A Fairfax environmental and professional services company has formed a joint venture with a Soviet ministry to monitor pollution at 32 Soviet plants that produce coke, a key ingredient in steelmaking.
The deal makes American Capital and Research Corp. (ACR) one of the first U.S. companies to enter what could be an enormous market for pollution control and other environmental services in both the Soviet Union and Eastern Europe.
The deal also has a built-in device designed to overcome one of the biggest difficulties in doing business in the Soviet Union -- coming up with a way to get profits back to the United States in some currency other than the ruble. Under the arrangement with the Soviet Ministry of Metallurgy, the details of which are still being worked out, ACR will receive cash from a barter arrangement.
Products from the Soviet coke plants where the environmental cleanup and monitoring services will be performed will be sold in international markets for Western currency. That money will then be used to pay ACR. Coke, a notoriously polluting fuel, fires ovens in which steel is made.
"In the case of the Soviet Union, the access to hard currency is the principal restraint, not the opportunities in the marketplace, which are enormous," said Jessica Tuchman Matthews, vice president of the World Resources Institute.
The barter arrangement was set up by Global Trade and Investment Inc., a trading company subsidiary of ACR. The trading subsidiary has set up similar arrangements for paying for goods and services from the West, but none for an environmental enterprise, said Nicholas Burakow, senior vice president of ACR. "We plan to be one of the most creative and agile firms operating in these markets, and we expect to earn profits from the outset," he said.
The company will help design systems to monitor and clean up pollutants, including sulfur, benzene and cyanide, emitted by the coke plants. The venture will begin with a single computer-based monitoring system that will ultimately be installed in all 32 plants. In addition, the technology may be used in Soviet-designed coke plants in other countries, such as India, Burakow said.
Although ACR and the Soviet ministry have signed letters of intent to form the venture, they have not worked out details, including what the shares of the joint venture will be, he said.
"It's a small contract in terms of dollars," Guy Chance, an analyst with Scott & Stringfellow Investment Corp. of Richmond, said of the Soviet venture. "It's a pilot, but it gives them a toehold and entree into a very interesting part of the world."
In a separate deal, ACR also announced yesterday a joint venture with a Hungarian chemical trading company. The Budapest-based venture will provide management and environmental consulting services in Eastern Europe, where environmental conditions are among the worst in the world.