons and their wives and chil-dren, as well as unmarried women and various other relatives. In casual speech relatives were identified as simply “brothers” (instead of cousins or second cousins) or “grandparents” (instead of great-aunts or –uncles). But the family was a complex hierarchy with an elaborate system of names to describe familial relations, ritualized seating arrangements at the communal table, and fairly rigid rules that codified relations. On the one hand, it was one big family with extremely strong ties of kinship and mutual responsibility; on the other, it wasn’t a group of equals.

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Traditionally, the family was headed by the patriarch, whose word was law and whose hand could be raised against anyone, particularly his wife, daugh-ters, and daughters-in-law. But actually, the patriarch’s powers were limited to the men’s work and some questions of money. Women ruled in matters of marriage and household budget, and were largely the decision-makers in the sphere of the women’s work.

Villagers worked together in the fields and barns, attended church together, celebrated together, and generally knew their neighbors’ lives as intimately as their own. The mir (village commune) might not have been a haven of co-operation and harmony — banish images of happy peasants gaily threshing wheat together and paint in gossiping, pilfering, and fighting — but it was a close-knit community. For centuries the worst punishment was exile from one’s family and village.

THE CITY PEASANTWhen the nation’s villagers started to move to the city at the end of the 19th century and during the early Soviet period, they brought their country ways with them. This was facilitated by economic constraints: people lived in com-munal barracks, communal apartments, or multi-generational single-family apartments. Privacy didn’t exist (and doesn’t exist in the language). Family members continued to be involved in each other’s lives. Even today, grand-parents usually play a profound role in the upbringing of their grandchildren; parents provide assistance to their children in everything from homework (in childhood) to household purchases (for middle-aged adults). Children have close relations with dozens of relatives, both immediate and distant. In hap-py families, it is a kind of ideal extended family, with shared responsibilities and joys. In unhappy families, it’s hell on earth.

Neighbors and friends became the urban-dweller’s mir. Friendships in Rus-sia are intense, intimate, and important. Much is expected of friends, and much is given to them — help, solace, money, sympathy, companionship, understanding, and plain good old conversation and fun. Married couples have friends together, and the husband and wife have their own friends, of-ten from childhood. Ties of friendship are as sacrosanct as ties of kinship, but casual acquaintances do not have the same level of intimacy or responsi-bility. Good relations with neighbors are to be nurtured, for, as Russians say, you can break off relations with family or friends, but you can’t move away from your neighbors.

16�

This paradigm differs from Western models, where it is more likely that the nuclear family (parents and children) live separately from their relatives, where there are more friendships that don’t entail the same level of responsi-bility, and where relatives and friends are less involved in each other’s lives.

CLANSIn the late 1980s and early 1990s, Russian sociologists began to note a new twist on the old kinship and friendship phenomenon — clans: groups of people that were connected by ties of loyalty. These clans might be people who shared professional interests, or went to school together, or worked to-gether, or lived near each other. They weren’t relatives or friends (in the deep Russian sense), but their loyalty to each other superseded laws, professional responsibilities or ethics. Sociologists posit that in the absence of a fair and functional judiciary, clear and concise legislation, and business transpar-ency, clan relationships provided a kind of relational glue that kept society from drifting into anarchy. Insider trading, nepotism, conflict of interest, and violating the sanctity of the contract might be wrong, but not helping out a clan member is unforgivable.

US AND THEMThe best thing about Russian families, friends, and clans is being included in them; the worst thing is being an outsider. The guy who butts in line, slips into a parking space you were clearly waiting for, or reneges on a contract, is also the guy who would drive 500 kilometers in a snowstorm to bring his mother medicine, hand over a packet of cash to a friend in need, and sit up all night with a former classmate distraught over his divorce. Care, consideration, and courtesy are not doled out to humankind in general, but saved for the people close to you.

The “us and them” mentality can also extend to other nationalities, ethnic groups, and religious confessions. Russians are prone to ethnic and religious stereotyping, once codified in jokes and stories, but now with increasing fre-quency in attacks, both verbal and physical. The jokes are usually good-na-tured, and the stereotyping includes Russians, who often come off worse than other nationalities. The dislike and mistrust of the “other,” — be it a person of a different race, ethnicity, nationality, sexual orientation, or physi-cal ability — is partially a function of a rapidly changing world: the sudden vis-ibility of people who are completely different, work migrants who do not have a vested interest in staying in Russia or fitting in, and a huge influx of foreign-

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ers. It is sometimes a result of political manipulation and general confusion about what this relatively new country, the Russian Federation, is. But it is also a deep-rooted discomfort and fear of people who are from a different family, village, or region. However, once someone who is “other” becomes known to a Russian, all those alienating qualities tend to melt away. People might have generally negative attitudes towards an ethnic group, but that doesn’t preclude becoming close friends with someone of that ethnicity.

The first magnificent exception to this is a person in trouble. If you have been robbed, if you are ill, if you are lost, if you car won’t start — no matter what is wrong, the same folks who demonstrate against your country, sneer at your religion, or don’t give you a moment’s consideration in the parking lot, will drop everything and be extraordinarily generous with their time, money, and possessions.

The second exception is when Russians are extending their hospitality. If you are a guest, you are brought into the fold and feted like an honored member of the family. In turn, when you offer hospitality, you are expected to be gener-ous, attentive, and emotionally open.

Wherever you are invited as a guest, be prepared to dedicate yourself fully to the occasion. Bring flowers, alcohol, confections — or all three. Expect to eat and drink more than you should (lest you insult your hosts or cause them to wonder if you liked what they offered). Forget polite small-talk. Expect to discuss everything under the sun — including topics forbidden in polite Western company: religion, money, and politics. Be prepared for emotion; there’s nothing wrong with weeping a bit over a parent now deceased or guf-fawing over a good joke or story. Be prepared to make toasts — to the host and hostess, the occasion, the food and drink, and whatever pops into your head. Don’t worry about staying too long (a sign of a successful party), or eat-ing and drinking too much (it’s expected), or speaking too sincerely (anything else would be an insult), or making a fool of yourself (Russians forgive human foibles). For an evening or an afternoon, you are part of the mir.

LEGACYIn many parts of the world, Russians are stereotyped as rather dour, humor-less folk, slow to smile and even slower to laugh. This could not be farther from the truth, but the image endures because foreigners don’t always un-derstand the Russian division between public encounters and intimate rela-

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tions. Russians are likely to have their community — their family, friends, and clan — with whom they are open, caring, loving, emotional and deeply committed. Everyone else gets a figurative polite nod of the head (not a smile — that is reserved for genuine displays of pleasure, not mere courtesy). As one ethnic group with a defined culture surrounded by — but not entirely integrated with — other, very different ethnic groups, Russians are acutely aware of cultural differences, which can lead to stereotyping — of others and themselves. They are both wary and welcoming. Once they accept someone, they expect a deeply engaged friendship, which can cross the boundaries of Western notions of privacy.

A LAST WORDThese observations are over-generalized, over-simplified, and far too brief. There isn’t, of course, a “typical” Russian who exhibits all the archetypal characteristics of the nation. These notes are meant merely as a remind-er that Russians are different and see the world differently because their land, their history, their religion, and their social structures bear little resem-blance to Western models, institutions, and lands. In addition, they are living through a highly politicized, fast-forward period of change, when disparate fragments of their collective past rise to the surface of today, get a quick and expedient interpretation, and then get shoved into a confusing mosaic of “the Russian path.” In this mosaic, a White Army general, Joseph Stalin, Alexander Nevsky, Vladimir Nabokov, Moist Mother Earth, and St Sergius are all positive figures, emblematic of “what it is to be Russian.” No wonder for-eigners are confused.

It will take time for Russians to sort out their past. In the meantime, foreigners can stay sane, keep enjoying Russia, and protect their relationships with Rus-sians if they learn more about Russia’s complex, contradictory, and rich past.

Never forget a close colleague’s birthday.

11. You, Russians and Moneyby Stuart Lawson

11. You, Russians and Moneyby Stuart Lawson

Stuart Lawson has served as the CEO of

HSBC Russia since March 2008. Stuart

has been closely involved in the evolu-

tion of Russian banking since 1995,

when he joined Citibank Russia as the

bank’s president. In 2000 he became

first senior advisor and subsequently

chairman of DeltaBank (later bought

by GE Money). Stuart became the first

foreigner to be executive chairman of

a Russian owned bank, Bank Soyuz

— part of Basic Element group — in

2004.

In 2006 and 2007 Stuart was nomi-

nated as one of the “Russian Bankers of

the Year,” an annual award recognizing

outstanding contributions to the sector.

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Although I am the proud holder of a British Passport, I have lived in Russia for so long that it is difficult for me to remember how it felt when I first arrived here. That said, I have worked with a number of expats over the years and of-fered much free advice and support. Whilst the old maxim that “money can-not buy you happiness” is certainly true — failure to manage your financial arrangements in the days immediately before and after your re-location will certainly increase the chances of misery.

BEFORE YOU GET HERE Your preparation for moving to Russia should really start before you arrive. I would encourage everyone — whether you are relocating as a result of your employment or with your spouse or partner, to have a comprehensive review with their existing bank. This should cover all those things that are impacted as direct result of living and/or working abroad — an “International Needs Review”, even if that does sound very grand.

The sort of areas this should cover includes: • Can my current bank help me open an account in Russia before I arrive?• Can I transfer money from my existing accounts to Russia and how much

will it cost?• Can I manage my existing bank accounts on the internet?• Is there any impact to any of my existing financial arrangements — for

example my pension; any savings accounts; any stocks and shares?• Are there any implications if I buy or sell those investments while I am in

Russia?• What are the implications if I lease my home whilst I am in Russia? • Is my will up to date — and are there any implications if I die in Russia?

There are countless questions and your current bank should be able to help you. They might suggest that you seek specific professional advice — a tax specialist for example before you leave. For many, their employer will make

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this service available. If so — take full advantage. It is also worth asking your employer a few questions before you get here. Many employers have set allowances to support international postings. Make sure you understand ex-actly what these cover and how you will be recompensed for those expenses that you initially pay for. Ask what support you will get from Human Resources in your company — before you leave and when you arrive in Russia.

“How often will I be paid?” can be so basic — and is often missed. Many Rus-sians are paid twice a month — which can have disastrous consequences if you have structured your existing regular payments on the same day.

Finally, don’t forget to arrive with some Rubles. These can be bought quite easily in Europe or the USA. This is the only legal tender in Russia. Trying to manage several large suitcases (to get through the first few weeks till your freight arrives) and managing an ATM at the airport is just unnecessary stress. The taxi driver will be less than impressed with anything other than Rubles. OK I’M AT THE AIRPORTRussia has a complex set of customs regulations relating to monies that can be brought into the country without filing a customs declaration. The posi-tion is exaggerated because the regulations change frequently. If you plan to bring in foreign currency in any quantity, you should seek up to date advice on the best approach.

BANKING IN RUSSIA For the ‘first timer’ abroad, understanding the implications of receiving your income in a different currency can be baffling. Initially it feels like you’re on holiday. The exchange rate between the currency you are familiar with and the Ruble — or any currency, is not always in nice round numbers. Your exist-ing bank or any exchange bureau should be able to provide you with a small exchange rate table. If not, prepare one for yourself. Keep it small enough to fit in your wallet or purse — and it will save you having to do your maths with a queue behind you. One of my previous colleagues mentioned how cheap his supermarket shop had been — until I pointed out that he had missed a nought off his calculations!

Once you’re arrived in Russia, if your existing bank was not open an account for you in advance, you should open a local bank account as quickly as possi-

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ble. Be prepared for the process to take some time. Not every bank is capable of dealing in a foreign language. A new colleague recently arrived from the UK and it took her four weeks to open her account and get a debit card. Ask how long the process will take — and if you have not heard in that timeframe — go back to the bank and ask about the current status of your application.

Many expats will be very used to paying for the majority of goods and services with cards — debit or credit cards. This is not a safe assumption in Russia. The number of stores and restaurants that take plastic is increasing — but you would be wise to ensure that they actually accept plastic before you start shopping or sit down to eat. In my early days in Russia, I had the embarrassing experi-ence that the supermarket did not take plastic and I had a trolley full of shopping. Even today, the largest ‘hyper-markets’ still do not take plastic. Be warned!

You will also need cash for Metro tickets and internation-al dialling phone cards that you might previously have been used to purchasing from a machine using plastic.

