Chapter 17: Biznes

It is doubtful whether the difficulties of trade with Russia are fully appreciated in this country…

(Mitford, p.109; July 1921)

A Frozen Meat Market in St Petersburg at the start of the XX Century
(From Dobson, Grove, Stewart)

Few areas of Russian life have seen such changes over the last hundred years or so as the business world; nevertheless, a peculiarly Russian strand has survived throughout. This is partly because the Russians’ Asian roots come through in business perhaps more than anywhere else; something which is apparent from the earliest quotations in this section, which is arranged chronologically: Tsarist times; the Soviet era; the modern age. The title of the section also reflects a Russian contradiction: in Soviet times, Biznes (a simple transliteration of the English word) clearly meant the sort of dirty, underhand dealings done by the capitalists. In post-Soviet times it has come to be the accepted word for “business”, corrupt or not: “Бизнес есть бизнес” [Biznes yest Biznes], “Business is business”, can be interpreted in a positive or negative way.

Hugh Stewart’s description of the Gostini Dvor (or “Strangers’ court” as he translates it) reflects the typical “large store” in Tsarist and Soviet times, and is, indeed, a typical Eastern covered market.

In the centre of each town is a Gostini Dvor, or Strangers’ court, a building with long rows of low-roofed stores, where, with Oriental bargaining, a large proportion of the local business is transacted. For reckoning calculations the merchants use the stchoti, a wooden framework about a foot long, and scarcely so broad, with rows of balls strung on wires.

(Stewart in Dobson, Grove, Stewart, p.390; 1913)

The fountain in the centre of GUM was often used as
a meeting place in Soviet times. But GUM has never
been a department store; rather it was an indoor
market in Soviet times and is now an exclusive
shopping arcade.

Russians used to boast in Soviet times that GUM on Red Square in Moscow was “the biggest shop in the world”; but this was an inaccurate description. Built in its present appearance in 1893, GUM stands for “State Department Store”, Государственный универсальный магазин [Gosudarstvenny universalny magazin], but its Tsarist name of Верхние торговые ряды, [Verkhniye torgoviye ryady, or Upper Trading Rows] is more accurate. GUM was and remains to this day no more than a large covered market, even if nowadays the luxury goods in which it specialises are not the kind of goods one would expect to find in a market! In modern parlance, it is a shopping centre (or “mall” as the Americans would say), albeit in a rather elaborate style. (Interestingly, Gostini Dvor in St Petersburg, on the city’s main thoroughfare, Nevsky Prospekt, still bears the original name.) Stewart refers to the merchants making their calculations on an abacus. As mentioned above in Everyday Life, I last saw one of these being used in Russia as late as 2009.

Gostini Dvor in St Petersburg in 1915. The name and
the facade remain the same today.
(From Steveni)

Just a few years before Stewart was writing, Carl Joubert noted that not only were such market-places typical of Russian cities, but the Eastern habit of haggling was typical.

In the big establishments of St Petersburg or Moscow it is the same as in the market-place of Yaroslaff – there will be an attempt made to cheat the customer to begin with, and a gradual “climb-down” on the part of the merchant until a reasonable figure is reached.

(Joubert, p. 45; 1904)

And, in a scene reminiscent of the market place in the Monty Python film, Life of Brian, H M Grove also notes the “Oriental” nature of trade in pre-Revolutionary Russia.

The shopman begins by asking twice as much as he is really prepared to take, and the customer offers one-half of what he is really prepared to pay. After hours of heated bargaining, each party declaring he is being ruined, a deal is ultimately effected by compromise. The noise and excitement accompanying these transactions are absolutely Oriental…

(Grove in Dobson, Grove, Stewart, p.168; 1913)

Anyone who went shopping in Soviet times – or even shopping in state-owned shops since – will find Grove’s description of shopping in the later part of the nineteenth century very familiar.

Up to fifteen or twenty years ago the Russian shops virtually showed nothing in their windows, and very little inside…

  Fifteen years or so ago it was quite a common thing to go into a shop and see groups of the employees chatting among themselves. After a due wait one of them would saunter over and ask what you wanted. When you said, he would say, “Do you want much?” If you replied affirmatively, he would brisk up somewhat and serve you; if, on the contrary, you wanted a small amount, the odds were he would reply, “Sorry, we have not got it,” and stroll back to resume his interrupted gossip with his comrades.

(Grove in Dobson, Grove, Stewart, p.238; 1913)

Firstly, there is the lack of goods in the windows. The difference between the late nineteenth and late twentieth centuries, though, was that in the earlier period they simply didn’t bother to display their goods; in the last fifteen or twenty years of the Soviet system, they didn’t have the goods to display. But the attitude of the sales staff was exactly the same. The customer in Soviet shops was always made to feel that they were a nuisance, getting in the way of the assistants gossiping, reading or filing their nails. Even some of the current younger generation who have grown up entirely in the post-Soviet era display these apparently typical Russian characteristics!

