WORLD

Capitalism, Soviet-style

Ruble millionaires form their own club

MALCOLM GRAY April 29 1991
WORLD

Capitalism, Soviet-style

Ruble millionaires form their own club

MALCOLM GRAY April 29 1991

Capitalism, Soviet-style

WORLD

THE SOVIET UNION

Ruble millionaires form their own club

On Leninsky Prospect, the Moscow Building Materials Exchange offers a pointed alternative to the faltering system that Vladimir Lenin helped found in 1917. There, on a major thoroughfare that commemorates the former Soviet leader, 25 commodity brokers spend 12-hour days in unabashed— and legal—pursuit of profits. They act as middlemen between the Soviet buyers and sellers of bulk consignments ranging from lumber to pantyhose—almost any item, in fact, that is in demand in a shortage-ridden society. With his 28-year-old brother, Dimitri, Herman Sterli-

gov, 24, opened the exchange three months ago, joining more than 170 similar trading operations across the country. And as exchange president, the intense, bespectacled entrepreneur has prospered, earning one million rubles from his share of sales commissions during the first month of business alone. But that success has made him a focus of envy: decades of Communist indoctrination have ingrained many Soviet officials with a deep distrust of successful businessmen. “The government,” said Sterligov, “believes that a poor man is an honest man and that a rich man is a thief.”

To counter that widely held view, Sterligov

helped to found the Young Millionaires’ Club of Russia earlier this month. Although not wealthy by Western standards—a ruble millionaire has a net worth of about $32,000—the young entrepreneurs, all under 35, have banded together to form a sort of trade union and protection society. And to underline their opposition to the current Soviet system, club members say that they will not admit any candidates who still belong to the Communist party. But in one way, at least, the club will not diverge from the prevailing traditions in the top echelons of Soviet government and bureau-

cracy: it will be a bastion of male power. As a miniskirted secretary refilled Sterligov’s teacup last week, he said that women could become members in principle. But he added: “I do not know of any women entrepreneurs in Russia. Rich women in this country have usually earned their money in another way”—a clear reference to the so-called oldest profession, prostitution.

In any event, of the 12 founding members only the Sterligov brothers and one other businessman were willing to disclose their identities publicly. All, however, swiftly emphasized that they had legally earned the millions of rubles that are required for member-

ship. That sense of caution appears to be wellfounded: the Soviet Union still has stringent rules governing private business, including a recent presidential decree that Kremlin officials say is intended to protect the country’s sagging economy from exploitation. The law allows the police to enter business premises at any time and inspect ledgers without a search warrant.

Sterligov shrugs off the sporadic visits by local police officers. “It is all legal,” he says of his operations, walking through the long, narrow trading hall that he rents for $160 per month from the Moscow City Transport Agency. “Anyway, the police tell me that they have no training for that sort of work and do not know how to read the documents they are examining.” But Andrei Fyodorov, the operator of Kropotkinskay 36, one of Moscow’s best private restaurants, expressed a gloomier view to Maclean 'slast week. Said Fyodorov: “Every day begins and ends with the fear that the police will burst into our restaurant and, under any pretext, conduct a search.”

Despite that recent chill to the business climate, homegrown Soviet enterprise has continued to grow since President Mikhail Gorbachev first eased restrictions in 1987. Now, there are about 250,000 co-operatives spread across the country, many of them flourishing under an ideological fiction which holds that they are new forms of worker-organized collectives that have sprung up to fulfil unmet needs. In fact, most of the enterprises, from Sterli-

gov’s commodity exchange to physician Svyatoslav Fyodorov’s massive, Moscow-based Eye Surgery Clinic, are private businesses in all but name, with an owner-boss in charge. Despite dramatic expansion, however, the co-op movement is still only a small part of the moribund Soviet economy, with about six million employees in a national labor force of 113 million.

For Sterligov, who dropped out of first-year law classes at Moscow University and who had no previous business experience, founding a commodity exchange has been personally profitable. That is because the business, whose logo bears the likeness of Sterligov’s pet shepherd dog, Alisa, handles material each day worth about 12 million rubles, or $387,000. Inside the dimly lit hall, buyers and sellers huddle around phones or shuffle papers that list a startling array of goods. Some of the items, including usually scarce building materials, come from state enterprises that can legally sell surplus goods at market prices once they have met state production quotas. Other items ranging from cars to television sets are the personal property of Soviet citizens.

And on every completed sale, Sterligov receives 0.42 per cent of the sales price. The 25 brokers, who each paid $24,000 for the right to make deals at the exchange’s long trestle tables, earn commissions worth 2.08 per cent of each closed sale. Said Sterligov: “We are all profiteers here.”

Last week, however, Sterligov looked more like the university student he recently was than

a rich businessman. Dressed in casual slacks and a black leather jacket, and smoking his way through a pack of Marlboro cigarettes, he complained bitterly that Soviet authorities were chronically unable to distinguish between straightforward capitalism and illegal activities.

At times, he echoed restaurateur Fyodorov’s view that Soviet businessmen might soon face even greater government harassment. And, he said, he could not even find relief from his high-pressure business by indulging in some high-quality shopping. There are few readily available luxury goods in the Soviet Union, and Sterligov has not yet managed to replace the modest, Soviet-built Zhiguli sedan that he wrecked recently in a traffic accident.

He is also wary about making a large-scale personal investment, such as buying a house or apartment, because he says that the government might reverse its timid moves towards privatization and confiscate personal property. As a result, he has confined his consumer spending to such items as televisions and videocassette recorders, popular merchandise that at the very least has resale value. Added Sterligov glumly: “Now I have four VCRs.” Despite such frustrations, Sterligov predicts that he will still be in business when a Moscow street that is named after Lenin succumbs totally to the inevitable—and becomes a showcase for capitalism.

MALCOLM GRAY in Moscow