Foreword
I entered Russia on a full time assignment in 1994 and through 2002 held positions as employee first with Germany’s and Europe’s leading jeans manufacturer. I later held successive corporate posts with the world’s two largest liquor producers, one flying the flag of Canada and the other the flag of the United Kingdom.
For those with some knowledge of Russia and its consumer culture, one might ask how one could not do well working in these specific industries: the jeans that the whole country’s youth craved, and liquor, in the country with the highest per capita consumption of alcohol in the world. But Russia and the industries themselves threw up hurdles as we shall see. Life was never humdrum.
In between these major jobs working for multinational corporations in this period I performed project consultancy work for a leading UK brewer, for one of Finland’s largest trucking firms that was a supplier to the US government in its construction of a new embassy in Moscow, to a small foreign owned domestic courier service, and finally to an innovative Russian-owned software development company active in export markets. I even managed to do a stint as acting Moscow office manager under temporary contract from the NGO responsible for US-Russian academic exchanges, the same people who had overseen my year as a Fulbright Fellow in 1971-72. These various assignments gave me a wide ranging perspective on the entire expatriate manager experience of Russia during the Roaring 1990s which I seek to share here with the reader.
If one wonders why I had such a succession of short term employment, in each of which I entered into contracts as if a lifetime career lay ahead, with provisions for stock allotments and pension plans, the reason is that such was the game at the time. Major corporations were hard pressed to find people like myself with “gravitas,” as they called it, with in-depth experience of Russian business and fluency in the language as they eased themselves into a tough market where their Board of Directors, rightly or wrongly, had great expectations.
In one of these assignments which I received with the help of a London head hunter, I was “parachuted in” to replace a young general manager, 10 years or more my junior who was deemed by the bosses in London to have gone rogue. I was given a three-month consultancy contract, which was extended repeatedly as the bosses above me were flung out of the company. It ended in a normal employment contract that lasted more briefly than the consultancy contracts which preceded it. The idea of my employers in each instance was to get urgent help while they prepared one of their own fair-haired boys to move in and replace me, the outsider, at the earliest opportunity. They showed me little loyalty, and I reciprocated, moving where possible to their direct competitors, who were best positioned to appreciate what I knew of the business.
The structure of this book follows the rule I established in Volume I: one third is narrative told in the voice of 2020 and two-thirds consists of my diary entries, personal and business correspondence, news clippings which all express my own and interlocutors’ views of what we saw around us in Russia at the time. Once again I urge the reader to approach the diary entries only after reading the narrative section of the book, because it sets the context. I have reduced to a bare minimum any explanatory information within or between the diary entries themselves.
Though today I pride myself on the independence of my political views from those of the thundering herd, the need for such resolute focus on inner voice has become essential only in the past couple of decades when the major media in the United States and in the West more generally have become wholly aligned on a propagandistic treatment of everything Russia-related. In the period under review in this volume, there was more confusion over where Russia was headed, more diversity of views. Moreover, within Russia there was a lively English language underground press serving the expat community with such titles as The Exile, a publication that was as insightful as it was irreverent and kept us all mentally alert.
The value to the general reader of my diary entries changed over the period 1994 – 2000 in keeping with my career progression and increasing exposure to the broad community of expats, diplomats and businessmen. Over time, my corporate employee positions moved up. Eventually I was in charge of an organization with staff numbering in the hundreds.
Of particular importance in this progression was my move from the rather provincial St Petersburg to Moscow in November 1995. I will ration the allocation of space to the diary entries in this volume accordingly.
My career as multinational corporate executive ended with the incoming millennial year 2000 when I parted company with United Distillers/Diageo. I moved back to St Petersburg and spent another two years assisting a small Russian software development company. My material here on this final stage of my adventure living and working in Russia will be very brief because I no longer was in the midst of the current of political, business, diplomatic developments. My remaining travel to Moscow was mostly in respect to my continuing chairmanship of the country’s most important private literary prize, The Russian Booker.