Talking about carrying cash is a timely moment to men-tion discretion. I would not encourage anyone to walk around with significant sums of cash — and certainly never to display large sums of money openly. If you want to keep a quantity of cash on you, keep some in your pocket or wallet and the rest in a security wallet inside your shirt. No matter how positive you feel about Russia or how hard you try to blend in — you look foreign and will therefore be the target of the pickpockets and thugs that exist in every large city around the world. And as a banker, I would be totally remiss if I did not say, please, please do not write down your new card PIN numbers and keep them with the cards, however tempting.

The only number you should ever write down is the tele-phone number to ring in the event your cards are lost or

Yes the right to criticize Russia is mine, because Russia is mine and I love it, and I do not give any for-eigner that right.

Igor Stravinsky toasting Dmitry

Shostakovich

BYTHE

WAY

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stolen. It is worth keeping this at home — along with a list of all your card numbers. If you do lose any cards or have your bag/wallet/purse stolen, ring all the card issuers as quickly as possible so that the cards can be blocked. Russian banks are just like all other banks — and you can be liable for fraudulent transactions if you do not notify the bank or card issuer as soon as you realise your cards are missing.

All Russian banks offer the wide range of products that you will be used to. Once you have a found a bank you are comfortable with, you can discuss any banking requirements.

GETTING YOUR HANDS ON THE MONEY!There are many banks and currency exchange counters in the cities, espe-cially in Moscow and St. Petersburg. If you want to exchange currency, you should shop around for the best exchange rates. Never, ever exchange cur-rency with people on the street. Aside from the fact it is illegal, you are open-ing up all sorts of unnecessary risks to yourself.

ATM machines are widely available. All of them dispense Rubles and some dispense US Dollars or Euros. They nearly all accept the major international card scheme cards — but it’s worth a quick check. Many banks will charge customers of another bank so you should check first if that prospect pres-ents you with a problem.

To help you, here is a list of words that you might find useful:

ENGLISH RUSSIAN PRoNUNcIAtIoNATM Банкомат Bankomat

Bank Банк Bank

Bank account Банковский счет Bankovskey schееot

Bank card (debit card) Банковская карточка Bankovskaya cartochka

Credit card Кредитная карточка Credeetnaya cartochka

Currency Валюта Valyouta

Currency exchange Обмен валюты Obmen valyouty

Dollars Доллары Dollaree

Euros Евро Yevro

Foreign currency Иностранная валюта Eenostrannaya valyouta

Money Деньги Dengee

Money transfer Перевод Perryvod

Rubles Рубли Rooblee

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WHAT DO RUSSIANS THINK ABOUT MONEY?The impact of communismLike everywhere, how people think about money is driven by their age, their geographic location and their social/economic environment. For Russians that creates a significant set of divides. Three generations lived in an eco-nomic environment that has little in common with today’s capitalism. A com-bination of central planning with an absence of a true market economy, the role of the party versus the role of financial expectations and the impact on the social environment has had some lasting effects on the older genera-tion’s attitude to money. Obviously with the passage of time this has been diluted but the impact can be seen from time to time in unexpected ways.

There was almost no retail lending until 2000 and Russians expected to save for their major purchases of houses and cars. A colleague asked me to look around Tverskaya the month I arrived in ‘95. His question: ‘what do you see?’ I had the wrong answer when I said: ‘buildings’. His answer was equity. As the country emerged from communism, the apartments were generally allocated to their inhabitants and with the absence of an ability to access loans, there was little refurbishment.

Given the sheer scale of the country, regional differences are significant and there has always been a substantial difference between the attitude of Mus-covites and the regions (and of course an old rivalry between St Petersburg and the capital). These differences mean that saving and spending patterns differ and as the marketplace evolves with significant new growth appearing in the regions, so these differences surface. Moscow is of course where the bulk of the wealth and growth are in Russia, but cities such as Yekaterinburg and Novosibirsk have significant local industry and thus wealth, and pockets of high earners can be found deep in the Siberian oil fields too.

The 90’s and turmoilThe appearance of capitalism in the 90’s meant that the whole system changed rapidly. Into the vacuum left by the abrupt disappearance of the cen-tralised economy moved raw capitalism. Banks mushroomed overnight, run in the most part by either Soviet-style managers who adopted their management skills to the new environment; or highly motivated, smart young inexperienced managers who learned as they went along. Of course the large state organisa-tions continued to function and for many these were the safe havens that they understood from the past. Customer service was not a priority for the banks

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during this time. It was also during this period that some of the foreign banks entered the market but these were focused almost exclusively on the multina-tional corporate sector with almost no retail or Russian corporate offerings.

During this period there was a dark side that appeared in the form of ‘get rich quick’ schemes, (the most infamous being MMM), the financially naїve public was lured into a series of schemes all of which ended in the painful realisa-tion that the majority had lost all their hard won savings.

This experience was made worse by the three bank crises that occurred dur-ing the decade. People lost their entire savings and their faith in all other than the state banks. The experience was made worse in several cases when the clients of a supposedly bankrupt bank would see the emergence of ‘bridge’ banks that were used to protect the wealth of the owners of the banks whilst cynically letting the clients lose their money.

The impact of the ’98 crisisThis was the most extreme of the 90’s crises and was principally caused by the ever increasing government debt market that finally reached a level that could not be sustained. Whilst some had predicted such an event, the reality was more severe than had been expected and this period wiped out a whole section of banks and left others crippled. It is important to note that the ex-perience gained throughout this period has almost no relevance to the man-agement of banks in more typical economic cycles. What was seen then was bank management in a financial earthquake where different skills of survival and reconstruction were required. This is relevant for the medium term fu-ture of banking in Russia as the normal skills of banking management are required and there needs to be specific training programmes in place both in the financial universities and inside the banks themselves. At the time of going to press, it seems yet more skills sets will be needed to deal with the latest turmoil in the global banking sector.

I believe that this major default enabled the banking system to create stron-ger fundamentals and that combined with the benign economic growth envi-ronment caused by the energy prices alongside the political security over the next period, has enabled the emergence of a dynamic retail banking system. It has also fundamentally shifted the relationship of the majority of the popu-lation with their money. It has enabled them to move closer to their lifestyle desires, has introduced the concept of service standards into banking and

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has moved much activity out of the banks into the ATM networks and the internet. The development of the retail banking sector during the 2000’sWith the experience of the 90’s, Russians lost their faith in the financial system and also became extremely cau-tious of extending their horizons. This meant that aside from their savings in the large state banks, people kept cash savings themselves. The retail banks were fairly un-derdeveloped and there were almost no loan products.

As the new era dawned and against an extremely healthy economic environment, retail banking, first through con-sumer loans alongside car loans and then with credit card debt and finally mortgages became available to a broader spectrum of the population, although mort-gages still represent only 15% of home purchases. It was also during this period that the law providing retail de-posit protection was passed which provided a base line safety net for consumers using any of the banks that had been cleared for entry to the system (800 out of 1200 made it through the screen). Combined with better cus-tomer service in some of the private sector banks, this provided an impetus for savers to move across from the state banks.

In addition, the 1�% flat tax rate was causing more Rus-sians to develop onshore wealth and this created an opportunity to manage their funds and provide onshore private banking services.

During the early stages of the emergence of the retail banking market, some banks took advantage of a rela-tively uninformed customer base to charge exorbitant interest rates hidden behind aggregate dollar or ruble amounts. Under new Central Bank regulations, the banks were forced to reveal true APRs and this is a further move toward a normalised consumer lending environment.

(Russia) is mired in poverty and mess, unwelcom-ing with no arresting wonders of nature... What is this unfathom-able, uncanny force that draws me to you?

Nikolai Gogol ‘Dead Souls’

BYTHE

WAY

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One holdover from the past mistrust of the banking system is the archaic manner in which mortgages are settled. There is no accepted concept of an escrow account and therefore buyer and seller go to their bank together. They sit across from a counting machine and watch as the entire amount of the transaction is counted (whether thousands or millions of dollars), the cash is then sealed and the two parties with the bank then put the cash in a safe deposit box. Each has a key which is held in safekeeping by the bank, once the papers have been registered both keys are then delivered to the seller and he/she can pick up the cash. A laborious process that has only one real advantage, you get to see the loot!

The car finance market has also developed very rapidly with Russia now the number one car importer in Europe. The banks have moved from being se-cured lenders requiring the car logbooks and a stack of paperwork to being very competitive and offering an essentially unsecured line of credit. This is now managed through brokers located at the car sales offices and with a few exceptions, these provide an efficient service for the client and have signifi-cantly reduced the banks’ margins.

RUSSIANS AND MONEY TODAYOf course, any generalisation will be wrong at some level or another, but age remains more of a determinant of attitude to money in Russia than other countries that did not have the experience of the communist regime. The young, like everywhere are connected globally thought the internet and are developing financial concepts that are potentially ahead of the western mar-kets (Russia has world leading human capital in science and technology and an ingrained ability to see around corners and barriers in software develop-ment). The older generation remain more cautious, frugal and to a greater or lesser extent, financially naїve. Capitalism is still very new for them.

Traditionally Russia has been seen as a “long term society”, with people be-ing careful with money and staying in one job for a long time. Much of this has changed has recent years and Russians are now spending money much faster, both on capital items such as cars and PCs (often with loans) and on disposable items. There is also much greater mobility of labour both within and to Moscow and recruiting and retaining good staff is a major challenge for most companies. It is worth stating that Russian staff do not only seek just a higher salary — the overall package is very important in Russia as are seemingly (but not) obvious things such as being paid on time, being paid

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legally and being treated decently in the workplace. The global crisis that is engulfing the world as this book goes to press will of course be felt on the Russian job market — what is less clear is how society in Russia will deal with redundancy, unemployment and the resulting risk of default on mort-gages and other loans.

The Russian view of money is also coloured by their somewhat negative ex-periences of capitalism. In the days of the Yeltsin regime, the lack of any en-forceable business codes meant that many corners were cut and while most ‘get rich quick’ schemes were scams, though some people did of course get rich quick. It is only in recent years that positive Russian role models for capitalism have emerged and the people as a whole are now getting a more favourable view of business.

Equally, the banks are developing an understanding of choice for the cur-rent market players. Market developments are causing banks to focus on the product and service offering and as more foreign banks enter the market and compete against more sophisticated and larger local banks.

12. Socialising with Russiansby Frank Ebbecke

12. Socialising with Russiansby Frank Ebbecke

Frank Ebbecke is German, but a true

Russian advertising “veteran”. He came

to the market in 1994, as member of the

“Ford Russia Launch Team”.

From 2004 to 2007 he was asked

to support the “Mazda Motor Russia

Launch Team”. In January 2008 he

became president of the Ark Scholz &

Friends Marketing Communications

Group with their lead agency

Ark Thompson, Ark Connect and Inbrief.

By education a journalist (seven years

for ‘Stern’ magazine), he entered the

advertising business by joining J. Walter

Thompson in Frankfurt. In his 16 years

of employment he mainly worked on

the European Ford accounts as creative

director.

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Fyodor Tyutchev, a beloved Russian poet, was the one who gave this wise advice as early as in the mid nineteen hundreds. It was addressed to all those who might often feel just a little lost over here. Well, not a lot has re-ally changed till today. Living here, this slightly fatalistic wisdom proves to be valid and valuable every single day. But this is exactly the point — it’s interesting, stimulating and thrilling all the time anytime. Let’s put it this way: every day you’ll see or hear something that you never saw or heard before — however well travelled you might be.

So why did you come here anyway? If you haven’t been sent eastwards by your company, I’d guess, you decided to come to big RUS yourself. And no-body can claim getting a Russian work permit is easy for anybody. So, you better live with your choice and get acquainted with your human environ-ment, and just remember: try to be open-minded, you’re a guest here, and you will stay a guest even if you spend the rest of your life in Russia. And just remember, too: the more you travel the corners of the globe the more you realize that in every population wherever they might live and whatever their history, cultural and educational levels might be, there are a lot of the “bad and ugly” but also a lot of the “good and honest” — and it’s not at all that different in Russia.

When the young, affluent, urban breed and/or the older, ultra-rich, loud, “mini” and “maxi” oligarchs sometimes might appear to you to be unbearably arrogant and ostentatious: have you ever thought that they just might have copied it from certain Western “turbo-capitalist” lifestyles — and in a very short time frame? Just understand and respect some differences in mental-ity like the ones highlighted in this little story: an American, a Frenchman, a German and a Russian are asked to write a piece about elephants. The American chooses as the title “The Elephant and how to make him bigger”, the Frenchman writes “The Elephant and Love”, the German quickly has a full specialist series ready which he calls “Short Introduction into the History of

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the Elephant” — and the Russian proudly titles his “The Elephant — a Rus-sian Invention”.

