Doing Business in Russia – Part 4

I was first exposed to common business practices when I worked in Dubai.  How to generate a budget, business development, financial reporting, all the usual stuff.  Included in this was the contents of a contract, and I realised that this could be pretty much whatever you wanted it to be provided the two parties agreed on it.  In its simplest form, a contract can be:

1.  Request for quotation, including description of services required.

2.  Quotation in response, referencing 1.

3.  Letter of acceptance, referencing 1 & 2.

4.  Staple in top left corner keeping 1, 2, & 3 together.

It can be even simpler than that when you consider the purchase of a train ticket for example, but in engineering business the above is about as simple as I’ve seen it.

And when you’re doing something like say, buying a CD containing software for managing scaffolding inventory from a small company in Australia, one would have thought you’d only need to send an email asking for a price, get a quote, send an email of acceptance along with an invoice, pay by bank transfer, and wait for the CD and receipt to arrive in the post.

Not so in Russia.  For starters, you can’t pay anything by bank transfer unless you have what is called a Passport of the Deal, which is a piece of paper the bank produces which says it has reviewed everything to do with the transaction and it has approved it.  The idea that a bank works for the customer in Russia is an alien concept, and you cannot merely instruct the bank to pay 20,000 Roubles to Company X’s account because you feel like it, and tell them it is not their business to ask why.  No, the bank is bound by law not to pay anything until it has issued a Passport of the Deal, and to get that you must supply them with a contract and invoice related exactly to the sum you wish to pay.  They then review this stack of paper, ask some stupid questions, and then issue the Passport of the Deal and transfer the money.  Eventually.  All of this is to prevent money laundering, and given the absolute lack of money laundering or other financial corruption going on in Russia, one can only say it works brilliantly.

I kid.

My second New Year in Sakhalin was the first in which I was managing a budget, and I was not particularly surpised to find myself buying stacks of Cognac and other goodies for the various authorities which you need to keep sweet in order to keep operating.  But I was somewhat surprised to find the accountant saying we need to buy lavish gifts for the company bank.  In the normal world, where banks work for you, it is the banks which come around doling out presents at Christmas.  In Russia, such is the inverted relationship, companies are advised to bung their banks gifts to keep them paying your company bills.

However, most Russian account departments do not recognise a contract as being a contract unless it is laid out in a proper contract document, complete with original signatures at the end, initialled on every page, blessed with a company stamp, and at least ten pages of pointless terms and conditions, the scope of work repeated a few times, price breakdown, etc.  And it had to be in Russian, and the prices must be in Russian Roubles.  Three pages stapled together was not considered to be a contract, even though I patiently pointed out to my company accountant that all the constituent parts which he expected to see were there, with the exception of the stamps and signatures.  But a piece of paper in Russia is meaningless without stamps and signatures all over it, and if there are several pieces of paper then their importance can be made all the more so by tying them together with string.  If this gets added to a stack and filed forever and never used or seen again, it must have been really important.  Russia is famous for having vast forests, and it’s just as well.

Where was I?  Oh, that’s right.  Anyway, all of this caused me a lot of bother when I wanted to buy this CD.  The Australian company we were buying it from, having not learned their business skills in the Soviet Union, was probably not going to entertain signing a huge contract in Russian for a simple software purchase, they probably didn’t own a three-inch rubber stamp bearing their company seal anyway, and I wasn’t going to make a complete numpty of myself by asking them.  So I arranged for our Bahrain branch to make the payment instead and, the little Gulf kingdom welcoming money launderers instead of chasing them away, had no such rules preventing it and the payment was duly made.

Then another problem arose.  Fortunately, I was warned of it by our accountant before the CD was dispatched.  Sadly, we wouldn’t be able to clear the CD through customs because, you guessed it, we didn’t have a proper contract for the purchase.  Yes, Russian customs needed a copy of the contract as well, it is not enough to show an invoice displaying the value of the goods and pay the duty on that.  So what did we do?  The Australians posted it to the UK office and it was passed to the next employee who was coming out our way.

When you work in Russia, you’d be amazed at what you end up carting around in your hand luggage.

(Doing Business in Russia – Parts 1, 2 & 3 are here , here and here respectively.)

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8 Responses to Doing Business in Russia – Part 4

  1. Alisa says:

    Боже иой…

  2. Alisa says:

    …’мой’…I can even do typos in Russian:-)

  3. Tim Worstall says:

    Hand luggage, yes.

    I once arrived at LAX with 15 kg of high purity scandium oxide in my bag. Rush order for a client, didn’t have time to do that passport of the deal thing. So much faster to just get on the plane with it to export it from Russia.

    Given that scandium oxide is a pure white powder, very reminiscent of Bolivian Marching Powder, I expected problems at LAX. They were surprised, it is true, when they checked my luggage and didn’t see me sweating at the thought of 20 years inside. So they did the quick swab test, agreed it wasn’t for stuffing up noses and let me go on my merry way.

    Which was nice as it meant I didn’t have to pay import duty…..

  4. Tim Newman says:

    Hah! I had a feeling that you would have hand-carried some weird metal product or other into Russia, Tim! :)

  5. Tim Worstall says:

    Out of, out of Russia……..

    Sheremetyevo I used to have this insane system. So, you get your luggage x rayed at the customs post. To make sure you’re not smuggling out artworks etc/caviar.

    However, your hand luggage is not x rayed at that point. So, you then go to the ticket check in and, quite natuarally of course, you then rearrange things between hand luggage and hold luggage.

    Put the hold luggage into the hold, take your by now rather lighter hand luggage off to the Irish Pub for a pint before the flight. Then, when you go to board the plane, then your hand luggage is checked.

    These people are insane.

  6. Tatyana says:

    Tim W: no more insane than our(US) TSA.
    OK, OK, not quite -but they really try to be good contenders

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