This book is about a time and place. I seek to present the tumultuous times in that given place, Russia, and what we on the ground knew about the political, social, cultural environment. The subject is not the specifics of any of the companies I worked for or with. What I describe here is the challenges of working in a major emerging market – challenges to the corporate structure, to the individual manager and his or her family.
It is not my intention to characterize the quality of their management, their cultures, their business plans. Failing to meet these challenges, as several of the companies I worked for failed, is not a condemnation, only a frank acknowledgement of how much has to come together to be successful.
I believe this book enters a niche that will widen over time but still has not been addressed.
In the period covered, as in my 25 year business career on the whole, I moved through several different industries. While corporations cultivate what they call their “cultures,” the greater factor is sectorial. Low margin, low paying companies in textiles, in service industries including logistics have one culture. High margin companies in luxury goods and in technology have another culture which tends to be high pay, offset by high turnover.
Quite apart from the specifics of job rotation and tenure associated with working in a key Emerging Market that I mentioned above, there were as I saw, limitations on your stay in companies of certain industries which were not geography specific. As I saw firsthand in the Fast Moving Consumer Goods companies, nothing moved faster than the managers – in and out.
The liquor industry which I served for more than half of my time based in Moscow in the ‘90s had a uniform factor, regardless of company or geographic location: managers were drawn from biscuits, from whatever other consumer goods peers; they were hired to replace rogue managers who had “played with the numbers.” They were given impossible sales targets and within two years were fired for playing with the numbers, meaning reporting as sales physical transfer of merchandise into warehouses while inventory accumulated.
Then one more context must be mentioned here to appreciate fully the volatile atmosphere of the place and times described: industrial consolidation in the liquor industry where I was engaged for much of my expat working life in Russia.
In Volume I, the entry of disruptive digital technologies in the telecommunications industry where I was engaged from 1980 to 1988 with ITT was discussed, insofar as it made the lives of all of us in the sector nervous, with limited career possibilities and a depressed mood much of the time. So in the 1990s, I found myself in another industry that on a global scale was undergoing insuperable economic challenges that forced upon the actors nonstop reorganizations ending in consolidation and the disappearance of corporations that had, in some cases, very long histories. Brands remained. They changed hands and were redistributed in the portfolios of the surviving companies, often to be redistributed in just a couple of years during the next round of mergers. My own career was directly affected. But unlike the 1980s in telecoms, the 1990s found me surfing the waves of consolidation to my personal profit.
During the period 1994 to 2000 covered in this second volume of my Memoirs, I kept weekly records of what I saw, what I did, what I and others were thinking about. The stimuli from outside were admittedly uneven with shifting balance between what is strictly personal, often financial or familial, and consequently of little interest to outsiders, and what is in fact highly relevant to an understanding of Russia and of us expats back then.
The stimuli became most representative and I would say political-economic in a broad sense as from mid-1997 when I moved from corporate employee to consultant serving several companies and for a time one very important NGO: I then joined the American Chamber of Commerce in Russia, went to the monthly meetings of the British business community at their commercial office, and joined the newly established Harvard Club of Russia – all in Moscow.
When a year ago I finally set about the task of processing the 50 linear feet of file folders which sat on the floor of my home office, I still did not know what this book would present that could be of general interest and also of professional interest to academic researchers for whom it would be one more primary source on the period that I drew out. I only knew that in the given period I necessarily interacted with business people, politicians and statesmen who were also at the height of their careers and so were by and large very interesting as well as influential people. Moreover, I would present the period in question from an angle that has not hitherto been developed – from the perspective of the expat community in Moscow and Petersburg. In the mid-90s this community was very large, numbering perhaps 50,000 families in the capital region.
