U.S. businesses view Soviet moves with optimism, caution Opportunities exist, but so does great risk

August 25, 1991|By David Conn

The mix of euphoria and caution that has swept the Soviet Union since last week's failed coup is mirrored among Americans trying to do business there: They are at once optimistic about the business climate and wary about the turbulence of coming reforms.

Most experts foresee a shift in power away from the Kremlin and toward the governments of the nation's 15 republics. That means decision-making authority will be closer to the people with whom Americans want to cut business deals.

Yet wrenching economic reforms -- stabilization of prices, convertibility of the ruble and privatization of state holdings -- likely will make the shores rocky for small companies still trying to establish a beachhead in the Soviet Union.

"The papers are saying now that all the hard-liners are expelled and they're free of this history, and I think that's an oversimplification," said Thomas Anaya, project manager with Argus Trading Ltd. of Rockville, which sells about $15 million of computer boards and commodities in the Soviet Union annually. "There's still a lot of resentment toward democratization and dissatisfaction with the market changes."

Still, he said, "This is a great opportunity. There are a lot of big projects going on."

Today, the value of private-sector U.S. joint ventures in the Soviet Union is $360 million -- out of a total of $3.15 billion of such Western investment there, according to PlanEcon Inc., a Washington consulting firm. Finland had $357 million in joint ventures, Germany had $346 million and Italy had $290 million.

Argus, which also has a joint-venture TV production studio in Moscow, is negotiating to be middleman to a company that wants to sell baby food in the Soviet Union.

Another big project is a far-reaching food production venture that Riggs National Bank of Washington, a Georgia company and a University of Maryland institute have negotiated with the Russian Republic. Russia is the largest republic, with 76 percent of the Soviet Union's land mass, and perhaps the most prominent beneficiary of the failed coup because of the leadership of its president, Boris N. Yeltsin.

The project, which could be worth as much as $6 billion to the U.S. partners, Russia and the other republics that join -- Soviet Georgia and the Ukraine, so far -- is designed to help make the nation self-sufficient in food production and distribution. Today, 30 percent to 40 percent of all the food produced in the Soviet Union is wasted within the nation's inefficient distribution system, according to economists.

Under the joint venture, Protein Foods Inc., based in Gainesville, Ga., will provide equipment to build food processing plants and wholesale and retail food outlets throughout the nation. The Soviet-American Venture Initiative, a research and consulting group in College Park, will advise Riggs and Protein Foods.

"I just got confirmation today by telephone from our contacts in the Russian Republic that [the project] is moving forward even faster than we had anticipated," Protein Foods President Robert Yarem said Thursday. The first shipments of food, to be traded with Russia for fuel, lumber and other goods, should be shipped by the end of October. Much of it may move through the port of Baltimore, he said.

Mr. Yarem, who returned from the Soviet Union last Sunday night, unaware of the unfolding events, advised patience to companies trying to get into the Soviet market. "Just keep calm and cool. These people are very intelligent, well-read and well-versed in negotiations. I don't think there's going to be a better time than now" to invest.

bTC At the beginning of last week, Stephen Hayes thought his timing couldn't have been worse.

His American Center for International Leadership, based in Baltimore, has been planning a two-week-long conference in Moscow. The conference, which is to start Sept. 10, will bring 200 Americans to discuss everything from trade and legal issues to environmental concerns. Originally scheduled for January, the forum was canceled when the Persian Gulf war started two days earlier, Mr. Hayes said.

If the right-wing coup had succeeded, it would have wiped out the ACIL, which has sent money "in the six figures" to Moscow in advance of the conference, Mr. Hayes said.

By Thursday, though, ACIL's fate was clear. "We're back on," an exultant Mr. Hayes said. "We're going to Disneyland!"

The optimism of Mr. Hayes and others looking to do business in the Soviet Union is inspired partly by the anticipated signing of the union treaty -- the event that may have spurred Soviet hard-liners to attempt their coup.

The treaty will give republics control over their economic resources and the authority to sign business agreements with foreign companies, Mr. Hayes said. "By going at the republic level, [businesses] will have a far better sense of who they're dealing with."

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