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Foreign Investors Edgy About Russia

August 28, 1998

MOSCOW (AP) _ Foreign investors in Russia are a hardy breed, having endured coup attempts, frequent government shakeups and currency freefalls in their effort to tap this huge consumer market. But the current economic turmoil has profoundly rattled some of them.

``Concern is probably at the highest level that I have seen,″ said Scott Blacklin, president of the American Chamber of Commerce in Russia. ``I stress that this is not cause for panic, but there are folks running around in an agitated state.″

Moscow has become a plum assignment for many executives, especially those on the career fast-track. Many live lavishly, in $10,000 a month apartments supported by drivers, maids and nannies, and enjoy perks such as extra vacations and living allowances.

The big foreign companies that have invested $21 billion in Russia since the country began its economic reforms in 1992 have no plans to close up shop.

But some have started laying off workers, and others are delaying new investment decisions until they see how the government solves the current mess and whether it tackles the underlying problems.

``There’s going to be a very strong psychological impact on Western investors who have lost their money and I think they are going to be reluctant to throw good money after bad,″ said Charles Keefe, head of the Coudert Brothers law firm in Moscow, which gives investment advice to Russian and Western companies.

Henry Briggs, general director of the St. Louis-based Monsanto-Searle pharmaceutical firm, said the current chaos makes him nervous but ``we’re not pulling out″ _ at least not yet.

Monsanto has been doing business in Russia for more than 20 years, and has just built a $32 million factory with a Russian partner.

``The state of the economy today is different even than two days ago. ... No one has said the state is going to take over your assets. If they did something like that, then yes, we’ll rethink″ the company’s future in Russia, he said.

Mary Pat Sloan, head of Alphagraphics Russia, called the current situation ``the toughest period we’ve been through″ since the printing company entered the market in 1989, mostly because of the problems in the banking industry.

Most business transactions in Russia must be done by bank transfers. But in recent weeks, banks have been slow to process such transfers, especially if they involve dollars, which many banks don’t have, Sloan said.

In addition, sales at companies such as Alphagraphics are down because most of their clients are in the banking and financial sectors _ the ones worst hit by the market meltdown.

The Moscow office of the Brunswick Warburg brokerage firm has laid off 80 people in the past month, spokesman Martin Anderson said. The Interfax news agency said the Lehman Brothers investment house has also reduced staff and sent some non-Russians home.

Sloan predicted some foreign investors will leave, especially those who arrived last year when the Russian stock market was the best-performing in the world.

Keefe was among many Western investors _ and many Russians _ with a sense that this is yet one more crisis to be weathered.

``You don’t see or I don’t sense ... impending doom or disaster reflected on people’s faces. ... Maybe that, too, is part of the Russian experience. Over the last 10 years they survived past disasters, they’ll survive this one.″

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