Russian Defense Business Directory


CHAPTER 8 - PROFILES OF RUSSIAN CITIES

NIZHNIY NOVGOROD

Nizhniy Novgorod (formerly known as Gorkiy) is Russia's third largest city, after Moscow and St. Petersburg. It has a metropolitan population of almost 2 million and its area is comprised of approximately 400 square kilometers. The region surrounding Nizhniy Novgorod has a population of nearly 3.7 million, and an area of 75,000 square kilometers. Founded in 1221, Nizhniy Novgorod is one of Russia's oldest cities and is located 265 miles east of Moscow, at the confluence of the Volga and Oka Rivers. Nizhniy Novgorod was an important commercial and banking center before the Revolution, and much of its entrepreneurial spirit apparently survived the Soviet era. One of the country's largest trade fairs was traditionally held in the city and has just been revived--in part to showcase military equipment produced in Nizhniy Novgorod. There are presently 15 universities and colleges, 172 secondary schools, 13 museums, five theaters, 20 newspapers, and six local TV stations in Nizhniy Novgorod. And until recently, it has been primarily known in the West as the place of internal exile of the late dissident, physicist Andrey Sakharov.

Nizhniy Novgorod Oblast ranks eighth in the country in terms of heavy industry but only 40th in the consumer and service sectors. The region is fairly well-suited to agriculture but is only marginally self-sufficient and must import several essential food items--including grain--from other regions. The economic profile presents potential investors with both problems and opportunities. The city has several hundred factories and plants, and thousands of small business enterprises. In addition to the defense industry, Nizhniy Novgorod is home to enterprises in the automotive, construction, electrical equipment, oil refining, textile, and plastics industries. However, much of the industrial base is aging. And, as with other industrial centers that depend on outside sources for food, raw materials, and energy, Nizhniy Novgorod has suffered from the severing of economic links which followed the breakup of the Soviet Union. The machine-building and chemical industries have been particularly hard hit.

Nizhniy Novgorod has been aggressive in trying to develop ties to the West, driven in large part by activist governor Boris Nemtsov. Yeltsin first named Nemtsov (who was then head of the Oblast administration) to be his representative to Nizhniy Novgorod partially as a result of Nemtsov's support during the August 1991 coup attempt. The Oblast council later gave Nemtsov the title of governor. Consensus-building has been the hallmark of Nemtsov's administration. For example, he has made a point of including a number of former Communists in his team. The main priority of this team is economic change in a stable social environment, and the administration has made social security a central concern of the local government. The local government's efforts to shield the population from some of the effects of Russia's economic transformation have fostered a high degree of political stability and generated greater confidence in local officials. The political consensus Nemtsov has cultivated has also helped attract the support of international investors and consultants.

Recognizing that privatization is probably the best insurance against the reversal of reform, Nizhniy Novgorod has moved quickly in this area and was touted by former acting Premier Gaydar as a model for the rest of Russia. With help from the World Bank, the city began auctioning off businesses in the trade and service sector in April 1992. In October 1992 the privatization program was extended to the trucking industry--the first instance where bidders were allowed to use the government-issued privatization vouchers in payment. The private farming movement in Nizhniy Novgorod has also shown one of the fastest growth rates of any region in Russia.

Boris Nemtsov has listed crime, along with inflation and unemployment, as his greatest worries. The onset of market reforms in Russia has been accompanied by a rapid rise in the volume and varieties of criminal activity. However, Nemtsov's own example of integrity, and the premium his administration places on consensus and stability, have contributed to a significantly lower level of various types of crime, corruption, and scandal than in other regions of Russia.

Nizhniy Novgorod ranks third, behind Moscow and St. Petersburg, in the concentration of defense industrial facilities. Its enterprises have produced a wide range of military equipment, including fighter aircraft, Sierra- and Kilo-class submarines, artillery and missile equipment for the ground forces, as well as radars and other electronic systems. The city also contains several scientific institutes engaged in the research and development of advanced technologies for the military.

Despite the oblast's early start on conversion--it began its own conversion program early in 1989--the process will be long and painful. Nemtsov is working closely with defense industrial managers in order to minimize the inevitable social dislocations through a go-slow approach to conversion, worker retraining programs, and efforts to find new jobs for unemployed workers. In addition, he is seeking ways to make these large enterprises more viable by reducing or eliminating their social welfare burdens which impede foreign investment and siphon off funds that the enterprise could use to finance defense conversion projects.

