Russian Prime Minister Sergei Stepashin arrived in Seattle on Sunday to court American investment in his country's ailing economy, but his entourage included a regional governor who has been accused of using strong-arm tactics to wrest assets from foreign investors.
The controversial member of Stepashin's delegation is Yevgeny Nazdratenko, governor of Primorsky province in Russia's Far East, who is embroiled in several disputes with foreign business leaders.
"Basically the governor is a pretty scary guy," said Andrew Fox, who sits on the boards of more than 20 companies in the region and is the honorary British consul in Vladivostok. Fox said that Nazdratenko summoned him on June 3 and threatened to send him "on an excursion to visit a very small room" where Fox would be kept until he agreed to give the governor control of a crucial stake in a shipping company and leave the company's existing management intact. Fox left that week and is now in Scotland.
David Gens, finance director of Seattle-based Far East Maritime Agency, said the Russian partner of one of the company's affiliates was ordered to contribute 10 percent of revenue for the rest of the year to Nazdratenko's reelection campaign.
In yet another dispute, an American investor has alleged that Nazdratenko packed the board of a company, diluted the ownership interest of foreign investors and diverted funds to coffers for his December reelection campaign.
Senior administration officials said Nazdratenko would not be included in meetings with President Clinton, Vice President Gore or other top U.S. officials today in Washington. But several business leaders said the mere presence of the Vladivostok politician, who accompanied Stepashin in Seattle for a tour of a Boeing plant and a dinner hosted by Washington Gov. Gary Locke (D), was sending a bad signal to investors.
"Russia has defaulted on its debts, it has a lot of economic problems, it should be extra careful" to woo foreign investors, said a Moscow-based spokesman for a group of foreign investors in a dispute with Nazdratenko over a Vladivostok-based fishing company. "To bring the poster boy of corruption along to the United States is just staggering."
Nazdratenko has repeatedly and forcefully denied allegations in the Russian media of tolerating corruption and organized crime. As the governor of an immense territory with valuable forests and rich fishing grounds north of Japan, Nazdratenko is a political powerhouse and runs his region with little supervision from authorities in faraway Moscow.
In Seattle, Stepashin told business leaders: "There are good prospects for investment in Russia, so please don't lose any time."
But Fox, who has lived in Vladivostok for seven years and represents foreigners with more than $100 million invested in the area, says he would like to ask Stepashin: "Which bits of Russia are you talking about?"
"Everyone knows it is a risky thing to invest in Russia," Fox added. "But it's so outrageous what's being done" in Vladivostok. "It's total lawlessness. Is that where Russia is heading?" Fox asked. "If so, then there is no sense in spending money there, and Russia is going to go backwards."
Acknowledging the complaints of many foreign investors, Stepashin told members of a U.S.-Russia business council in Washington last night that "all investments have to be protected not only in word, but in deed." He said, "We understand that investors have every reason to be weary," but added that "we are dead set on changing our attitude."
Many of those who have suffered from the fickle nature of Russia's economic system are in Seattle, the first stop in Stepashin's U.S. visit.
Gens estimates that one Vladivostok fishing trawler company, Zao Super, owes tens of millions of dollars to Seattle-area suppliers of nets, fuel, spare parts and maintenance services. Yet the Russian Committee of Fisheries on July 2 transferred most of Zao Super's main assets -- the fishing boats -- to another company whose major shareholder and chairman is a close associate of Nazdratenko.
Zao Super, which allegedly was told to divert money to Nazdratenko's campaign, has $350 million in debts being renegotiated by the Paris Club, a creditors' group comprised of the governments of leading industrialized nations.
Despite these and other economic problems, Stepashin is widely expected to receive support in Washington for Russia's quest for $4.5 billion in loans from the International Monetary Fund and up to $2 billion from the World Bank. He will meet with officials of those institutions on Wednesday. The IMF funding is important to negotiations on rescheduling Russia's crushing debts. Russia, which has $17 billion in debt payments due this year, already has defaulted on many obligations.
The IMF has been reluctant to support Russia since a combination of capital flight, poor tax collection, weak budget controls, corruption and lumbering state enterprises led to a collapse of the Russian currency, the ruble, in August 1998.
But senior U.S. and IMF officials have been equally reluctant to isolate Russia by cutting off economic assistance.
"We are going ahead with a package which I hope is credible, which I hope will be implemented fully," Alassane Ouattara, deputy managing director of the IMF, told Reuters. "The first intentions and the first measures taken by the new government are quite positive. . . . The board knows the parameters, the difficulties and the risks."