Chapter 5
The Moose Joint Venture

'X, as any other organisation, does not exist independently of its surroundings - it is a product of the beliefs and basic assumptions, actions and interactions of both its managers and employees and people outside the organisation. In some ways, it is possible to trace a coherent pattern of thoughts, beliefs and actions in X; in others it is not. Many of the previous socialist frameworks have been destroyed, others continue to function and be powerful'

(Michailova, 1997: 17).

What the Moose Case Study Contributes

This chapter will set the scene for chapters in Part III by providing an account of the experiences of and the difficulties being faced by the Moose joint venture prior to the researcher's arrival. These give some considerable insight into the operation of cultural differences, and the obstacles these cultural differences present to building trust - in their 'full glory' - applicable to all western investors and their local counterparts in Russia. The venture's problems offer excellent practical examples of the many mundane, yet significant problems faced by Russians and westerners in the everyday operation of a joint venture.

Identities have been concealed throughout this and the data chapters to protect confidentiality. Informants from the western organisations documented in this research are described using a title that describes their position within the organisation, with their nationality also being noted. Focus group respondents are simply noted as that - their job titles are not presented, although their nationality is. Moose interviewees are denoted by nationality, and by fictional name if this is appropriate. In the case study data, the two deputies - one Russian and one expatriate - are recorded as Mikhail and John respectively; these are fictional names. Similarly, random fictional names are provided if this is necessary during the course of any interviewee report, meeting notes, etc, once again to protect confidentiality.

A Brief History of Moose

The joint venture - Moose - was formed following the discovery of a substantial oil and gas reservoir in the mid-1980s. The field is located in the Arctic Circle and was developed between 1989 and 1991. Two local state organisations with responsibility for mining developed the field, together with a north American joint venture partner who joined in 1991, and a UK partner - Mammoth - who joined during 1992. Originally, the two local state organisations had a 50% shareholding (split 40/10) in the venture, the north American partners 25% and the UK partners (Mammoth) 25%. In 1995, the American partners withdrew from the project and Mammoth - the UK partners - bought out their 25% shareholding, to become 50% shareholders in the venture.

The researcher was invited to visit the joint venture in March 1997. At the time, Moose was involved with some 60 wells and over 50 kilometres of new export pipelines had been laid; production was at approximately 5000 m3 per day. Over the course of its existence thus far, the venture had paid over $60 million in taxes to the local city administration, the local republic and the Russian Federation. This was in addition to a yearly minimum contribution of $200,000 to the local republic's Social Development Plan: projects funded included an indoor sports facility, donations to the construction of a Russian orthodox church and to the local republic's Children's Fund, and donations to organisations involved with culture, education and medicine. Considerable efforts were ongoing to minimise the environmental impact of development activities in the form of regular chemical monitoring of surface waters, sumpless wells, reclamation of areas disturbed in the course of production, and an oil spill contingency plan and equipment.

Life in Moose in March 1997

At the time of the research visit, a new expatriate deputy director - 'John' - had been in post for three months, following the departure of Moose's previous expatriate deputy: he was the UK shareholder's ('Mammoth') most senior representative on site. Over that initial three-month period, a wide variety of issues and tensions had arisen, and finally, one evening in March, matters were brought to a head, with the expatriate deputy claiming to have 'manoeuvred' a meeting to set cards on the table and clear the air. For the expatriate deputy, the tensions present in the venture were manifested through a role clash between himself and his Russian opposite number - 'Mikhail'. However, as the meeting went on, it evolved into a much wider debate into related sources of conflict and difficulty.

The role clash arose partially out of the absence of the joint venture's permanent Russian general director. The Russian general director was also president of the largest (40%) Russian shareholder in the venture. A powerful local politician, believed to have ambitions in Moscow, the general director was at the venture at most a day or two a month, essentially to attend meetings.

Below him in the joint venture hierarchy was the Mammoth expatriate deputy director who was officially number two on the organisational chart, and below him a Russian opposite number, formally director of corporate services. However, despite these two individuals' positions on the organisational chart, a role clash had resulted from the fact that the expatriate deputy director was both officially number two, and number two as far as the Mammoth side was concerned, while on the Russian side the Russian deputy was viewed as, and behaved as, the number two in the organisation. The meeting attempted to overcome mounting tensions between the two deputies over demarcation lines for their roles. The issues that were covered were significant, and when the expatriate deputy finally emerged and arrived in the canteen for a very late dinner, he was greeted with a cry from the expectant (expatriate) crowd of 'Did you draw blood?'.