And then a rather unexpected dimension emerged: my memoirs as a side of the cultural history of Russia during the period described. Both from the very start and to the very end I was embedded in Russian cultural life, surrounded in particular by the musical world, later by the literary world. Partly this was a consequence of my working for much of the time in the luxury goods industry which favored cultural sponsorship and gave me, as Managing Director, a relatively free hand in choosing what to spend and where. In this connection, I entered in collegial and then often into friendly relations with people in the artistic world. Partly, it came from the activities of my wife, Larisa Zalesova. As a widely respected journalist and card-carrying member of the Russian intelligentsia, my wife gave me access to the pinnacles of this culture-rich country’s symphony orchestra, ballet and opera theater, drama theater and book publishing milieu.
At first as I pored over my diaries and found that I had included lengthy thoughts on the great many operas, ballets, concerts that I went to over these years I did not know what to do with this material. But finally it gelled. These records reflect the fact that high culture, the performing arts were, are and will be a defining element of Russia and as an expat, with a lot of time living alone, with family living abroad, I filled my evenings with this rare offering. My, our life was spent in the musical world for several years, in the literary world for several years as chairman of the Russian Booker from 1998- 2002. Many big names like Mstislav Rostropovich, Yuri Lyubimov and Georg Szolti were involved and I think there will be general interest as I set out here interconnections in that society, expat and local.
I hope the reader will find rewards in this testimony of someone who was not privy counsellor to presidents, whose activities were more those of an observer with a trained eye and background knowledge. Namely, I enjoyed the privilege of freedom to meet and work with Russians and expatriates from all levels of society without intermediation of partisan interpreters or journalists, so as to form my own conclusions, which I set out here.
.Introduction
In Volume I, I called out a turning point in the political atmosphere affecting foreign business, namely the July 1978 arrest and shabby imprisonment excommunicado in Lefortovo of one F. Jay Crawford, a service manager of International Harvester. This demonstrated that none of us foreigners was safe from the reach of the Soviet intelligence services. We became pawns in the fast changing political relations at the state to state level. This event, alongside trials of Jewish dissidents the same summer, helped to push the détente policy introduced in 1972 by Richard Nixon to the exit door.
In this Volume II, there was similarly an inflection moment as regards foreign business in Russia. It came in November 1996 with the murder of Paul Tatum, an American, part owner of a business center within one of the first western managed hotels in Moscow, the Radisson Slavyanskaya.
Tatum was shot dead in a pedestrian passage just near the hotel by criminals acting in the spirit of national assertiveness encouraged by then Moscow mayor Yuri Luzhkov. In case we missed the political meaning of his murder, Russian television showed on the evening news Tatum’s naked body stretched out on a table of the city morgue. This gruesome image had no precedent.
The killing of Tatum came just months after the critically important elections that gave Boris Yeltsin his second term in office, with the connivance of Russian oligarchs, who came into their own thanks to concessions that bought Yeltsin his winning margin in a run-off. It was nine months after Yeltsin changed his accommodative “Mr. Yes” foreign minister Andrei Kozyrev for Yevgeni Primakov, a strong defender of Russian national interests on the world stage. More generally, this was the onset of a xenophobic reaction that I had foreseen back in 1990 and recorded in a diary entry dated May 20-24 of that year whichI published in Volume I on page 350: “Russians are too clever and too well educated to have American hucksters dance on their heads for long. There will be a xenophobic reaction.”
As I looked over not just my own observations in the diaries, but the news and interpretation of leading journalists at the time, it is clear that changes within Russia provided grist for those in the West who were not confident about the country’s turning the corner on its past as trouble maker for the U.S.-led international community. In particular, as the reforms to replace the Communist command economy by a market driven economy stumbled, as the elections brought to the fore strong Communist and nationalist votes, there was nervous concern that the supposedly democratic America-friendly forces marshaled by Yeltsin might be driven from power. Thus, throughout the period under review in this volume the United States and its allies took actions which they may have viewed as defensive in nature, but which the Russians saw as unfriendly and threatening. This set in motion a ratcheting up of East-West tensions that ultimately led us to the head to head confrontation with Russia that has characterized the first decades of the 21st century. As my narrative unfolds, I will call out the significant moments in the period 1995-2000.
