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Toni Schönfelder
A lifetime of innovation

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Toni Schönfelder
A lifetime of innovation

THE CRISIS IN RUSSIA Written by Anders Lidman and Toni Schönfelder " I think the market has overreacted and we believe the present situation in Russia to be very interesting and gives us a purchase signal on the financial markets in Moscow." The statement was recently made by one of the leading London based fund dealers. While the Russian crisis gets worse for every day, our dispair and anguish increase by the day over the ignorance and fundamental lack of knowledge by western experts of this vastly different country. Or is it our newly developed finance-technocratic society which has killed all remaining wisdom and knowledge represented among historians, philosophers and of course in litterature. All that our western news media seem to rely on these days are stock market traders, business lawyers and politicians. Mother Russia has always been different from us in the West. We have to go back in our history to the separation of the christian church into West - and East Rome, to see why the difference came about. While Western Europe experienced renaissance, the right of the individual towards the state and a legal system that could be trusted, the Ortodox church in Constantinople pursued a strict authoritarian doctrine, where the church and the state gave the orders and the individuals obeyed. The power over Russia came originally from the East with the Mongols or Tatars as they were commonly called. They ruled Russia between 1224 and 1480, with total control from the Pacific Ocean to the Baltic Sea. The Tatars were followed by the Grand Dukes of Moscow, who conserved the rigid, stiff and mentally regressive regim of the Orientals. The days of East Rome came to an end in 1453 when Constaninople was conquered by the Turks and became Islamic. The insignia of Bysans and Ortodox Christianity, the Dubbel Eagle, was inherited by the Grand Duke of Russia who simultaneously took the title "Tsar", after the Roman "Caesar". The Dukes of Moscow developed and refined bureaucracy into a dictaturship humanity had not seen before. All Russians, with the exception of the Tsar, had someone to obey blindly, a person who ruled over their lives and their destiny. One word and everything could vanish, savings, property and indeed life itself. Millions and millions again of Russians have been sent out to feed the enemy canons or were used as slaves like any other consumer goods. Tenthousands of million Russians were deported and torn up with their roots from their families and loved ones when being sent from one corner to the other of this vast land. Few Russians are unaware of Stalins uncountable "cleansings" where alltogether 40 to 60 million people were murdered, starved to death or died from deseases or malnutrition. Few things have changed in today’s Russia. The country lacks a legal system worth it’s name and still one puts one’s life at stake if one opposes the wrong person or just happen to stand in the way for someone’s vital economic interests. A Russian’s real right in society is derived from the spoken word of his boss. This is the platform for his life and the only thing that counts. Words can be changed in seconds, which explains why the Russian finds the concept of long-term planning meaningless. An ordinary Russian can not grasp concepts such as democracy, citizen’s rights or a legal system supporting the individual towards the state. On the contrary is his soul and body the essance of a thousand years of terror and obediance. Above it all KGB watches and rules. Or rather the fragmented parts of the old KGB. In reality nothing has changed, why we for sake of simplicity have chosen to continue to call the Russian federal intelligence- and surveillance organization KGB. KGB is everywhere, including every business enterprise in Russia, Russian and foreign alike. KGB stands above all law, criminal as well as civil law. It has unlimited authority to issue personal cards granting that individual total immunity from any interference or unwanted action by the society. Such a small red card is held by around one million of the fortunate nomenclatura and is a complete protection against arrests for any reason whatsoever. Nor can they be checked by the Police, Customs or Tax Authorities. They are in short part of an other world. Naturally Russia has a legal system, formally. The young state enacted a new Civil Code in 1995. It covers all parts of significance, except for ownership of land, which means that private ownership of land is not yet introduced in Russia. The problem however with this Code, as with all other laws in Russia, is that it is full of conceptual as well as technical deficiencies, which makes it worth little if anything when facing reality. When the foreign business man tries to make some sense out of one law, he might face KGB:s tax police who refers to another, until now unknown law, or a newly issued presidential decree which can be used against the foreigner. These decrees, which the president can issue in no time at all, are often ordered by the various Oligarks or Robberbarons. As an example are all large Russian companies exempted from tax through decrees. It is precisely here the westerner goes wrong and gets lost in Russia. Since this real structure is hidden to outsiders, they are often led to draw the wrong