“100 kilometers is no distance, 100 rubles is no money and 100 grams is no vodka”, says an old Russian proverb. And indeed — in Russia everything is a little bigger, a little further, a little more limitless. This is true for the pure geography and for the Russian people and their demands. Russia simply is the largest territory in the world (as big as the whole of Latin America), from Kaliningrad in the West all the way to Cape Provideniya in the very Far East on the shores of the Bering Sea, spanning over 11 time zones and offering the world’s biggest natural reserves, from oil to gas, and wood to gold, you name it. You might be locked into a plane easily for more than ten hours on a domestic flight like the one from Moscow to Vladivostok or for a full seven days in a railway wagon on the famous “Trans Siberian”, covering the same distance on the ground, the only way, as there’s still not a through road from West to East which deserves the name “road”, never mind a motorway. No less than 50,000 settlements somewhere out there have no paved road connections at all — it’s not really easy to socialize with your new compatri-ots out there. But what’s fascinating is that when you arrive how far you ever might have gone nationwide, everybody still addresses you in the Russian language — and welcomes you with a toast and a shot of vodka. If you earn your rubles in dealing with bizniz (Russian for business) partners all over the place, you will hardly be able to close your eyes for a rest: when your guys start working in the Far East, your buddies in the Far West are just shutting down their laptops.

Other than the sheer distances, the weather conditions significantly contrib-ute to the experience of dealing with Russians. In general they’re influenced by a severe continental climate, meaning quite hot summers changing the guard with long, very cold winters. This harsh contrast seems also to be re-sponsible for the Russian character: if necessary, a typical Russian is able to reach for the stars, but at the same time he may simply be able to lie on a bearskin to use a genuine Russian picture, just doing nothing. In these dark, frosty months the relationship with your Russian friends may appear to be marked by deep melancholy and even tearful self-pity. However, the average Russian takes a more fatalistic view to what happens around them and what they know they individually can’t change at all. Even in times of economic crisis and they have survived quite a number of them in even re-cent history — the answer to the common question “kakdila” (“how are you’)

18�

is “normalne” — normal. On the contrary, a typical German, having to trade “down” from a Mercedes S class to a Mercedes C class, might think his whole world is going down the drain.

Even if it might take some time, look forward to finally being invited to your Russian friends’ home. Now I’m not talking about being invited to one of your millionaire/billionaire friends living in their ‘Tudor’- or ‘Versailles’- imitations (… you can buy a lot for your money but not necessarily taste, as is well-known…) out of town with a 20-million dollar yacht on the lake which never goes anywhere, it’s just there for partying. No, I’m talking about being in-vited to decent, well-educated, career-minded, hardworking people from the evolving Russian middle class. They might live with at least three generations (the center of a Russian family, “Babushka”, the grandma, the young couple with their two kids) in the average Moscow apartment, sized +/- 60 square meters, nestled in a “living machine” together with a couple of hundred or even thousands of neighbours under one roof. Best to close your eyes and nose before entering the block and the elevator: you may stumble over a lot of rubbish; smell a lot of bad odors in a gloomy staircase; sometimes even be frightened by the atmosphere. Public areas nobody really takes too much care of, the pleasant surprise often comes only when you enter the people’s private environment.

Russians are a reasonably superstitious tribe with centuries-old customs: for example, don’t reach out your hand to greet your hosts as soon as the door opens across the threshold, first step in. Make sure you slip out of your street shoes and don’t whistle as that might mean there will be money problems in the house. Make sure you bring a gift — as small as it might be — some chocolate, a bottle of wine, a toy for the kids, a scarf for the “babushka”, something, it’ll be the gesture, the individual idea and not the monetary value that is appreciated. As a reward you’ll experience over-whelming hospitality, you might even think sometimes that they can’t af-ford all these goodies. The table will be overloaded with the best you can

Do not be modest in talking about your education and qualifications. Russians respect study and learning.

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imagine to eat, just try the amazing variety of handpicked, pickled mush-rooms and gherkins, the fresh vegetables from their own “dacha” garden, their weekend home out of town, the fresh-made blinis accompanied by all kinds of wild berries or even by fresh black, orange, red or green caviar. The “Shampanskoye”, wines and fresh juices will be inexhaustible. Be prepared to listen to endless stories, quotations from Russia’s big, dearly beloved writers and poets (Russia traditionally is a nation of readers), from Pushkin onwards, and enjoy most of all the toasts with all the drinking. Everybody should drink at the same time; by the way, avoid raising your glass and drinking just on your own. The later the hour, the more the vodka, the longer the toasts get and the more emotional they become. A vivid example: “Vod-ka is poison, poison is death, death is sleep, sleep is health. Let’s drink to our health”. And no, don’t smash the empty glass against the wall behind you because of your own and everyone else’s accelerating enthusiasm: it’s a myth that this is a Russian custom …

But one custom that is real is an invitation to the traditional “banya” . A total body and soul cleaning process, something like the as famous Finnish sauna but hotter than hell. Every Russian just loves it, there are plenty of public ones in the residential areas of every city and a “banya” hut can be found next to almost every “dacha” in the country rather than a garage. If you are in Moscow, don’t miss the “Sandunov” banya institution — a feast for the eye, for your outer and inner well-being, even the right environment for doing some confidential business. It first opened its doors in 1806 and the original, largely unchanged interior architecture and decoration dates back to 1896, making you feel like you are in a town residence of nobles. If you also enjoy the “wine and dine” offered there, merely dressed in a sig-nature towel, it’s easy to forget about time. Be sure that the farewell will be long with a lot of hugs, kisses and utmost best wishes. All together a private event, which is for sure, the best way to dig a little deeper into the legendary “Russian soul”.

But it’s also fun if you are invited for another private party with some “upper class” new Russians the next night to get the full picture of Russian hospital-ity. You might well end up in an incredible living environment as you’ve never seen in your life before: marble floors Roman style, French antiques, ultra-modern design pieces from Italy, ballroom-sized crystal chandeliers, genu-ine gold-plated wallcoverings, plasma TV sets even in the toilet, a climatized room exclusively for the good hundred fur coats of the lady of the house and

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a garage, as big as a factory hall, for the mobile toys of the host. The quality of the food and drink will match the quality of course: Maine lobster flown in from America’s east coast; oysters from Brittany; Champagne really from the Champagne area, just as examples, and you might even be privately enter-tained by a real world pop star, flown in for a six-digit fee for a few songs on the host’s own jet.

If these kind of people invite you for a multi-course dinner at one of the many fancy restaurants which may last the whole night, don’t be too surprised that you’re among quite a large number of other invitees — Russians love self-indulgence and feasting in big company. Don’t show you are embarrassed that your host brought two of his mistresses instead of his wife and that he pays cash out of an exclusive briefcase carried in by his bodyguards. Having this scene in mind, here is a little episode which shows the Russians” brand of humour:

“A young ambitious guy from the provinces has made it into the management of a well-respected, big company in Moscow. At the year-end party he flies his wife, who still lives somewhere out there, into Moscow. At the dinner he points out some of his bosses to her — there is one of the Vice Presidents, next to him his mistress, next to him sits the President together with his mis-tress, and there, that is our Chairman with one of his girlfriends. She is not as astonished as he had thought and asks him “ … and where’s your mistress?” He hesitates to answer but then directs her eyes to a stunning lady sitting at the next table. She looks at her carefully, then back to him and says with pride and satisfaction “our woman is the most beautiful”.

To wherever and by whomever you might be invited — all the occasions de-scribed have something in common: a great tradition. Big eating and drinking events, “Russkoye Zastolye”, are important Russian habits that have grown over centuries. It represents a kind of philosophy for a good family life, a good

Read one of the “great” Russian novels — whether you choose “Dead Souls”, “Crime and Punishment” or “Anna Karenina”, they will give you great insights into Russian culture.

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time to share experiences, to tell fairy tales, to play musi-cal instruments, sing and dance.

This tradition has long found its way into Russian busi-ness culture: extensive business lunches with many business partners are an essential part of the day-to-day business life. Only after they have had several really good times around a restaurant table, Russians feel comfort-able enough to close a deal with someone new. Then you also can start to trust them, however, keep in mind the Russian proverb “We Russians love the Probably, the Ap-proximately, the Somehow” — but in the end the deal will be done, only after somewhat complex procedures.

“Da”, yes, is coming back to Russia’s “nouveau riches”, the happy few. However, they are not that few: more than 80,000 millionaires and most of the 5� billionaires call Moscow their home. Subsequently this world metropo-lis of officially 9-10 million, unofficially up to 16 million people, offers just about everything that is super-chic, super-hot, super-expensive, super-exclusive … and su-per-dispensable.

For them but also for those who are still struggling to get their first million (€ or $, of course) Moscow, the unrivaled capital of it all, counts no less than 14,500 licensed watering holes, kiosks, restaurants, bars, discos and clubs — possibly a world record. Many of them have their doors open 24/7/�65 and many of them have high-class live or house DJ music. Enough opportunities for you to socialize with locals and the rest of the world?! If you’re hungrier for more cultural treats, “pozhaluista”, please: Moscow is home to more than 1�0 theaters, four opera houses, several concert halls and a large number of museums. Yes, and Mos-cow is greener than most people think — with parks, lakes, forests, most of them even Russian-like, which means big. Moscow is full of energy, ambition, pride, arrogance, rudeness, violence, noise, peace, beauty,

The sever-ity of Rus-sian laws is softened by the fact that obey-ing them is optional.

Mikhail Saltykov-Shchedrin,

Russian 19th Century satirist

BYTHE

WAY

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fineness, and everything else you can imagine, Moscow, most of all is more future than past.

Simply, absolutely exciting. If NYC is known to the world as the city which nev-er sleeps, what would you call Moscow then — definitely nothing less seduc-tive. And if NYC calls itself the “Big Apple”, I’d call Moscow probably the “Big Melon” (just for the size comparison and in honor of the average Muscovites’ favorite piece of fruit).

After dinner the ever-changing, hyper-exclusive club scene of Moscow offers an irresistible temptation to keep the ball rolling. Moscow still has more than 800 gambling halls and casinos, the third biggest gambling place globally — behind Las Vegas and Macau. But it might end up as a real downer. Don’t take it too personally if a guy having arrived half an hour after you at the en-trance — he, grim and odd looking like his own bodyguard and you, carefully dressed with your brightest 64-teeth smile and in your fanciest party outfit — is warmly greeted and immediately waved in: just have a closer look — he might have just jumped out of the backseat of his Rolls or Maybach, escorted by black GMC-trucks with blackened windows and a number of blonde girls with the longest legs on both sides of the world. Or he’s simply known to have an oil fountain in his backyard. Some tables at some places you can only reserve for a couple of thousand dollars but for this they come with a private powder room and much more.

Roman Abramovich, one of the world-famous, young Russian oligarchs, is said to have said: “We Russians don’t live that long, so, we make money and spend it right away”. Saving money is not exactly a virtue of Russians anyway — in the Soviet Union they earned some money but had few choices of what to buy and in the nearer past a large number of people lost their money in the “crash” during the late Nineties. Who knows what’ll happen again tomorrow? Today I live — and I want to live well!

Russians tend to marry young and get divorced young — there are statis-tics which say that the average marriage time of young couples is two years. But when they marry, make sure you’re part of the party. Not a few families spend all the money they can get hold of from everywhere and everyone for that one day or two, the so-called happiest in their lives, and happily spend all of it for food, fun, music, gifts and booze. There cannot be many stretched limos left in downtown Manhattan or L.A. as they’re all serving

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in Moscow, St.Petersburg and the other big “millionikis” (the twelve other urban areas across the country where more than a million people live). In Moscow, most of them also make a stop in “Victory Park”, a huge WW2 me-morial area. Part of it is “Lovers Lane”, a long road with the shape of hearts and wedding rings as inlays in the pavement. There, one stretched Hum-mer, Cadillac or even Jaguar is parked behind the other on Friday and Sat-urday afternoons. The newlyweds are photographed and the champagne flows — if you’re clever and if you want to meet the locals at a very special occasion in their lives, just join one or two of the wedding crowds, kiss the bride and act as if you were family and/or friend: this is easy, Russians can be very open and hospitable at these times. We’ve tried it more than once and had lots of fun.

As strange as it might sound, there are also the more sad occasions which can make you feel close to the Russian’s attitude towards life — and death. At after-funeral gatherings there are as many tears flowing as laughter to be enjoyed as family members and friends remember the most humorous and happy moments in the life of their late relative with their toasts. And at cer-tain anniversary times everybody gathers again around the grave, bringing some food and drinks to share with the deceased. What a great way to keep the memory alive.

After the marriage and when the bulk of the money has been spent on it, the problem of getting a proper roof over their heads starts right away. A lot of newlyweds have no other choice than to stay with one of the couple’s par-ents for a while because especially in Moscow apartment prices have gone through the roof in recent years. Indeed, instead of their own property, they would rather spend money to see the world. Russian’s preferred (non-visa) destinations are Turkey and Egypt.