The expatriate deputy director general, prior to the meeting, described his role thus: 'As deputy general director I've got two functions, one is deputy general director, and the second is director of operations.' As director of operations, he was responsible for production, development and exploration in the field and all related matters. The role of deputy director general 'is in fact virtually a full-time job because the general director is absent most of the time... so in that sense we [Mammoth] also manage the business... We have an office in Moscow... they also report to me, and to that end we have a full range of business management functions... a corporate director, procurement, finance, HR, marketing and general other office administration.' So, he had responsibility for running the field activities, the management functions of running the venture in the absence of and in addition to the Russian director general, and the management of the business systems from the UK side through Moscow.

Compare this with the description given by his Russian opposite number of his own role, interviewed after the meeting: 'Officially my position is director of corporate services. But actually my responsibilities include, well, first of all I am responsible for all the operations in the field, and all the operations of our company on behalf of the Russian party, and to defend the Russian party's interests.'

Explaining further the range of his responsibilities, he said: 'The decision was made that [?in order?] not to have two directors of operations, one for the Russian party, the second one for the western party, it was an official nomination of director of corporate services, bearing constantly in mind that his main duty is to cover all the operational aspects of all the activities, the same with John. It's another name for the same position actually. {So you and John share the same position?} Mostly, yes. There are certain particularities in each position. For example I am mostly charged to combine operational needs and corporate services needs, while John deals directly with operations and has nothing to with corporate services... I am trying... to apply equal attention to both aspects. But, of course, if need be, when serious decisions are to be made concerning production or operations as general, a joint decision then is made by both myself and John.' Expanding on his responsibility for the operations side of the venture, he claimed that this was partly because: 'John has been working here for three months and he does not have enough experience to handle the whole situation.'

There is evidently a potential conflict between the two accounts of the roles of the two individuals involved, and it was largely the build-up in everyday difficulties that such a cross-over in perceived responsibilities gave rise to, that led to the meeting. John, the expatriate deputy, made an important discovery during the meeting - ie that: 'although Mikhail is corporate services director, [the general director]... has asked him in the absence of him being here... to keep an overview of the operations from a Russian perspective, and to that end to work cooperatively with me to ensure we do the best for both of us. So in actuality, the organisational chart shows him as corporate services director with mainly administrative responsibilities, and me operations. His [ie the Russian deputy's] interpretation is he also has responsibility for operations. I can treat this in a number of ways and say no you don't, these are the demarcation lines, and we're going to go into battle on every single issue. Or we go into the thing as he's got strengths, I've got strengths, we're going to work cooperatively together and the organisational chart doesn't count for a great deal because he's 40+ years old, he's been here 20 years. He clearly has got all the contacts, and in many areas, most areas of dealing with local authorities, he is the right person. But I can't afford to be excluded.'

The two deputies discussed their roles at length, along with a variety of sources of difficulty that had been ongoing in the venture: 'a long meeting, discussed lots of issues', that John believed went successfully: 'the meeting ended up very cooperative'.

It is now appropriate to set the context for life in the venture in March 1997 by describing the other key challenges, in addition to the role conflict between John and Mikhail, that Moose was experiencing during March 1997.

Finance Problems

At the beginning of 1996, Moose had faced a severe cash crisis - the second in its short history - the repercussions of which were painful for the venture to endure. The expatriate deputy director described the situation thus: 'last year we were spending money before we earned it, and when it came to the crunch they found that we were virtually in liquidation, this company was so over-extended. At that point, everyone started looking for scapegoats, and of course the scapegoats were the people spending the money... [there was] a lot of internal friction, to the point where people wouldn't speak to each other and doors were slammed, and I won't meet with him and I won't meet with the other, and that sort of thing. There are a number of changes still to take place.'1

Obviously such a series of events was having a severe impact on relations within the venture. Indeed, there was a very difficult atmosphere in the accounting and finance department, partially as a result of the ongoing change process: 'you've got the western accounting and the Russian accounting, and there is a clash now between the Russians and the westerners, there are too many changes... it's our way or your way and there is now a battle' (American interviewee).2

At the root of the situation was the common requirement in the Russian business context for prepayment - payment is made in advance for items that are ordered, rather than being made on delivery.3 In response to the financial crisis, the finance function both within the venture and in Moscow, was trying to refuse to prepay: invoices were being rounded-down locally, and then in Moscow, and then delayed. When payment was actually made, it took around a week to clear; in this time-lag, goods mounted up at the suppliers, these delays then went back upstream and projects could not go ahead, at high costs per day.