conclusions. What the westerner sees whether he is a businessman, lawyer, banker or politician, is a marionett theatre where he judges the behaviour of the puppets in stead of the power behind who pulls the strings. KGB:s "work" inside the companies can be divided in three parts. Firstly they collect all information and sort out what they judge important or might be useful in the future to hold against the company. In this process all telephone calls including mobile telephones, all fax communication and all E-mails are bugged. All internal documents and protocols as well as oral statements by key employees are noted. If an 100% check is not made, it is because KGB chose to have it that way. Secondly, all informationen collected is passed on to one or more principals. Principals in this connection are most often the Robberbarons. These persons represent powerful groups of interest and usually control a competitor to the foreign company. As a third part of KGB:s "work" comes quite logical various actions by its authorities against the foreign company. Said actions can include inspections by the local tax police followed by hefty fines and other obstructive measures. If it is not the local tax police it might be any other out of the ocean of administrative arms belonging to the KGB, such as the regional tax police, the federal tax police, the VAT-police, the passport police, the health authorities and the authority for company permits. This last authority issues the general operations permit ( the little red stamp) required for any company in Russia. Permits are something of a Russian speciality and is required for more things then one could imagine. Companies as well as private persons need permission to open bank accounts in rubel. 99% of the Russians do not have any accounts because there are no banks where they live. If an account in a foreign currency is needed, a permit by the Central Bank must be obtained, one for each currency. When a company employs it’s head of finances, a permit is required for this person from the local tax authority. One permit is required for investments and another for production and so on all the way into Russian eternity. The foreign company is after these encounters more than likely to end its Russian affairs. The fines together with other proper measures, are to heavy to bear which leads the foreign company to give away its investments into Russian hands and leave the country almost with relief. The number of western companies who went this way is substantial. But rarely are their Russian adventures publicly heard of. It is of no asset to a distinguished president or managing director of a large company to have been lured down in the Russian funnel. Once you are down there deep enough with a large enough investment, then you are done. The small entrepreneur is normally less releived to see the money disappear. Firstly because his company loses money, secondly because his private money are spent as well. The large, reputed companies are seldom losing anything. They leave that part to the taxpayers, since they have only invested against guaranteed export credits. Where is the guts and sense of responsibility among the traders, stock brokers, lawyers, acountants and all the others with their Moscow offices who are supposed to inform corporate managers in advance. Or maybe we shall forgive them because they did not know better. In any event, what we hear when it is to late is " nothing is without risks" or in modern language "shit happens". That the right of ownership never ever has been protected by law in Russia or that never the faintest possibility ever existed of being able to conduct normal business without having all your secrets revealed and subsequently used to destroy you, that story is seldom told by the experts. Nor do the experts say anything about the fact that they never really had a chance to get close to Russia and the real Russians from their Moscow offices. We who wrote this article were running the largest Russian owned company in Sweden, the Baltic Express Line. During 6 years over one million passengers were carried between Germany, Sweden and Finland to S:t Petersburg. We were the most profitable shipline on the Baltic Sea. Our mother company was the Balting Shipping Company of St Petersburg. Baltic Shipping Co was only some years ago the largest shipping company in the world, with 180 vessels and valued to 3 billion dollars. We met however the Russian reality when KGB as a tool for the elite managed to destroy the entire company in less than two years. Left is now one barge without an engine. This drama had of course not been possible without the consent and indeed support from those ministers recently praised by the West -- and still are-- to be the salvation for Russia and the guarante for continued way to reforms and market economy. The story can be read in two articles by S:t Petersburg News in August 1998, www Russia has been thoroughly plundered. A small group of men at the top have been stealing the unbelievable amount of USD 1.400 billion which have been taken out of the country. There is practically no money left in the Russian economy to oil the machinery. The payment system has stopped. How could anyone in the West beleive that persons who earned a maximum of 240 rubels a month eight years ago, now legally could have multibillion accounts in dollars abroad. Do please remember that nothing could be done and nothing achieved without the support from