The Crisis In Russia

The streets of Moscow are quieter this October than they've been in some years. The restaurants are empty, and so are the shops.

But business is booming for the companies that pack up western executives and business people, who are leaving in droves in the wake of the Russian stock market crash that shook the world on August 17th. Most companies are suffering. In Moscow, tens of thousands of young Russian business people have been laid off.

Ann Stuart Hill works for the Ford Foundation. She was scheduled to leave this fall after four years in Moscow.

"When I first came here four years ago - I have a daughter - I noticed there weren't any baby carriages - people weren't having babies," she says. "Then, I think they started to hope. And now they don't know again."

She says many of her friends are thinking about leaving.

"Many of them, particularly those with children, are thinking about it. They're waiting. If the banks stay open, if they can find things in the shops, they'll stay, if not, they'll leave."

Stephen Cohen is a professor of Russian studies and history at New York University, and a consultant to CBS News.

"What happened in Moscow, the financial crisis, it was like the Titanic that hit the iceberg," Cohen says. "It had sunk, and there was just that little tip as the rest of the ship goes under water, that finally sinks down. That's what happened in Moscow."

Cohen says the Russian crisis had been building for seven years.

"A handful, barely a handful of western investors, as they're called, went into Russia to actually produce something - maybe it was a hamburger. Maybe it was in the form of food processing plants or maybe it was energy, but the overwhelming majority of the money that went into Russia didn't produce anything."

Cohen says that's not all.

"A a good deal of what went up in Moscow and St. Petersburg that was called reform was for the consumption of Washington. They'd say, look: Bennetton, markets, yuppies with cellular phones, Mercedes Benz, just like us, let's buy here. They bought into a pyramid scam and they took a bath."

Some market analysts say that investors expected too much from Russia too fast.

"I think we were being overly optimistic about what Russia could do in a short period of time," says Robert Hormats, vice chairman of Goldman Sachs International.

Like many investment firms, Goldman Sachs took heavy losses when the bottom fell out of the Russian stock market.

"There was a feeling among investors for a period of time, in fact encouraged by parts of the U.S. government, that American support for Russia is so strong that they were, in a way, too nuclear to fail," Hormats says. "It then appeared to the market that Russia was too big to save. And at that point, confidence in the ruble collapsed, conidence in the Russian market collapsed, and confidence in Russian securities collapsed, and that led to huge losses."

The losses for western investors hurt, of course. But in the Russian heartland, the suffering is immediate and very real.

At the Western Union office in Brighton Beach, New York, one of the largest communities of Russian emigres in the world, concerned relatives are sending school supplies, clothes, even food like pasta and chicken soup, along with hard-earned dollars that may well be converted into almost worthless rubles by the time they reach their destination.

Boris Talis is the executive director of the Brighton Beach business improvement district. His son runs the Western Union office in Brighton Beach.

"From Lenin to Yeltsin, the same story, money disappears. People survive by trading," Talis explains.

Talis says crime is so rampant that it is dangerous for Russians to go alone to pick up money sent by American relatives.

At the YMHA in Brighton Beach, Russians in a citizenship class tell of rising anti-Semitism in these hard times. A man named Anatoly is one of them.

"There is anti-Semitism in Ukraine. Very bad," he says.

Anatoly has many friends still in the Ukraine. All Jews must leave, he says.

"Unfortunately, I think that it is difficult and dangerous to live in Russia now - not only for the Jewish people, but for all people," says Tatiana Borodin, who teaches at the YMHA.

She came to the United States with her son three years ago and won her green card in a lottery. She is very happy to be here, but has been worried about her mother back in Russia.

"She is being constantly threatened by some criminals because they know her only daughter lives in the United States," Borodin says. "And my mother often complains and says that some people come up to her and say 'Please give me your money because I know your daughter lives in the United States, and I know she helps you.'"

A few months ago, people looked at the new Russia and the movement towards democracy and businesses opening up and everyone was saying 'This is what Russia should be.' Tatiana says looking back at it now, it was like a mirage.

This time around, the hardships have arrived in a different way.

"Russians remember famine," Cohen says. "They remember it, but there were differences. First of all, for the most part, it wasn't peacetime; it was the devastation of war...people might sacrifice for the family and their homeland, but what are they sacrificing for now?"

Robert Hormats says that we must not turn our backs on Russia in its time of need.

"The average Russian finds himself or herself in the middle, between and old system they didn't like but understood, and a new system which promised a great deal, which has not been able to deliver much except profound instability," he says.
"They see very few people getting rich, and a lot of other Russians uffering, and that has given strength to the communists."

Cohen thinks people in their early 20's to mid-30's have lost hope, and maybe even their belief in market economy.

Zachary Sapozhnin lives in Livingston, New Jersey now, with his wife Nina and their two children. But he runs a computer software company with 150 employees in St. Petersberg, and three employees in Omsk, Siberia.

In the last month, he has hired more workers, rather than lay them off. They communicate by phone, but mostly by Internet. One of Zachary's employees works for a university in Omsk, but he hasn't been paid since July. Working for Zachary Sapozhnin is his lifeline.

Two weeks ago, Tatiana Borodin, her son Yakov waited in Kennedy International Airport for Tatiana's mother to arrive. For a year, at least, they will not have to worry if she is safe.

"If this country fragments, if this country deteriorates, if its economy collapses, it would be bad, not only for the Russians, but also for other countries in the world," Hormats says.

To that, Cohen adds:

"If we don't help them now, in this human calamity, then the Russian kids and grandkids of today will never forgive us."

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