Traveling to Nizhniy Novgorod from Moscow

Traveling by train is probably the best choice in transport from Moscow to Nizhniy Novgorod. The most convenient train is the "Yarmarka" express, which leaves Kazan station in Moscow in the evening and arrives in Nizhniy Novgorod around 6:00 a.m. after making only a few stops. Sleeping compartments are arranged either for two people ("SV class") or for four. There is a similar "Yarmarka" train from Nizhniy Novgorod that arrives in Moscow before 7 a.m. the next day. The train is comfortable and equipped with a small dining car. It would be advisable to get local assistance in procuring tickets, as the process can be crowded and complicated. Buy tickets as early as possible, as the trains fill up.

Nizhniy Novgorod is also accessible from Moscow by air (a Russian airline flight of slightly more than one hour) or by train (a trip of nearly 9 hours). The Nizhniy Novgorod Airport is about 45 minutes to an hour out of town. Travelers are advised to arrive at the airport one (1) hour before departure. The flight into Moscow lands at the Bykovo Airport, which is well to the south of Moscow and farther from the center of the city than Sheremetyevo Airport.

Accommodations in Nizhniy Novgorod

There are several hotels in Nizhniy Novgorod. A few of them are within walking distance of the Kremlin, where the oblast and city offices are located. The Nizhniy Novgorod Oblast Department of International Relations, in building number 1, Kremlin, Nizhniy Novgorod, 603082 {tel: (011 7 8312) 39-16-21, fax: (011-7-8312) 39-00-48}, can help with arrangements, or can link individuals with a service that can assist them.

Finding Assistance in Nizhniy Novgorod

The Oblast Department of International Relations can assist individuals in finding translators and can explain the communication facilities available in the region. However, the Nizhniy Novgorod office of the International Executive Service Corps is an excellent starting point for firms seeking to link up with enterprises in the Nizhniy Novgorod area. This group is located in building number 1, Kremlin, Nizhniy Novgorod, 603082 {tel: (011-7-8312) 39-13-45, fax: (011-7-8312) 39-00-56}.

The American Business Center Nizhniy Novgorod is located at 1 Ploschad Svoboda, Nizhniy Novgorod, {tel: (011-7-8312) 37-22-13}. Russia contact is Michael Levin.

The Oblast Department of Economics and Forecasting may also be of assistance. The Deputy Governor for this Department is Vasiliy Dorofeyevich Kozlov. The department is situated in building number 2, Office 236, Kremlin, Nizhniy Novgorod 603082 {tel: (011-7-8312) 39-06-62, fax: (011-7-8312) 39-06-29}.

Commercial research organizations in Nizhniy Novgorod can also help individuals learn more about the region. These include:

Epitsentr, Nizhniy Novgorod office, building number 1, Kremlin, Nizhniy Novgorod 603082 {tel: (011-7-8312) 39-13-45, fax: (011-7-8312) 39-00-48}.

The Fund for Strategic Initiative, 2 Ulyanov St, Nizhniy Novgorod 603005 {tel: (011-7-8312) 39-02-49, fax: (011-7-8312) 35-64-80}.

An additional point of contact for industrial firms is the Nizhniy Novgorod Association of Enterprises and Organizations, Nizhne-Volzhskaya Nab., 5/2, Nizhniy Novgorod 603001 {tel and fax: (011-7-8312) 33-33-29}.

The International Executive Service Corps (IESC) Office, building number 1, room 415, Kremlin, Nizhniy Novgorod 603082 {tel and fax: (011-7-8312) 39-00-56}, Victor Tchelistcheff, Regional Country Director, translators/assistants: (evenings) Leonid Vorontsov (56-31-53); (weekends) Alexander Gordienko (67-26-57).

DHL Worldwide Express, 1 Oktyabrskaya Square, Office #38, Nizhniy Novgorod 603005, {tel: (011-7-8312) 32-25-99}.

Peace Corps Volga Region, 46 Gagarin Ave., Nizhniy Novgorod {tel: (011-7-8312) 65-78-89, fax: (011-7-8312) 65-78-12}.

YEKATERINBURG

Founded in 1723, Yekaterinburg (formerly known as Sverdlovsk) is one of the largest cities in Russia with a population of about 1.4 million, and is located in the south Urals on the river Iset, some 900 miles east of Moscow, 25 miles inside Asia--156 miles short of Siberia. The elevation is 919 feet above sea level. It has a substantial industrial base and is located at the crossroads of major transportation and communications lines. Sverdlovsk Oblast, in which Yekaterinburg is located, occupies 194,300 square kilometers of territory, is home to 4.7 million people, and ranks second in industrial output and third in population among Russia's republics and oblasts. Until 1991, Yekaterinburg, as well as the rest of Sverdlovsk oblast, was closed to foreigners because of the concentration of defense and related industries.

