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Russia: Foreign Businesses In St. Petersburg Plan To Stay

St. Petersburg, 28 September 1998 (RFE/RL) -- Despite the worsening economic situation ig business in St. Petersburg say they plan to weather out the storm.

"While people are no longer euphoric over Russia as they used to be, a lot of companies are taking a wait-and-see attitude, especially looking to see what the new government's economic policy will be," James McCarthy, chief commercial officer at the American consulate in St. Petersburg, told RFE/RL. "No one is leaving. Companies have already put in too many resources here and you cannot just decide to leave overnight.

Matthew Chichester, head of Henry Chichester Chartered Surveyors, which owns and manages several business centers in St. Petersburg, said that the companies he rents office space to, which are major western companies, are staying because they see the long-term opportunity.

In his words, "these companies are mature enough to ride out the crisis even though they do not have guarantees from their mother company."

Small businesses, however, are being hit the hardest since they have less reserves and often the capital sunk into them is owned by individuals who risked everything in order to open shop in St. Petersburg.

Irina Belan, chief accountant at Westpost, a small local business which provides postal services, said that her company can hold out under these conditions of declining income and higher costs for several months, but longer than that, the future is bleak.

While Moscow's American business community has so far reported losses of about 463 million dollars since the start of the crisis, according to a recent American Chamber of Commerce report, no such study has yet been done for St. Petersburg.

But the St. Petersburg International Business Association, or SPIBA, says it is in the process of just such a study, trying to determine the impact of the crisis on the international business community in the city.

"The mood is pretty somber, but many businesses are taking a wait-and-see attitude," said Anna Kassner, executive director of SPIBA. "But I have not seen an extreme loss of faith in Russia, and in fact confidence has been boosted now that there is a government.

Still, there are fears that Russia might go back to central controls, and if they start doing that then people would lose more faith and start exiting, added Kassner.

Multi-national giants are also having their share of problems. Last week, after announcing a temporary stoppage in manufacturing due to both technical reasons and the uncertainties in the market, R. J. Reynolds, one of the world's leading tobacco manufacturers, said manufacturing was up and running again on Friday.

"We have every intention to continue working here," said Irina Galieva, official spokeswoman for RJR-Petro, the local subsidiary of RJR. "We see the crisis as a temporary problem and believe the difficulties will pass. We are not even considering the possibility of stopping work in Russia."

The future of RJR, which has 420 million dollars invested in Russia, seemed even more precarious last week, when Prime Minister Yevgeny Primakov first announced on Russian TV the need for a state monopoly on the manufacture and sale of both alcohol and tobacco. Government officials, however, later said that the Prime Minister had jumped the gun and that nothing had as of yet been decided about the fate of the tobacco industry.

Despite all these setbacks and once the situation stabilizes, the Russian market will probably continue to attract foreign businessmen, as it has for centuries, regardless of any cataclysm.

"The one thing in Russia's favor is that it still has a talented work force and a large number of consumers," said McCarthy. "With such long-term promise many companies will certainly take a long look before they would even think of pulling out."