Cash is used exclusively to make payments! There are no, maybe a few, checking accounts in Russia. This is difficult for Americans to understand and believe since the use of checking, or demand deposit, accounts have permeated every part of our life. I suspect credit cards will be used more extensively than checking accounts. Why is this?

First, one has to understand the past history and present circumstances of the Russian people. In the past the value of the ruble was fairly steady with the exchange rates being controlled by the central government in Moscow. In my first visit to Russia in 1989, the exchange rate was eight rubles to the dollar. The small, illegal black market rate was somewhat higher. Russians were unable to exchange rubles for dollars.

All transactions were cash and people kept excess money in the State Bank of Russia, the only bank permitted. For large transactions, people went to the bank and bought a bank check, like our cashier’s check.

With the coming of reform, severe inflation reared its head, so now the ruble exchange rate is 5600 rubles to the dollar. This means that anyone having savings in rubles, lost all of its value. Also, the government permitted banks to be organized without sufficient capital, oversight, or trained managers. Thirty locally organized banks are operating in Nizhny Novgorod plus an additional twenty-four branches of Moscow banks. Six of these banks went bankrupt in 1996. There is no deposit insurance, so depositors lost most or all of their funds. Therefore, people don’t trust the banks. With the ruble now convertible into dollars, people now hold their excess cash, if any, in U.S. Dollar $100 bills.

Since my initial visit to Russia’s third largest city was to lecture on banking and small business, I have enjoyed a continuing relationship with several of the local bankers. In one bank I have maintained a deposit in U.S. dollars for several years. Some of the bankers were products of the old system and brought to their new banks experience and a natural bent toward conservativism. However, many entered the banking industry with an erroneous idea of benefiting their friends and making themselves rich. These banks often are the ones in financial difficulty.

One reads of newspaper reports about bankers being ambushed and held for ransom. These reports originate largely in Moscow and don’t seem to be as prevalent in Nizhny Novgorod. However, the local bankers take no chances. A customer entering a bank, usually after being identified and admitted, will see several guards with pistols and one will carry a sub-machine gun.

Employees are paid in rubles and must go to the headquarters or paymaster to obtain their pay in cash. Pensioners and retirees also receive their payments in cash. In the United States, social security and pension recipients receive their funds by check or direct deposit into their checking account. In Russia, a representative goes to the home of the pensioner and gives the recipient cash, rubles. This delivery is made twice each month. The system seems vulnerable to fraud and extortion. I asked one recipient what happens if she is away or sick when the woman comes with the payment. She replied she would return at another time. Also, to insure a good relationship, she tips the delivery woman each time she comes.

There seems to be no movement to establish checking accounts, but credit cards are entering the scene. A credit card, usually of a Russia financial group, can be used for restaurant and clothing purchases. These programs originate in Moscow, so the local bankers are not too familiar with the credit requirements or usage restrictions. For various reasons I wanted to open an account in dollars in Nizhny Novgorod. I had known Egor Koloshin, Chairman of the Board and Director of the Promstroybank and in this trip I had a long visit with him followed by the usual lunch and refreshments. His bank is the largest in Nizhny Novgorod and the 41^st largest bank in Russia, so naturally I selected his bank.

This is a story of frustration, bureaucracy, and the difficulty of conducting business in Russia.

My friend and sponsor, Vladimir K., had spent three hours the previous day obtaining information on the complicated procedure and possible courses of action. Rather than opening a business account in my company nave, we determined it would be easier to open a personal account in my name only. Now the story begins.

In Russia, the terms and number of the account along with the right of withdrawal must be notarized in a specially established government notary office. These people are paid by the State and make appropriate charges for their services. Under normal conditions, a citizen must make an appointment a week or two in advance, however, since they work closely with the bank, we were able to see them at 10:30 a.m. the next morning. We established the account number, the terms of withdrawal and recorded my identification (USA Passport). The process took over an hour and the charge was 36,000 rubles ($ 30). I now possessed a notarized document with the various stamps stating I intended to open an account at Promstroybank.

After a short walk to the bank from the notary office, we went to the International department of the bank, consisting of manager who I had met at the Koloshin meeting, Nadia, the English interpreter employed by the bank, and six others. I frankly don’t be critical, because they supplied us with coffee during the long waiting periods.

The papers were presented to the head of the international department, and she thought I may need to be registered for tax purposes. This was not mentioned the previous day, but today after calling several people she felt it was necessary. Of course, there will be no interest or income on the account, but tax registration I must have. So off to the tax office, another ten minute walk, we went. In all fairness to the Russians, it should be noted we would not open an account in the U.S. without a Social Security number.

In this office people and businesses file tax forms and pay taxes. There were two tables where 10 tax consultants were sitting with people on the other of the tables talking to the consultant. There was also a line of 30 people waiting their turn in may be two or three hours.

