It was to be two weeks of relaxation, touring the palaces and museums of Moscow and St. Petersburg and quietly cruising the waterways connecting these two cities steeped in culture and history. We arrived in Moscow just a week after hostilities commenced between Georgian and Russian forces in the breakaway province of South Ossetia. That's pretty far from here, I thought to myself, and shouldn't have an impact on our long-awaited vacation in Russia.
As it turned out, the conflict in Georgia dominated local and foreign newscasts as well as conversations between American tourists and our Russian hosts. What started out as an ordinary tourist holiday turned into a quest for knowledge and understanding of the history, geography and politics of modern Russia. To supplement my reading of Russian history, I was able to speak with an official of the Communist Party, listen to business owners, visit with Russian families in their homes and debate politics with Russian university professors and a media consultant. Here's what I learned.
From the earliest leaders in the ninth century to the breakup of the Soviet Union in 1991, Russia has been ruled by despots. Some have been more benevolent that others, but all have been autocratic leaders with absolute power. For the last 17 years, the Russian government has been experimenting with democracy. A parliamentary system has been established and citizens have a voice in selecting local and national leaders.
The history of Russia is a chronicle of warfare through the ages in Europe and Asia. Russian losses have been staggering; perhaps 5 million were killed in World War I, and nearly 30 million were killed in World War II. One is reminded of Russia's violent history in the monuments, paintings and artifacts on almost every corner of Moscow and St. Petersburg. It seems every Russian family was directly impacted by World War II.
Extraordinary wealth was accumulated by the imperial families who owned the land and the serfs who worked the land. Property, sometimes entire towns, was awarded to family members and allies who supported the czars and their political ambitions. The magnificent collections of gold, silver, diamonds, emeralds, rubies and amber, as well as paintings, sculptures, fountains and gardens on display in grand palaces and huge museums, are testament to the wealth of the czars.
The vast majority of citizens in European Russia profess Orthodox Christianity. Among the hundreds of Orthodox churches in Moscow, one can count the number of synagogues and mosques on one hand. Orthodox Christianity was selected by Prince Vladimir as the official religion for Russia in 988. He reportedly chose Orthodoxy because of the astounding beauty of a cathedral in Constantinople. The extraordinary scale and beauty of Orthodox cathedrals in Russia today lend credence to this theory. The church in Russia has often collaborated with the imperial families and accumulated substantial wealth as a result. Orthodox cathedrals display magnificent frescos and icons, the latter gilded with gold and jewels.
Russia is the largest country in world. Nearly twice the land area of the United States, Russia stretches across 11 time zones and two continents. She is bordered by China, Mongolia and Kazakhstan in Asia, Azerbaijan and Georgia in the Caucasus, and Ukraine, Belarus, Latvia, Estonia and Finland in Europe. Russia's near neighbors include Japan, North Korea, Pakistan, Afghanistan, Iran, Iraq, Syria and Turkey. With few exceptions, this is not a list of politically stable nations.
The people we saw in and around Moscow and St. Petersburg were largely middle class, of European heritage, doing their best to make a living in an uncertain world. There were smartly dressed business men and women commuting to work, teenagers wearing jeans and hanging out with their iPods, and matronly retired women selling their household treasures to help pay the rent. There seems to be a weariness among the people - weariness from decades (centuries) of war, political repression, religious suppression, economic deprivation and uncertainty about the future. There is an overall "grayness" about the country despite the pastel nineteenth century buildings and luminous onion domes.
Vladimir Putin, former head of the FSB (formerly KGB), was elected president of Russia in 2000. During his eight years in office, Putin consolidated power and lead with an iron fist. The Russian legislature (Duma) and judiciary are very weak. The Putin era was a good time for entrepreneurs who were friends of the president, as they were able to acquire access to Russia's natural resources and grow very wealthy. Having completed his constitutionally limited second term, Putin nominated Dmitry Medvedev to succeed him as president while Putin assumed the post of prime minister and head of the Duma. Since becoming president several months ago, Medvedev has followed Putin's hard line. The intervention in Georgia is a prime example. Is Medvedev acting of his own volition or as an instrument of Putin's power? What direction will Russia take under its new leader?
"Russian history is unpredictable." That's a popular expression in Russia as the passing of time uncovers secrets from prior regimes. If Russian history is unpredictable then Russia's future is certainly hard to forecast. Nonetheless I'll give it a try.
Russia has been humiliated since the beginning of the end of the Cold War. The national treasury has been drained (except for recent oil revenues). The military has been weakened. The army was defeated in Afghanistan. Collectivism has failed. The population has been declining for over a decade. American influence is growing in neighboring states. Several of Russia's former soviet-era allies are leaning toward NATO membership. The Russian people are dispirited. The gap between rich and poor is growing. The promises of a democratic society have not been fully realized. The people are weary of war. Russia is losing influence in the world at the expense of China, Japan, India, France and the United States. There is a certain paranoia that Russia may soon become an insignificant, extraction economy surrounded by powerful nations with ambitious agendas.
It seems to me that Putin is on a quest to advance three strategic goals for Russia. First, he will bolster Russia's political and economic security by fostering friendly or benign governments in bordering states. Military actions in Chechnya and Georgia, and the rumored partitioning of Ukraine, are part of this strategy. Russia will protect its ability to ship oil, gas and other natural resources to the West. Second, Putin will rally the Russian people around a national cause. The rallying point will be fear of political, economic and military attack from Russia's historic enemies (China, Japan, Germany, France, United States, etc.) The history and geography of Russia are conducive to paranoia. Third, with secure borders and a united population, Russia will be in a position to unleash the potential of her natural resources and her people. A mature democracy would empower its people to strengthen the economy and promote national security through economic vigor and independence. However, Russia is a fledgling democracy, burdened by centuries of mistrust, oppression, tyranny, intrigue, war and slavery.
What does this all mean for American business? There are limitless opportunities in Russia to help develop natural resources, upgrade infrastructure, modernize manufacturing and promote high technology development. However, there are real risks associated with political instability, organized crime, unmotivated workers, military conflicts and nationalization of property. So we must tread carefully when considering doing business in Russia.
I'll watch Russian history unfold with fond memories of Red Square and St. Basil's Cathedral, the Hermitage Museum treasures, the Volga River, fine vodka - and sipping tea, singing and dancing with a Russian grandmother in her living room.
Nastrovia!
Louis Allegra is president of Allegra Management Consulting, Inc. He chairs CEO advisory boards in affiliation with Vistage International, the world's leading chief executive organization.