Despite strong support for President Yeltsin personally, regional leaders are determined to acquire considerable autonomy from the central government. Yekaterinburg is the city where Yeltsin began his political career, so he has consistently received strong support from both government officials and the general public. However, Sverdlovsk is one of three oblasts which added an extra question to the April 1993 referendum regarding granting the region equal status with republics in the Russian Federation. It was overwhelmingly approved. In July 1993, the oblast soviet voted to establish a Urals Republic on its territory in an effort to enhance the region's political and economic status.

Former oblast governor, Eduard Rossel, remains a powerful leader in the region. Yeltsin fired Rossel in October 1993 for his efforts to create the Urals Republic. However, in December 1993 he was overwhelmingly elected to a seat in the new Federation Council and remains involved in building interregional cooperation. Rossel was also elected head of the Sverdlovsk regional Duma.

In January 1994, Yeltsin appointed Aleksey Strakhov, the energetic former deputy mayor of Yekaterinburg, as governor. The mayor of Yekaterinburg is Arkadiy Chernetskiy.

Local officials are trying to make the Sverdlovsk oblast a center for business, industry, and culture, and have aggressively sought to make the oblast attractive to foreign investors. The oblast is the leading territory in the Urals economic region in terms of industrial output and has a high concentration of heavy industry--primarily metalworking, machine building, metallurgy, and chemical and petrochemical industries. The region also contains pharmaceutical and light industry enterprises such as food processing and jewelry. During Commerce Secretary Brown's March-April 1994 Presidential Business Development Mission to Russia, the U.S. firm Allen & Associates signed agreements with a Yekaterinburg enterprise that will lead to production of generic pharmaceuticals and establishment of pharmaceutical distribution systems in the region.

The Sverdlovsk region has one of the highest concentrations of defense enterprises in Russia and, as a result, the economy has suffered from cutbacks in military orders. Defense plants in the area produce tanks, artillery, missiles and missile launchers, enriched uranium, and nuclear warheads. In fact, a facility in Yekaterinburg was involved in biological warfare research where, in the late 1970s, the accidental release of a bacteriological agent may have caused an anthrax outbreak.

In 1986-1991, export volume of basic categories of goods decreased substantially. The export of rolled steel fell by 31 percent, of steel pipes--by three times, of ferro-alloys-by two times, of lumber--by 5.3 times, of plywood--by half, of excavating machines--by nine times. During the last twenty years, the export of asbestos reached its minimum. The export of metal-cutting machine tools, electric motors, particle boards, fibers boards, sleepers, turpentine and rosin has ceased.

Yekaterinburg is also an important cultural and educational center. There are 14 institutions of higher education located in the city, as well as the Urals Department of the Academy of Sciences. In addition, Yekaterinburg ranks third in Russia for its performing arts, with five theaters and several museums. Unfortunately, Yekaterinburg has to deal with the problem of organized crime.

Visitors to Yekaterinburg can see the site of the former House of Ipatyev where the last Russian Czar and his family died. Emperor Nicholas II and his family were killed in the cellar of the House of Ipatyev on the night of July 16, 1918.

During the Soviet era, the House of Ipatyev served as the Museum of the Revolution, the Anti-Religious Museum, the Council of Atheists' Society, the Rector's Office of the Ural Siberian Community University, the Regional Party Archive, and a Branch of the Chelyabinsk Institute of Culture. The House of Ipatyev was torn down in 1977, but the ruins of the mansion remain a popular attraction for visitors.

Traveling to Yekaterinburg

There is a vast network of public transportation throughout the city, e.g., buses, trolleys, and trams. This means of transportation is convenient to all and very inexpensive by American standards.

Taxis are available but visitors are encouraged to use caution. Only enter marked taxis in which the driver is alone, and always establish a destination price before entering.

There is a train service with daily departures between Moscow and Yekaterinburg. The trip takes slightly more than one day. The "Ural" runs from Yekaterinburg to Moscow, while the "Russia" and "Sibiryak" pass through Yekaterinburg on their way from Moscow to Novosibirsk.

