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SMALL BUSINESS / JANE APPLEGATE

Patience Needed to Succeed in U.S.S.R.

May 17, 1991|JANE APPLEGATE

Although hundreds of Soviets were clamoring to buy pizza from his Astro Pizza truck, Shelley Zeiger firmly asked the young salesclerk to stop selling.

"She was taking their money and throwing it in a bag rather than saying, 'Thank you' and using the cash register," recalls Zeiger, a pioneering entrepreneur from Trenton, N.J.

"I asked her to put the money in the cash register and say, 'Spacebo,' which means 'Thank you,' " Zeiger said. "You should have seen the looks on the people's faces. That's when I knew I had brought a little bit of America to the Soviet people."

A native of the Ukraine, Zeiger has been doing business in the Soviet Union since the mid-1970s. Through the years, he has imported natural fragrances and wooden nesting dolls. He has sold the Soviets pizza and Nathan's hot dogs. But he said his greatest triumph was opening the Trenmos restaurant about a mile from the Kremlin. Named for Trenton and Moscow, the upscale restaurant accepts both rubles and hard currency for steak, ice cream and apple pie.

Although he has succeeded in making money in the Soviet Union, Zeiger admits doing business there is rough.

"They want to have a free market system, but when it comes to digging into their pockets or having to deal with supply and demand, they can't," Zeiger said.

Civil unrest, the virtual impossibility of converting rubles to dollars and dealing with bureaucratic red tape discourage even the most energetic American entrepreneurs. Still, Zeiger and others doing business in the Soviet Union remain optimistic because "we are dealing with 300 million people who need anything and everything except guns."

"This is like the Wild West," said Jeff Ostrovsky, a Russian immigrant who founded Staten Island, N.Y.-based Atlantic J & S Corp. to set up joint ventures with the Soviet Union.

Ostrovsky, whose firm is involved in oil and gas ventures, plastic production and metal recycling, said the demand for products is "absolutely tremendous."

"The Soviet people understand that the free market and democracy are the only ways to save the country from total collapse."

He said business owners willing to be patient and creative about getting their money out will be rewarded by profits. Because it is nearly impossible to convert rubles to hard currency, he advises clients to invest them in projects such as hotel construction or in the production of items destined for export.

Atlantic J & S works with marketing consultants and attorneys in the Soviet Union to set up joint ventures. But signing a joint venture agreement is no cause for immediate celebration. Although the Soviets have set up about 1,200 to 1,400 joint ventures, Ostrovsky said only 10% or 20% are actually operating.

"Doing business over there is a long-term game; you won't experience fast returns," said David Kern Peteler, a Los Angeles attorney who specializes in business transactions with the Soviets.

Deal-making can also be costly, with legal fees in the $50,000 range for a complicated transaction.

Peteler said American businesses continue to be frustrated by the Soviet monetary system.

"The Russian government has gold and dollars, but it is difficult to get them to spend them," said Peteler, who believes that the ruble will become a convertible currency by the end of the century if the Soviets are serious about joining the world economy.

American entrepreneurs are often surprised at how naive their Soviet counterparts can be about business.

"Russians tend to use bluster to cover up embarrassment over their troubled economy," Peteler said. "But they are seeking help, and having a Western partner gives them credibility."

Finding a good local partner to work with is essential to doing business in the Soviet Union. Zeiger's partner is the Lenin District Food Catering Trust. Zeiger's son, Jeff, spends three out of every four months in Moscow, running the Trenmos restaurant and keeping an eye on the family's other business ventures.

Zeiger and others say applying for an export license to sell your goods is the simplest way for a small business to enter the Soviet market. Right now, demand is high for the most basic consumer goods.

But if you decide to try to do business with the Soviets, you are pretty much on your own. Right now, it is impossible to obtain foreign credit insurance or financing from the U.S. Export-Import Bank. However, the U.S. Department of Commerce is planning to take a group of small-business owners to Moscow on a trade mission in December.

"You have to do it yourself," Zeiger said. "You won't get much help from state or federal commerce department officials."

Zeiger said U.S. entrepreneurs are also at a disadvantage when they compete against European and Japanese business owners who receive government assistance for their exports to the Soviet Union.

"Despite the problems, I still think dealing with the Soviets is very attractive for those with the courage and guts to take the risks," Zeiger said.

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