Russian Joint Venture Remains on Track
Despite an intensifying power struggle in Russia and worries about a possible return to communism there, a major U.S. chemical company Tuesday decided to go ahead with plans for a Russian joint venture.
W. R. Grace & Co. said it would invest several million dollars in a factory to make vacuum-packed food containers and set up a sales division in Moscow.
For Grace and most other companies, it has been easy to stick with plans for investment in Russia. For the most part, they haven’t reached the point of ponying up huge sums.
And the plodding pace of talks with the Russian government tends to make U.S. firms go slow anyhow.
Still, the Russian parliament’s drive to remove President Boris N. Yeltsin from office is some cause for concern. Jeans maker Levi Strauss & Co. is looking at further investment in Russia beyond its Moscow store, but is not on the brink of making a decision, spokesman John Pachtner said.
Pachtner indicated that the company is happy not to have to make up its mind immediately. “These events are enough to make any investor take pause, us included,” he said.
John Morton, a Boston attorney whose firm is working on about a dozen contracts between U.S. companies and Russia, said his clients aren’t changing their plans, but have been careful all along.
“Nobody’s been rushing headlong to invest millions of dollars. They’ve been moving slowly, deliberately, lining up thoughtful, phased transactions,” Morton said.
The risk companies face is that they could invest millions in a business only to see a new regime come to power that might shut down or nationalize the operation. Also, depending on the government that emerges from the current power struggle, the United States might put limits on who can do business there.
Yeltsin over the weekend declared emergency rule and called for an April 25 vote of confidence on his government. Russia’s Constitutional Court said Tuesday that the declaration was unconstitutional and its Speaker said there were grounds to remove Yeltsin from office.
Some of the biggest investment plans in Russia involve U.S. firms drilling and pumping in the country’s vast oil and natural gas fields. An Exxon-Mobil joint venture is still assessing possible oil fields and Royal Dutch-Shell is studying the feasibility of an investment.
“Actual large investment and construction of sites isn’t going to happen in the immediate future,” said Jon Hines, a New York-based international attorney for oil and gas companies.
The oil companies have been holding out for better terms and guarantees because of the political risk.