However, top of the wish list is a prestigious car. Russians love their cars dearly. Doesn’t matter whether new or used — German and Japanese mod-

Drinking in Russia may be on a scale that you are not used to. Pace yourself and if you have any doubts then only sip during toasts.

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els are the favorites. Quite a number of people spend more money on their car insurance than on health insurance for themselves and their family. And 28% of drivers admit that they have sex in their car on a regular basis — is it because their apartment is always too crowded or is it that they love their car that much?!

Especially hot is the luxury car market: the Russian elite, including govern-ment members are on the road in their Audi, BMW, or Mercedes, and not at all in “normal” ones, no, with the biggest engine size and tuned out and inside by renowned aftermarket-designers. Russia, with Moscow on top in mid 2008 became Europe’s biggest car market, having overtaken Germany which has been no. 1 for the last 60 years. Annual sales are going to rocket up to three million units and for a lot of manufacturers Russia has become the most important global market: for Bentley, Maybach, Porsche, Ferrari, Lamborghini etc. Their new owners, most of them only between 27 and 45 years old, much younger than anywhere else, like to pay cash (compare our little dinner spectacle story) — therefore most dealers have their own bank counters in the showroom. Insiders know of one Muscovite who is the proud owner of not less than 40 Merc AMG-models plus a couple of other high-end cars.

Looking at Moscow traffic situations, 24 hours a day, it makes sense to in-vest in a big and cosy chauffeur-driven car: Moscow’s city planner counted on a peak of only 600,000 cars in the late eighties — today six million cars are flooding the streets. As no car parks were ever planned, a lot of them are occupying driving lanes, sidewalks, etc., making congestion even worse. On a usual bizniz day it’s normal to spend three-four hours in traffic jams when commuting between only two big meetings taking place at different ends of the city — scheduling more than two is just not feasible. In a comfortable, well-equipped limo you’re able to make all the calls, work on your laptop and watch the bizniz programs on TV. But when these smart guys with the right connections are in a hurry, they simply order their driver to put the blue light (costs a mere $ 10,000 cash to a civil servant) on the roof and then to push the gas pedal to the limit thus passing the jam.

On Moscow streets only sheer power reigns — big against small, old against new, rich against poor and they all together against pedestrians desperate-ly try to manoeuvre through the cars parked on the sidewalk or to cross a street.

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Yes, there is a speed limit — 60km/h by law and down to 10 km/h in the constant jam. However, later in the evening the ring roads (there are three of them and a fourth is under construction) turn into race tracks with-out any rules. 120 km/h can be the average speed ev-erybody goes, changing lanes without indicating, tail-gating — even the guys in their often rundown Ladas and rotten Volgas try to get in pole position at a red traffic light. Frequent accidents are the logical conse-quence and then the race is quickly over because the next traffic jam is building up. If you thought traffic in Rome or Paris was chaotic and NYC cab drivers can drive you crazy, then you’ve never driven in the Russian capital. But frustration will not gain you a single centi-meter, just be patient — things will happen eventually.

But traffic jams also have their good sides for many Rus-sians — they serve as the favorite excuse for being late for an appointment. And they’re almost always late.

Never think of a meeting earlier than 10.00 in the morn-ing, but better to tell the participants you want to start at 9.00 — then you can expect everybody to be around the table between 10.�0 and 11.00.

If you want to cruise more quickly and safely through the city, check out the Metro: it’s fast, there are many lines with a very dense network, one train follows the other after only 60 seconds and there has never been an acci-dent since it was built some 70-80 years ago. On week-days 9.5 million people use the Moscow underground (this is double the number of London or Paris passen-gers). Try to avoid the peak hours as you might come a little too close to your fellow citizens. Russians have no need for personal space!

Here, in Russia among Russians, everything is possible — in a negative sense but also in a very positive sense. Don’t get easily upset or give up — Russia and the Rus-

For us in Russia, commu-nism is a dead dog, while, for many people in the West, it is still a liv-ing lion.

Alexander Solzhenitsyn

BYTHE

WAY

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sians will open up to you, slowly but surely. Here, it’s still pioneer times. A lot to explore, a lot to develop, a lot to achieve, just take your chance in Russia with Russians and keep in mind another Russian favorite belief: “Don’t ask for a problem before a problem asks for you” … only then it’s time to act.

It might take a little longer than elsewhere in the world to get close to Rus-sia and the Russians, especially to the megapolis Moscow and the Musco-vites. But if a Russian finally has become your partner and friend, then you have him forever. Admittedly, there’s not an immediate big smile on every Russian face but if you can swallow all that Russia and the Russians have to offer under their rough skin, you well might like to stay here forever. You either love it or hate it. I guess I learned to love it.

A successful negotiation in Russia requires above all that the relationship between the parties be built first. You need to take time in the early stages to do this.

13. The Essence of Russia: Devushki, Zhenshchiny, Babushki

by Paolo Casciato

13. The Essence of Russia: Devushki, Zhenshchiny, Babushki

by Paolo Casciato

Paolo Casciato is the Dow public af-

fairs leader for Russia, Eastern Europe,

Greece and Turkey. Based in Moscow

since 2006, Paolo joined Dow Italia

in Milan in 2001 as the public affairs

leader for the Southern European region

including Italy, Spain, Portugal, France

and Greece. In 2005 – 2006 he also

had responsibility for European Internal

Communications.

Before joining Dow, Paolo worked as a

journalist for 12 years in Italy and then

served for 5 years as the Corporate Com-

munication leader for Southern Europe

at Ciba Specialty Chemicals, based in

Bologna, Italy.

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I believe Russia is a female country, a country of women. Without question-ing the value of Russian men — nor considering the immense Russian cul-tural, artistic and religious treasures and relics, what definitively impresses most visitors (obviously including me) during a trip to Russia are the Russian women.

Russian women impress more than Russian men. Yes, regardless of whether you are a man or a woman, in Russia for a long business trip, an expat, a tourist for just a few days, or if you are a student or a pensioner: what you’ll remember about your Russian experience are first of all its women, then comes the rest.

In fact, although Russian men are — similarly to Russian women — warm in their nature, they generally tend not to take too much care about their appearance, which makes them less remarkable than women when you just look at them. This doesn’t mean they are not smart, educated, kind and sensitive to their women’s needs and desires. For example, compared with foreign men in this aspect, even in their own country they seem very closed and change-resistant — this is particularly true for the current middle-aged male generation. The younger generation definitively has greater access to international standards and trends, and perhaps also driven by a stronger curiosity they are learning how to care more about their appearance.

Should I specify right now that by talking about Russian women I’m not only referring to their indisputable beauty? Maybe I should: well, I’m not just di-recting my thoughts towards one of the most common international stereo-types (and a reality): the astonishing beauty of Russian women. But I cannot ignore it either. While the reality is evident going around the big cities such as Moscow or St. Petersburg as well as in rural villages, in winter or in sum-mer, there is a second dimension surprisingly able to shadow the glamour of the Russian beauty. This is probably the main reason why Russian women

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seem so interesting, attractive and memorable — their strong character which surely enables them to fight to “survive”, advance and succeed in the extremely competitive environment of today’s Russia without impacting their exquisite natural gentleness. They tend to have a high level of education as well as possess open-mindedness, intelligence and pragmatism, and this combined with their strong ethics at work, where they prove to be reliable and hardworking, can make them exemplary employees. Their attributes in-clude clarity in setting personal objectives and the consistency in achieving them, an ability to always guide and support their partners, in good times and in bad, and the proven ability to overcome any difficulties while still remain-ing feminine regardless of the socio-economic context in which they find themselves. Does it seem too much? It is not.

And we are back to the beauty of Russian women. In a convergence with their natural beauty, Russian women — it appears crystal clear — are nowadays extremely determined to affirm their femininity, to be and appear like women regardless of their income and personal situation.

Russian women seem to make something of a mission of valuing their fem-ininity with a dress code, careful makeup, and high heels they apparently never abandon: in the office, visiting shopping centers, going around with their friends, walking with their kids, in supermarkets, in a park or at a mu-seum, with no difference whether they are going to drive a car or take the underground, and even ignoring the sometimes challenging Russian weather or the road and sidewalk conditions.

Why, you might ask? Simply, Russian women desire to be beautiful and at-tractive. And they succeed because they know well how to do it without of-fending their intelligence, their dignity as a woman, and surely without mer-chandising their body. It has nothing to do with feminism in Russia. It is about culture, education and desire.

As a visitor, it is of paramount importance not to confuse a dress code which sometimes might leave little to the imagination with an invitation to ap-proach a woman believing she might be somehow “easy”. You can instead easily avoid making a poor impression by just not thinking that whatever you see is obvious. The era of Russian women looking for foreigners to escape Russia and improve their living conditions is definitively over. The opposite might be true now.

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Surely these are not unique differentiating factors of Russian women, but I believe this combination explains why many non-Russian men fall in love with Russian women although they might keep struggling forever with the cultural differences. But that’s definitively a different story.

What I believe is important to consider, when striving to understand today’s Russian women, is the historical context that has contributed to the condi-tions and common elements you can notice in their personality.

Simply learning the recent history of Russia has personally helped me a lot; along with progressively understanding and appreciating the positive as-pects of my now years-long experience in the country, while also clarifying many of the more or less apparent and strong paradoxes and contradictions that characterize daily life in today’s Russia.

In fact, although the situation is gradually changing for the better with ben-efits spreading from the wealth Russia has been generating in the recent years, I’m pretty sure that together with the impression of Russian women what you’ll bring back from your Russian experience are the extremes you will notice simply going around the country, and — if you stay long enough — you may also come to struggle with. Anyhow, Russian citizens are fighting against them almost daily, and be sure they will progressively solve them; at least the most pressing ones.

Coming back to the recent history of women in Russian society, it must be considered how only half a century ago Russian women were asked by the Soviet State to be strong mothers-workers-wives (with no alternative). Even in the art of those times they were depicted as happy, smiling and confident with hammers and sickles, dressed like factory workers, coal miners, sol-diers or medical doctors, while suckling their babies at the same time. I’m sure you’ve seen dozens of the typical realist images from the Soviet Social-ist period.

In their real life women were de-facto dressing in ways that devalued their femininity, ignoring and refusing any fashion style from the West that could have shown them to be non-patriotic, and a traitor to the Soviet cause. But Russian women never lost their inherent desire and ability to be beautiful and adorn themselves. It is quite the contrary, as you can witness first-hand once in Russia or by just skimming through any magazine.

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The historical and cultural situation has dramatically changed since the even recent Soviet times, no doubt, and today’s Russia has little or nothing in com-mon with that period. Anyhow the new Russia is still young, very young, and the reaction to that period created the myth of the super feminine super-woman, a role that Russian women have easily picked up and know well how to play.

It might be changing again, but I personally doubt that Russian women will ever abdicate their strong and intense femininity, as they like it so much and they know they are liked because of it. Might it be a kind of revenge for the re-cent past, and for the male-predominance still characterizing the country?

Approaching Russia, constructing (or de-constructing) your idea of the typical Russian woman — How do you imagine a Russian “devushka” (as young Rus-sian women are called in Russian)? Relatively easily I assume: long straight blonde hair, almond eyes, long legs, pink cheeks, walking on high heels even in snow and ice, dressed to reveal a beautiful body, totally determined to be and look like the most beautiful, attractive women. Anything else?

There’s more, but it’s already an adequate description and at the same time it turns out to be a useless description, a stupid generalization. In fact, you can easily find thousands of different “devushki” with short dark hair and brown eyes, of average hieght and with an “average” body. How could you expect — in a country so rich in ethnicities and with 150 million citizens — to find a model of a woman that embodies all the different traits of the Russian women?

Get ready: if you are planning to visit Russia, forget about any possible ste-reotypes and just prepare to face the most heterogeneous range of appear-ances. This will surely help you in discovering the essence of Russia: its women.

Once you are in Russia, women surround you everywhere, more than in many other countries you have visited, and regardless of whether you want to no-tice it or not. Women are there.

The first contact with the strong personality and truly varied power of women in Russia is at the airport — unless you arrived with the Russian Airlines Aeroflot or Transaero, in which case you will already have had a chance to experience it.

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Let’s briefly then anticipate some of the most common situations you’ll be in while in Russia, with a specific regard to its feminine component, highlighting in daily life the presence of Devushki, Zhenshchiny and Babushki.