There was therefore a feeling that finance, through questioning, rounding-down, and delaying prepayment requests, was constraining jobs in the company untenably, when it was actually a service department that should not be interfering with the 'proper business' of the venture:4 'The prepayments problem and invoicing is indicative in a sense of the fact that no matter how hard you push, you find that there are other departments, other people, who just don't somehow, in our opinion for no good reason, they don't cooperate. There's a tendency I think here for service departments not quite to understand the idea of being a service department, they seem to think they're an end in themselves' (Mammoth interviewee).

The problem reflects a tough attitude, based on suspicions about the motives of those demanding prepayment prevailing in the finance department, as described by this American: 'the question is why pay people up front? Either they don't trust Moose, which I think is out of the question, we always pay our bills,5 or there's other things that we don't know about... There are intermediary people, middle men, who maybe get a share, there's no reason why we should prepay all the materials. I am worried that we don't get materials at the end, we don't get quality and quantity.'

For the venture, the consequence of this tough stance was frequent delays in securing vital equipment, as a result of which projects were being subject to disruption, and resentment was rising ever higher: The classic case at the moment is that you are desperately trying to get jobs done, and projects built and so forth, we have invoices coming in for prepayment and yet we have a finance system which is constraining this, and seems to the eye of the lower echelon to totally disregard the urgency of these matters by just delaying payments or delaying funding. There's a great deal of frustration' (Mammoth interviewee).

Perhaps rounding-down was being employed as a way ol making managers more inclined to negotiate the best price for the venture. The American interviewee from the finance department claimed: 'Prices are kind of rocky, why are prices going up 100% overnight? ... We used to buy a concrete slab for 25 bucks, now they're over $27 a piece - is cost of living, inflation etc that high that it's so expensive in Russia to build a concrete slab? We are a service department paying the bills, we question these things. The people who are making those deals for the company should be asking the questions. When we ask the questions there is always resistance... But prepayment is part of the game, and everyone seems to have accepted it as business practice, which in my opinion is not right... I think the stand has to be made by management... My personal impression is that to agree to accept that as a Russian practice in business is totally unacceptable.'

In fact, he thought that foreign investors generally in Russia were guilty ot complacency in this regard: 'I don't think anyone here challenges the Russians and we get deeper and deeper into these situations where nobody stands up to them. $16 million was withheld from the venture, just sitting in a bank account because a customs tariff was imposed. It stayed there for a year - the venture almost died, the business almost died, and finally after a year, we finally, through negotiation, lobbying, we got our $16 million back, but that could have killed the venture. Normally I would have said enough is enough, if we don't get that money in the bank in the next two months we are folding the operation... I think [the Russians] still see us as the bad guy trying to steal everything from them... If I would be an investor in Russia, I would leave my money in the bank [in the west] and get 8%, why should I put my money here [in Russia] and lose it overnight? ...It doesn't improve, it's deteriorating now, and I don't know what progress has been made over the last five years.'

Lack of trust in the external business environment was clearly having a considerable impact on activities within the venture. These exogenous factors are considered next.

Exogenous Factors

Prepayment is almost a microcosm of the complex demands of the external environment and the agencies that run and regulate the business environment, and which clearly fed into the operation of the joint venture as far as the westerners were concerned: 'In Russia you prepay everything, and if you don't deliver, if you say you deliver on Friday, on Saturday you issue a writ, and if they don't deliver by Monday, on Tuesday, you start court proceedings. Equally, if you get invoiced and you don't pay and the goods are delivered, you will get charged interest.