powerful political circles. We find ministers for privitisation and prime ministers who have given Mother Russia away in small pieces to their sponsors. President Jeltsin is not excluded. A loan is not a loan but fresh new money to be used as a gift and sent out of the country they distrust and with which they have no loyalty. It is only our politicians in the West who still call it loans and persist in giving away their tax payers money to the Robberbarons. Such a prominent person as Mr Gaidar, former prime minister, publicly warned the West from handing out loans to Russia. Why should the wealthy risk a new dictator in their country who might wish to murder or deport them and put them in a new Gulag camp? And even if it just so happened that a friendly ruler would come to power, why still stay in this grey misery and restore a good part of the globe. No, not when there exists a nice, comfortable, tidy and cosy world with an already established infrastructure such as in Hampstead, on Long Island or in Beverley Hills, with the children at Oxford or Berkeley. As alternatives there is also Cyprus, Vienna, Malta, the Carribean or Costa del Sol or the French Riviera. Back to where we started, Russia in the eyes of the young fund dealer. His opinion has been shared by the majority of his colleagues. Their judgements have been declared the highest wisdom by our western news media. Mammon seem to be the bearer of all thruth these days, so bring in all his pupils in the TV-studios to tell the rest of us about war and piece in ancient kingdoms. The shorter statements the better, because media time is expensive. The West has with generous loans contributed in creating the largest gangster economy the world has ever seen. Russia is very near a collapse, quite apart from the stock market which is irrelevant for what is happening out in the country. Nearly all money invested went to Moscow. A small portion found its way to S:t Petersburg and for the rest Russia is a disaster and a tragedy. All news coverage seem to circle around the Kremlin. Few journalists are seen on the Russian country roads, so nearly ever can we see how it really looks like out there. It is not a pretty sight. Miserable roads, apalling baracks to live in, no running water, no electricity in many villages, broken machines and tools, dirty, tired, hungry people without any hope for a better future. Unemployed, drunk people in the middle of the day, waiting for a nasty, bitterly cold winter to come. Noone has any money and large regions are being cut out of energy and food. Strategic installations are about to become security risks due to lack of energy. What in the world is going to happen? In our opinion one or more coups will take place. The question is not if, but rather when and how many and where will it stop and with what? As we see it there will be a new "father" on his way with a brown-reddish glow around him, who will be welcomed as a liberator by a large part of the population, including the army. His name is likely to be Alexander Lukashenko and he is presently the president of Belarus. Dictatorship is already in force in Belarus. Anyone who criticises the country or the president risks 6 years in jail. Planeconomy is reintroduced with the result that people are receiving their pensions again, slim but they get them. The armed forces are kept above starvation and they also get their tiny salaries so they can feed their families and keep their honour and pride. There is food, not much but enough and the energy supply is working. Most "buziness men" from the West are gone and so are all foreign diplomats for whom the president closed the access to their residences. The next step will be to arrange an even closer Union between the two brothers so that they can share the same president. Quicker than we can imagine, Lukashenko will be listed among the candidates for presidency over Russia/Belarus and from there on the rest of the world are advised to fasten their safety belts. We have since a couple of years back pointed at this course of development. We have at different occasions such as conferences, trade fairs and seminars advised against investments in Russia. We have assisted a number of companies and those who followed our advice have saved a lot of money. For some who nevertheless decided to venture into business investments in Russia, we have been able to guide them with the help of our Russian partners around most of the black holes. It seems to us that the simple brutality and greed of todays Russia is a reality which does not fit in to the modern political jargon of the West. This new Euro-language does not provide for such simple things and down to earth matters as plundering a nation. What we do not say does not exist, therefore we continue to assist the OSS-countries, says Brussels and or local governments. Meanwhile we continue with our simple advice for business relations with Russia. do not invest a penny in Russia no joint ventures do not try to compete with Russian owned enterprises in Russia sell to them what they want against advance payment in dollar or deutsch mark buy with delivery first and payment thereafter be correct and meet your obligations always Also the next Russia whatever nature and shape she will have, is obliged to trade with us in the West. The ones who fulfilled their obligations and never ran into trouble are most likely to be the future trade partners.

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