As the quotation at the head of this section shows, it is not just in Russian shops that foreigners have had cause to be exasperated by the Russian attitude to trade. The Russo-British Chamber of Commerce (RBCC) was, rather curiously, formed in 1916; curiously, because for two years war had been raging in Europe and was showing no signs of ending. What the Chamber’s founders didn’t know was that the whole Russian system was on the verge of collapse. In March 1917, Tsar Nicholas II was overthrown; and in November of the same year the Bolsheviks were to seize power and five years of civil war were to begin. Perhaps unsurprisingly, the effect on international trade was catastrophic: in 1920 imports into Russia represented just 0.5% of the figure for 1913. Small wonder then, that the first Director of the RBCC, Captain A H Mitford, expressed concerns about the state of Russo-British trade in the opening remarks to the editorial in the Chamber’s first Bulletin in February 1919:

Shortly after the commencement of the year 1918 trade with Russia entirely ceased, and the useful activities of this Chamber were consequently very much limited.

(Mitford, p.2; Feb 1919)

What is heartening, however, is Mitford’s “stiff upper lip” language. The extent to which the West was failing to grasp what had happened in Russia is shown by this quotation from the British Prime Minister of the time, Lloyd George, cited by Hedrick Smith.

“I believe we can have her [Russia] by trade. Commerce has a sobering influence… Trade, in my opinion, will bring an end to the ferocity, the rapine, and the crudity of Bolshevism surer than any other method.” British Prime Minister Lloyd George, 10 February 1922.

(As cited in Smith, The Russians, p.593; 1977)

Trade did not put an end to the ferocity of Bolshevism.

One thing which didn’t change from Tsarist times, through the supposedly socialist Soviet system and is considered the norm now, is tipping. In the West, we are used to giving tips in restaurants and to taxi drivers. Grove maintains that a hundred years ago tipping was even more widespread.

Russia is an awful country for tips – you tip for everything.

(Grove in Dobson, Grove, Stewart, p.282; 1913)

And one of my own experiences, from 1979, shows that Soviet taxi drivers considered taking a tip as their right – no matter what the ideology said. I gave a taxi driver a three rouble note for a fare of two roubles thirty kopecks. Realising that I was a foreigner, he felt he should explain.

Taxi Driver: Unfortunately, in our country taxi drivers very rarely have any change…

SD: That’s interesting, because they say that under socialism you don’t give tips.

Taxi Driver (turning round to me with a grin): Let them say it!

(Dalziel)

I felt that the taxi driver had earned his 70 kopecks!

Smith’s colourful description of a typical Soviet market captures the essence of the place, and still rings true today; the only difference is that there is now more produce available.

Let the browsing shopper hesitate by one vendor and the competing chorus begins. Here, an unshaven peasant missing some front teeth offers skinned rabbit. There, a roly-poly Russian shows off farm-fresh eggs in earthy hands. An old woman, head wound in scarves like a mummy, offers a hunk of tvorog (sweetened homemade cottage cheese) on waxed paper, or a sample of smetana (sour cream) from a white enamel bucket. A swarthy, flat-capped Georgian will carve the skin off a pear, eyeing the shopper craftily, and then extend a succulent sliver on his knife. In the far corner, women in rough country clothes beckon you toward dried mushrooms dangling on strings like necklaces of corks.

(Smith, The Russians, p.247; 1977)

Moscow's twice-yearly Honey Market still has the feel
of the old market places

And George Feifer, writing in the mid-seventies, comes close to predicting what post-Soviet Moscow would be like.

Moscow offices – of the First National City Bank, Rockefeller’s Chase Manhattan, Univac and the rest – are opening everywhere, their expense-account staffs reserving the best restaurant tables. Beneath Lenin’s portrait, the Minister of Foreign Trade contracts with Pepsi-Cola to produce millions of bottles annually, Comrade Brezhnev boasting he’ll drink the first one. The Russian people will stand on line all day, and with Pepsi and chewing gum – yesterday’s arch symbols of American vulgarity and imperialism – finally in their grasp the new revolution will be postponed another fifty years …

  …Very soon “my” Moscow won’t be the same.

(Feifer, p.434; 1976)

The “new revolution”, of course, was not fifty years away; but Feifer’s Moscow – the Moscow of the Soviet period – did disappear very quickly after he wrote this. Just how quickly that Moscow disappeared, and yet the Asiatic way of doing business/Biznes remained is reflected in these post-Soviet comments.

[Gazprom] became the epitome of the closed Russian company, working through influence and power, rather than through the markets. It had its own “social” programme of redistribution, and its own “foreign policy” of pressure on the surrounding states. It successfully rebuffed all efforts by the economic reformers to break it up, or to increase its taxes. It did not so much bargain with the state, as integrate itself into it… It had ceased to be a part of the Soviet state, and had become a Russian fiefdom.

