The Russians Mean Business... About Business

That the sweet smell of détente can leave a bitter aftertaste should not come as news, writes reporter Smith from Moscow. The Russians have been trading shrewdly with the West since before the discovery of America.

In the fall of 1971, when I arrived in Moscow, only a few billboards punctuated the route from the airport to town, and they bore exaggerated, unfriendly, political cartoons of evil-looking American jets bombing helpless Vietnamese, or a sharp-eyed Uncle Sam, dollar signs in place of his eyeballs and moneybags dripping from his pockets, doling out bundles of planes, tanks, and other ugly weaponry to a menacing Israeli wearing an eye patch.

Today, those billboards are gone. The highway from Sheremetyevo airport to Moscow is now decorated with signboards, in English and Russian, announcing the product lines of Traktoroeksport, Stankoimport, Aeroflot, Prodintorg, and other Soviet foreign trading companies. The ads are plain and pedestrian. But the change from political polemics to commercial promotion is a significant sign of the times, a pragmatic symbol of the Kremlin’s preoccupation with trade and its abandonment of go-it-alone economics.

For Americans, the watershed was the huge grain deal in the summer of 1972. People were suddenly jolted out of their nonchalance about trading with the Russians when three Soviet trade specialists bought up nearly 20 million tons of American grain at bargain subsidized prices on favorable credits before the American market knew what had hit it. The classic Ivan Ivanov was no longer a stodgy Khrushchevian peasant, but a smart business operator to be reckoned with in the boardrooms of private enterprise.

The enormous scale of the Soviet orders, the swiftness and secrecy of their execution, the Soviet ability to synchronize the big orders with simultaneous chartering of transport ships, the Russians’ sophisticated knowledge of the commodity markets and their general shrewdness in the tough American competitive arena, all came as a surprise. In short, the grain deal produced not only wariness, but a new, if grudging, respect for the finesse of Soviet traders. More important, it pointed up the glaring lack of knowledge in America about how the Soviets do business.

“They were very sharp in their buying practices,” remarked George Shultz, then Secretary of the Treasury, “and I think that we should follow the adage. ‘If we are burned the first time, why, maybe they did it, but if we get burned twice, that is our fault and we shouldn’t have let that happen.’ ” Yet it almost did happen again in October, if on a smaller scale. The Ford Administration stopped a 3.4-million-ton wheat and corn purchase by the Soviets just before it was completed, moved in the direction of export controls over such private deals, and then negotiated a smaller, compromise purchase to be staggered over a period of months.

The grain deal of 1972 contained some important lessons about the Soviet style of commerce. In their relentless hunt for Western technology, the Soviets have been in an essentially weak trading position, as they were when they bought American wheat because their own harvest was failing in 1972. Yet the Kremlin has been playing its relatively weak hand as if operating from strength. Its secretive state monopoly system has enabled it to play off Western companies—and countries—coyly and quite effectively. When, for example, Moscow felt last spring that Congress was stalling on huge Siberian gas deals with America, it decided the time was right to start talking with Japan and West Germany.

As the first grain deal showed, Western businessmen and governments find the Soviet market so magnetic that the Kremlin has demanded and often obtained special terms of trade—low interest rates, favorable long-term credits normally extended to underdeveloped nations, wholesale transfer of factories and plants without the kind of profit repatriation or partnership arrangements that Western companies bargain for elsewhere.

The French government and the U.S. Export-Import Bank, among others, have granted Moscow loans at 6 percent interest or a fraction more—well below the prevailing market rates—to promote trade with the Soviet Union. The Soviets are practically alone among advanced countries in being granted Export-Import Bank loans; such loans generally go to developing countries. Even commercial banks like the Chase Manhattan have reportedly loaned money to Moscow below the going rate in order to get a head start in doing business with the Soviets. The earlier grain deal was partly financed by a $500 million credit from Washington at 6.125 percent interest, plus Agriculture Department subsidies that reached forty-seven cents per bushel and cost American taxpayers roughly $300 million; U.S. wheat prices soared as a result, and dragged bread prices up with them.