Yekaterinburg is also accessible by air from Moscow and Frankfurt, Germany. The Yekaterinburg Koltsovo airport is located approximately 15 miles from the center of the city--a 30-minute ride by car. The airport is quite picturesque and is regarded as one of the 10 best in Russia. It was classified as an international airport in early 1993, and renovation and construction for improvement and expansion are currently underway. The regional Aeroflot company operates three flights per day between Yekaterinburg and Moscow. The trip takes about two hours. In addition, Lufthansa recently began twice-weekly flights between Yekaterinburg and Frankfurt.

The city center is a walker's delight in which to observe and absorb the commingling of Yekaterinburg's past with its present. Daytime walking is considered safe, affording an opportunity to explore and discover Yekaterinburg's many shops and museums. However, walking at night is discouraged.

Accommodations in Yekaterinburg

Two of the better hotels in Yekaterinburg include the Magister Hotel {tel (7-3432) 22-36-65/22-42-06; fax (7-3432) 22-56-74} and the Oktyabrskaya {tel (7-3432) 44-31-39; fax (7-3432) 44-50-16}. The Magister Hotel is centrally located within walking distance of the city center. The apartments are very clean and have relatively modern bathrooms and kitchens (that include cooktops but no ovens). The hotel is situated on a trolley line that is convenient and easy to use. The Oktobrskaya is equally comfortable. There are small restaurants in both hotels that serve traditional Russian food. Menus are printed in Russian and, while limited, selections are changed daily. The Yekaterinburg-based Sverdlovsk Region Department of International Economic Cooperation {tel (7-3432) 51-54-97 or 55-12-21} can assist with arrangements, or can link individuals with a service that can help.

Finding Assistance in Yekaterinburg and the Sverdlovsk Region

The telephone area code for Yekaterinburg is 3432. It is possible to direct dial to the United States. A long distance operator is not necessary, and connections are relatively clear. Patience and persistence are helpful as the telephone lines are few and frequently busy.

Domestic calls within Russia can be direct dialed. To call Moscow, one must first dial the in-country prefix 8, followed by the city code 095, and then the telephone number. Calling Russia from outside the CIS, one needs to dial 7 then 095.

Fax machines are fairly standard equipment in many offices. Additionally, E-mail is available at the Sprint office located in the main Post Office on Lenin Street. E-mail allows message transmission throughout the world in seconds.

The Yekaterinburg office of the International Executive Service Corps is an excellent starting point for firms seeking to link up with enterprises in the Sverdlovsk area. The IESC office is located in the Magister Hotel at 50 Ul. 8 Marta, 620014 Yekaterinburg {tel. and fax.: (011 7 3432) 226-746; E-mail [email protected]}.

The American Business Center Yekaterinburg is located at 80 Lunacharsky Street, 620 219 Yekaterinburg, George Lambrou, {tel: (011 7 3432) 55-56-89}, {fax (011 7 3432) 556-116}

U.S. Consulate General: Jack Segal, Consul General; Karen Puschel, Vice Consul {tel (011 7 3432) 60-11-43; fax (011 7 3432) 60-11-81}.

Government and commercial research organizations in Yekaterinburg that can also help individuals include:

The Urals Center for International Cooperation, the Urals Chamber of Commerce and Industry, the Urals Power System, the Association for Economic Interrelations among the regions and Republics of the Urals area, and other regional organizations are situated in Yekaterinburg.

Department of Foreign Investments of Economic Committee in the Government of Sverdlovsk Region, Yevgeniy Grachev, head of the department {tel: (011 7-3432) 58-97-37 or 58-97-35}.

Administration of the Representative of the Ministry of External Economic Relations for the Urals region, Igor Artemiyev, Representative {tel: (011 7-3432) 51-08-62 or 57-99-27}.

Urals Chamber of Commerce and Industry, Yuriy Matushkin, Chairman {tel: (011 7- 3432) 53-04-49}; fax: (011 7-3432) 53-58-63; Telex: 7212751 PALATA SU}.

Urals Chamber of Commerce and Industry, 620219, GSP-822, Yekaterinburg, 6 Ulitsa Vostochnaya {tel: (011 7-3432) 53-04-49; fax: (011 7-3432) 53-58-63, (011 7-3432) 55-73-51; telex: 721751 PLT SU}.

External Trade Firm "Uralvneshtorg" Ministry of Foreign Economic Relations of the Russian Federation, 620031, Yekaterinburg, 1 Pl. Oktyabrskaya {tel: (011 7-3432) 51-75-53 or 51-17-34 or 51-90-83; fax: (011 7-3432) 51-75-53; Telex: 721759}.