'If you're importing from the west, the bank wants to know that the goods have been delivered, and the only way that the bank knows the goods have been delivered is by getting a letter from the customs people to say the goods have arrived in the country and have cleared customs. So the bank wants to know what you're buying and what you're receiving, and the customs people want to know what you're going to buy and what you're going to receive, so there's everybody chasing around these pieces of paper. It's a real nightmare because we're piggy in the middle not getting our goods. And now they've introduced certification, and they want us to have agreements with western companies to state how much business we're going to do in advance... So they've got to get round that or we've got to get round that' (Mammoth contractor).

Within the enterprise, the various bureaucratic requirements on the outside were predictably reflected on the inside, with frustrated westerners asking why it was necessary to have '20 signatures to get an invoice approved'. Boris, who dealt with customs, was the individual who often suffered most from the fact that 'sometimes it's difficult to explain to westerners the need for such dual signatures'. However, Russians occasionally remarked that this is something their UK partners should be used to: 'sometimes it's a long process and we have to overcome some bureaucratic procedures, but bureaucratic procedures are the same in the UK.'

Constant bureaucratic demands were a permanent irritation across all departments at all times. The next section considers this problem in more detail.

Customs Difficulties

Notes from many meetings give an indication of the amount of time, effort and energy expended on dealing with customs problems and their inevitable consequences. The following notes are typical.6 The meeting dealt with attempts to source in Russia a 'liner' (a polythene sheet used in the waste disposal system at an installation). The venture had in place an active initiative to significantly reduce the use of western materials, placing the onus on domestically-produced items. Sourcing the liner was becoming time critical, as the part was needed for a project that could only be completed during the summer. Failure to source it in Russia meant it needed to be imported. With customs, certification, etc delays, the completion of the project for which it was required was being put in jeopardy.

[Peter]: 'A Gosplan7 certificate is required for five parts that need to be ordered from abroad, it costs $900 for the certificate. There have been some more customs clearance problems ... but this time customs damaged some of our property in the process.'8

[Ivan]: 'A memo has been sent to Boris [responsible for customs clearance, also in the meeting] regarding the liner - he's been unable to source in Russia.'

[Paul]: 'I've just been at a meeting where we were not able to come to a decision as nothing had been done to source the liner.'

[Boris]: 'I've been on the phone every day and can't source it in Russia, so it must be sourced in the west.'

{At this point, the meeting came to a decision to source the part in the west, but the UK side made a point of underlining that they must be satisfied that it cannot be sourced in Russia, and minuted the fact that Boris would write a memo saying this. It was commented at length that taking the decision not to source in Russia would slow things down considerably.}

[Peter]: 'What's the situation with customs?'

[Boris]: 'Not good! Rolls of drawing paper are stuck in customs and they can't currently produce a drawing. Remember, a slack translation or inaccurate description leads to customs initiating cases against companies.'

[Peter]: 'Everyone recognises you have a very difficult job in keeping customs happy with their requirements... We have to make sure when talking to 'our' [ie western] suppliers etc that they are very careful.'

[Boris]: 'We try to inform them because it's like a nightmare never ended.'

This spat about the liner had become urgent. As one attendee at the meeting explained afterwards: 'The liner should have been sorted out by this meeting. A decision at this morning's meeting couldn't be made as Boris wasn't invited, so that group now needs a memo saying Boris has tried and cannot source in Russia. Many things are dependent on the weather, for example pipelines must be built before the thaw. Also, there are the logistics of getting stuff from Moscow to the town in summer - roads are two concrete pads (they are permanently snowed over for around nine months of the year), and the venture has to pay the local organisation in charge of the roads a 'supplement' every time a lorry comes into town - even more during the summer. Trucks are heavier than the limit even when unladen.'9

Indeed, by the time of this meeting, it had become apparent that a great deal of items were sitting in customs, and things were getting critical. There was recognition of the need to prioritise, and a 'hot list' was developed of items to be tracked and got in as a matter of urgency. The pressure on Boris, who dealt with customs in the joint venture, was evident in a number of meetings, and the hot list of items that he was to attempt to get customs to clear was a recurrent theme. On at least two occasions, such as that above, Boris was assured by westerners at the meeting that they understood what a good and difficult job he and his department were doing. Indeed, they were recalling from holiday one of Boris's colleagues who was a customs specialist to help determine priorities for the business to present to customs.