It was typical of Soviet style that the first grain purchases were handled mainly through two giant American trading firms. The Soviet pattern of trade inevitably favors the big multinational corporations because the scale of Soviet operations and the normally ponderous slowness of Soviet negotiations generally proves too costly and too tedious for all but the major corporations.

So the swiftness of the first grain deal was unusual. When Armand Hammer, chairman of Occidental Petroleum Corp., was handed a Sovietprepared draft of a rather vaguely worded agreement on principles for technical exchange, he glanced over it quickly, found it acceptable, and signed it. Soviet officials, having anticipated delays and haggling over language, were flabbergasted.

“But Mr. Hammer,” bleated a Soviet bureaucrat, “that was meant for your study. It’s only a draft. You see, it’s marked ‘draft.’ ” Hammer promptly fished out his pen, scratched through the word “draft,” and handed the agreement back to the disconcerted Soviet official, who was left with no alternative but to sign his own paper.

The first grain deal demonstrated the successful Soviet technique of developing detailed, highly specialized knowledge of Western markets in order to drive the best bargains that world capitalism offers. The Foreign Trade Ministry maintains a bureau of two hundred and fifty highly trained economists whose task is to monitor day by day the worldwide demand, supply, and price trends on goods from cocoa or crude oil to finished manufactures, and to produce sharp, timely analyses for Moscow’s specialized foreign trading companies.

The 1972 grain deal also pointed up the ease with which this generation of Soviet foreign trade executives moves in the capitalist world, staying at plush hotels like the Regency or Hilton in New York, or the Madison in Washington, flying on the private jets of American corporate princes, playing tennis with metal rackets at the Greenwich Country Club, having barbecues in Memphis, or lolling on the sands at Miami Beach,

“When you get with these guys who talk good English and adjust quickly to our style of life, you forget in two minutes that you are talking to a Russian,” remarked one American economist. “Georgy Maslov, the head of Sovinflot, who grew up in Brooklyn when his father was head of Amtorg Trading Company, speaks American English as well as you or I. Vladimir Alkhimov, Deputy Minister of Foreign Trade, is at home with Americans; in our country, he might be a successful investment banker.

“This group of people who now travel the world and do business for Moscow are marvelous operators. You can spend a weekend, or a week, with them and have a very pleasant time. You simply forget they are Russians. As a result, they find out a good deal about us but what chance do we have of finding out much about them? What do they really think? What are they really after beyond the deal at hand? We’re the country hicks in this game because we aren’t prepared for it.”

Communist ideology may condemn Wall Street, and Soviet propaganda may daily deride the “international leviathans” of the military-industrial complex as the “real villains” who oppose détente. But, as the grain deals showed, in the hard-nosed world of commerce the Kremlin clearly prefers dealing with the big corporations. Eight of last year’s top ten Defense Department contractors— Lockheed, General Electric, Boeing, McDonnellDouglas, United Aircraft, General Dynamics, Textron, Rockwell International— are doing business or dickering with the Soviets. Sometimes this even leads to awkwardly amusing situations. Once, a General Dynamics executive was explaining the firm’s shipbuilding prowess, and launched into a description—with slides—of its production of nuclear-armed American Polaris submarines. When he suddenly caught himself, his audience of Soviet officials broke out in laughter.

The process of tapping Western technology got its start under Ivan the Great.

The new Soviet traders—and undoubtedly Leonid Brezhnev himself—clearly thrive on hobnobbing with the aristocrats of American capitalism. Names like Rockefeller or Du Pont give off a magic aura here, despite years of Soviet caricatures of fat capitalists with big cigars exploiting the poor. Coming out of his first meeting with Prime Minister Kosygin in May of 1973, David Rockefeller remarked with evident amusement, “The world must be changing rapidly—I cannot help thinking that Soviet officials do not take their own propaganda too seriously.”

The Cold War legacy, as well as Moscow’s longtime economic isolationism, has also mistakenly led many Americans to conclude that trade is a new game for the Russians. The Europeans know better. Actually, buying high technology from the West is a pattern of commerce that precedes the discovery of America, and there are today astonishing parallels between the style and practice of Soviet trade and the earlier operations of Czar Peter the Great and his predecessors.

Russian merchants in the Middle Ages used to trade furs—the natural resource of that era as gas and oil are today — for what then amounted to high technology: processed woolen textiles and metalwork from Central Europe, or silks and finely worked gold and silver from the Orient. The organized process of tapping Western technology and expertise got its real start under Ivan the Great five hundred years ago. He hired Italian architects and engineers to build two of the great Kremlin cathedrals, a palace, and the Kremlin walls and towers, much as today’s rulers hire Western firms to construct entire factories. Other Italians ran the imperial mint and managed the casting of cannons for the Grand Prince of Muscovy. Greek masters were brought in to teach art.

The next czar, Ivan the Terrible, persuaded some Englishmen to set up the first Russian press, used German military engineers to help him mount the seige of Kazan against the Tatars in 1552, and had the Dutch set up an ironworks to support the armaments industry. At the turn of the eighteenth century, Peter the Great conducted a Western technology hunt on a grander scale, bringing to Russia thousands of foreign craftsmen in all fields and recruiting hundreds of Swedes and Germans to work in his civil service because he valued their efficiency, self-discipline, and honestv. He personally learned shipbuilding in Holland and England, and remodeled his government on the Swedish pattern. After him. Catherine the Great briefly hired John Paul Jones to tone up the Russian navy.

Trade and politics were traditionally closely linked. Czars entrusted their trade emissaries with diplomatic missions, much as the Kremlin and the White House now send a trade minister or our Secretary of Commerce to deliver political messages. In those days, too, the Russians imposed ideological controls on trade, and segregated foreign merchants from the local population. Like the Communist party today, the Russian Orthodox Church in the fifteenth century was on guard against alien heresies. From 1490 onward, books brought along by Western merchants were seized by the customs agent of the Grand Prince of Muscovy, who was in turn stirred to action by a vigilant and defensive church.

Then, as today, resident foreigners lived in isolated enclaves, apart from the mass of Russians. The most important of these, called Kitaigorod, was located outside the Kremlin walls where now stands the Rossiya Hotel, one of the most frequent lodgings of foreign businessmen and Western delegations today.

Russian history even contains a precedent for Leonid Brezhnev’s effort to sweeten the climate of trade with America by letting large numbers of Soviet Jews emigrate. Around 1600, Czar Boris Godunov released a number of German merchants captured during the battle of Novgorod in a deliberate ploy to cajole the German princedoms into commerce. This angered the Russian reactionaries of the day, who had urged him to take a hard line on the prisoner issue.

Even Lenin, the revolutionary, was fascinated with American managerial skills, and declared his readiness to pay “not only with gold but even with raw materials” for capitalist technology. His flirtation with Western business in the 1920s is now regularly cited by his successors as unimpeachable justification for their current policy.

In the modern era, Prime Minister Aleksei Kosygin, by temperament and training an economic administrator with an urge for efficiency, was the first to advance the rationale for trading heavily with the West. “In our time.” he told the assembled Communist party elite in 1966, “it is beeoming more and more evident that the scientific and technical revolution under way in the modern world calls for freer international contacts and creates conditions for broad economic exchanges between socialist and capitalist countries.” In other words, the Soviet economy was industrialized but not modernized, and ran the risk of falling disastrously far behind if Moscow did not abandon its economic isolationism and begin trading vigorously with the West.

But it was Brezhnev, with a kind of mercantile-political realism, who transformed this insight into a cornerstone of Soviet detente policy. More than once, the burly party leader has made clear that the Kremlin needs peace and accommodation with the West for “realization of large-scale plans for the construction of a new society.”

