During the nineties, Russia saw the downfall of Perestroika and the emergence of Capitalism. This was not, however, the kind of Capitalism we know in the West. The legal regulations on how companies could compete were simply not there. As Ruslan had made clear to me, the law was exactly what the government said it was at the time and this was subject to interpretation on a case-by-case basis. In Russia it became a bit of a free-for-all. Anyone could go out and grab what they wanted and only the strongest survived. Much of what had previously belonged to the people in the form of state assets was Ôsold offÕ to certain well-connected people who had been in the right place at the right time. This meant that the whole of the Oil and Gas, Mining, Automotive and Communications industries were privatised and put into the hands of the Ôchosen fewÕ, otherwise known as The Oligarchs. Some of them, primarily those who had retained good relations with the government, chose to stay in Russia. Others decided to take their wealth and simply leave the country. At the time all this took place, the Russian government was proclaiming that there was a ÔFree Market EconomyÕ and anyone could go out and start their own business, selling anything to anyone. On the face of it this was a real incentive to set up a company. The market was only free, however, if you paid the right people in the right places! If the money ended up in the right hands, you could be sure that your business would be deemed to be acting within the law.
The problem with this was that if a competitor paid the right people in the right places more than you did, then suddenly the life expectancy of your company, and often that of the director, was severely reduced. It was a dog-eat-dog society and only the fittest survived. The key to survival was to be the one with the most money and, more importantly, the best connections in those Ôright placesÕ. Business partners could deceive you at any time, especially if they had better relationships than you did with the right officials. The long and the short of it was that everybody had to be watched and nobody could be trusted. Anatoly had played this game and played it very well. He was now enjoying the fruits of his success.
In addition to this extreme form of unregulated capitalism, there had also been a banking collapse in Russia in 1998. The effect of this was that many of the banks closed down overnight, leaving their customers queuing up to get their money, which had simply disappeared. Whether the banks were to blame is another discussion, but after that the banks were no longer trusted by the majority of businessmen. It would take a long time for trust in the system to be restored and certainly Anatoly was not likely to put his trust in it in the near future. Then again, heÕd made sure he didnÕt need to. He had a simple solution to this problem.
Security Solutions
At first he had kept his money under his mattress, so to speak. Of course, over time he found that as his wealth grew he needed more than a mattress. Soon the spare room of his apartment was full of money and there was the added problem of security. It was not particularly a good idea to have a room full of cash in his apartment. The only way he could keep it safe was to put it in a bank, but of course the banks couldnÕt be trusted. So he came up with another solution, one which many Russian businessmen decided to adopt. This was to start his own bank.
On top of having his own bank in which to keep his money, he needed to make sure of his own safety. Once again, as many other Russian businessmen found themselves doing, he surrounded himself with massive security and personal protection. This took the form of a Mercedes with blackened windows which took him into work, an armed driver, and dogs surrounding the house which was heavily alarmed. If anyone so much as looked at it, the alarm system would be activated and both security guards and dogs would leap into action.
The End Result
The end result was simple, Anatoly trusted no-one other than his security team who were paid to protect him. This trust was the kind that had come with a price tag. It was not surprising, therefore, that he wanted to keep everything under his own control. Money made today could be taken away tomorrow. Friendships and customers who were there now might not be there tomorrow. His own life, which he was leading today, could be taken away tomorrow. For this reason he had some basic principles which he lived by:
1. Live for today, knowing there might not be a tomorrow
2. Trust nobody
3. Keep any money you have in a bank owned by you. Better still, move it outside of Russia
The third point was one that seemed a little extreme, but at the time of our meeting, one of the Ôchosen onesÕ who had benefitted from the sell-off of state assets was having all of his companies and bank accounts frozen by the state. This had made entrepreneurs even more reluctant to put any trust in the system.
He was suspicious of everything but I could see he had good reason to be, based on the past. It was not that he was unusually paranoid. His reaction was pretty much the same as almost all successful Russian businessmen. It certainly wasnÕt The West that he didnÕt trust in business, which was why he wanted to do more business there.
Whereas changing and developing his business within Russia would be hard if his current business model was not going to change, building business partner relationships outside of Russia would be possible. This was why he wanted my help and I was more than willing to assist. With that in mind we came to an agreement where I would source and set up meetings with potential partners in Europe, for a fee that would, if required, be paid into a bank account outside Russia!
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