(Lloyd, p.279; 1998)

We have double business ethics for everyone; the business ethics of so-called, “friends of your friend”. I mean, if you have real friends here in Russia, you may rely on them and they will be quite ethical to you. But if you’re an outsider; if you didn’t become the “friend”, they won’t have real business ethics to you. And about the contract: under our legal instability, under our jumps of legislation every second day, our managers do not believe in papers. And sometimes I’m surprised when Western companies are paying to their consultants huge money to deliver the contract with all the details. The contracts exist in accordance with Russian saying, “to violate them”. The word of the businessman – if you got really acquainted, if you became friends – the people will behave properly, and will be quite ethical. And the papers? The papers can be changed!

(Myasoyedov, interview with Dalziel, September 1994; Programme 5)

Privatization, the fantastic gamble of throwing the state sector into the hands of whoever would prove resourceful and ruthless enough to grasp it, gave the Russian banks and finance houses their early character, and will mark their future for ever. Because of its scale, speed and chaos, the privatization process ensured that finance would become a Darwinian arena in which the protagonists would slug it out to the death of the weakest.

(Lloyd, p.282; 1998)

Now [September 1994], we’re a more or less civilised economy, because the only shortage here is money. I cannot say that from the first of January 1992 the country reached the free market. I’d rather say that we have reached flea market by now!

(Myasoyedov, interview with Dalziel, September 1994; Programme 4)

[After the collapse of the USSR] Russian managers and business people were not equipped for the business world – except in Russia, which was a very particular experience.

(Lloyd, p.374; 1998)

Bill Browder describes this “particular experience” graphically. Lloyd himself (above) talks about the business world as “a Darwinian arena in which the protagonists would slug it out to the death of the weakest”; for Browder there was nothing scientific about it:

…Russian business culture is closer to that of a prison yard than anything else. In prison, all you have is your reputation. Your position is hard-earned and it is not relinquished easily. When someone is crossing the yard coming for you, you cannot stand idly by. You have to kill him before he kills you. If you don’t, and if you manage to survive the attack, you’ll be deemed weak and before you know it you will have lost your respect and become someone’s bitch. This is the calculus that every oligarch and every Russian politician goes through every day.

(Browder, p.161; 2015)

As he makes clear in his book, Red Notice, Browder was playing for high stakes; and although he did not realise it at that time, the stakes were about to become as high as they could get: the book’s sub-title is, How I Became Putin’s No.1 Enemy. Most Westerners, of course, have never gone as far or taken the risks which Browder took.

Neil Payne, of Coopers & Lybrand, told me in an interview of a situation in which he and thousands of other Western businessmen found themselves in post-Soviet Russia. And it remains true to this day.

One’s initial feeling when we were starting negotiations ourselves was that you thought you had a deal only to find that was only the start of the negotiation process proper. But I think that once you get to know the Russians and they trust you, then a deal is a deal; albeit that I think the best of them are born businessmen and they do want to get the maximum out of an arrangement; and if they can twist it slightly in their favour then they will.

(Payne, interview with Dalziel, February 1995)

I have had numerous Western businessmen express the sentiment to me that they thought that they had reached an agreement with a Russian partner – before realising that as far as the Russian was concerned the negotiation process was just beginning!

Another crucial area where post-Soviet business culture differs from what Western business people are used to is in what is usually referred to as “due diligence”. Whether you are entering into a partnership, buying shares or contemplating a merger or acquisition of a company, it is considered good practice to find out as much about that business as possible. In the United Kingdom, much necessary information can be obtained from Companies House. In Russia, it is not so simple, as Browder discovered in 1996 when he was just starting out on the adventure which was to lead him to understand the vicious side of Russian business he described above. He was considering buying into the Sidanco oil company.

Going after information in Russia was like hurtling down the rabbit hole. Ask a question, get a riddle. Track a lead, hit a wall. Nothing was self-evident or clear. After seventy years of KGB-instilled paranoia, Russians were careful to guard their information. Even enquiring after a person’s health could feel like asking someone to reveal a state secret, and I knew that asking about the condition of a company would prove exponentially more difficult.

(Browder, p.137; 2015)

And, finally in this section, Peter Pomerantsev comments on a nasty but all-too-common way in which businesses which were showing signs of success were dealt with in the post-Soviet period.

“Reiding” [i.e. a Russian version of the English word, raiding – SD]…was the most common form of corporate takeover in Russia…Business rivals…pay the security services to have the head of a company arrested; while they are in prison their documents and registrations are seized, the company is re-registered under different owners, and by the time the original owners are released the company has been bought and sold and split up by new owners…It was the right to do this that glued together the great “power vertical” that stretched from the President down to the lowliest traffic cop.

(Pomerantsev, p.107; 2015)

See also: Sex, Lloyd, “…there was a heavy and quite unembarrassed emphasis on female decorativeness and sexiness…”