At the Airport — Standing in the queue is always an experience. And the intensity of such an experience may be directly related to the length of the line of people in front of you, even beyond the reasons why you are waiting. Be prepared to face many queues in Russia: Russian people are historically used to queues and have become “professional queuers”. They never get depressed standing in a line, and rarely will you see them upset in this often frustrating situation; on the contrary, you’ll observe them remaining appar-ently calm but trying any tricks to advance faster than the other people. Be ready to firmly argue with the most active of them, if you want to maintain your position and advance in the queue.

In Russia, a sense of comfort can be found by looking at the women at pass-port control. Dressed in khaki and in a Soviet-style uniform, looking seriously and without emotion at the just-landed passenger in front of them straight in the eyes, she takes his or her passport, visa and migration card, and then reads and checks the entire package. As always, it is done without showing any emotions, like the most professional of poker players.

You will be able to enter Russia, but not because the officer is a blonde wom-an, if and only if you have all your documents right. Have you greeted her and smiled? Well done. But the officer sitting in her closed cubicle has not replied to your enthusiastic smile — you can bet. You pretended to be re-laxed? You weren’t, and she has surely noticed it. After scanning thousands of passports and people before you, she may have even discretely increased her psychological pressure on you by repeatedly and intensively looking at you (and through you) like an “x-ray” far more times than needed. Don’t be surprised, just learn to get used to it.

There is a way out, if you panic in queues or tremble in front of (blonde) public officers: arrange VIP service in advance and a nice woman will pick you up once you exit the plane, maybe even smiling — they are specifically trained for this. She then brings you to a reserved area where you even won’t no-tice all the bureaucracy behind passport control, and your documents are stamped and returned while you comfortably have a drink and get your lug-gage delivered to your sofa.

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In Russia you might feel at the moment of your arrival, even before officially entering the territory of the Rus-sian Federation, measured and kindly downsized by a nice young woman who decides whether or not you are allowed to enter her country. And as you are smart, you have already started understanding the real power of women in today’s Russian society.

You are in Russia now, welcome. Let’s go ahead with the next possible experiences.

In business — If you are planning to visit the Russian offices of any private company, an embassy or a consul-ate, a government office or a newspaper, as you might expect, you are going to meet many women there. At the reception, for sure, but they are also located inside, cov-ering an increasing number of different roles with com-petence and professionalism.

In the most recent years Russian women have discov-ered — not surprisingly — the ability to develop new competencies and have progressively gained their space within the new professions of the modern economy: in sales and marketing, design and fashion, as well as in advertising, journalism, public relations and so on. This is no doubt a positive consequence of the rapid expan-sion of these new professions in Russian business soci-ety, and a running train of opportunities exists for women who can demonstrate their value and potential in such fast growing contexts.

They may start from low-paid jobs, however supported by results they keep moving ahead and up to leading positions especially within international companies that do not discriminate by gender, and in general do not dis-criminate at all.

Once you’re inside the office, you will rarely notice peo-ple smiling at each other or smiling at you. It is nothing

If women can be railroad workers in Russia, why can’t they fly in space?

Valentina Tereshkova,

Soviet cosmonaut

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personal, it is part of Russian culture that a serious professional must always remain serious, and not indulge in more intimate behavior, including smiling. This doesn’t mean that you will not see women and men smiling around, but the atmosphere you will find is likely to be not as relaxed as you could find in similar circumstances in other countries. This doesn’t mean people in Rus-sia work without having fun either; Russian people have learned since they were young that smiling in business could be associated with a superficial personality and an unprofessional approach to work, so they tend not to do it. They might not smile, but you can be sure that Russian women — and men — are not superficial, both in general and at work.

If you are planning to spend a couple of months in Russia, you’ll see the peo-ple around you progressively changing and showing their true nature which is indeed warm, friendly and smiley.

What can you do? Should you not smile or stop being friendly if this is the atmosphere at your work? Surely not: be friendly and smile; and even make jokes if you want, but please also consider the risk of being misunderstood, as the first meter to be applied will obviously be the one of the local culture, and not yours.

Regarding jokes, you can relax: Russian culture is significantly more “toler-ant” when compared with the American one, for instance and you will not incur the risk of legal action if for whatever reasons you say or do something “offensive”. Anyhow, caution remains the best approach until you understand where the cultural borders of acceptance are.

Russian women and men are smart and acknowledge cultural differences, but it’s expected that you, as a visitor, strive to understand them and adapt your behavior accordingly. At least before they start to understand you and your cultural background. Particularly if during your visit you plan to achieve specific business objectives, you surely don’t want to confuse or upset your audience with any behavior that might appear as unusual for them: so, be yourself and smile, be kind but also show that you are serious in your inten-tions, and aware and respectful of the local cultural specifics.

Statistics show that women account for about half of the employed popu-lation in Russia (and for about half of the unemployed population), mainly working in public health, education, and in different administrative roles.

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Similar to what happens in other countries, men occupy the largest proportion of leadership positions and their salaries are on average higher than the ones of women doing comparable jobs, although the Russian constitu-tion clearly states the principle of equal pay for equal work. The Russian labor code is extremely complex, and it’s definitively not worth going into it deeper here, but I believe it is worth mentioning the three year maternity and child care leave that applies to all employed women. While it does protect them, it also causes some possible discrimination in the hiring process, especially in the case of young women.

Although it’s true that women in Russia still do not have visible high-ranking positions in business or govern-ment, it is a legitimate question whether they really want these positions or do not have such ambitions. The cur-rent place of Russian women in the business sphere doesn’t fully reflect their value and potential. If you stay long enough in Russia or visit the country frequently you are sure to notice a slow but significant evolution with an increasing number of talented women conquering lead-ing and decision-making roles.

On the topic of “business etiquette” in Russia, you will most likely notice that Russian business culture is based on personal contacts and relations. Do expect to be invit-ed to numerous business lunches and dinners, to which obviously female colleagues are also invited. You’ll be in-volved in several toasts, and don’t forget to raise one to the women, but be careful about the amount of drink you can tolerate! I was given sound advice when I moved to Russia: during the several toasts that are raised, only the person who offers the toast is expected to drink the entire glass, while the other people can just take a sip. It helps!

While it is possible, please note that in general refusing a drink is considered to be impolite. Instead you can just pretend to drink, which is accepted for a foreigner, but

If you live among wolves you have to act like a wolf.

Nikita Khruschev

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always actively participate in the relaxed atmosphere. Do not risk offend-ing your Russian company that could compromise the positive conclusion of a possible business deal. In fact, lunches and dinners — after long meet-ings and exhausting discussions in the office — are the preferred contexts in which to seal a contract in Russia.

Further, the informal environment created by sitting and eating all togeth-er might be the ideal context to allow your Russian counterparts (men and women) to abandon their usual tendency of speaking in metaphors and be as open, frank and direct as they can be in the right setting.

In the Underground — If you are planning to stay for some time in Russia you will most certainly take the underground in Moscow (the “Metro”) because it’s the fastest transportation system in the city, and the only one you can rely on if you have an appointment somewhere in the center and you wish to be there on time. In any case, the 70-year-old Moscow underground is worth visiting as many of its stations are true art galleries where you can admire significant examples of Russian art, while witnessing the evolution of mod-ern Russian history.

It can be rare to see a woman — always wearing the official uniform — driv-ing the historical Metro trains, but it can happen, so don’t be surprised. Any-how, even if the driver is a woman, you have already met and maybe noticed at least four women in uniform watching you. They have been continuously examining you and silently approving your behavior, ready to stop you if you do not respect all the written and non-written rules of the extremely effec-tive, fast, clean, cheap and safe Moscow Metro. These women were at the ticket office, at the turnstiles, at the end of the escalators and on the long platforms (sometimes more complex to go through than the mythical Deda-lus’ labyrinth).

Nobody other than zhenshchiny are usually working in the Russian under-ground: middle aged women, sometimes married and with a family, other times still single or divorced, but that’s not the point. What might be interest-ing is that these women represent a generation that, born in the 50s or the 60s, had found itself at the age of 20 — �0 in a difficult situation as Russia experienced a period of the largest social and political changes in its recent history, suddenly moving millions of people from one way of life to a com-pletely new and revolutionary one — yet to be completely defined and under-

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stood. This represented a true earthquake in these individuals’ existences, requiring them to quickly develop the ability to change and adapt, and very often without finding any clear references to guide or help them.

Some of those zhenshchiny are solid people with higher education, a good life and a strong, united family. If they work in the underground system it might be because they need to work and have accepted the opportunity, not necessarily because they are desperate or cannot find other and better jobs in the medium/long run. As a general rule in Russia, it’s not good to judge people based on their job. You can easily find a person in Russia with a high school diploma working in the security staff at the entrance of a building or inside, as well as an engineer, a doctor or a lawyer welcoming you at the reception of the office you are visiting. Life is not easy in Russia — less than ever in Moscow, one of the most expensive (and challenging) cities in the world — and while looking for better opportunities, women and men cannot remain unemployed, particularly if they are middle-aged.

Zhenshchiny generally differ from devushki also in the way they look, al-though their dress code might be equally elegant, they definitively look more “traditional” and less provocative. Another difference relates to the fact that according to their social status they may dress in western style or use the clothes typical of twenty/thirty years ago that you can still easily find in all markets across Russia.

Zhenshchiny usually live in the Soviet style buildings that still characterize Russian cities with their family that usually includes parents and parents-in-law, when not extended to relatives that have found a good job in the city and need a place to live while waiting to become independent and rent or buy their own apartment.

Other zhenshchiny appear to have been less lucky, and can be poor, sad, jobless and hopeless — one of the extremes in today’s Russia. You might see them at the underground stops or in the street, close to churches or at the entrance to markets discretely selling food products, small plants, little bouquets of flowers or handcrafted objects, but very rarely begging.

In restaurants, cafés, pubs, shops — Plenty of beautiful young devushki and elegant zhenshchiny work in public places such as restaurants, cafés, pubs and shops in general.

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Consistent with their education, you will see them going around being seri-ous and busy, never smiling at the customers. They expect you to behave properly and in a respectful way — which you should do. While on average shop assistants do not receive extra bonuses based on their results (it is changing), waiters count on your tip, 10 per cent is fine, and will be as atten-tive as they can to gain your appreciation.

On the road — If you are ready to accept the bumps of driving on chaotic Rus-sian roads (particularly in Moscow, but also in St Petersburg and other big cities in the country), admire and smell the Ladas and Zhigulis aligned with the most modern and expensive cars you can imagine, as well as apocalyp-tic traffic jams of a dimension that can easily be in the order of a thousand cars, then welcome to driving in Russia! Daily traffic is normally challenging and is at its worst from 7.00 am until 7.�0 / 8.00 pm (with a small break in the middle of the day). According to a basic rule: in the morning avoid going to the center of the city and vice versa in the afternoon. If you discover that’s your direction… relax, you can’t change it.

The only positive aspect — if you can consider it positive — is that at least you’ll enjoy the surrounding company of nice Russian female drivers sitting in the only group of cars that will not get so close to your vehicle to threaten you and your car, nor take all your movements as a personal challenge to be aggressively controlled and contained.

Well, it’s obviously not easy to get know other people in a traffic jam, as ev-erybody remains strictly closed in their metallic wheeled cubicles, but to help the time pass try to look at the different driving styles of the other cars before checking the gender of the driver, and you’ll get more proof that Russia is a country where things that move effectively are driven by women.

Open markets — In Russia, open markets (so called “Rynok”) are very popu-lar and interesting to visit. You will find there all kinds of products, from fresh

There is no bad weather in Russia – just bad clothes and shoes. Prepare yourself properly for the winter.

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food to more or less ‘antique’ icons, and the largest variety of people. The most interesting group of people you can meet there are, no doubt, the Rus-sian “babushki”, or grandmothers, women that bring with them the history of the country, and represent the Russia that is like a window to the completely different Russia of today.

Beyond these markets, you will remember the vision of the typical Russian babushki — highly respected because of their strong attitudes, experience and straight-forward manners — doing any kind of job to earn a little extra money to complement the average monthly equivalent of USD 50 of their pension. Other babushki work in public services such as the Metro or in mu-seums or by keeping sidewalks clean.

Babushski maintain an important role within Russian families, looking after their grandchildren and offering their relatives space in their apartment as the cost of a flat — especially in Moscow — has become prohibitive, par-ticularly for young couples, students, young people in their first job or in very poorly paid positions in supermarkets, shops, state organizations, hospitals, the armed forces, and the police.

Driving on the outskirts of Russian cities you will see babushki sitting on chairs along the road, close to their homes, selling mushrooms, cucumbers, fruits and potatoes that they grow in their little garden, or any specialty they have cooked themselves.