However, Nadia, from the bank, knew where to go so we went upstairs to a room where six people had desks. The reason apparently I charge was reading a newspaper and she directed us to another woman. This woman said they didn’t issue tax registrations on Wednesday, only on Thursday. After a discussion in which my departure time was explained, she agreed to fill out the forms. However, she said it required the approval of the Director of the tax office. She went downstairs, the office was a large converted house, returned in twenty minutes, and told us to wait outside the office for awhile.

After ten minutes, I sent Andrew, my English speaking interpreter and helper, inside the office and ask how much longer. She said, “Wait, the director was in a meeting and it might be one or two hours”. Hearing this, Nadia went to see the director’s secretary and she said there was no meeting. In fact, he wasn’t even in the building. That woman was prepared to have us wait all afternoon (it was 1:30 p.m.). The bank then determined tax registration could be obtained the next day. Now back to the bank.

The bank needed to prepare a “Payment Order”. All transactions, withdrawals, deposits, etc., all require a payment order. It is their action document. After preparation and my signature, the payment order was taken by the head of the international department downstairs for the Director’s, Mr. Koloshin, signature. However, he was out of the bank and she returned with the document unsigned. I said there must be someone else to approve it, so downstairs she went again (each trip consumed about twenty minutes) and returned with the news that the two deputies who are also authorized were out of the bank also. I was reminding myself that this is what would happen at the Madison Bank when we had a Board of Directors meeting.

She finally agreed to sign something, but said it wouldn’t be official if that was O.K. with me. Of course, it was since I didn’t know the difference and couldn’t care less.

We then proceeded to the cashier to make my $100 deposit, but first we stopped in the accounting department. A big discussion, more like an argument, ensued as to how to set-up the account on the banks’s books. I learned it was the first account of this type opened by an individual. They had several business dollar accounts, but not individual.

I was interested in the whole process, really had nothing else to do, so all day long I patiently waited for events to unfold. It was now 3:30 p.m. and I announced I was leaving in 15 minutes. Then they found a way to handle the transaction. I gave my $100 to the cashier. I noticed the deposit receipt did proper account. Nadia, the excellent interpreter and a big help, stated they would be sure it was recorded properly. Then with a smile, she said, “Besides, it is the only account like this we have.” I was now ready to leave and they did provide a bank car to drive us to my hotel.

My whole purpose in detailing this story is to demonstrate how far behind some parts of the Russian economy are. Of course, banks and governments are always the last to change. In this case, the middle level clerks were afraid to make a decision and delayed or bucked the problem to someone else. These clerks were not concerned that the account opening took from 10:30 a.m. to 3:45 p.m., but how do we handle something and cover ourselves from criticism. I realize U.S. employees of government and business use the same tactics. Since the Russians have no checking accounts and no interbank clearings, bank customers are really not trusted (or anyone else), I guess all this can be expected.

I did transfer $1000 into this account from the United States and after ten days the bank called and reported the funds had been received. There is hope!

Russia still seems to be the same, yet change is evident in so many little ways, and visible to an outside observer. Although this was my fourth visit to Russia’s third largest city, Nizhny Novgorod, it had been three years since I had, seen this industrial city, 250 miles east of Moscow.

Nizhny Novgorod, a city of 1,5 million people located at the junction of the Volga and Oka Rivers, was called Gorky during the Communist days. During its 800 year history, its strategic location made it a trade center and for 100 years, host of the Nizhny Novgorod trade fair.

The Communists took a city with skilled tradesmen and turned it into a heavy industry complex. Nuclear submarines, MiG airplanes, tanks, trucks, and for years Volga cars have been manufactured in this lovely city on the Volga. Nizhny Novgorod, or Gorky, was always closed to foreigners because of the extensive military manufacturing, and thus became a good place to send political dissidents Andrei Sakharov, being the most prominent. His apartment, where he was kept under house arrest is now a tourist attraction.

In my first visit, in 1991, two years following the introduction of Perestroika, stores were devoid of merchandise, the streets were safe, and people were hopeful the prospective changes would bring a better life. Now, in 1997, stores are full of foodstuffs, clothing and appliances, major and petty crime is rampant, and the joy and anticipation of yesteryear has turned into disappointment and resignation. They now recognize a change to a better life, if there is to be one, will take time. These are hard, confusing times, but interestingly, no one I spoke with wanted to return to the old days.

The contrast between the rich and poor is alarming. There are a number of rich people driving in their imported Mercedes cars, eating at good restaurants, and wearing fine clothes. A soup and salad at a privatized Nizhny Novgorod restaurant cost the same as in downtown Chicago. An upscale clothing store presented the same quality and prices of merchandise found at Marshall Field’s.

Where did this wealth come from? Profits came from importing merchandise mainly, but also using contacts, interpreting and representing foreign companies. European and American businessmen eager to enter the large Russian market of 150 million people need assistance of every kind. The talented, young, aggressive Russian has learned how to profit from this need.