A joke that circulated within the official Soviet establishment on the eve of Brezhnev’s visit to America in June, 1973, put the matter even more bluntly. Brezhnev, it went, had gathered his advisers for counsel on what he should ask from America. “Ask them to sell us cars and build us highways,” suggested one. “Ask them to build us computer factories and petrochemical plants,” said a second. “Ask them to build oil pipelines and atomic power stations.” said a third. “No.” replied Brezhnev thoughtfully. “I’ll just ask them to build us Communism.”

By now, the two general techniques in the Soviet pattern of trade are fairly well known. One is to tap Western technology and longterm credits in order to develop inaccessible resources rapidly, especially oil, natural gas, timber, and rare metals in Siberia. The other is to import complete industrial installations wholesale, especially to develop the chemical and petrochemical industries, the automotive field, computer production, the energy sector, and modern metallurgy.

The sums involved are enormous: $1 billion for Krupp and other German firms to build a steel mill; $1 billion for the Japanese to expand the Siberian timber and coal industries: SI billion from Bonn for oil pipelines; S600-S700 million from American and West European firms to equip an ammonia complex; more than $1 billion for American, French, and other Western technologies for the Kama River truck plant; and, it is hoped, $3 billion-plus from the United States for developing Siberian natural gas. In 1972 alone, orders for Western technology ran to $2 billion-a figure that rose in 1973 and is still climbing—with the result that Moscow now spends more than 20 percent of its foreign exchange earnings annually in repaying loans. Essentially, it operates big deals on a barter basis using oil, gas, lumber, ammonia and other raw materials to pay back the credits used to build new plants.

More, however, lies behind the Soviet trade strategy than erecting large new industrial facilities. The major contract with Fiat to build a complete auto factory at Togliatti illustrates another Soviet ob|ective. Fiat not only planned, programmed and supervised construction of the complex, but trained Soviet engineers and technicians and provided technical help in running the installation. Thus, what Moscow wanted to acquire was not just a modern plant, but the very art of modern mass production of cars plus the management and organization for such mass production.

Occasionally, the Kremlin has been tempted to use trade for political and strategic reasons, to exploit economic crises, and to try to disrupt Western economies. Some Western skeptics of détente, like Senator Henry M. Jackson, the Washington Democrat, believe that this helps explain Moscow’s behavior in the oil crisis last winter.

As an oil-exporting nation with customers in Western as well as Eastern Europe, Moscow had its own financial and economic reasons for wanting to see the world price of oil driven upward. The Soviet press and radio, especially Arab-language broadcasts, urged the Arab oil nations to maintain solidarity with the Arab combatants of Syria and Egypt by using the “oil weapon.” To do anything short of bleeding Western countries and their international oil corporations, the organs of Moscow argued, was to fail the Arab cause, to fail to use the full leverage of economic power at the disposal of what is, in Moscow’s terms, the worldwide national liberation movement.

The Soviet oil-exporting agency quickly doubled, trebled, and quadrupled its own contract prices with West Germany, Finland, the Netherlands, and other Western nations to reap hard currency windfall profits. This eased the strain of financing Moscow’s purchases of Western technology.

In the view of observers like Jackson, the Soviet Union had other, deeper, political objectives as well in exhorting the Arab oil sheikhs to bargain hard with the West. Moscow’s advocacy of nationalizing Western oil companies is nothing new; it fits in with a long-standing Soviet tactic of trying to uproot Western influence in the Middle East. But in the current crisis, Jackson and others feel that Moscow—half privately, half publicly promoting the upward spiral of oil prices—was hoping to push the West toward bankruptcy and depression. By next year, the higher oil prices are expected to put a drain of $100 billion on Western economies. One view is that Moscow takes great comfort in seeing the pressures of inflation increasing in the West. The Soviet press, moreover, made no secret that Moscow also saw advantages in the rising competitive frictions between Western Europe and the United States as the oil crisis mounted.

Westerners find foreign trade officials the most worldly segment of the Soviet power elite.

By and large, however, Moscow’s strategy in developing trade with the West has not been to cause havoc in world markets, but rather to tap the greater know-how of the West to build the muscle of the Soviet state. Its approach has been disappointing to those Western businessmen who once eagerly eyed the relatively untapped Soviet consumer market, 250 million strong, and anticipated big sales. The Soviets may have given quite a splash to the introduction of Pepsi-Cola, but overall, consumer goods have gotten very low priority, in keeping with the general scheme of the Soviet economy.

