Khrushchev Says Its Who You Know That Counts

June 5, 2002
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GRAND RAPIDS — If a local businessman wishes to construct an assembly plant in St. Petersburg or Moscow, he could do so much more cheaply than here.

But unless he first established himself with exactly the right Russian partner, he quickly and literally would have everything stolen from under him.

That’s how Sergei Nikitich Khrushchev described the likely fate of Americans trying to do business in Russia without the right kind of help.

“You have to find some partner who can solve all these problems with criminals, with police, with authorities.”

Khrushchev (pronounced CRUSH-chof) was here earlier this month under the sponsorship of the World Affairs Council of West Michigan, the Van Andel Global Trade Center and the International Business Program of the Seidman School of Business at Grand Valley State University.

In heavily accented but precise English, Khrushchev sketched a portrait of a great country rife with corruption and led by an authoritarian premier possessing a limited grasp of what makes an economy tick.

Though Russia has an excellent educational base and vast natural resources, he believes it will take a half-century to catch up with the G-7 nations in the wake of Breshnev-era stagnation and the wrenching of the USSR’s collapse.

Khrushchev, son of the late premier of the USSR and general secretary of the Soviet Communist Party, told the Business Journal the problem of doing business in Russia is difficult to comprehend from an American perspective for two reasons.

First is the corruption and criminal oligarchy of which he speaks.

Second, he said, Americans and Russians look at law utterly differently.

“Western culture grew up from western Roman culture, which placed great emphasis on law,” he said.

“And much later in America there were no kings, no landlords, to solve problems for the people. Americans created rules, the law that would make people responsible for their own prosperity. You cannot do anything without rules and the American respect for law, for the constitution.”

He believes it is impossible for anything to happen here like the day Boris Yeltsin ordered Russian Army tanks to shell the Russian parliament building.

“You cannot imagine during impeachment for President Nixon or President Clinton to give orders for tanks to shoot at the capital. And if they did give this order, I don’t think a general would accept it. And if he did, somebody else would stop him.”

He said Russian traditions are wholly different. Russians pretend to respect the law, but in fact look to a paternalistic tradition for personal welfare.

“In Russian it is very different,” he said. “Russian history grows from the eastern Roman Empire. It is Byzantine.

“In Czarist Russia, the people thought of the father of the nation, and he thought of ‘My children, my slaves, and what I do for them is for their good.’ There is no thought of a Constitution like yours.”

To be sure, he said, under the communist leadership, a constitution existed and the Politburo could and did function to a degree like a legislative body, enacting and amending laws. But it functioned as an oligarchy.

But he indicated the differences between Czarist Russia and the USSR were nowhere near as profound as the difference between Russian and American traditions.

Consequently, American investors in Russia cannot depend upon laws, but must depend upon finding the right friends who can set up protective alliances of government and police officials and the shadowy criminal oligarchy that overlaps both.

“Of course, in the process,” he said, grinning, “you will become criminal yourself.

“If you are a nobody like you or me, and calling for the police,” he said, “they will be neutral for you and they will just try to solve your problem.

"But when you belong to one of those powerful groups in Russia,” he said, the police must first check to see who is allied to whom. In the recent past, he said, investigators who have pursued cases strictly on their legal merit “are being replaced by people who, um, understand the situation.”

Another example of Russians and law relates to taxes. “Taxes are so high that they make business impossible,” he said. “So most people do everything to avoid them.”

He indicated the criminal element in Russia exhibits much more sense concerning its patrons than the government. Once the fix is in, he said corrupt officials and criminals do not want to discourage or kill American investors, but to milk them.

His observations stem in part, he said, from the success his son has enjoyed working as the Russian partner of an American communications firm. “He knows how to solve these problems,” he said. “So he is successful. The company he is with has gone from one to 60 people. I leave my dacha to him.”

He cited another instance of the law’s malleability from the period his father was in power: an instance when a teen-ager murdered several infants and their mothers. Under Soviet law, he explained, it was illegal to execute a teen-ager regardless of the crime. But the public outrage was so intense that the criminal-justice system petitioned the elder Khrushchev to allow the murderer’s execution. The Soviet premier enthusiastically complied.

“That could not happen in the United States,” he said.

Khrushchev, a physicist turned Cold War research specialist, has been an American citizen for two years and is a Cold War research fellow with Brown University. Work such as his is impossible in Russia, he said, because the Russian government cannot fund research. “You can do research in Russia only if you have American grants.”

Khrushchev first came to the United States during his father’s tour of the country. He said the two often talked of how centrally controlled economics could make the USSR as great or greater than the United States.

“Maybe today, my father would understand market economics is better. But not then.”

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