Babushki creativity doesn’t stop here as you can also see them with their husbands — the old “dedushki”– playing traditional Russian musical instru-ments and singing typical songs of their time for the tourists visiting fascinat-ing open markets like the vernissage Ismailovo in Moscow.

Russian families — Once you have been accepted as a friend, it’s not un-usual for a person you know, a neighbor or a colleague to invite you home and

Russia is a safe country if you use your common sense. Avoid railway stations at night, nightclubs with lots of black limos parked outside and groups of skin-heads on the streets and you will be safe.

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introduce you to his or her family. At work, it might happen less frequently, or just later on, if you are a man and your colleague is a woman. If you’re invited, be his/her honored guest and enjoy warm Russian hospitality. Just bring a bouquet of flowers for his wife, if that applies (that’s expected) and feel free to bring small gifts for the children, if any.

Women, even if they work, typically also run the family in Russia. And while some might complain about having it all on her shoulders, the situation is generally accepted and the interference of men in the domestic ménage is more tolerated than encouraged.

Men are less present and active at home than their spouses, and also when it comes to the childrens’ education it’s usually the mother who principally cares about it while attempting to teach their sons a higher level of sensitivity that will let them grow into more involved future fathers. But obviously this varies significantly with relation to the educational level of the couple, their age (young fathers are significantly more involved in family life), and their “social maturity”.

You might also be invited to the typical Russian family “dachas”, little wood-en houses in the countryside, sometimes not as comfortable as you would expect according to Western standards. However, they are more and more frequently real houses with all kind of luxuries where families spend their weekends and sometimes summers in closer connection with nature, and enjoying food often prepared using the vegetables the members of the family (particularly babushki and dedushki) cultivate there.

Getting married — Not only foreigners find Russian women to be very sexy and intellectually attractive, you will quickly notice particularly in the big cit-ies like Moscow and Saint Petersburg a lot of young women getting married. You’ll notice it because marriages are very numerous and many couples choose to go around in huge white cars the day of the wedding, surrounded by their friends in other cars heavily decorated, all of them participating in making that day unforgettable.

Divorce in Russia is still relatively common, and although the percentage of divorces in Russia and in the United States is comparable, Russian youths seem to be very easy in committing to a relationship and single-mothers are common. Additionally, also because of the relatively young average age at

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which couples get married, the older a woman gets the harder it seems to be for her to find a new husband. It works differently for men.

When a woman in Russia gets married she can take the surname of her husband, or maintain her own. If she decides to adopt the husband’s surname, the sur-name is feminized by usually adding “a” at the end (for example, a woman marrying Mr. Chekhov will become Mrs.Chekhova). Also, as a curiosity, it’s worth mention-ing that in official circumstances Russians use not only their first and last name, but also the patronymic they received from their father when they were born (Piotr, son of Mikhail, is Piotr Mikhailovich, while Elena would be Elena Mikhailovna, plus obviously their last name, feminized for the women).

Daily life — As women will surround you during your stay in Russia, if you are a single man it might happen that you meet the woman of your dreams in a Russian wom-an. My apologies to the women reading…

If you realize you have met the woman of your life, be aware you are expected to make the first move. And be sure you won’t find an open door in front of you. Russian women are used to fighting to succeed and this trait of their character will emerge in this circumstance too.

If you get engaged, you will discover that your Russian fiancée expects you to be continuously present and sup-port her in everything and in all her needs, to offer her flowers, to walk around together hand-in-hand for hours, to open all the doors and give her way, to pay for her shopping, to invite her to romantic dinners and social events, in other words, to be a perfect gentleman, noth-ing less.

On the other hand, she will do everything in order to be for you the most romantic and supportive partner. Re-

Life is short; live it up.

Nikita Khruschev

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gardless if it is negotiating the best price for something you want to buy or a taxi ride, arguing with a street policeman who stopped you or questioned the validity of your visa to showing all the artistic beauties of her city, she will be with you all the way.

My experience in Russia is definitively not enough to draw any conclusions, but at least I can say that even though living in Russia (and in Moscow par-ticularly) is not at all easy, being a foreigner generally helps. The Russians you interact with are more willing to spend some extra effort and energy to help a foreigner, particularly if he or she behaves properly and uses with them the same kindness he or she would apply in his or her native country. Regardless of the behaviors I observe around me, every time I ask for help, I get it, par-ticularly from Russian women. And I’m not special. Not all Russian women fit the categories I have outlined but I hope what I say, subjective as it is will be helpful.

Thanks indeed to all the Russian women I have met.

Russians are problem avoiders rather than problem confronters – you need to develop a high degree of trust in your colleagues before they will come to you to tell you about something that has gone wrong.

14. Expatriate Life in Russia — a practical view

by Erica Fursova

14. Expatriate Life in Russia — a practical view

by Erica Fursova

Erica Holt Fursova is the human resources manager at the Anglo-Ameri-can School of Moscow. This is her third “tour-of-choice” in Moscow. A resident now since 2000, she divides her time between a downtown apartment and a “dacha” with her husband, a native-Muscovite, U.S. citizen and honorary Texan, Sergey, and two daughters Liza and Katya.

Erica is a graduate from the University of Texas with a BBA in International Busi-ness and holds a certificate in Russian language & culture from the Russian State Humanitarian University. Erica worked previously for the Texas Depart-ment of Insurance.

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BACKGROUNDI came to the Soviet Union for the first time as a single high school student on a cultural exchange program in 1990. It could have been named more appropriately a cultural SHOCK program — coming from California, the Mos-cow of 1990 was a city filled with incomprehensible things to the average teenage American mind... limited food options, no advertisements, no seats nor doors on the school toilets...Nevertheless, I left the country after a few weeks smitten with the intensity of the people, of the weather, of the con-trasts and depth. Leaving the airport, despite the glare from the immigration officer and her menacing Kalashnikov gun, I somehow knew I’d be back.

On my second trip to Russia, I took the train from Helsinki to St. Petersburg in 199� to meet up with my fiancé, whom I had met initially in the exchange program. We married in January, 1994 and began our hybrid American-Rus-sian family life in a studio apartment by the Moscow State University- a “cozy place with all the comforts.” Unknown to me at the time, it was (and still is, although the recent economic boom has made it possible for more young couples to buy or lease their own space) unusual for young couples to have their own apartment — most live with either his family or her family, at least for the first few years. We navigated life in Moscow for a year before moving back to the United States where we lived for the following years. When our daughter was two years old, we realized that she would not be fluent in the Russian language, nor would she fully experience Russian culture living in our neighborhood in the southern U.S. The economic outlook was improving in Russia, my husband’s family was eager for us to be near them and since we love challenge, adventure and the world hadn’t exploded with the coming of Y2K, we decided to move back. So with a Rottweiler, a Siamese cat, a two year old and six suitcases, we returned to a drastically different Moscow. Different from that of my husband’s childhood, different from 1990, 199�... one trait of the city is constant change. Moscow is dynamic — living in Rus-sia, you need to:

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• expect the unexpected (have plans, back-up plans and contingency plans for the back-up plans that fail!)

• be creative, inventive and resourceful• have a sense of humor• be flexible• appreciate the absurd• don’t search for logic where none is to be found• don’t let the weather be an excuse for unhappiness• attempt to learn & practise (often from your children, as they are better at

this!) as much of the language as possible essentially, many of the same things you need in ANY country!

Moscow is a huge metropolitan city — one of the world’s most expensive and one of the largest. It is very densely populated — something that you must be prepared to accept. If you have not lived in such a city before, this can be distracting, in Moscow, your personal/private space while out and about is the six inches around you!

Moscow has all the advantages and disadvantages that a metropolis of-fers. Art, history and cultural events are plentiful. There is a wide variety of sports facilities, theaters, movie theaters, art galleries, restaurants, clubs, and shops.

Moscow is the financial, political and cultural capital of a rapidly changing so-ciety. There is an enormous amount of poverty and an unfathomable amount of wealth. It is still considered a “hardship” post by many embassies and companies. The average expat stay is only around two-three years, which can be sad for those of us who remain for longer. I hope that the information listed here will help you make your decision, or assist you and your family if you are already Russia-bound!

WHAT TO BRING/WHAT TO LEAVE BEHINDHousehold NecessitiesEven if your apartment or home will be furnished, it will not be stocked with all of the household items you will need. I recommend leaving most of your furniture at your home of record, if possible, as shipping and customs can be cumbersome, especially for antiques or valuable items. You will need curtains or blinds that shut out the light in summer and let the maximum amount of light in during the winter. These are available for purchase or custom-order here.

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Most people still ship their kitchen and house wares, but now almost all items can be purchased in Moscow and other major Russian cities. There are furniture stores located throughout the country, and the prices are generally comparable to stores in North America and the U.K. In some major cities, there are also home supply stores that carry tools, plants and other household items. Appli-ance stores for TV’s, electronics, small appliances, and phones are numerous.

Shipping your personal belongings by air as unaccompanied luggage is not recommended because of the difficulties involved with customs clearance and the complicated process of retrieving unaccompanied luggage from the airport warehouses.

Appliances are 220 volts. Unless you bring a transformer, you may simply want to buy your 220V appliances here. If you are coming from a non-metric country, you will want to bring an oven thermometer, measuring spoons and cups to help you when cooking. Ovens, refrigerators, dishwashers and wash-ing machines are usually smaller in size than those in North America.

Other items• Extra passport size photos (for visas when you travel, for your work card).

These are readily available here, but upon arrival you may need them im-mediately.

• Prescription medication — you can contact the medical clinics in Moscow before you arrive to see if the medicines you need are available in the Rus-sian market. Refer to your insurance company for additional medical infor-mation. It is imperative that you are familiar with the medical clinics, your policy coverage and benefits before you arrive. I know of several instances where people have become ill within the first week of arrival.

• ATM cards — more than one is helpful. Visa, visa electron, plus, maestro, MasterCard, and Cirrus networks are available here — depending on your destination city, the availability of ATM machines and banks will vary. Ma-chines dispense Russian rubles and may also dispense US dollars (usually in $50 or $100 bills).

• At least two credit cards (MasterCard or Visa). American Express is also accepted in many places.

• Transformer(s) and adaptor(s) (if you are bringing small appliances/gad-gets that aren’t 220V). Irons, alarm clocks and appliances that generate a lot of heat are unsafe to use with transformers. You can get transformers at local stores but it may be easier to find them before coming.

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OUTFITTING YOUR FAMILYSeveral large, Western-type shopping malls have opened here in the past five years. Western style clothing is available in all sizes and all qualities. Prices, however, tend to be somewhat higher than in North America or in the U.K., so most expats prefer to purchase essentials in their home country or while on vacation. Moscow in particular, has a fantastic variety of baby gear, toys, and children’s’ gadgets — the variety of prams is unmatched. There is also a thriving second-hand market for bulky and long-lasting items among the local expat community.

You might want to bring (but all are available locally):• Adequate socks, undergarments• Raingear and good rubber boots• Warm winter coats. Garments should be suitable for temperatures which

can drop below -�0C. • Snow pants• Good winter boots (non-skid, lined and waterproof)• Gloves, hats, mittens, scarves• Several formal outfits. The selection of formal wear is limited, and there

are many events sponsored by companies, embassies and non-profit or-ganizations.

• Summer clothes• Slippers “tapichkee” (outside shoes are never worn indoors)

Buildings are generally warm even in the coldest winter months, and it can be very warm in apartments — in many instances, you cannot control the level of central heating.

Clothes for Children:• Variety of boots• Snowsuit or jacket and snow pants (needed by end of October)• Indoor shoes • Warm tights

Russian employees may seem to make long and chatty phone calls. This is all part of building and maintaining the relationships that are so critical to busi-ness life in Russia.

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• Hats, mittens/gloves and scarves. It is unthinkable for Russians to send babies and toddlers outside without a hat — sun hat if summer, warm hat if winter. You will quickly meet several gruff Russian grandmothers “ba-bushkas” sternly dispensing parenting advice if you try to defy this rule! (Likewise if you try to go without slippers indoors.)

Many Russians are not accustomed to changing their outfits daily — this applies to children as well as adults. So don’t be surprised if you see Russian staff in your office wearing the same outfit several days in a row/times per week. I advise purchasing fewer, high-quality garments before your move. This is especially true since many expats will not know the size of your closets (or storage space in your home) until after arrival, when your shipment has already been packed.

Other Items• Clothes hangers (you can get them here but they aren’t always cheap)• A toolbox• SAD (Seasonal Affective Disorder) light. Moscow is very dark from late No-

vember to January, (but light from May to September, with sunrise before 5 a.m. in July and sunset around midnight!)