On a more mundane level, the conduct of business does not have the ease and informality of Western commerce, or even that of some East European countries. Unlike Yugoslavia or Rumania, Moscow is not yet permitting full-fledged joint investment ventures. Businessmen cannot fly into Moscow unannounced, as they can into Budapest or Warsaw, and pick up a visa at the airport. But important changes have taken place over the past ten to fifteen years.

“Ten years ago,” said a Frenchman with long business experience here, “you had to negotiate through Soviet security men. At the Foreign Trade Ministry you would actually be talking to an agent who knew absolutely nothing about business, and he would have to relay what you said to the trading specialists, and then relay back to you their answer. It was terribly slow. But now, you can talk directly with their trading specialists. As a result, the Soviets are more discriminating buyers now than before.”

An American businessman, trading here for fifteen years, recalled the old days, when cables from his home office were often delayed in delivery to his hotel for a day or two, and his Soviet negotiators seemed familiar with their contents when next he met them. So prestige-conscious were Soviets under the late Premier Khrushchev that when some orders went out for American fertilizers, Soviet traders reportedly asked that the goods be shipped in “neutral packaging”—to hide their American origin. Some businesses reported also that Soviet trading missions abroad were so saturated with intelligence agents that the real Soviet businessmen could not keep up with the commercial workload. (Britain, in 1971, expelled one hundred and five Soviets as spies, mostly from trade and commercial offices in London.)

Some of these old practices linger on. True, Western businessmen increasingly deal directly with real socialist executives, their ultimate customers, and come away favorably impressed with their caliber. Yet the really big commercial deals are negotiated by ministers or deputy ministers. Managers of Soviet industrial associations, comparable to American board chairmen or corporate presidents, sit at the table, but as silent partners.

Westerners generally find foreign trade officials the most worldly segment of the Soviet power elite, far more exposed to the outside world than the Communist party hierarchy. The best of the younger socialist executives are bright, welltrained. hardheaded, probing, energetic. Many have engineering backgrounds. Others came up the ladder in the Foreign Trade Ministry. The most versatile speak one or two foreign languages quite well.

They do not live nearly so poshiy as the corporate princes in the West, but they live very well by Soviet standards. Many have overfurnished threeor four-room apartments and access, free or at low cost, to suburban government dachas. Among their most treasured privileges is the chance to travel abroad regularly and to mingle with foreigners. They shop in special stores for the Soviet elite, where hard-to-get caviar and imported foods and clothing are sold at cut-rate prices; they go on subsidized vacations to government rest houses; they ride in chauffeur-driven government cars.

Their influential positions help them place their children in choice schools, institutes, and careers, though, like American Establishment families, Soviet executives admit privately to problems with their younger generation. One Soviet executive said he had to take a fourteen-year-old daughter out of school to get her married because of pregnancy. Others privately voice exasperation with the craze of their youngsters for Western rock, jeans, and hair, though drugs are not generally a problem. More than one father has complained that the younger generation is no longer patriotic.

But many executives cater to these whims of their young. They are happy when foreign businessmen present them with gifts of Hair or Jesus Christ Superstar records, as well as Swiss watches or expensive Western pens or lighters. Many wives are caught up in the current bourgeois Soviet fad of buying Czarist antiques. Traveling husbands sometimes indulge themselves in Western tailored suits and accessories, or come home discreetly with modern art objects for their apartments.

“Well, you ripped us off when you bought Alaska. Give us back Alaska and we’ll give you back your wheat or your money.”

On the job, these men fall generally into two schools: the modernizers as distinguished from the merchants, or, to put it another way, the innovators as distinguished from the brokers. In classic Russian fashion, the merchantbrokers hunt the best bargains and thrive on the hassling of the bazaar. The other, innovative, school is more flexible and pragmatic, more interested in modernizing and revitalizing the Soviet economy than in shaving Western prices to the last kopeck.