An important point in all this was the heavy reliance on the Russian partners to deal with these difficulties. As one western interviewee observed, the result of customs and similar difficulties had been that the venture had 'moved responsibility away from westerners to Russians to deal with it.'

The above meeting notes, replete with references to other meetings on the same subject, further action needing to be taken, adjustments having to be put in place, etc, are indicative of the time and energy put into sourcing just one small item. This was a pattern of difficulties encountered for all types of products, across all manner of meetings at the venture. There were many silly results of such difficulties: for example, one interviewee described how even the packaging had to be covered in the description given to customs ('What will you do with it?' 'Just throw it away.'); another westerner complained how the previous year, everyone had been stealing each other's paper clips when customs refused to pass a batch.

The Bureaucratic Burden

The individual officials who were imposing rules, and creating situations such as those described above, were not necessarily actively working against the venture. A possible root cause of some of the difficulties with external bureaucratic requirements that Moose was experiencing was the difficulty of interpreting the law in the post-Soviet situation. As one western interviewee put it: 'there is no leeway for interpretation in an area where interpretation is the key.' They identify amongst customs officials 'almost a defence or fear culture of what will happen when it enters the country - for example, for tyres, the tread patterns determine if they need a licence.'

As another western respondent commented: 'The point is, if you are in a country like the US or the UK, when things like this happen they probably try to find a way to solve the problem, and the people who are in authority will probably have the authority to make a deal, to make things happen, to say OK we've got a problem, let's fix it. These people, they spend days studying things and if it says you can't do that, when you need to do something outside what the books say, they could be fined, maybe lose their job, be put in jail. It's what I call management by fear. Nobody gives them the authority to make the decision, because all the authority has to be made at the very high level. The bureaucracy does not allow people to say "I'm going to do that, I'm going to take that initiative to do this", and you could apply that to every single function' (Mammoth contractor).

This was the situation not only outside of the venture, but within it too: 'People working by the book, and you want to get something paid through the petty cash, and you're not allowed to have petty cash in US$, and you try to get something paid through the petty cash and you wouldn't believe the paperwork for $50. They're protecting themselves from everything. You move one piece of equipment from one side of the warehouse to the other side of the warehouse, you have to fill in a piece of paper to say I give that piece of equipment to the other side of the warehouse. {Do you think this has an effect on western investment?} Yes.'10

This is why tight regulation caused such high levels of difficulties for everyone involved. A pressing problem at the time of the case study visit was new certification requirements being implemented by the state standards organisation Gosstandard. Such requirements were introduced constantly - as Boris (responsible for customs) forlornly stated in answer to a question asking what makes his job difficult: 'Too many and too frequent changes in legislation, alterations to customs and other areas'. These lead to very real financial losses for the company, because: 'fines are imposed as a result of perhaps a delay in the information about the new legislation, and by the time the cargo arrives, there is a new regulation and the company has to pay a fine.'11

For those importing products from the west, changing certification requirements, in addition to the threat of fines, caused considerable difficulties on account of the need to get western suppliers to provide documentation when exporting to Russia that would be acceptable to the authorities, and that would allow goods to be passed. As one western interviewee who dealt with these problems daily puts it: 'The problem is they don't accept other standards, eg ISO 9000, and everything must reach Gosstandard standards...12 For certification you need a certificate from the manufacturer and you can't get the information required technically; each certificate costs $500 per consignment.

'Protectionism of the domestic market - fine as long as we can get what we need. It may well collapse as it is not working very well. There's new legislation every January - up here all they know is they have to implement it. In June they are threatening that everything you import must be labelled in Russian.

'We've had to look at our database of suppliers we use, and we have a problem -I'mreluctant to go to suppliers and say you have to go through all this rigmarole. Therefore in the UK we stick with one supplier and so this restricts your choice' (Mammoth expatriate).

There had been occasions when the authorities had offered help, or there had been cooperation. But, even when help was made available, this could be unreliable. If the assistance was from one individual rather than across the board, then this could fall apart. For example, Moose had a verbal agreement from a boss in customs that if they bought five or less of a particular item, he would allow it through. However, when he was not there, his deputy would not let the items pass.