I assumed that in my memoirs of Russia in the 1990s I would be describing corruption in high places which I had witnessed first-hand. In my mind’s eye I had a rogues’ gallery. Everyone knows that Russia was and is corrupt. My man bites dog story would expose the corruption of us, the Westerners dealing with Russia. To specialists in the field, there were known cases or instances of allegations. In 1996 Western mainstream newspapers discussed in some detail allegations of impropriety, of violation of rules of ethics by the EU’s first ambassador to the Russian Federation Michael Emerson, who had concluded agreements with Russian business interests, read thugs, that would provide him with a living after he left the service, or before as some thought. There were allegations against Harvard university junior faculty who were seconded to US-financed aid programs to help with privatization and who engaged in “double dipping,” abusing their fiduciary responsibilities for insider trading.
These cases never came to trial, of course. Emerson had friends in high places. The boys from Harvard were protected by the President of the University, Larry Summers, who could pull strings back then with impunity. However, what I saw never came to the public eye. It was corporate slush funds set up ostensibly for paying bribes in Moscow but which in large part never left London headquarters and were said to have been distributed among top managers. It was executives conspiring with Russian distributors and importers to work against the interests of the corporation or participating in gray channel sales into Russia for which they got a percentage.
It is no secret that the liquor business in Russia, and not only in Russia, was, and surely in places remains highly criminalized. I can vouch for that fact from my own firsthand experience in the field. From 1995 to 2000 the greatest part of my time was in the liquor industry, which was particularly infested with crooks at all levels, from the street kiosks up to the infamous tennis trainer of President Yeltsin who supervised one of the greatest scams of all time, which I saw firsthand as the manager of a business gutted by this given machination.
But there were many less stellar thieves and schemers from among the expatriate community whom I rubbed shoulders with at the regular gatherings held in consulates, bars and receptions around town. This was all the more common in Moscow, which was and remains the capital of tusovki, chic parties that Russians so love. Here, to put a face to the characterization, I saw occasionally a well-dressed journalist turned pimp who made a fortune serving the sexual appetite of a Russian business tycoon in St Petersburg. But, more significantly, here you had deeply corrupt Swiss bankers who were promoting sales of the highly speculative and ultimately toxic Russian state bonds to conservative American pension funds including CALPERS.
Chapter One. Who were we, the expatriates in Russia in the 1990s?
I began my expatriate existence in Russia in 1994 at 49, an age at which most middle level corporate executives have peaked in their careers and are looking to the exit, which commonly became age 55 in the period under discussion here. In my case, this was in fact the launching age for a career in business that had begun as a consultant, on a steep incline to the top, had hit a wall in 1980 when the Russian invasion of Afghanistan triggered an intensification of the Cold War that put a shabash on all those working in the Soviet empire, which extended into Central Europe.
To be sure, there were plenty of others my age around me during my years living and working in the two Russian capitals, St Petersburg and Moscow, from 1994 to 2002. However, there were many more youngsters in the expatriate cohort: new college graduates, many of whom had studied Russian and had some degree of fluency in the language as the main underpinnings of their hoped for fast starts in business life at the new frontier that post-Communist Russia represented.
They had careers to begin. I had a career to cap.
Heading up corporate representations in Russia was a position I had been preparing myself for over several decades, first as an area specialist, then as a consultant to multinationals on large industrial and commercial projects in Russia (the USSR), then as a middle management executive based in the Western European coordination center of one of America’s largest conglomerates with responsibility for several countries in the East Bloc.
I do not conceal from myself or from others, that the 5 years from 1995 to 2000 when I was on corporate payrolls in Moscow and St Petersburg were the most lucrative in my professional life and provided me with the capital to carry on from then to the present in what can be described as “semi-retirement.”
