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Down and out in Russia
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August 18, 1999: 10:43 p.m. ET
Ex-pats in Russian endure hard times after miracle economy goes sour
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NEW YORK (CNNfn) - During the mid-1990's, Russia's new, capitalist economy was a source of easy money. One particular mutual fund doubled in just three months and kept doubling.
But all that money, and all the hope for an economic miracle, evaporated on Aug. 17th, 1998.
Now, a year after Russia's economic collapse, what happened to some of the people who staked their future on capitalism in Russia?
For much of the 1990s, Russia was the hot hand for international investors. Money from around the globe poured into the pot. But most players assumed that free-market capitalism would seamlessly replace 70 years of communism.
Ten months ago, many of the players were really gambling, raising the stakes on hand after hand. Now, exactly one year after Russia's economy collapsed, most are finally folding their cards.
In November 1998, Fred Berliner worked in the Moscow trading offices of Troika Dialog.
Ten weeks earlier, Russia had defaulted on its massive debt, causing the Russian ruble to lose two-thirds of its value in a single day. Anxieties were high.
Berliner had been in Russia for 5 years and was widely credited for bringing Nasdaq-type trading to the Russian Stock market.
The moment Russia's economy imploded, the Russian stock market all but evaporated.
Eight months after the crash, the brokerage office is quieter, and Russia's reeling economy is still crying for help.
"I don't think anything's changed since the crisis has happened, it's more of the same," Berliner said. "There's still no credibility, there's still no fiscal policy, one wonders if they're really collecting that much tax revenue, there's just a long way to go."
Russia's economy will have to rebuild without Berliner. He is heading back to the United States.
"Long-term, I think they will muddle through," Berliner said.
Gavin Rankin has worked in Russia's investment community for most of the 1990s. Westerners in Russia are often derided for being in the country only for the buck, but not Rankin.
He was widely respected for his genuine interest in the people of Russia. Each morning, he hitch-hiked to work, looking for post-crisis insight from every-day Russians.
It couldn't have been any worse for Rankin. The fund he managed, The Lexington Troika Dialog Russia Fund was the worst-performing mutual fund in the world in 1998.
Ever optimistic, he thought Russia was ripe for quick rebound. He continued to ferret out investments for his fund.
"There's going to be tremendous upside potential, and there remains tremendous upside potential," Rankin noted. "You know the fact that I haven't packed my bags and gone home, I've got family here, and my daughter, I just put my daughter back into school here, shows really a belief that Russia will be here tomorrow, will survive."
Only five months after our interview, Rankin left for London.
"The aftermath of a hurricane normally has an extremely long tail," Rankin said. "The process of recovery in Russia has been delayed quite considerably following the events of August."
Instability runs deep in Russia, something expatriates may have failed to fully appreciate. One crisis often serves as a trigger for another.
Uncertainty reared its head again in March, following NATO's action in Kosovo. Overnight, being an American in Moscow didn't have the same cache'.
Bernie Sucher, a senior trader at Troika Dialog Brokerage and owner of several businesses around Moscow has ridden the wild ride of Russia since 1991. Sucher is one ex-pat who is still sticking around.
"I think to really put this into context, you have to understand that Russia can only handle, can only meet so much of the expectations the rest of the world has," Sucher said. "This is not a government, this is not an economy that has the established institutions to fulfill everybody's expectations."
What is clear is the somewhat surprising reality that investors are still interested in Russia. During an hour spent with Sucher, world oil prices spiked and suddenly he was busy.
"They want to buy Russian stocks again," Sucher said. "Look, we have leading stocks up 200% since the bottom of last year. Those kinds of returns generate interest."
"This is still a risky country and these are still very risky markets," he added.
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