Generally, though, western interviewees observed sentiments amongst officials that tended to be typified by an individual who had recently left the local customs authorities, and who had apparently vowed 'to bring Moose to its knees.' Indeed, the common feeling amongst the western staff was that: 'Because we're big, everyone wants their pound of flesh.' The UK partners felt that they had plenty of evidence of the truth of this amongst the Russian authorities: 'We pay $millions in duty, but any small mistakes they take us to court, they don't give us a break even through we've been here five years.' This respondent continued: 'The customs are gunning for us - we're a successful company with a lot of money, they're trying to fleece us. I don't know if I object to that, maybe that's the penalty for being here.' However, setting up the venture in an enclosed office complex on the edge of town may well further hostilities, as the expatriate deputy put it: 'some of the external authorities [take the view] that we, Moose, are a state within a state, that we are a law amongst ourselves. There may be some truth in that.'

The Fire Department Audit

Such views were further reinforced during the case study week. At the time of the research visit, a major incident relating to questionable motives amongst the local regulatory authorities was a fire department audit that had been conducted at one of the joint venture's facilities deep in the field. Following the audit, the local fire department concluded that the venture's internal arrangements were not up to scratch in this regard, and that the venture needed to give the fire department 0.5% of the construction costs of the facility as recompense for the extra cover that would be needed. According to the expatriate deputy director: 'we said no, we have our own fire service up there, best you can have. Mikhail [the Russian deputy] has taken it up to a high level in Moscow last year and they agreed we shouldn't have to pay it. This year they did an audit and closed lots of things down and said we still have to pay.'

This was a big issue, coming up time and time again in meetings, taking up a lot of management time and energy. Russians too were unhappy with the decision, pointing to the fact that the fire department had done the same thing the previous year, and had been told by Moscow that they were not permitted to demand extra money.

As the expatriate deputy director put it: 'the local fire brigade, we're a rich western company and there are laws that have been enacted that in their view require us to fund them to a degree. And we take a different view to that, and we're actually in conflict with them and it will become a more serious conflict. So there are some serious issues, whereas in the west we know that there is a law enacted and we will always work within the law. And we will always work within the law here, but some of these laws are a little grey, and some of them are interpretation, they're not so clear cut.'

Summary

The foregoing sections have described the main challenges affecting the Moose joint venture in March 1997.

A key event during the research visit was the meeting between the expatriate and Russian deputies on the subject of a perceived role clash between the two of them. The Russian deputy felt he had been mandated by the absentee general director of the venture to oversee all aspects of the running of Moose. The new expatriate deputy, over the course of his first three months at the venture, had encountered numerous examples of the Russian deputy apparently countermanding him in his role responsibilities. As a result, he felt left out of many of the processes that he believed he should have been part of. The meeting was his attempt to redress the balance, and ended with undertakings to work more cooperatively together in matters of joint decision making.

Moose in early 1997 was facing severe financial constraints. Following the near financial collapse of Moose in the year previous, the finance department both locally and in Moscow took upon itself the role of stringent financial guardian. The Russian business tradition of prepayment may have been a root cause of the problems this policy caused, as suddenly bills were going unpaid, or when they were paid, were made out in insufficient amounts, and late. The result was extreme resentment building in the venture towards what was viewed as a service department untenably constraining Moose's legitimate business activities, and causing further run-on costs and delays.

In the external environment, significant issues were arising as a consequence of Russia's bureaucratic practices. It had become urgent during the case study week to have certain items cleared through customs that had sat there for unreasonably long periods. A related concern was the local fire department conducting an audit of the Moose facilities in the field and finding them lacking, as a result of which a 'charge' was levied for the extra service that would have to be provided. Underlying both the customs and the fire department tales were a number of problems.

First, the customs difficulties arose out of a typical pattern of behaviour on the part of the customs authorities who insisted on stringent state-determined certification requirements being met. This was a tendency that was exacerbated by the reluctance on the part of many officials to interpret the law - no decision can be made unless the book or the boss says so. However, other reasons were less sincere. Certain bureaucrats had been quite open in their hostility to the venture, while others were believed to see Moose as a cash cow, there for the milking.

