Medium and small businesses are becoming the main targets of crime and official racketeering by government bureaucrats.

Vladimir Putin
Forbes #9 (42) September 2007

Even the President of Russia acknowledges that businesses in Russia are subject to heavy pressure at all levels. The only thing he fails to mention is that the main threat to businesses is not crime and racketeering by government bureaucrats (though these are threats as well). The main threat is official government racketeering.

Read the thoughts of Mr. Shwartzman.

The question is not, “When will this end?” but rather “Who is next?”

The current situation in Russia is first and foremost disadvantageous to the elite. The part of the population most at risk is successful businessmen. Wealthy and influential people are basically outside of the law, since they are the ones who are most at risk of pressure from those in power or actual expropriation.

This part of the population, more than any other, perceives the instability and abnormality of its position in society.

And thus the so-called “affairs of pharmacists” (Protek), the problems of the “Russian Standard” bank, Euronet, Rusneft (you can easily continue this list yourself).

And the numerous interviews and repudiations of Oleg Shwartzman don’t count for much. We are even ready to believe that the words “Bend, twist, torture, and force into social activity all Khodorkovskys” are not his own. Rather, these are the words of the people in power, who “decide questions of business.”

Do you think that in Russia there are few other “raiders of wealth”? Do you seriously think that no one wants your money?

This situation is best described by “Gazeta.ru” in an article entitled “The Chinafication of Russia – through the revolution in law”:

«Private property is now given to the businessman by the government in the form of a temporary right to conduct business and make profit, but this right can be recalled or taken away by force at any moment.”

So get used to the new reality. Of course the proletariat, “who have nothing to lose but their chains” do not have to worry. But for those who do have something to lose, now is the best time to think about the future. What will happen to your business, what will happen to your money, what will happen to you…
From our conversations with a number of Russian businessmen, we can identify three potential courses of action:

• to the barricades;
• things will bear themselves out;
• it is time to vote with your feet.

As to the first potential course of action, we can note that revolutions in Russia never brought happiness to those who carried them out. Your chances of losing your business, your money and your own life “on the barricades” are far higher than your chances of defending any of the items enumerated above.

For those who think that “things will bear themselves out”, we can recall the wonderful line of the well-known commentator Maxim Sokolov, which appeared more than fifteen years ago on the pages of the newspaper “Kommersant” in regard to the promises made by then-Premier Mr. Pavlov – “blessed is he who believes, may he find warmth in this world.”

By the way, one of our acquaintances (long since in the U.S.) had a grandfather who was a merchant of the first guild prior to the Bolshevik revolution in Kiev. Security agents of the state asked him: “Why are you not helping to establish the new regime? You should be socially responsible and donate money for the repairs of Lukyanovskoii prison.” Of course, under the tender gaze of state security agents, the grandfather was forced into generosity. And who do you think was the first prisoner in this newly repaired prison? He was. And he certainly never left. For the new regime no longer needed merchants of the first guild.

Now, friends, do you feel the social responsibility of conducting business?

You only have two options: repair a prison for yourself or save at least part of your money and ensure a good life for yourself and your family, in a place where you will not be persecuted for being a wealthy and successful person.

However, for those who think that the ideal course of action is to “leave everything and emigrate”, we want to stress that businesses that are successful in Russia are not always successful in America – and vice versa. Of course those who own ten million dollars or more need not worry about this.

So what is a more realistic course of action, when it is too early to leave everything and emigrate, but too late to not do anything?

“Don’t put all your eggs in one basket” or Diversification of Business.

Diversifying your business, transferring capital to a reliable jurisdiction, creating additional, independent sources of revenue, and organizing a business-immigration for you and your family, or obtaining a second passport, is, from our point of view, the most reasonable course of action.

There are two countries in the world that can firmly say NO to Russia: the U.S. and England. (Well, also Estonia, but Russians are not much liked there…)

Both in the U.S. and in England private property is sacred and protected. In Russia, at present, private property is really temporary, for at any moment it can be taken away forcefully or expropriated from you by government bureaucrats. Moreover, your “private property” may be forcefully taken away from you for no reason whatsoever. When THEY decide that “it is time”, your property will be forcefully taken away. And for God sakes if you stupidly try to fight for your property, then you will certainly be excommunicated from society, where in a few years you will realize that freedom and life are much more important than private property, which in any case is a mere fiction in Russia. NEP is over. It costs money to exit.

England is of course a wonderful country, but from the point of view of business, it is far behind the U.S. The potential of any business is tied to the potential of the national economy, and the GDP of England is about 1/9 that of the U.S. If profits are not necessary for you, then England is a great option. But on the whole, the cream of the crop was already taken in England about five years ago, when growth in London real estate prices slowed from 20-25% a year to 8-10% a year. And there are no other good business opportunities in England, just ask Roman Abramovich. Especially in the suburbs. It’s like Chukotka. But London football players eat much more than deer breeders in Chukotka. The financial losses of “Chelsea” in 2005 were 250 million dollars. Chukotka gets 20 million dollars from the federal government. So it is hard to reproach Abramovich for being unable to make a profit. Not in England. Maybe you will be able to do it? Good luck.

If you want to do business, then the advantages of transferring your business and your finances to the U.S. are obvious.

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