One of the most prominent of the innovators is Jerman Gvishiani, a suave, handsome, articulate, highly trained economist who is Prime Minister Kosygin’s son-in-law. He travels widely, speaks English effortlessly, and has gained a reputation as Moscow’s chief apostle of adapting modern sophisticated business management from the West.

In his book Organization and Administration: A Socialist Analysis of Western Theory, he advanced the rationale for using computers, systems analysis, the theory of information, and econometrics to improve the centralized Soviet economic planning and management system. He has warmly invited the big multinationals to do business in Moscow. Indeed, the Soviet State Committee on Science and Technology, of which he is deputy chairman, often acts as midwife to major new commercial relationships with the high technology companies of the West.

Among others whom Westerners put in this modernizing group are Leonid Kostandov, Minister of the Chemical Industry; Valentin Shashin, Minister of the Petroleum Industry; and Deputy Foreign Trade Ministers Nikolai Osipov, Nikolai Smelyakov, and Vladimir Alkhimov.

Alkhimov, bright, diminutive, personable, and well schooled in international finance, is Moscow’s leading salesman in America. After three years as commercial counselor in the Soviet Embassy in Washington, he has learned to cope with Americans. Once, during a visit by a group of White House Fellows here, Alkhimov was asked to comment on the Soviet “rip-off” of the United States on the wheat deal, and quickly parried: “Well, you ripped us off when you bought Alaska. Give us back Alaska and we’ll give you back your wheat or your money.”

A highly decorated World War II hero, now in his mid-fifties, Alkhimov once defused a ticklish question about Soviet Jewry during a business gathering in Chicago by recalling how, during the war, he and another man—a Jew— had manned a gun together for hours and had beaten back the Germans after everyone else in their sixty-fourman artillery battery was killed. At home, among insiders, he is known as a man who stuck his neck out by privately advocating that the Kremlin be flexible on the Jewish emigration question.

Most other officials in the Foreign Trade Ministry are regarded by their Western counterparts as traditionalists of the merchant school: First Deputy Trade Minister Ivan Semichastnov, Deputy Ministers Aleksei Manzhulo and Nikolai Komarov, and topflight trade specialists like Nikolai Belousov, the slender, gray-haired chairman of Eksportkhleb who executed the grain deal.

Those who have negotiated with Komarov regard him as the classic Soviet type—a husky, forceful, hard-driving, self-made man who graduated from the Moscow Aviation Institute and came later to foreign trade. He is neither as worldly nor as polished as some of his colleagues; he has a reputation as a bulldog of a negotiator with a fondness for the Wild West and American cowboy lore. “If he had been born in America, he could have been a tycoon.” commented one American.

“In trying to get a bargain for the Soviet Union, guys like Komarov overnegotiate,” observed a Western executive. “They don’t really like capitalists. They hate to see a capitalist get any profit at Soviet expense. It is not so much a matter of ideology. It’s a matter of national loyalty—having your team win. It comes out all the time in little ways: Soviet engineers can be spellbound by American technology, by demonstrations on how to grow oranges in Florida, how to transport an entire plant complex and set it up quickly in lightweight housing, how to organize distribution. But the Komarovs of the Foreign Trade Ministry tell them that they are not ready for such a system, and that a similar deal can be obtained through the Italians at half the price. So, months later, they make a deal finally with the Italians. It is a cheaper deal, but far less advanced.”

An American diplomat, evoking Dean Rusk’s famous comment about being eyeball-to-eyeball with the Russians in the Cuban missile crisis, remarked, “Some of these negotiations become a question of who is going to blink first. They are tougher than tough American labor-management bargaining.”

The obsessive secrecy of the Soviet system and the Soviets’ undying mistrust of foreigners can also create obstacles. In 1970, the State Planning Committee bought a Model 470 computer from International Computers, Ltd., a British company, but it took a year to get the programming worked out because the Soviets refused for months to give precise information on what they wanted to use the computer for. A French company sold equipment a couple of years ago for a Soviet factory near Moscow, but found its technicians continually blocked for security checks when they went each day to install the equipment. Eventually the French discovered that the hitch was that the factory had been designated a “closed” (security) facility after the French equipment had been brought in.