Many of the issues and themes described above in relation to the Moose joint venture will recur throughout the chapters in Part III. Problems relating to eg bureaucracy, customs difficulties, lack of knowledge of local practices, and dual accounting systems, in what seems to be a generally low-trust local business environment, will be discussed at length. In the subsequent chapters, these and many other themes will be explored via the trust determinants.

1 There are a number of confidential aspects to this problem that cannot be presented.

2 It is important to note the profound changes made in the accounting and finance function in the venture. As is hinted in the account, both western and Russian accounting methods were in place: 'when we started the programme [we had to find] accounting systems acceptable to the Russian and the western sides. Financial statements were produced in dual language, meeting Russian legislative requirements as well as the GAAP [Generally Accepted Accounting Principles] requirements. We designed a system which at that time was I believe an acceptable system... we didn't have as much data as we have today... It works very well for two years until we have our database full and we can't put any more data in the system... The problem we had is to have the Russians accepting it, that all the information which is in the system is in that little box, they couldn't believe it! Because when we moved into Russia we didn't have any computers, the Russians used to have these long legends and columns, 50 columns, the old way... The tax inspector ...she wanted proof that everything that we report, we produce, include all the detail, because she cannot see it, it was in the data banks. I remember trying to convince the tax inspector that it's there. Finally, it took some time, a month, and after explaining, producing a report, she finally agreed that it was all there. [We keep] Russian books as well - a Russian one and a computer, they were not used to working with computers.'

3 This is a point recognised by one of the Russian respondents as showing that there is 'much more trust in the western style of business, well no prepayment is required usually, these are very serious differences.'

4 However, a number of interviewees in 1996 and 1997 reported that many western companies in Russia actually refuse to give such credit.

5 Or do they? Delaying and rounding down of prepayment requests leads to the situation described by a Russian interviewee who, when asked what Moose does when an external organisations does not pay them, replied 'most often we are at fault!' because of delayed payments.

6 Please note that meeting transcripts appear in summary form. Note also, customs difficulties took up time in so many meetings, it was difficult for the researcher to select which set of meeting notes to use in this section.

7 The state planning organisation, that set certification requirements for and permitted entry into Russia of imported goods.

8 In fact, one of the people at the meeting spent a long time during that week going backwards and forwards, inspecting the damage, and trying - unsuccessfully - to get recompense.

9 The weather can be a constraining factor that means the most mundane items can bring activities to a halt. In one meeting, some shortages of safety/site clothing were discussed, ending with the question: 'Can we expect to get it during the right season?'. Workers in the field are not permitted to work in temperatures above or below - or + 45 degrees centigrade.

10 It is issues related to a tradition of looking to the boss, not interpreting the law for fear of retribution etc, that may account for the apparent discrepancy between interviewee accounts of the role of the law. For example, one Russian interviewee said 'the court in Russia is very seldom a place of justice'; a focus group discussion confirmed that the Russians have no faith in their legal system. Yet, westerners in this case study observed: 'Legally they will read the contracts and they will use the contracts... here in Russia they are definitely used by the tax authorities, by the customs authorities, by whatever, it's the first thing they look at. Finance, the finance girl, she will look at the contract, and if the contract says so and so, and so and so, that's it.' Although, in doing their everyday job, Russians quickly turned to the contract, the book or whatever, this was an act of self-protection. What happened once they had said something could not be done perhaps was not their concern, as long as they had done their bit 'by the book'.

11 In addition to such losses, lack of predictability on other items can create further problems. For example, the Russian government changed its mind about Moose exporting all the oil that was produced by the venture, insisting instead that only 50% was to be exported, and 50% sold within Russia.

12 There was a general reluctance to recognise internationally developed standards such as IS09000 in Russia. It may be possible to put this down to a Russian attitude that there is more than one way to do business under the market system, and just because much of the 'western' world does it one way, that by no means requires the Russians to do it that way too. As one Russian interviewee put it: 'The western ways are not always the best ways. In Russia now all kinds of interesting things are happening, and lots of interesting things emerge, including legal ideas which can create some competition. So take this code which was adopted last year, in 1995. It is considered to be the best civil code in the world now, because those people who prepared this code tried to include as much of the relationship which can exist between the people, companies, different parties as it was possible to include in this kind of document.'

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