• Vitamins • Fabric softener sheets

Electronics Multi-system televisions, DVD players and VCRs are available. DVDs and videos you buy here may not work in a North American player. Multi-system TVs and VCRs and DVD players are cheaper to buy here. Russia is on a different system from the US, Canada and Great Britain. DVDs are widely available — purchase only in of-ficial stores to avoid low-quality, pirated copies, which are sold on the streets.

There are appliances markets in every major city that carry a huge selection of products from a variety of manufacturers. When buying electronics, it is standard practice for the cashier or special clerk to open the package and plug in/test the item to demonstrate that it is in good condition. Inquire with your company and see if their orientation program includes organized shop-ping trips during your first weeks in the country.

LEAVE BEHINDThe following items are readily available in Moscow, but you may want to bring yours, depending on your preference, your budget and shipment allowance.

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• Hair dryer • Clock radios/alarm clocks (unless they are 220v)• Iron• Space saving items/stackable containers• Home appliances (toasters, grills, etc...)• Ironing board (huge selection here, but much more expensive than in North

America)• Shower curtain (if you have a favorite)• Wastebaskets • Home decor items

What to bring in your hand luggagePack the following in your hand luggage or accompanied luggage. A good money belt (worn under your clothing) is very useful and practical, especially if you plan to travel within Russia.

• Passport and visa for all family members (keep current copies of each in your checked luggage, and in a safe place upon arrival)

• At least six (6) spare passport size photos for each family member.• Small electronics, mobile phones, iPod, camera• Special medications — if you or anyone in your family needs them, and a

copy of prescriptions to be filled.• Currency: around $500 (in US or Euro currency) per adult. Bills must be new

and crisp or almost new with no ink marks, tears, or stains. • ATM card. It is absolutely necessary to have at least one ATM card, and

preferably two. Make sure that you check with your bank whether your ATM card will work in Russia, and communicate with your bank ahead of time about your payroll deposits (if it will be wired/transferred abroad), and ask them to place a note on your account that you will have frequent charges in Russia so they do not automatically block your card.

• A MasterCard or Visa is recommended because of their wide acceptance. Set up online banking service to pay bills. Do this ahead of time and update it regularly.

• Customs Declarations: Rare or expensive jewelry, antiques and art works carried with you into Russia must be declared. You will receive a declara-tion form in the plane before arrival and must go through the red Cus-toms line and have this form stamped. Bringing these types of items is uncommon and not recommended. Upon entry to the Russian Federation all foreign currency certain amounts must be declared. Do not carry large

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amounts of cash. Violations of currency rules are serious offenses under Russian law.

• It is advisable to bring a detailed inventory of the contents of each suitcase and also of your shipment. This can assist you in clearing them through Rus-sian customs after arrival, and for checking your shipment when it arrives.

• Sufficient clothing for two-three months. Sea freight usually takes 6 to 10 weeks, but unusual delays of up to 4 months have been experienced (rare). Therefore, sufficient clothing, suitable for cold weather, should be brought in the accompanied luggage to prepare for that possibility. Pack an emer-gency supply with you in your hand luggage in case your suitcase should fail to arrive on the same plane.

• A valid driver's license, an international driver's license or other secondary form of identification for each person in your family (copy of birth certificate if a minor)

• You may wish to pack specialized work or business materials.

Bringing PetsWith a little advanced planning, bringing your cat or dog is very do-able and often makes the transition of moving easier, especially for children who are attached to the family pet. Bringing fowl or other animals may be more com-plicated. Pets must have a reserved space on the airplane and the number of animals per flight is limited. Advance planning is necessary.

Pets can be brought into Russia as long as you have a certificate of good health for the animal from a vet in your home country. You must also have a letter from an authorized vet (i.e. anyone with a veterinary qualification), cer-tified within 48 hours, calculated from your arrival, that the pet is fit to travel and contains no contagious diseases.

Airlines have numerous restrictions on bringing pets, including airport (air) temperatures at the departure and destination. The airline will determine whether the animal will travel in the passenger cabin or in the luggage com-partment.

Check with the Russian Consulate, airline or health department in your area to find out whether a special form or stamp is required and where to obtain them. There are no quarantine laws in Russia. As long as all documents con-cerning vaccines and the pet’s health are in order you should not encounter difficulties when bringing an animal into the country.

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Today there is a nice selection of pet food and care products available, in-cluding most of the major brands.

AccommodationsLocation, location, location. While scouting apartments or a country home, don’t let the realtor sway you with catchy phrases or quoting distances. Even in the center of Moscow, it can take up to two hours to travel a few kilometers at the worst times. Be sure you travel to and from your preferred residence, to the office, to your child’s school at both the morning and evening rush hours before committing. Ask for average travel times including traffic and inclem-ent weather conditions. For families with school-aged children, I recommend finding a residence in close proximity to the school. It is frustrating and physi-cally uncomfortable for adults to be in gridlock traffic — for children, it is even worse!

City life vs. Country life. The pros and cons here will be the same as in any country. There are many homes located in the suburbs and even several gat-ed communities which cater to expats, especially in the Moscow region. The suburbs or country side offer the possibility to live in a house with your own private yard, and possibly a sauna or guest house on the premises as well. Things are more remote; however, your commute may not be much longer than if you were on the other side of the city. There is no enforced zoning, so be sure to take careful note of the surrounding neighborhood before commit-ting to a location (your neighbor could have goats, chickens or even a cow!). Small wooden cottages with no indoor plumbing and a wood-stove for heating may be located next to multi-million dollar mansions, next to brand-new facto-ries. Some areas can be a patchwork of commercial and residential use.

The central city offers the convenience of close-by entertainment and shop-ping, but the price is pollution, noise, smaller living spaces, no private yard and possibly still a long commute, depending on your office/apartment loca-tion. If you’ve never lived in an apartment or a city with more than 10 million residents, apartment life in Moscow will be a change!

Many Russians have what I consider a flamboyant style of decorating — this can become evident when doing the “look and see” at apartments. You can save yourself and your real estate representative a lot of time if you clearly state your requirements and preferences, including decorating styles. Many expat apartments are fully furnished.

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If you are invited to a Russian’s home, that is a sign of trust and you should cer-tainly agree. It will give you insight into your new acquaintance or colleague, and you will almost assuredly enjoy your visit. A gift is in order — flowers, candy and wine are appropriate. Be careful not to take anything (such as a cake on a cake plate or tray) that you do not want to give the hosts — I learned this the hard way!

WORK/LIFE BALANCERussia is a country of extremes, and this applies to work in modern Russia as well. For the working spouse (or both), depending on the commute - working hours will likely be long and most especially if you have direct contact with Russian companies/clients. Most Russian companies officially begin work-ing at either 9:00 or 10:00 and work late into the evening. Frequently, busi-ness negotiations and deals are discussed over lengthy formal dinners at a restaurant, including toasts and drinks. These talks may go until midnight or one in the morning. Spouses are never invited to such evening business negotiations/dinners — business is business and home is home.

Additionally, if your company has its corporate office in another time zone, you may find yourself working long hours in order to make the conferences. Business trips or travel within Russia is an entirely different experience than being in Moscow or St. Petersburg — expect a decreased level of service and comfort, and some products may still be harder to find in the regions, so be sure to take any necessary medications or special items.

Stay-at-home spouses will find many opportunities to volunteer and get in-volved. If you have school-aged children, most of the international schools have opportunities to volunteer. Take advantage of these! It is crucial that the non-working spouse be happy, content and not isolated — particularly dur-ing the long, cold, gray winters. You should also work to expand your circle of friends to include not only other expats, but locals as well. It is these Russian acquaintances that will help you decipher their culture, translate your taxicab call, and laugh or cry with you at two a.m. and remain forever in your memory of Russia. If you surround yourself in the expat “bubble,” this can lead to the “us vs. them” syndrome and unhappiness. To really enjoy and make the most of your experience here, you must leap into the culture, into the craziness with zeal! Russians are keen observers and notice details. You might feel very distant at first, and think that you won’t ever be “friends” with anyone here, but give it time, especially as you make efforts (often verbally as you try out the language) to understand them.

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Don’t let the weather be an excuse. Russians get out in all types of weather, and so should you! I frequently see my neighbors gardening in a downpour, and then I remember that I have an umbrella and can get out for a walk. Accept the fact that from November — late February, you will be doing lots of things in “the dark”. The days are short then, and frequently there is a dark cloud cover. This is compensated during the summer when there is an incredible amount of bright sunlight and long, long days! Try to stick around during my favorite month — July. It is usually warm, sunny and there are fewer residents in the city. In the countryside, you will enjoy beautiful flowers and possibly you will be invited to someone’s dacha (country resi-dence).

MOBILITY WalkingRussians are accustomed to walking long distances even in inclement weather — in our village some neighbors walk 2-� kilometers to the main road morning and evening each day all year round. If asking for directions in the city, be aware that “just around the corner” and “not far” can mean a 20 minute walk! It is fairly common to see men walking with baby strollers — usually the fathers or grandfathers take the baby out for a walk (Here people take babies for walks to put them to sleep, and bring them home when they awake!) while the mothers and/or grandmothers cook and clean the home.

Many big cities are not engineered for stroller or wheelchair access. Shops and stores are frequently located in basements, accessible only by narrow staircases. Even big stores tend to have small, crowded aisles and taking young babies to stores is frowned upon. Elevators in older buildings can be almost too small to accommodate more than one adult and a baby pram — creating a problem if you are alone and also have a second child.

While scouting out an apartment or home, be sure to note pedestrian ac-cess, location of parks and stores — walking to work/school if possible is a wonderful solution to the gridlock traffic. Walking can be unpleasant on some of the major roads in Moscow due to the noise and pollution (exhaust fumes of vehicles), but most Russian cities have a vast number of parks and protected forests with wide, paved paths. Pedestrians’ rights are not closely observed in Moscow. Cars do generally not stop for pedestrians, and sometimes drive on the sidewalks. When crossing

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the street, it is advisable to always cross the street using the underground or above-ground pedestrian bridges ”perekhod”. (Indicated by a blue sign with a man walking down steps.) Never stop and stand in the middle of the street to try and cross it, even though you will see many Russians doing this. Currently, there are public advertising campaigns and other attempts to increase driver awareness. Remember to dress in reflective clothing to increase your vis-ibility if walking in the dark.

company cars & Private chauffeursIf your uplift package includes the use of a company car and/or chauffeur, you have a wonderful benefit. If not, you can still be very mobile in Moscow and other large cities, as the public transport systems are extensive (see the next section).

You may also decide to hire a private chauffeur. Private drivers are advertised throughout the expat community, but they may be more hassle and expense than benefit. I have had a private driver hired through a job I once had in Moscow. It was a nightmare. The driver refused to heed my instructions, had a sour disposition and thought driving on sidewalks was an appropriate way to circumvent traffic jams. My husband’s company provides him with a car and driver — luckily, their driver pool is very professional and law-abiding ac-cording to the traffic rules! A bilingual driver with experience on the Moscow roads can be difficult to find.

Metro, Buses, Trolleys, and TramsWhen traveling in the cities, you have a wide range of options if you want to use the public transport system. There are the metro, buses, trams and commuter trains (electrichka), and the service that they provide is both ef-ficient and cheap. All public transport run on time (apart from the traffic delays for busses) and are very frequent — there are also very few chang-es to the timetable. If you have children under seven, they can travel free throughout the public transport system, although this may not be advisable during rush hour when it gets extremely crowded.

The Metro This is a very reliable way to get around Moscow. You can identify a metro sta-tion by a large, red letter ‘M’ outside the station. Trains run between 05:�0 and 01:00 and in order to access the system you use a magnetic ticket or a pass that you have to show as you pass through a turnstile. This ticket can be

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bought at all metro station ticket offices and will be priced according to the number of rides that you want to pay for in advance.

Trains run at intervals of two to four minutes during normal times and one to two minutes during rush hours. Every station has a police post, a first-aid station and telephones — both local and international. Transfer points close at 01:00, so watch the time or you might get stuck in the middle of the night in a part of town where you don’t intend to be!

Buses, Trams and Trolleys All of these are nearly as efficient as the metro. The stops can be identified by a yellow board and the letter ‘A’. It is easy to buy tickets for buses, trams and trolleys from metro stations or from special transportation kiosks located near metro stations. The kiosks have signs that say, “Spetsialny Proezdnye Billeti” (Специальные Проездные Билеты). Tickets can also be purchased directly from the driver when boarding.

Buses, trams and trolleys stop at every single stop along the route. There are no transfers and there are no return tickets — you have to buy a ticket for each, and there is a uniform price per ticket. Service is between 05:�0 to 01:00. Strollers can be taken, but especially in spring and the fall, it can be messy and difficult getting in and out.