Only very slowly is the Soviet Union opening up on the most basic information for the huge Siberian natural gas investments it wants from the United States. After long delays, American specialists have been permitted into the Urengoye gas field to begin checking out the reserves and to start making feasibility studies. But so far Moscow has not produced the financial information on its foreign exchange reserves and outstanding debt that international banks routinely require before making large loans.

This secrecy and standoffishness spills over into the man-to-man commercial relations. Abroad, Soviet executives may like fraternizing, but they rarely invite foreigners here to their homes, and they shy away from an informal two-man business lunch.

“It’s not a good idea to bring over a golf-coursecocktail-circuit American executive,” observed Christopher Stowell, a young East-West marketing specialist from Washington. “The Russians are far more technically oriented in their negotiations than any other country I’ve ever seen. They check everything out thoroughly. They do a complete technical feasibility study worldwide on any piece of equipment they buy in volume. They do their homework well. This is something they have to do to get money from their Plan. They use the negotiations as a learning process. A lot of Westerners don’t like that, but you’ve got to understand, this is part of doing business here.”

For many American firms, making the initial contacts has been hard, though in the past year the Soviets have helped set up trade shows to bring together thousands of their industrial specialists with American firms in the oil and gas equipment field, air safety control, and the machine tool industry, among others. Americans then face a labyrinthine bureaucratic structure—individual industrial ministries and their enterprises, the ultimate consumers of foreign hardware; the Ministry of Foreign Trade and its export-import companies, which actually negotiate the deals; the State Committee on Science and Technology, which promotes hookups between Soviet firms and Western ones; the State Bank of Foreign Trade, which allocates the hard currency for Western technology; and the State Planning Commission, which dovetails foreign trade and the domestic economy, and has to authorize the big deals.

Many Western executives find the Soviet red tape monumental. “The Soviets can move very rapidly when they want,” observed Sargent Shriver, now an international lawyer. “Or they can move very slowly. They can do nothing and take forever doing it, if they want. They can drag it out, without ever saying yes, without ever saying no, or without ever being rude about it. But eventually you decide it’s not going to move because they’re not really interested. You can have two things going that look almost the same. One they take and the other they don’t. And you never get an explanation why.”

The classic example of a protracted project was the Fiat deal to build the car plant at Togliatti. The idea, broached by Fiat in the late 1950s, was picked up by the Soviet leadership in 1962. It took four years to negotiate a contract and four more to produce the first Zhiguli, or Soviet-made Fiat-124. The entire affair was much more work than Fiat anticipated. Soviet negotiators in Italy hesitated to take responsibility for decisions, went home for instructions, and sometimes new negotiators showed up in their places. To break deadlocks, the Italians had to escalate to higher bureaucratic levels.

With its contract in hand, Fiat suddenly received two hundred volumes of Russian building instructions and had to invest 1.2 million man-hours just to handle the translating. Working conditions at Togliatti were so rugged for Italian workmen that they had to be constantly rotated, and paid $1.5 million extra in bonuses, to hold them on the job there. So serious were the time and cost overruns that even now Fiat officials refuse to say whether the deal was profitable. An added problem has arisen from Moscow’s practice of selling Sovietmade Fiat-124s under other names (Zhiguli. Lada) in the West in competition with Fiat. The Italian company’s experience reportedly deterred DaimlerBenz from agreeing to serve as main contractor for the Kama River truck plant except on stiff terms that Moscow did not accept. Even now, it is unclear whether Fiat, for all its effort, will get an inside track on expansion of the Togliatti plant.

The weakest link in Soviet foreign trade is exporting, a problem that plagues Soviet officials as well as Westerners. “We want trade to be a twoway street,” observed Robert Costello, Moscow representative for Pullman, Inc. “We’ve been doing our best to purchase what we can from the Soviets. But it is harder to buy than to sell. They “High interest rates are hard to square with Marx.”

are not orientated to go after the export market. We have to go after them.”

