Dr. Gary K. Busch: What Happens When Sergei Dies

One of my first tasks in Russia was to arrange for the import of alumina into the Russian Far East for the Siberian aluminium industry. Alumina is like a fine white sand and requires grabs which have rubber lips to stop the alumina from running out when the grab is lifted
I asked the head of the port if there were such grabs in the port. He said he thought so but that I should ask Sergei. I went to find Sergei, who was an old, retired worker from the port. I asked him if he knew if these grabs existed and where they were. He said to come back the next day. I went back and Sergei asked me to accompany him. We walked down to the port and, just behind the refrigerated shed; Sergei pointed to the ground and said “They are buried here!”

I was a bit dubious but the port director brought a front end loader and we dug. Sure enough, there were two very good grabs with rubber lips; exactly as I had requested. Being very naпve, I asked why they were buried. I was told that in the Soviet Union everything belonged to the State. Equipment could not be sold, traded or used as collateral. They had to be accounted for in the assets of the port. Even if something was broken it had to be accounted for. Therefore, since everything had to stay on the port’s property, it was easiest to bury it and dig it up when it was needed. All over Russia, in ports, factories or transport depots there were things buried. It meant they could be accounted for but took up no valuable space.

I asked how they remembered where everything was buried. They told me that every place had a ‘Sergei’ of its own who was in charge of remembering. Whenever something had to be found, Sergei would remember where it was. I then asked the obvious question, “What happens when Sergei dies or forgets?” The answer was “Then Russia will have lost some very important assets.”

In today’s Russia it is not only the equipment which has been buried. In the rush towards economic growth and ‘improvement’ many of the values and cultural ideals of proper Russian behaviour have been buried. One of the strongest traditions has been that of ‘sobornost’; the community of the wills; a notion of a civic society. This took a different form under communism, when it became the communal or national will as opposed to the Orthodox tradition. Nonetheless it was powerful. In the face of Westernisation this communality was one of the first victims.

Another set of norms of proper behaviour were taught in every school. There may have been a deep cynicism against the ‘vlasti’ or the ‘nomenklatura’ for their excesses and special privileges but this was because their behaviour violated the norms taught in the educational system; equality before the law; the value of work and production; the shunning of mercenary behaviour; and the belief that wealth was a sin and poverty was a virtue. What was important was being able to rely on a circle of friends, a system which would deliver heat and hot water; and a system which would provide at least the bare necessities of life. Even the communist doctrines which were taught had a firm hold. I can remember the ambivalence of response when I was asked to design a wheat import facility in the Far East and their looks when they saw I had called the project the “Pavlik Morozov Memorial Grain Store”.

When we capitalists arrived in the middle of Russia in 1992 no one knew what would happen. Everyone had their own hopes and their own ideals. In two cities I was one of the first Westerners allowed into what was a ‘closed city’. In many others I was among the first to visit. Neither side had any idea of what to expect. I was surprised to find that things were as well organised as they were; that if one used the Russian system effectively, things would work. If one tried to impose a foreign system there was no capacity to make it work. We decided that the only way to make the new system work was to prepay everything. There was no cash available in the system so, with the best will in the world, the Russian partners could not deliver because they didn’t have the cash to make it work. So, we prepaid. In fact we prepaid millions of dollars in cash; to metal smelters, to ports to railroads and to agents. With all this cash, in U.S. dollars, paid we never lost one bar of metal. The Russians fulfilled their side of the bargain every time. It was miraculous to us that in what appeared to be a chaotic system there was ethics and reliability. It cost us no more than if we had paid later, but we took the risk on the basis of the Russian character and the personal relationships developed with our Russian partners.

It must be said, in fairness, that this entire system was facilitated despite the Russian Government. I had a 26,000 ton vessel full of alumina arriving in the port. I had deposited US$150,000 to the account of the port in Moscow. When I arrived at the port I was told that there might be a strike. I asked why. I was told that the port workers were upset that they had not been paid. I asked why they had not been paid; I was told that there was no money to pay them. This surprised me because I had put the money in the port’s account, in cash, myself. The port director laughed and said that the port had plenty of money in its account but that there was no facility to access cash. He could go to the bank and arrange to transfer funds to another account but that all cash was held in Moscow and it would take over a month to get the cash released for the port to use. I asked my colleagues what I should do to solve this problem. I flew to Khabarovsk and went to se a man who operated outside the normal system. If memory serves they called him “Poodle”. I negotiated a conversion rate with him. The port transferred the dollars to his account and I took two big black plastic bags of roubles to the port and work commenced. On many occasions the presence of a Mafia was the saviour of the business. They had the liquidity (from selling cigarettes, vodka, etc.) and were able to allow us to do our business. Without the Mafia the Russian system would not have worked. The Governments were useless because of their rules. Only the freewheelers could make the system work. Whatever else they may be accused of, Russia owes them a debt of gratitude.

Unfortunately these days are gone. There is a new generation of high flyers; stock wizards, mega-banks. There are hustlers from every country operating with Russian partners. The old values and ethics have been ‘reformed’ and cutthroat capitalism has taken over as an alternative. The process of economic liberalisation and growth has been bought by the sacrifices of many who didn’t know how to function in the Brave New World. There is a generational gap in Russian success stories with the younger surpassing the old. Now there is democracy and democratic elections coming up where the Chekists who control the political system seem likely to drive everyone else out of business. As it was described to me “Democracy is three wolves and one sheep deciding on what’s for supper”.

So, when I think of how it started I remember Sergei and his knowledge of where everything of value could be found I wonder what is going to happen to Russia when the Sergeis forget or die.