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Russian factory owner undaunted by the system

Boris Smorodov is a dyed-in-the-wool survivor. His latest venture is valenki, traditional Russian felt boots.

May 10, 2009|Megan K. Stack

VYSHNY VOLOCHEK, RUSSIA — Here in this town of shuttered factories and stilled textile mills, a forgettable stop on the dreary stretch of bone-crunching road from Moscow to St. Petersburg, there lives an indefatigable entrepreneur.

Boris Smorodov has survived the orphanage and the madhouse; struggled through decades of economic and political turmoil; cast around for products to sell and enterprises to build, only to go broke on whims of fate. Today, at 60, he runs a small factory where a few workers hammer out one of this country's most ancient handicrafts: valenki, felt boots made of densely packed wool.

"I can tell you how Russian business was created," Smorodov declares, and adds a folksy Russian saying: "I've passed through it all, even the copper pipes."

In Smorodov's factory, entrepreneurship has done battle with gangsters and crooked officials, and traditions persist in the midst of what is supposed to have changed. It is a snapshot of what Russia has been, and of the tireless force of its people, even amid the vagaries of international economic tides.

In 2007, Smorodov's factory sold 6,200 pairs of valenki, which go for about $40. Last year, as oil prices tumbled and the financial downturn began to grip Russia, production was cut to about 5,000 pairs. Smorodov says won't make more than 4,000 this year; he had to lay off five of his 25 workers. "The crisis is telling on everybody," he says. "We could boost production, but I have no confidence that we'd sell them. People just don't have the money."

Yet there is something implacable in the way Smorodov describes his business woes, the hint of a shrug in his voice. This snow-haired man who snorts and coughs bullishly between words is, after all, the product of a country that gives people two choices: Fall apart at the seams, or become very hardy. Smorodov has seen worse crises, and he believes this too will pass.

"There are always obstacles, mostly created by the authorities," he says. "I have a lot of local officials coming here. I tell them, 'Forget my number and never call again.' They say, 'Why don't you invest in this fund,' and I know that tomorrow it will be plundered."

Born in the nearby village of Spirovo, Smorodov was 2 when his mother died in childbirth; the infant didn't survive either. In grief, Smorodov's father hit the bottle hard. He beat somebody to death, landed in prison and eventually hanged himself.

Smorodov was left in the care of a grandmother. "Everything I have, I owe to my grandmother," he says. "She worked hard. She was a believer."

But the old woman's pension couldn't stretch far enough, and she was forced to put him in the care of the state. Smorodov's coming of age took place in a string of Soviet institutions -- orphanage, boarding school, a trade school where he learned to blow glass, then factories and finally the army. When the crumbling communist empire began to allow small private businesses to fill the gaps in market supply, Smorodov opened the first cooperative shop in town and sold Moldovan and Georgian fruits and vegetables.

"I made a heap of money. By local standards, I was an oligarch," he says, laughing ruefully. "I thought, OK, I won't have to work again until my pension. But then the currency reforms began."

In a string of monetary revaluations that marked Russian capitalism's birth in the early 1990s, Smorodov's savings evaporated. Whittled down to nothing but the sugar and meat he'd stashed in a warehouse, he sold the supplies -- and invested the cash in one of the notorious pyramid schemes that swept Russia during the wildest days of the financial free-for-all. That money, too, was gone for good.

"I suffered three bankruptcies in a year and a half," Smorodov says. "People all around me were just committing suicide, hanging themselves. It was a time of suicide and bandits." But he persevered as privatization swept the country, and managed to buy a dry-cleaning and dyeing factory.

The dry-cleaning business was rough from the start. Local authorities wanted a cut, he says, and when Smorodov wearied of paying them off, he was faced with criminal cases against his business.

One day, he says, a police commander appeared at the factory and took him to an insane asylum to undergo a monthlong evaluation. He believes local officials were trying to strip him of his property.

"I spent a month surrounded by lunatics," he said.

Involuntary commitment was a classic tactic of Soviet authorities and partially survives in contemporary Russia.

Smorodov was eventually declared mentally sound and released, but problems remained. Competing dry cleaners arrived. Smorodov was no longer making a profit.

Finally, a machine worker stuck his head into Smorodov's office. "Why don't we make valenki?" he asked.

Smorodov thought it over: True, valenki were already being churned out at a nearby factory. But those boots were machine-made, too stiff for comfort and prone to shrinkage. He'd find a way to make them better, he decided.

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