I reached the height of my business career in Russia at the level of Country manager/General Manager, Russia and the CIS. In the order of things this was either a middle management or lower rung of top management position in major corporations. This book is therefore not about my own exploits so much as the milieu in which I lived and worked. It will be directed towards the remarkable people I met along the way.
The 1990s Russia which I describe here was a country very different from the static, almost petrified Soviet Union that I had gotten to know from my student days in the 1960s through business visits in the 1980s. It was a different country from Russia today in many dimensions, including the prosperity of the population, the degree of civil and political freedoms they enjoy, the conditions of doing business, infrastructure.
At the time, the Big Four global legal and accounting consultancies established a large presence in Moscow and created an infrastructure supportive of US and international business representations. They created a Potemkin village Russia for the benefit of corporate headquarters in the West and gave to Russia an undeserved patina of rule of law that comforted the home offices though it was largely unmatched by reality on the ground which kept us expat managers on our toes all the time. There were never ending abrupt changes in the tax and legal environment that put in jeopardy all of our earnest and best made business plans, which are the highest preoccupation of every business.
The 1990s Russia was a magnet for swashbuckling characters from the West, fortune seekers and seekers of sexual adventures in an environment where everything was for sale, no holds barred.
Many of the expat executives I associated with in Moscow in the 1990s were my own age, in their mid-40s, but many others were 15 years my junior, straight out of the university with perhaps a major in Russian and some language courses under their belts. They were all actively recruited, as I was, to fill posts that were created by decisions from the very top of major corporations to establish a presence in the newly opened Russian market and to throw the rule book of corporate governance out the window while getting started in a land that was chaotic and where the law was a moving target.
I mentioned at the start of this volume how I had been parachuted into the Moscow Representative Office of one multinational in 1995. Since my predecessor had been fired “execution style” as so often happens in large organizations and was barred from entering the office premises to recover his personal effects, I happened to find in one drawer of my desk his cache of personal correspondence going back several years. They were very interesting because of how they reflected the type of young people who came to Russia as linguists, completed undergraduate programs in Slavic languages and literature, perhaps got an MA in a special joint program with American universities run in Moscow and very quickly saw the opportunities to get immediate employment and move into major companies. They changed career direction and signed on to head representative offices or otherwise take marketing responsibility for Russia and the CIS.
These new arrivals to the business world were by temperament swashbucklers. Some married Russian girlfriends and ‘went native.’
But Russia in the 1990s was not just a magnet for footloose opportunists. It attracted some of the world’s best young talent. Recent college graduates came in the knowledge that this new “emerging market” offered entry level positions that could very quickly turn into serious career steps in line with their professional training.
Looking at journalism, I think first of The Financial Times which had a strong team on the ground in Moscow covering not only business and politics but music, the performing arts and visual arts. One of the most frequent bylines at the FT was Chrystia Freeland, then a young Canadian. Freeland later made a career change from journalism, as Boris Johnson has done in the UK, and eventually became Minister of Foreign Affairs in Toronto, then Deputy Premier. But I think few know that her entry rung on the ladder was precisely in Russia, the land of opportunity.
As I noted in passing above, Moscow in 1995 already counted an English speaking expatriate community of more than 50,000 families. To serve them, several English language daily newspapers financed by advertising and distributed free of charge in all hotels and western business centers appeared. Some came and went, but the most successful was The Moscow Times in what became an Independent Media empire that drew on very considerable financial flows as the publisher of Russian language editions of US glossy magazines that appealed to the New Russians. The Moscow Times attracted a very talented group of young US, UK starting journalists, as well as some talented English-speaking Russians including Leonid Bershidsky, whom we see today at the peak of career in association with Bloomberg.
This book will cover other stars in the business world and politics, Russians and foreigners, whom I met in the period with mention of where they are today.