Of course, the Mafia has also created its own class of wealth. They have permeated most parts of the Russian business scene, and extract their ounce or pound of flesh on each person in business. And they are everywhere. I asked an official of a high-quality Nizhny Novgorod bank if the bank had any Mafia money. He said, “They don’t come in and announce they are from the Mafia. We try to keep them out if we can.”

Crime

Crime is ever present. One reads so much about major crime: extortion, killing of recalcitrant executives, burning of businesses, fraud and other offenses. This exists but, I wasn’t able to observe these crimes. There was a television report about three thugs entering a small business office and gunning down the three business partners. According to my host, this type of event is a common occurrence.

However, petty thievery is another matter. I left my Russian shapka, the fur hat, at home because boys come and take it from a foreigner’s head.

In the flat of my Russian friend and host, they are unable to keep electric light bulbs in the corridors because petty thieves take the bulbs and sell them on the street. Russians have always double and triple locked their steel doors leading into the flat and now some have alarm systems alerting the police.

The safety of foreigners is clearly a concern of the Russian hosts and the concern is increasing. During my first visits to Nizhny Novgorod, my hosts felt comfortable leaving me at the tram or bus stop and I could proceed to my hotel myself. In the last two visits in 1994 and 1997, my hosts insisted on accompanying me all the way to my lodgings. When I protested that I felt this was unnecessary, they recited the number of visitors who had been mugged. Some in broad daylight.

Interestingly, people associate democracy and freedom with crime. Certainly, if one looks at the United States, this could be an apt observation. It is useless to point out that Western Europe democracies and others do not experience this relationship. It is my observation that petty crime has always been present as evident by the double and triple locked doors I have observed the past seven years. However, with the wide variance in wealth and large number of poverty stricken people, the level of theft has increased substantially.

Religion

Russia remains a very secular nation in spite of inadequate attempt by various U.S. religious groups. Some of the Russia Orthodox churches are being restored, but after seventy years of neglect and non-use, there is much work to be done. Also, this church is woefully inadequately prepared to reach out to the secular community. Their ranks of trained priests and acknowledgeable parishioners are very low. After years of just being afloat, it is difficult to have a dominant voice. Yet, many Russians recognize some relationship with the Orthodox. They state, “we are Russian and the Orthodox church is Russian.”

In the older part of the city there are a number of closed Russian churches and some are being rehabilitated. However, in the industrial part of the city, which was built in the Communist days, one can drive for miles and not see a single church building. Of course, this is the area where most people live!

Religion was authorized in the USSR constitution, but very restricted in actual practice. Only two Orthodox churches, one Baptist, one synogue, and one mosque were permitted to exist. Visiting the Baptist church in its old, cramped building where three hundred dedicated worshippers stood for a two hour service was an inspirational experience. Since that time with the assistance of foreign money, they have constructed a new building where four hundred people can worship in comfort, peace, and not be threatened. For seventy years, these people kept the faith alive in Nizhny Novgorod, in spite of threats, discouragement, and deprivation. However, now it is difficult for them to reach out and minister to the large number of non-believers.

In my opinion, Russia is still very open to learning about Jesus Christ. Part of this interest is curiosity because they had been told how bad Christianity was and now they want to explore the tenets of religion for themselves. Also, in spite of the lure of capitalism and its focus on money, people still sense emptiness in their lives and are interested in investigating the value of Christianity.

Recognizing all the factors listed above, the efforts are much too small to have a real influence in the lives of a large number of people, specially in the face of economic opportunity for a few and deprivation for many. In many cases, the search for a livelihood is a difficult and time-consuming need. Russia is and will continue to be largely a very secular, non-religious nation. Discouraging, but true.

Government

The very popular regional governor, Boris Nemtsov, had just accepted a position of Deputy Prime Minister with the central government in Moscow when I arrived. He was well-liked, had helped make the Nizhny Novgorod, region the most advanced regarding reform and privatization of any of the Russian regions and the people were sorry to see him leave. They have hopes he can make changes in Moscow, but they aren’t so sure this will happen. There is not much confidence in the central government, people seem to be resigned its mistakes and failure to improve economic conditions.

Boris Yeltsin doesn’t generate much enthusiasm, but he seems to be the only recognized leader. He was just emerging from his prolonged period of illness and inactivity so people seemed to be hopeful his recovery was complete. But there is clearly a wait-and-see attitude. However, the economic problems are also local and the quest for money and necessities is so pervasive, that the focus is on the immediate situation and using whatever tools are at hand to help their immediate needs. Moscow is important, but more significant is how do I live today.

In the End

Russia has seen many crises before and through their toughness, steadfastness, and recognition that life has always been difficult the people have persevered. The one thousand year history of this immense country has been one of battles for food, shelter, and economic survival.

The Russians are an educated people with deep literature, music and arts talents giving them a sense of recognition that times have been difficult before and will improve some time in the future. The present adult older generation will not see significant benefits, but younger people and their children will live in a much different Russia. Their basic intelligence, philosophical approach to life, and ability to survive all are factors in creating a new, free and progressive Russia. The change may take ten or twenty years, but it will come.