Businessweek Archives

Welcome To The Moscow Shopping Mall


International Business

WELCOME TO THE MOSCOW SHOPPING MALL

Moscow ain't what it used to be. Not far from Red Square, on the ground floor of the main post office, there are Chicago-style commodity pits where traders battle for anything from secondhand jets to truckloads of computers. Across the way, on Bolshaya Dorogomilovskaya, one of Moscow's huge downtown avenues, strollers can snap up bottles of Beefeater's Gin at sidewalk kiosks.

Soviet party bosses still brand this kind of behavior as spekulatsiya--speculation--and until a few months ago sent perpetrators to prison. But a fast-growing flock of street-smart traders is slowly forging a new economy from the wreckage left by central planners. This fledgling new order has prices that are set by markets, not bureaucrats, and a ruble that is creeping toward convertibility.

For the first time in Soviet history, Moscow street prices for consumer goods aren't out of whack with what Parisians or New Yorkers would pay back home. Take the Beefeater's. Time was, only people such as Communist Party hacks or the hookers who plied the foreigners' hotels could get the dollars needed to buy premium tipples such as imported gin. These days, a rising class of fat-cat entrepreneurs can buy the gin for 350 rubles, about $12 at black market rates. Of course, that's equal to a whole month's paycheck for the average Ivan.

GRAND ILYUSHIN. But there's no doubt that the continuing devaluation of the ruble is shaking up the old ways of business. While the official exchange rate is still a fantastic $1.70 to the ruble, the government is taking note of the shadow economy by offering tourists rubles at the black market rate of 3~. And it's allowing institutions to spring up where both Russians and foreigners can spend their rubles or dollars on a broadening range of goods.

The busiest of these new markets is the Russian Commodity & Raw Materials Exchange, where on a recent day brokers frantically waved red and yellow cards under the disapproving gaze of a bust of Lenin. On the block was an Ilyushin-76 cargo aircraft, eventually knocked down to a state company for 29 million rubles. Jets are a popular buy because even government-owned companies are hustling to set up in-house airlines to escape the clutches of unreliable flag-carrier Aeroflot.

The exchange has 1,000 seats, going for $143,000 a pop, and an average daily trading volume of 35 million rubles. Four small U. S. trading companies are among the nine foreign outfits that own seats. In all, some 300 commodities exchanges are in business from Moscow to Vladivostok. At these baby bourses, goods ranging from sugar and oil to IBM-XT personal computers are traded.

Not long ago, such items could only be had through orders from red-tape-snarled state agencies or in back-alley deals. But now, Soviet brokerage firms snatch up scarce products such as potatoes for Boris, who resells them to cooperative restaurants, or Nikolai, who wants an Ilyushin for that private air-freight business he plans. Local sources say that many of the brokers are alumni of black markets such as Moscow's notorious Rizhsky Rynok, where under-the-counter Kalashnikov rifles are on offer.

WESTERN GOODIES. When the bourses make sales in rubles, prices usually follow black market exchange rates. For example, a Sony Video 8 videocamera went for 40,000 rubles, or about $1,250 at black market rates. An Olivetti 2400-baud modem sold for $260. That's not far off retail prices in midtown Manhattan. Now, the business newspaper Commersant prints prices from nine bourses for commodities ranging from timber to two grades of gasoline.

The bourses aren't the only place a Muscovite with rubles to burn can stock up on Japanese electronics. With growing political freedom, Soviet borders are becoming more porous. Even though severe restrictions remain, Soviets may legally hold dollars and travel abroad. They return loaded with Western goodies. And now they can sell them legally in "commercial shops" that have sprung up in recent months. There, the goods are resold for rubles at a hefty markup.

As much as the system has changed, it has yet to solve the foreign businessperson's most nettlesome problem: repatriating ruble profits in hard currency. Theoretically, foreigners could unload unwanted ruble profits at the bourses for products they could easily sell for hard currency. "But to really get hard currency, you need to export--and for that, you have to go through the major trouble of getting export licenses," says Alexander Aglibankin, a Western Siberian economist. Dollars can be bought at special auctions, but bourse securities trading is primitive.

The bourses and fancy boutiques, meanwhile, are out of reach for most Soviets. Viktor Maslov, a 54-year-old director of a railcar manufacturing plant, suffered sticker shock at Rossiya Commercial Shop in downtown Moscow. He wanted a Black & Decker jigsaw. But the price, 3,990 rubles, took him aback: "I'd have to work a year to buy that. These are crazy prices." So they seem. But that's the price of shifting to a market economy.Peter Galuszka and Patricia Kranz in Moscow


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus