Investment opportunities creep back into Russia as economy picks up


The Arbat Irish House, a retail complex on the New Arbat, one of Moscow's prime retail streets, was once the focal point for a thriving and highly visible Irish community. The Shamrock Bar, which opened in the summer of 1991, was the first real pub in Moscow. Next door was a flourishing supermarket, the first to challenge the dominance of the Finnish group Stockmann in catering for a large and affluent expatriate community.

Here on Saturdays, Moscow's Irish could buy their Galtee rashers and sausages, their Avonmore butter and other comfort foods that helped make the Irish House a home from home.

Bags were then unloaded from trolleys and hauled into the Shamrock for a Saturday afternoon pint and the exchange of gossip about the community and the news from home.

A few "new Russians" gave the place an occasional touch of the "Wild East". I once saw a young man let off some rounds from his handgun to impress his girlfriend.

The Irish House is still there in name. Nobody bothered to take the old signs down, but there is no Irish involvement since Aer Rianta pulled out of its downtown operation long before the economic crash of 1998. The Shamrock still exists but is no longer thronged with customers whether expats or new Russians. The once-packed supermarket is now a pool hall.

In the old days, more than 400 citizens had registered at the Irish embassy. This figure was generally regarded as merely the tip of the iceberg.

A large transient Irish population arrived for the boom, particularly in the construction industry. I remember one Saturday afternoon in 1993, a corner of the Shamrock in which Irish was the vernacular language as a group of building workers from Connemara began their weekend.

Today the embassy has less than 70 people on its books and that figure is regarded by the remaining expats as unrealistically high. The big exodus began shortly after the collapse of August 17th, 1998, a date imprinted on the memory of everyone in Russia.

Mr Joe Fitzgerald from Limerick and Ms Deirdre Mahoney from Cork had done well up to then. Joe, a butcher by trade, flourished in a land where meat was cut in the markets by men who swiped at sides of beef with large hatchets. The customer did not have a choice of sirloin, or striploin or round steak. The only cut on offer was a cross-section of cow.

While Joe introduced some sophistication to the meat market Deirdre could do business in flawless Russian. By the summer of 1998, with Russian partners, they ran a beef deboning plant at Ramensky south east of Moscow. "Business was good that summer and when we closed on Friday, August 14th, with $150,000 worth of roubles in the bank. There didn't seem to be any need to worry," Mr Fitzgerald said.

On the following Monday those roubles were worth $50,000. "We were not big enough to absorb such a loss. We stayed on at Ramensky and worked until we cleared our debts. The plant is still being operated by our former Russian partners," he added.

Joe is now involved in selling Irish meat to Sweden and Deirdre expects to get involved in the recruitment of Russian computer experts for the Irish software industry.

Those who have stayed on have mixed feelings about prospects for the future. Mr Kevin McLaughlin, the Irish Trade Board representative, believes there are strong opportunities, particularly in the telecommunications sector and especially in provincial cities.

He cites the recent deal between Norilsk Nickel, one of the biggest mining companies in the world, with Boart-Longyear of Shannon for the provision of drilling equipment as an indication of the opportunities becoming available as Russia's economy recovers.

Oil prices are the key to the upturn in a country in which oil and gas exports are crucial. But the fall of the rouble from six to the dollar in 1998 to more than 28 to the dollar at present has curbed imports and encouraged Russian entrepreneurs to produce items which were previously available only from abroad.

Oil and import substitution have made the macro-economic indicators look promising, but not everyone sees it that way.

Mr Mark McDonagh, from Cratloe, Co Clare, runs Sally O'Brien's, the larger of the two Irish-run pubs in the city. "The macro figures are promising but none of this has reached the small business," he said. "I was looking at some of my old files from a few years ago and comparing the figures with today's. I got so depressed that I tore them up."

In boom times Sally's trade was 75 per cent expat and 25 per cent Russian. Today it is exactly the opposite but the volume is much smaller. The expat community has dwindled since the slump. Western companies let their highly-paid expat staff go and replaced them with Russian workers on lower salaries. For a while Sally's had a boom in farewell parties but today the place is extremely quiet except at weekends. Now even the farewell party market has disappeared.

"Ownership of the property has been vital to us. We have 250 square metres (approx 2,600 square feet) of prime retail space across the river from the Kremlin. The rent on a place like this would be prohibitive. If we hadn't decided to buy the place we would be out of business."

Mr Patrick O'Dolan from Dublin is chairman of the Russian-Irish business association and runs the Moscom communications and paging company which has been in existence in Moscow for eight years.

Before the economic crisis he employed 220 Russian staff, today he employs 95. He believes the fall in the expat population is by no means a bad thing. Russians have replaced foreigners in many jobs and are now in top management in the Russian offices of western firms.

Aer Rianta, he points out, now has only five Irish people in its very large duty-free operation at Moscow's international Sheremetyevo Airport. Murray O Laoire, the Irish architectural firm, has first-class Russian architects.

What is happening now is, Mr O'Dolan says, what was going to happen anyway. The August 1998 crash just accelerated the process.

Mr Steve Rabbette from Cork has been running a software development business in Moscow for five years. He is the only Irish person in the company which employs 10 Russians on a permanent basis and hires in others at times of peak activity. His company provides software services to businesses outside Russia and is therefore neither selling to, nor dependent upon, the Russian market.

That doesn't mean he has not had problems. "There are still too many barriers to business, particularly in the legal framework and in the area of repatriation of profits. We have an inhouse lawyer in our company. It's the easiest and cheapest way to do things," he said.

"If people are interested in coming in to Russia and doing business, my advice to them is to go ahead and do it. They don't need a Russian partner as they used to in Soviet times. I don't have a Russian partner and neither does Pat O'Dolan."

And the Mafia? "The stories about the Mafia controlling everything here are simply not true," according to Mr Rabbette. "That doesn't mean they aren't there. You should always be on your guard. You've got to be streetwise. They don't control everything, but if you leave the door open for them they'll come in."