Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, March 24, 1993 TAG: 9303240121
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: LENGTH: Medium
WARY EYE ON THE BEAR
Despite Russia's intensifying power struggle, major U.S. companies are proceeding with plans for joint ventures there.For many companies, it has been easy to stick with plans for investment in Russia. For the most part, they haven't reached the point of ponying up huge sums. And the plodding pace of talks with the Russian government tends to make U.S. firms go slow anyway.
W.R. Grace & Co., for example, said it would invest several million dollars in a factory to make vacuum-packed food containers and in a sales division in Moscow.
Still, the Russian parliament's drive to remove President Boris Yeltsin from office is cause for concern. Jeans maker Levi Strauss & Co. is considering further investment in Russia beyond its Moscow store, but is happy not to have to make up its mind immediately, said spokesman John Pachtner.
"These events are enough to make any investor take pause, us included," he said.
John Morton, a Boston lawyer whose firm is working on a dozen contracts between U.S. companies and Russia, said his clients aren't changing their plans, but they have been careful all along.
"Nobody's been rushing headlong to invest millions of dollars. They've been moving slowly, deliberately, lining up thoughtful, phased transactions," Morton said.
The risk now is that a new regime could come to power that might shut down or nationalize an operation with foreign investment. Also, depending on what government emerges from the power struggle, the United States might restrict who can do business there.
Some of the biggest investment plans in Russia involve the country's vast oil and natural gas fields. An Exxon-Mobil joint venture is still assessing possible oil fields and Royal Dutch-Shell is studying the feasibility of an investment.
"Actual large investment and construction of sites isn't going to happen in the immediate future," said Jon Hines, a New York-based international attorney for oil and gas companies. "Investors don't have to react to each temperature reading each day."
The oil companies have been holding out for better terms and guarantees because of the political risk.
"The Russians' complaint is that foreign companies are not putting in substantial investment. But the companies don't put it in if the political situation is not stable," said Marshall Goldman, associate director of the Russian Research Center at Harvard.
The oil companies, which could help the Russian economy by bringing in hard currency, and businesses that provide products such as Grace's packaging to prevent food spoilage, might be in a good position to get Russian government support, analysts say.
A Grace spokesman said its products would improve the quality of life in Russia and "should flourish regardless of the political situation."
But Coca-Cola's plan to open a bottling plant in St. Petersburg faces opposition from city officials who dispute the wisdom of opening a soft-drink plant when food is in short supply.