Urals Information Center "INFORMVES" Ministry of Foreign Economic Relations of the Russian Federation, 620031, Yekaterinburg, 3 Pl. Oktyabrskaya {tel: (011 7-3432) 51-08-62; fax: (011 7-3432) 58-99-22}.

Institute of Economics, Urals Division of the Russian Academy of Sciences, 620219, Yekaterinburg GSP-664, 29 Ul. Moskovskaya {tel: (011 7-3432) 51-45-36; Teletype: 221088 LAG}.

Joint Stock Company "Urals External Trade Association", 620219, Yekaterinburg GSP-873, 11 Ul. Pushkina {tel: (011 7-3432) 22-67-46: fax: (011 7-3432) 22-57-35; telex: 721551 INTER}.

Urals Regional Commercial Bank "Vneshtorgbank RF" (Uralvneshtorgbank), 620219, Yekaterinburg, GSP-626, 7 Ul. Generalskaya {tel: (011 7-3432) 57-38-44, 57-35-03; fax: (011 7-3432) 44-49-72, Telex: 721066}.

Small Business Association of Yekaterinburg (Publisher of Business Bulletin "AMB-EXPRESS"), 620026, Yekaterinburg, 73-1 Ul. Narodnoy Voli {tel: (011 7-3432) 22-07-71, 22-16-90; fax: (011 7-3432) 22-95-11; Telex: 721879 BIS}.

Center for Development of Small and Medium Businesses, 620031, Yekaterinburg, 13 Ul. 8 Marta {tel: (011 7-3432) 56-99-14}.

Urals Institute of National Economy, 620219, Yekaterinburg, 62 Ul. 8 Marta {tel: (011 7- 3432) 29-96-83; Teletype: 225551}.

PREVIEW OF FIFTH INSTALLMENT: FOCUS ON ST. PETERSBURG AND

THE LENINGRAD OBLAST

To better acquaint U.S. businesses with the opportunities for business in various Russian cities, each subsequent installment of the Directory will highlight a particular Russian city, providing information on the political climate for business development, technology for which the region is known, and the economic, business and social infrastructure that may be unique to that area. The installment will also highlight profiles of enterprises in that city. The fifth installment of the Directory will focus on St. Petersburg and the Leningrad Oblast.

St. Petersburg

St. Petersburg, the former capital of Russia, has a population of just under five million people, and is the second largest city in Russia. The surrounding Leningrad oblast has an additional 1.8 million people. Located on the eastern end of the Gulf of Finland, the St. Petersburg area provides a key strategic business center, providing access to the interior of Russia. With its highly educated population, seaport, railroad network, and international airport, the region is rapidly becoming a vital crossroads for trade connecting Russia with the global economy.

The region is a central hub for commercial activity in the northwest region of Russia and is a major intellectual, cultural, financial, and industrial center in the Russian Federation. St. Petersburg is home to the largest commercial seaport (by volume) in northwest Russia and the city serves as a major transportation center for both the region and Russia as a whole. The Leningrad oblast has 330 km of coastline, with several natural bays and ports. It also possesses an extensive transportation system, including the October railway system--one of the largest in Russia--and an extensive inland waterway system of rivers and canals. The area also has a workforce that ranks among the best-educated and skilled in Russia. One tenth of all Russian scientists work in St. Petersburg, and over a third of all employees have university or higher professional degrees. The Leningrad Oblast is rich in natural resources and has a varied industrial and agricultural base which is closely linked to that of St. Petersburg. Key industrial sectors in the region include shipbuilding, aerospace, agriculture, metallurgy, petrochemicals, food processing, and forestry and wood processing.

Defense enterprises form a significant portion of the economy in St. Petersburg, and until recently produced 70 percent of the city's output and employed over half the workforce. Some 400 scientific institutes are located in the city, almost all of which were engaged in some military-related research. Many of St. Petersburg's defense plants are the premier institutions in their field. The products of St. Petersburg defense plants traditionally included surface ships and submarines, munitions, tanks, electronics and optics, and aircraft and missile components.

Most of St. Petersburg's defense enterprises are in the process of shifting mainly to commercial production. The city government is openly pro-business and St. Petersburg is one of Russia's leaders in making progress on privatization. The oblast government is taking a proactive role in guiding the region's development, particularly with respect to port facilities and infrastructure projects.