Taxis These can be hailed in the street. Taxis are not always metered so the fare may have to be negotiated before you leave. Fares depend on the distance and traffic conditions (time). There are a variety of taxis in Moscow, both of-ficial and unofficial (private cars). The safest thing to do is book ahead using an official taxi company. Taxis can be ordered for a single ride, for several hours, for the whole day, or a standing order can be placed.

Flagging down a taxi means flagging down any private driver willing to drive you for a fee, otherwise known as “gypsy cabs”. I do not recommend this for new arrivals still unfamiliar with surroundings, or for non-Russian speakers. It can be dangerous. If you decide to go with this option, be sure keep the following in mind:

• Negotiate the fee up front before getting into the car.• Never take a gypsy cab if you are intoxicated.

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• Do not enter a taxi which already contains another passenger. Sit behind the driver.

• If it is at night, women traveling alone should consider whether there is an alternative form of transport that might be less risky.

• If your Russian is limited, try to have the full address of your destination written down in Russian. Referring to the metro station nearest to your destination usually helps. Many of the drivers are immigrants and do not know the city well.

Purchasing a vehiclePurchasing a private vehicle is a big commitment, and I recommend that families wait several months before making the decision to buy a vehicle in Russia.

Driver’s licenseYou are highly recommended to obtain an international driver’s license be-fore you leave your home country, even if you don’t plan to drive overseas. It can serve as a secondary form of identification. Obtaining a Russian license is a complicated process; you must pass both a written and a driving exam.

The retail car market is booming exponentially each year in Russia. Foreign-made vehicles are the norm on the crowded streets of Moscow now. Used cars are often available for sale by departing expats and diplomats — adver-tisements can be found via embassy (most diplomatic vehicles are for sale only to other diplomats) and other expat newsletters, word-of-mouth and ex-pat web sites. Transferring registration when both parties are not in Moscow is very difficult.

New cars are available from various auto dealers. Buying a car can be time-consuming and it is impossible to accomplish all required tasks in one day. Expect the entire process to take several weeks, if not months.

Once you purchase your vehicle, you will need a new license plate, and a new technical (inspection) license “tekosmotra”. It will also take at least one full day to arrange for an insurance policy. Third-party liability insurance is obligatory when owning a car in Russia and must be purchased from a local company.

Basic Road RulesThe official speed limit in Russia is 60 kph/�7 mph in the city; 90 kph/56

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mph in unpopulated areas and 120 kph/72 mph on open highways. At inter-sections, the vehicle on the right has the right of way.

The blue and white traffic arrows over the lanes of major thoroughfares indi-cate turns and no-turns. Although the Russians are notorious for not wearing their seatbelts, you always should, and it is the law. All roads contain many unmarked hazards: potholes, missing manhole covers, may be poorly light-ed, debris in the roadway... Between October and March, you will need either ‘all season radials’ or studded tires. The mass of Russian drivers are very inexperienced, drive very fast for the road congestion and traffic conditions, and take incredible risks. Any expatriates on the road should always drive defensively - be on the look out for cars driving into oncoming traffic, approaching or passing you on the “wrong” side, run-ning lights, driving on sidewalks, etc. There are many traffic cops on Moscow’s streets and they have the right to stop you for document checks at any time. You should always have your car ownership paper (a laminated card), drivers’ license, passport (original) and insurance papers with you when driving.

Flashing your headlights is the accepted way of getting the attention of an-other driver or pedestrians. Muscovites seldom use their horns and change lanes indiscriminately.

If you drive, there is a good chance that you will eventually be involved in a fender-bender accident. If you are involved in an accident, you may not move your car until a traffic policeman arrives to take measurements and write a report. You should not get out of your car. Lock the doors and use your cellu-lar phone to call your company representative (or another Russian-speaker) and your insurance company immediately.

For car repairs, ask for references among the expat community, your com-pany representative, or from Russian acquaintances. Spare parts can be dif-ficult and expensive to get for foreign made cars, especially older models.When parking, it is advisable to stick to well lit, busy streets or paid lots to help avoid vandalism, theft and towing by the authorities.

Cash, Cheque or Credit?All cash transactions conducted in the Russian economy must be in rubles. Many stores and restaurants will accept credit cards. VISA and MasterCard

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are accepted in larger stores. Personal checks are unknown in the Russian economy and are never accepted by businesses or individuals in Russia.

Cash is the payment method of choice. You’ll obtain either US Dollars or Euros from a bank machine then change them into Rubles at a currency ex-change (you usually get a better rate), or withdraw Rubles (more convenient) directly from the ATM/bank. Fraud is more prevalent in Russia than in some other countries, and I recommend using your credit card with caution and only at major establishments. Keep your receipts and verify them with your credit card statements. Some banks charge a “foreign fee” ranging from 1-5%, be sure to inquire with your bank before your arrival.

Currency ExchangesCurrency exchange booths are located at stand-alone kiosks and inside banks. Rates are usually prominently displayed, but you must be careful, as sometimes the posted rates are for exchanging large amounts ($1000 or more). The world’s major currencies are easily exchanged (USD, Euro, GBP, others). Do not be distracted while exchanging money. Watch the cashier and ALWAYS carefully count the rubles you receive before leaving the coun-ter. You should also be sure to put your wallet safely away before exiting the booth. Exchange rates can be found on the web.

SECURITYCrime in MoscowFor a city the size of Moscow the crime situation is not abnormal. Common sense that would apply in any large city should be used here. The acts of violence you read about are rarely random, but are targeted towards specific people. Unfortunately, there are regular occurrences of race-related crime.

The following general crime prevention measures are recommended.• Walk in well-lit areas. Avoid back streets and alleys. Be alert when using

underground pedestrian walkways (be especially wary of gypsies begging). Travel with a companion, especially at night.

• Carry handbags in a secure manner. Place wallets in zippered or inside pockets.

• Be wary of con artists, distractions, and diversions.• Be careful when you use bank machines, and preferably use ones that are

located inside a bank. Avoid ATMs located on the external wall of any build-ing or on the street, including a bank.

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• Security briefings are offered by most companies and information is also available from embassies. Take advantage of these resources before you are a target of petty theft.

• Avoid the metro at the peak hours when strangers get closer to you than your spouse might!

MilitiamenThe “street police” are authorized to stop you and request your documents (passport, registration and migration card) at any time. In the event you are stopped or detained by militia, do not panic. Maintain a calm, respectable com-posure and tone of voice. Answer reasonable questions, but do not make any admissions (i.e. — in a car accident, do not volunteer that you were at fault). Ask to be released. Do not sign anything. If they refuse to release you within a reasonable period, use your cell phone to telephone your embassy regional security office or the appropriate representative from your company.

Residential Security TipsThe popular expat housing areas are generally very safe but one should al-ways use common sense. Do not open your door to unidentified persons or to unexpected, unknown persons. Use the viewer or the security camera/phone. Instruct domestic help never to admit unannounced and unidentified persons. Instruct all family members not to admit service or maintenance personnel unless they are expected and well identified. Let your common sense prevail and do not invite a brand-new acquaintance into your home.

MEDICAL MATTERSMedical Check UpYour family should have a medical check-up, including dental and vision care before arriving in Moscow. Bring copies of optical prescriptions as well as a spare pair of eye glasses or contact lenses for emergencies. Glasses and lenses are easily available in Moscow and very reasonably priced.

Medical Services in MoscowThere are several modern, western-style clinics in Moscow that provide medical and dental care with English, French and German-speaking doctors. Medical care in Moscow is very good and modern at the major commercial hospitals and clinics, although some practices and procedures may be dif-ferent from your home country. I had my first child in the U.S. and delivered my second daughter in a private hospital in Moscow — the major difference

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was not the hospital equipment or facility — it was the style of care. Rus-sian doctors and nurses do not generally consider it necessary to inform the patient of even the names of the medicines or procedures, much less the possible side effects. This aside, I find medical care to be high quality and professional.

COMMUNICATIONTelephones & EmailSome landline telephones in Russia still require pulse dial, so if you are pur-chasing a new phone, make sure it has a switch. Mobile phone use is com-mon and there is a stunning range of models and service plans available. If you have a tri-band phone, it should work in Russia. Some mobile phones purchased in the U.S. will not work in Russia.

Phone calling cards are best for making international calls, as the rates can be high especially when using cell phones.

To stay in touch visually, the use of computer conferencing tools is very pop-ular. Broadband internet is available in Moscow and other major cities, al-though still rare in the countryside and suburbs. If your home will be located outside of the city, it is likely that the internet access available will be a dial-up connection.

Mail ServicesThe Russian Postal System is generally reliable. Mail will be subject to cus-toms inspection. Arrival times vary, but usually take 2-4 weeks to North America, although once I received a package six months after my mother posted it!

GASTRONOMIC OPTIONSFood StoresShopping becomes much more of a necessity in Russia than a form of en-tertainment. Grocery stores and supermarkets are located in all parts of Moscow. In the suburbs, it can be difficult to find a supermarket, most likely there will be many small “mom and pop” stores, or specialty shops such as a butchers’ and a fresh produce stand. In Moscow, the stores carry fresh, frozen and canned fruit and vegetables, cheeses, meat, fish, dry goods and a wide range of gourmet items. Prices can be high at gourmet shops cater-ing to foreigners and the new Russian upper class, but so is the quality and

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most items are available all year long. Grocery stores in Moscow are crowded in the evenings, especially Friday evenings and weekends after 1�:00. Baby food and many dairy products especially for toddlers and infants are widely available. In almost all shops, you bag your own purchases and at smaller stores, you must pay for the bags.

Markets or “Rinoks”Outdoor or indoor markets are called “rinoks” and are found in every town. Prices are usually cheaper than in stores. You will always find a larger variety of items, especially in the food markets, but watch the quality. You should use common sense and caution when shopping at these markets — I always try to purchase where the prices are prominently displayed — otherwise, you will be paying much more if the vendor detects an accent or if you don’t speak Russian.

Shoppers bring their own plastic bags or baskets for carrying purchases, and jars with lids for filling with honey, sour cream, pickles. There are also construction markets, clothing markets and home/house wares markets. Ri-noks are generally open daily from 08:00-18:00. Watch your handbags and keep a vigilant eye on the weighing scales as you would in any market.

Ask one of your new Russian acquaintances to take you to their favorite market!

ENTERTAINMENT WITH THE FAMILYIf you have children, you will quickly discover that Russians love kids. Chil-dren seem to remain children for a very long time here — grandparents and parents are doting and children are often not expected to help with the household chores, but are waited upon. In today’s Russia, it seems that many parents lavish and indulge their children with all things of which were inaccessible to them during their Soviet childhoods.

Russians rarely take their children out to eat in restaurants — restaurants are for official dinners or events — cafes are more for casual dining. In Moscow, there are a few restaurants that cater to children, but most do not. Kids also don’t go shopping with parents unless there is no one at home to leave the kids with — although now with the opening of many malls, that is changing.

Most major Russian cities have a myriad of places and activities especially for families. There are zoos, puppet theaters, musical and drama theatres,

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museums, and parks all just for children. Outdoor playgrounds in apartment courtyards vary in quality and age. Almost every apartment complex has its own playground; therefore, if yours is not acceptable, take a walk and scout out a better one — there is sure to be one nearby. (The parks and playgrounds are another excellent place to meet Russians with children the same age as yours and probably they live in your neighborhood, too!)

In Russia, you often have to get back to basics to entertain your children. A walk in the botanical gardens, or a picnic on the grounds of one of the mag-nificent historical estates around the city, for instance. The Russians, most admirably, know how to enjoy the simple things in life without always having to rely on special entertainment, equipment, computers or television. This is especially true in the countryside, where you will find most of Moscow’s children during the summer months — at their family’s dacha.

Sports are popular and there are many specialized complexes for tennis, swimming, ice skating and the like. Sporting good stores are well stocked and sell a variety of clothing and equipment.

SELECTING A SCHOOLWhen selecting or evaluating potential schools for your children, be sure to thoughtfully examine the schools’ curriculum, philosophy and mission. You should also become familiar with the fee structure and admissions process, behavioral expectations and requirements for continued admission. Many of the schools and preschools in Moscow and St. Petersburg, regardless if they are international or Russian, have long waiting lists due to the increased migration and population of these cities. Quality education options are nu-merous in the large cities.

Ultimately, you are responsible for the quality of your experience in Russia! Read up on the culture, traditions and possible obstacles for you and your family before you make the move. Proper preparation and planning, physi-cally but especially psychologically, make all the difference! Manage your expectations realistically so that you are not overwhelmed or disappointed. Our family loves both Russia and the United States — don’t ask us to choose which we prefer — vastly different, both are great — both are “home” for our family.

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