Progress, Soviet Style : Moscow Trade Center Decaying on $16 a Day

When it was opened a decade ago, Moscow’s International Trade Center was meant to be a focal point for Soviet foreign trade, a showcase for the country’s economic cooperation with the West.

Today, the center’s general director complains that he cannot even replace a broken chair because the government takes all his profit, leaving him the equivalent of $16 a day to maintain the $100-million complex.

As a result, Western business executives are concerned about what will happen to the enterprises they are considering establishing with Soviet partners.

Fyodor K. Kryuchko, the center’s director for the past three years, lists the problems--broken elevators, dirty ceilings, faulty air conditioning, restaurants without enough chairs for their patrons, snack bars that cannot make coffee.

Complaints are multiplying from executives for whom the center was to be the headquarters of their companies’ expansion into the Soviet Union, a vast and largely unexplored market for most.

“For the money they pay (in rent), they expect and are entitled to the same standards of service as they would get at home,” Kryuchko said in an angry interview with the Soviet government newspaper Izvestia. “We are quite aware of this, but there is nothing we can do.”

Became a ‘Cash Cow’

Although the center had an income of more than $63 million last year, a 45% growth over four years, Kryuchko said its request for $6.7 million for urgent repairs was slashed to a tenth of that.

Built on the bank of the Moscow River in the 1970s by a consortium organized by Armand Hammer, chairman of Occidental Petroleum, the center was to provide much-needed office space, housing, conference facilities and hotel rooms for Western executives and, in this way, was to help the Soviet Union increase its trade.

Instead, it became a “cash cow” for the Soviet government, bringing in millions of dollars in scarce hard currency, with most operating costs paid in soft rubles and, according to Kryuchko, virtually no money reinvested.

“It is quite clear, 10 years after the opening of the International Center, a great deal is in need of renewal, replacement and refurbishment,” he said. “Virtually all our equipment is worn out or outmoded. Our kitchen equipment, for example, is on its last legs. Elevator and telephone services are also on the brink of collapse.”

The center’s management had hoped that recent decisions encouraging entrepreneurship and foreign trade would apply to it and that it then would be able to use some of its revenue for renovation, Kryuchko said. But, so far, the center has been denied the necessary legal status.

Exercise in Red Tape

“As a general director, I have the right to spend 10 rubles (about $16) a day in cash for the center, but it is practically impossible to buy anything today without cash,” he said. “To rent a chair to a client, that is five rubles a day, and four days’ rental pays for a chair. But I have been here for three years, and we have not managed to buy a single chair.”

When, with a bit of entrepreneurship that is rare here, the center increases its revenue, it is not allowed to keep any of the profits. A river boat that the center turned into a French restaurant had to turn over its profit, about $1.6 million last year, to the state.

Even the daily purchase of vegetables for the center’s half-dozen restaurants is a major exercise in red tape. To buy fresh vegetables at Moscow’s city markets, paying cash, the center must “collect a dozen signatures, including that of at least one director of the market, confirming the prices paid,” according to Kryuchko. But the alternative would be poorer-quality vegetables--when they were available--from state suppliers.

Despite all its problems, the center cannot meet the demand of foreign companies for office space and housing.

Kryuchko said the center could fill a second block with the same number of office suites and apartments, but has been unable to get government agreement to take a necessary 25-yard strip from an adjacent 35-acre park because of neighbors’ objections.