American businessmen miss Yeltsin’s Russia

Russians observed no laws; foreigners paid 1,000 USD and got everything they wished
When economic reforms started in Russia, US companies were enthusiastic about buying Russian enterprises at give-away prices. Further, such enterprises were successfully closed, which allowed foreign businessmen to take their goods out of the country, as they were not satisfied with import substitution in Russia. When customs duties were overstated, Russia couldn’t afford to import any more. However, some foreign businessmen still preferred to develop firms in Russia. Others, on the contrary, gave up, and Russian businessmen finally gained control over the enterprises. And now, when these Russian businessmen are rather successful, the Americans suddenly declared that they are also interested in Russian business.

America’s Sawyer Research is trying to restore its ownership of a quartz glass enterprise in the Russian city of Gus-Khrustalny. At that, the US media have launched a hysterical campaign concerning the torments of naive American investors in corrupt Russia. As the company is the world’s leader in quartz production, the whole of the US State Department has become involved in the resturing the business to its former American owners. US Ambassador to Russia Alexander Vershbow visited the Vladimir region, where the enterprise is situated, and gave an interview to a famous Moscow newspaper.

According to Izvestia, Sawyer Research has been absolutely privately owned enterprise since 1983; its owners are unknown. From the end of the 1980s to thebeginning of the 1990s, piezoelectric production was practically unprofitable. Moreover, natural quartz, which is one of the most widespread minerals on the planet, became a strong rival to it on the market. Sawyer Research bought 23% shares of the quartz glass enterprise in 1994. On the contrary, the local administration of Gus-Khrustalny says that Americans gained complete ownership of the enterprise. In fact, US investments were not enough even to cover operational needs. Arrears of the enterprise were increasing, especially for electric energy consumption. Russia’s ROEL Consulting bought back the debts of the enterprise and initiated bankruptcy proceedings.

However, it was perfectly evident that Americans didn’t plan to develop the enterprise. Sawyer reached an agreement with the first bankruptcy manager and received a workshop for growing artificial quartz on a 25-year lease with the right of subsequent redemption. It is perfectly clear that the workshop is the essential section of the enterprise. This kind of privatization was very typical for Russia at the beginning of the 1990s. It should be mentioned here that Russian officials dealing with privatization learnt of this scheme from the American advisors of Yegor Gaidar and Anatoly Chubais. In fact, this privatization scheme is an instrument of American economic imperialism. It took about ten years before Russian businessmen understood how to restore property privatized in this way. Within the same period, Russian industry was completely ruined. Foreign businessmen invested nothing at all in their Russian enterprises, but instead tried to obtain great profits and then gave them up. And now, when foreign businessmen complain about corrupt Russians who try to deprive them of their enterprises (which they abandoned themselves), the complaints are not convincing at all; moreover, they only cause more anger towards foreign businessmen.

It should be mentioned here that Russian businessmen have finally become experienced enough to see which enterprises can make a profit. Currently, when they enjoy the support of the Russian government, they are even more successful with their enterprises. As soon as Russian businessmen declared their wish to restore profitable production at the quartz glass enterprise, the bankruptcy manager was replaced. Last year, the lease contract with American businessmen was declared invalid and appeals against the decision from the US side were turned down. Finally, the enterprise gained a Russian owner.

At the same time, Americans didn't give up: having won no support in Russia, they hope to bring the case to the international level and launched a campaign in the US media. Director of the American company Garry Johnson said in an interview to Cleveland’s The Plain Dealer that he estimates the losses in the privatization of the quartz glass enterprise to be $8 million. However, principles are more important for the USA in this case; American businessmen want to find out who actually rules over Russia.

Other American media outlets are practically of the same opinion. At that, American readers who are unaware of Russian reality probably believe that the cases concerning the quartz glass enterprise and the Ilim Pulp Enterprise are one and the same. And they probably don’t understand that the situation has nothing to do with any "mafia." It is not clear for them that an enterprise with big debts for energy supplies can bring no profit at all. And there is no chance to avoid payment of the debt. Moreover, the debts of the enterprise were bought by a Russian company and the bankruptcy proceedings were completed in accordance to legislation. That is why there is no reason to consider the case as a political conflict and allege that corrupt ministers rule over Russia.

It is a sure fact that Russian laws are currently better and correspond to international norms. Unlike in the era of Boris Yeltsin, these laws are strictly observed in the country. And American investors seem very much disappointed with the fact that Russians now are more law-abiding than before. On the other hand, they can no longer have businesses in Russia and invest more and more money in it. If Americans think that investing in Russia is unprofitable, Russian oligarchs can do it instead under the direction of Vladimir Putin.

The visit of the US Ambassador Alexander Vershbow to Gus-Khrustalny brought some results. In any case, the Americans had produced some quartz and exported it. When they left, the enterprise lost clients on the international markets, and this is against the background of a scanty demand for this product on the domestic market. The US Ambassador thinks that creation of a Russian-American joint enterprise would be a nice way out. The new owners of the quartz glass enterprise plan to manage without American help. They say that functioning capacity of the enterprise currently at 70%, and monthly earnings are $300,000 (they are expected to reach $450,000 by the end of the year).

ROEL Consulting managers say that the enterprise can earn up to $2 million per year at a 100% functioning capacity. And this is the level when competent governmental authorities will focus attention on the enterprise. Artificial quartz is currently a strategic product necessary for computers, cell phones, and so on. ROEL Consulting says it is ready for negotiations with the former American owner. At the same time, the Russian company is working on the establishment and registration of a foreign trade branch establishment. In the end, strategic materials are attractive not only for Americans. Dmitry Slobodanuk PRAVDA.Ru

For reference:

The annual production of artificial quartz makes up 650 tons in the USA, 400 tons in China, and 230 tons in Japan. Russia has three quartz-producing enterprises, and the total production of artificial quartz in Russia may reach 570 tons per year. According to the estimates of the Research Institute for Synthesis of Mineral Resources, the world’s demand for piezo-quartz makes up 2,500 tons per year, which is 450-500 tons above the supply. According to Allied Business Intelligence forecasts, the market of quartz-based micro-chips will increase by 11% every year. Experts say that construction of a modern enterprise to produce quartz in the USA will cost about $70 million. This means that an enterprise already functioning is more attractive for investors.

Translated by Maria Gousseva

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