The Making of a Market

By Carla Marinucci
October 6, 1991

Doing business with the bear can lead to some ruble awakenings

They have come to graciously accept a telephone system which, to put it politely, rarely works, and food that is mostly wretched. They know how to live with an impossible government bureaucracy-and how to live without fax, voicemail and messenger services.

And still, they keep coming back to do business in the Soviet Union.

"This is where the future is," says James Garrison, who went to the Soviet Union 12 years ago to do non-profit work and found himself hooked on the culture, the people and the promise. Today, Garrison, chairman and CEO of Diomedes, Inc. of San Francisco, is working up deals ranging from Soviet onion dehydration plants to coordinating appearances of top Soviet officials on speaking tours and at major investment conferences. "I like being in a country that has unlimited resources and unlimited possibilities," he says.

"Doing business with the Russians requires warmth, honesty, a little soul-and the ability to drink seven vodkas without falling off the table," laughs Peter Necarsulmer, founder and president of The PBN Company, whose public relations and marketing firm is headquartered in San Francisco.

Necarsulmer, who began working with the Soviets in June 1990 when he coordinated press arrangements for the San Francisco visit of President Mikhail Gorbachev, has since gone on to develop a variety of Soviet projects. Last week, his firm released The Moscow Poll, the first major scientific poll on life in the Soviet Union, intended to provide key information to companies considering doing business there. PBN is also a key marketing consultant for the Kremlin Cup, one of the U.S.S.R.'s first corporate tennis events.

Both Garrison and Necarsulmer, whose business interests represent widely divergent areas, lack the capital of Chevron, Hewlett-Packard or Apple Computer, Inc., all major firms with big interests in the Soviet Union. But they have one thing in common: they've managed to get their relatively small firms on the inside track in the Soviet Union-a country where who you know is as important as what you do.

Garrison has come to know influential people who include Eduard Shevardnadze, the former foreign minister, and Boris Yeltsin, the Russian Republic President. He arranged Yeltsin's 1989 visit to the U.S., and Shevardnadze's national speaking tour in May of this year. He continues to collaborate with Shevardnadze in an issues-oriented group called the International Foreign Policy Institute, and will take the former Soviet foreign minister on a major speaking tour of Korea and Japan in November.

This week, Garrison is in Moscow to coordinate appearances of top Soviet officials-including Arkady Volsky, chair of the Scientific and Industrial Association of the U.S.S.R., and St. Petersburg Mayor Anatoly Sobchak-at a major Bear Stearns investment conference focusing on "Russia in Transition."

Necarsulmer, too, travels in key Soviet inner circles. After the Gorbachev visit to San Francisco in June 1990, PBN became the first in public relations to be fully accredited by the Soviet Ministry of Information. With that blessing, PBN coordinated news and media at the Bush-Gorbachev summit in July and August, including the working breakfast hosted by Bush for 100 top American and Soviet business leaders. In September, PBN handled the international press corps for the Moscow visit of Secretary of State James Baker.

Last week, Necarsulmer was in Moscow to work a press center and telecommunications for 1,000 international journalists at the United Nations-sponsored Conference on Security and Cooperation in Europe.

"Tremendous perseverence"

Getting a foot firmly in the door of the Soviet market "requires tremendous perseverance," says Garrison, whose 2-year-old global trading and consulting firm is now helping develop a chain of stores which accept foreign currency in major Soviet hotels, as well as seafood, agribusiness and housing deals in the Ukraine and Soviet Pacific.

"You research, you get a sense of the possibilities, and you start making phone calls," Garrison says. "Contacts with major government officials are secondary to your perseverance and your products-to what you have to offer."

"A successful relationship in the Soviet Union is based on credibility and integrity," says Necarsulmer, whose firm employs 19 in San Francisco, Moscow and Sacramento offices. "Government officials want to know if you'll deliver what you promise. A key is the ability to act rapidly and bend the rules when you need to. We got the call to handle the Gorby visit on 10 days notice…and we're in the mode of saying 'da' whenever we can."

The emergence of Bay Area firms in such high profile work isn't accidental, says Necarsulmer.

"The Soviets view the Bay Area as the gateway to the Pacific," says Necarsulmer. "The Soviet Consulate, the only official government representative outside Washington and New York, is here. We've got half a dozen of the world's great learning institutions, Silicon Valley, great ports, and some major Fortune 500 companies here."

And for years, a variety of Bay Area think tanks and non-profits have also fostered the Soviet-San Francisco relationship.

The Esalen Institute Soviet-American Exchange Program, headed by Garrison for four years, brought to the Bay Area top Soviet artists, educators, journalists and government officials, like Abel Aganbegyan, Gorbachev's top economic adviser. Garrison says there is still a core of dedicated non-profit leaders who, like him, believe that "the Soviet-American relationship is the most important relationship in the world," because of its effect on global stability.

Tough Proposition

Even so, doing business-even for seasoned insiders-can be a tough proposition.

"Sometimes it's absolutely maddening," says Necarsulmer. Getting officials to return phone calls, acknowledge faxes, and cut through the red tape can be the source of industrial-strength headaches. He, like Garrison, speaks only rudimentary Russian, and relies on trusted Soviet employees and translators to help smooth the way.

But communications, both international and within the Soviet Union-even within a few blocks in central Moscow-are trying.

("If I had an extra $20,000, I'd start up a bicycle messenger service in Moscow and be a millionaire next year," he says.)

Necarsulmer says that his San Francisco office and PBN Moscow manager Kimberly Getto are "constantly burning up the E-mail and fax" just to keep in touch.

To handle major news and marketing events, he has learned to truck in audio-visual equipment, international cellular phone systems, walkie talkies and repeater systems rather than rely on what's available in Moscow.

"We're trying to facilitate the practical aspects of conducting business in the modern world," he says. "These things become details, but not obstacles."

A bigger problem, both acknowledge, may be the uncertainty about what will happen in the wake of the failed August coup. "In some ways, the coup was a rehearsal for things to come, unless we move as a unified world to support the Soviets," says Garrison, who organized a rally at City Hall supporting the Soviet democratic movement in the days following the coup attempt.

"One thing that the right wing could play on is rampant dissatisfaction in the streets. Unless Gorbachev and Yeltsin can deliver a better livelihood, someone will rise up and say they need order."

Here at home, "there's still a large body of people who need the Cold War," sighs Garrison, "and they're laying awake at night, trying to figure out how to get it started again."

Still, both say they're in the right place at the right time-and they intend to stay.

"I think there will be an unprecedented outpouring of private, government and corporate support (for Soviet projects)," says Necarsulmer. "There's just too much at stake."

"You don't dismantle a 70-year dictatorship in a day," says Garrison. "A rough analogy might be Japan and Germany after World War II," when the re-building efforts were overwhelming, but held so much promise, he says.

"Those who sat it out (then) are still sitting there," he says. "The higher the risk, the higher the profit."