A major difficulty is that export quotas are set by the central planning agency, Gosplan, for an entire five-year period. Sometimes a foreign firm signs up the entire export allotment at one fell swoop, and when other customers appear, the Soviets refuse to sell in order to preserve stockpiles for domestic needs,

Paradoxically, this citadel of socialism has found generally that in an era of detente, the profit motive has made businessmen its most reliable partners in the West. Nonetheless, dogma has intruded at times in commercial disputes over interest rates, repatriation of profits, foreign ownership in combined ventures within the Soviet Union, or foreign participation on Soviet boards of directors.

“On things that matter to them, they can be as tough as nails,” commented an American executive living in Moscow. “Interest rates, for example. It’s not the money. It’s just that high interest rates are hard to square with Marx.”

But ingenious Western businessmen are probing for ways to surmount such obstacles. Instead of profit repatriation from enterprises, foreign traders like the Japanese have learned to bargain for lower prices on Soviet timber, oil, or other resources to make a bigger profit on resale abroad. Various Western firms cut interest rates to suit the canons of Marxism, provided that Moscow accepts a compensating increase in prices on Western technology. Another gimmick is to test Soviet receptiveness to lease-back arrangements in place of joint ownership, to royalties as substitutes for dividend payments, to joint technical advisory committees instead of foreign directors on Soviet boards of directors.

To prevent jarring experiences like the 1972 wheat deal, Samuel Pisar, a Polish-born, now American, international lawyer, has advocated developing a whole set of new ground rules for East-West trade. In his book Commerce and Coexistence, one of the most influential works on the subject, Pisar has offered eighty different points, ranging from complaint procedures, arbitration, and adjustment of various commercial laws in both East and West, to rules protecting patents and trademarks and insuring that royalty payments are not blocked by currency restrictions, to broader provisions asserting that Communist economic trading firms cannot beg off fulfilling contracts on grounds that a five-year plan was changed. He is particularly concerned about rules against Communist states re-exporting Western technology at lower prices and rules requiring the East to open up on foreign trade and marketing information, which might have helped cushion the blow of the first wheat deal.

“That was not trade, it was massive procurement.”Pisar contends. “The Soviet officials were monolithic buyers for 250 million people at one time, plus they had the power of total secrecy about their market operations and our total ignorance about their own harvest. We had no preparation for that kind of deal. There were no ground rules, largely because our rules in previous years had been devoted to preventing trade with the Soviets, not to promoting it.

“The same thing actually happened when the Soviets sold aluminum and tin in 1958. They were evidently switching from planes to missiles and they had aluminum to get rid of. They dumped and the bottom fell out of the British aluminum market.

“In neither case was it malicious or dishonest or even unfair. Any trader would want to be secret about this kind of deal. What we need to do is develop with the Russians a framework of ground rules for permanent trade. For decades our two economic systems have essentially avoided doing business with each other. Now, suddenly, we have a tremendous change: national declarations of intent to engage in long-term, large-scale trade. But we are not yet really prepared for it.”

Increasing commerce with the world is having some impact on the Soviet system. Some Westerners even envisage trade as a catalyst for liberalization in the USSR. They harbor hopes that experimentation with new technologies, new concepts of management, and more flexible economics in general, may ultimately lead to greater freedom of thought and expression.

Skeptics, however, observe that during previous eras in history, Russia’s rulers have gone through phases of borrowing from the West, grafting on outside techniques to cope with economic lag and backwardness, only to revert to periods of reaction. Russia has never stirred out of its own special orbit or lost its authoritarian stamp.

Indeed, change is taking place in the Soviet economic system, but so far it is change within parameters that preclude any fundamental transformation. Foreign techniques are transplanted without generating any basic alteration of the Soviet economic or political system. The current Communist leadership seems as capable as its czarist predecessors of making adaptations for the sake of world commerce, while managing to contain the germ of change. □