Politics of the expatriate community
In the 60s in the USSR, a popular tune had the refrain “Ух ты, ах ты, все мы космонавты” – “Ooh, Aah, we are all cosmonauts”. I take that to signify that each age has its mass hypnotism. In the period of the mid-1990s, we, the expat managers in Russia were subject to such hypnotism insofar as we all shared the globalist and Liberal Democracy values which my favorite newspaper The Financial Times, and most other mainstream media propagated. They still do. Here again, it is I who have changed.
But I am obliged to admit that in the 1990s I saw the evolving political world of the New Russia through their lenses. It was second nature to us all. Not surprising that when Zhirinovsky came onto the scene and did so well in the December 1994 Duma elections, I was describing him in my notes as a neo-fascist. Where did I get that from? From the FT, which then shifted to calling him merely ‘extreme nationalist.’
Another big source of information was informal, exchange of gossip and speculation with peers and with the diplomatic corps. The British Embassy in Moscow was a big and generous host of expat gatherings in their premises for free drinks and the opportunity to network, not merely over career issues, about housing issues, but also over domestic politics. And there were industry associations such as the liquor lobby that I participated in at a certain point. Add to this personal ties in the rather small community of Russia specialists going back to the times of our post-graduate studies or language programs
Then there was the American Chamber of Commerce in Russia, which despite “American” in its name was de facto the preeminent association of all the world’s businesses. Separately there was created a European Business association, and the Brits had and have their RBBC meeting in Moscow and St Petersburg, ie. the Russian-British Business Council. These chambers all had regular luncheons with guest Russian political-government officials and visiting eminent foreigners.
And then there is another factor entering into the issue of what we expats knew and did not know was going on in the country where we were stationed: as heads of representations we were constantly going back and forth to corporate headquarters in Western Europe, where we were immersed in the visions of Russia prevailing there. In my own case this meant traveling every couple of weeks back to London for several days of consultations.
National security
Russia/Soviet Union was from the very start of my traveling there a place that attracted marginal operators. In 1975, my first employment with a small consultancy based in New York within the premises of one of the largest public relations and advertising houses in the United States at that time provided me with a peephole on this. The brother of the consultancy’s Dutch born chairwoman who split his time between The Netherlands and Moscow at the time was widely rumored to be trading in electronics that were on the proscribed COCOM list, that is prohibited for sale to the Soviet Union. At bars in Moscow I met the same crowd of shady personalities.
On both sides, foreign and Russian, national security was always a factor in this business. From my days at ITT Europe in the 1980s, security officers within the company lorded it over us marketing managers with constant reminders of the mission impossible we were pursuing: going after sales of advanced communications systems in countries where the eventual licenses for export were under a question and where too much success could endanger our very extensive relationship with the US defense department.
It was a shock to find that the same security custodians would reappear in my life in the now free Russian Federation in the 1990s, both former CIA, or present CIA, and former Russian KGB. Once again their presence on the scene goes on for decades. The same ex-KGB general who was expelled from Margaret Thatcher’s Britain on charges of involvement in the Philby affair was now the counterpart and partner of an ex-CIA officer in the service of one of the Big Five accounting consultancies in Moscow. His name resurfaced in 2017 when his small security company received the contract to provide protection to the US embassy in Moscow following its forced repatriation of half of its staff in the diplomatic row with the Kremlin.
Personal security
In Volume I, I called the atmosphere in late 1970s Russia sinister and intimidating. It was, of course, nothing compared to the real physical dangers of working in Moscow during the go-go years of the 1990s. Then the risks came not from the state security apparatus but from the criminal gangs. Given that most of my time from 1995 to 2000 I was in the employ of liquor companies, operating with high visibility in one of the most criminally infested sectors of the Russian economy, I am well prepared to discuss what caused our justified attacks of nervousness.
However, the risks were clear to me well before I entered the spirits industry. They were inescapable from my first days as an incoming resident manager in St Petersburg for the German jeans manufacturer Mustang.
©Gilbert Doctorow 2020
Gilbert Doctorow 