The Russian Adventure by Robert & Anne Colee 1993. The document that helped change the course of history.
THE RUSSIAN ADVENTURE copy right 1993 2001 2010
PREFACE ___________ Global Communications Group, Inc.
is an Atlanta based telecommunications
company.
For over a year now(1993), we at Global have been exploring the possibilities of establishing trade relations with Russia. For the first two quarters of 1992, Global invested $65,000, untold time and incalculable energy to this end. Our forays into this project have convinced us that we have a more formidable task ahead of us than we ever surmised. At the same time we believe that it is one potentially more rewarding than most people can even envision. Russia is similar in size and population to the U.S.A. Since for the last 50 years, Russia has poured vast amounts of its Gross National Product into military defense, Russia's defense system is on par with ours.
It is in its standard of living that Russia lags considerably behind the U.S. and, for that matter, most of its Western neighbors. In Russia, to obtain even the minimum daily requirement of consumer items one must stand in line for hours. Things such as food, clothing and household goods are not as easily accessible in Russia as they are in most developed countries. Russian people are faced ever increasingly with a sluggish supply and an out-of-date manufacturing system. The factories and the workers in Russia are government subsidized. It would therefore be financially expedient for the U.S. companies to invest in a new manufacturing environment for the Russian market. Russia has some untapped resources that are among the best in the world.
Some very beneficial "side deals" can come to be in Russia. In the past, we at Global have explored the idea of importing various Russian and exporting various American goods and services. These have included, but were not limited to oil, diamonds, precious metals, aircraft, space craft, automobiles, consumer items, food, biomedical equipment, computers, military surplus, electronics, housing and alternate energy. Russia has a huge supply of an untold number of products. On the other hand, the U.S. has many things that Russia needs.
(2) To provide a market economy, Russia must revamp its communications industry and provide a larger pool of consumer items to its people. Russia and the U.S. are facing unemployment crises and a flagging economy. They both need to shore up their manufacturing industries and effect commercial deal making.
(3) TELECOMMUNICATIONS In August 1990 Global Communications Group was formed from the assets of Earth Station Satellite Systems, Systems Marketing Corporation, Superbikes Inc., M.U.S.E.U.M., and others. The new company was registered in the State of Georgia as a service and communications business to market and service a wide range of products nationally. More specifically, Global's aim was to provide immediate service to local and national telephone interconnect companies specializing in the Hitachi PBX telephone product line among other things. A telecommunications laboratory was established to do component level service and software updates.
Among the systems that are outdated in Russia is its telephone service, which uses 1920s technology in many instances. However its telecommunications potential is staggering. Presently Global supports more than 150 interconnect companies and sites, nationally and overseas. Because of our dealings with customers, suppliers and other interested parties, we at Global are now at a point where we are able to locate and provide a wide array of telephone and telecommunications products of many descriptions. We are now looking to our customers, business contacts, etc. to provide a proforma listing of all types of telecommunications equipment for the Russian economy.
( For the purposes of this pamphlet, a proforma listing is a list of equipment type, availability over a period of time and price.) The Hitachi product line will be one of many PBX equipment entries. With the Hitachi line, Global will guarantee service, parts, and software updates for the next 5 to 10 years. To acquire almost new equipment in this way as opposed to acquiring brand-new equipment, will save Russia one third to one half of the start up costs. As systems come off of lease, or there are upgrades in the U.S., a full offering will be made in Russia. New equipment will also be provided as needed.
In January 1992, Global was asked to bid on a 3000 line telephone system with satellite teleports. This later grew to 22 million lines of subscribers. It is conservatively estimated that a 22 million subscriber telephone circuit needs to be in place within 5 to 7 years. This means that 3 to 4 million phones a year must be installed complete with the central office, pbx, key, telephone sets, cellular, satellite, microwave and cable.
(4) In analyzing Russia's system, we came to the
following conclusions:
1) The present Russian telephone system
should be considered only on a salvage basis, for the metals content. 2) A new infrastructure, combining wire, fiber-optic, radio links and satellite links should be put in place. 3) Existing connections should be continued in the initial stages, but in the later stages these should be retro-fitted on a pro-forma basis. 4) To facilitate the process of having many toll users on all systems, all forms of telecommunication should be planned for upon set-up of the new system. 5) By using fiberoptics we can combine many steps in this project, that would not be possible to combine using an older system. Through modern signal compression in fiberoptic and satellite communications, many more channels of communication are available today than were even a few years ago. 6) We can instigate this project technologically in Russia in a way that is at least comparable with, if not superior to, the telecommunications systems of the U.S.A. 7) This project will take an estimated 5 to 20 years to complete for the whole country. Individual sites will take days to months to complete. 8) By changing the Russian technology to U.S. compatible technology, we can supply all of Russia's needs with new and used equipment from the U.S. inventory. At first, test site central office systems, serving 3,000 to 30,000 subscribers can be set up to serve local communities. As the systems are connected onto the network, PBX, key and residence phones will dot the landscape, providing new state of the art local communications. Long distance will be via satellite and microwave relay stations, providing long line toll traffic from which tariffs can be extracted. Cable television, computing and Fax capabilities will be included as a matter of course. Since a vast labor pool of trained technical people exists in Russia, these people can be trained to build and maintain the network. With an eye to facilitating this process, and with a view to gauging reaction in our industry to our project as a whole, we made various inquiries among our own (5) colleagues in the industry. The response was and continues to be overwhelmingly positive. About half of the 400 interconnect companies we contacted expressed their willingness to contribute in various ways. These included selling equipment, providing training, installing and/or dismantelling equipment, doing site surveys, interconnect, service and brokerage. For its part, Global is willing to start a service, repair and warehouse space to facilitate the Russian populations maintenance of their own equipment. We have a full staff of core people who have expressed their willingness to go to Russia, train people, and facilitate installations and service. There are many more phone systems in the U.S. inventory than it can currently use on the domestic market. Any manufacturing or remanufacturing of equipment can be done in Russia, using the many idle military defense factories and employing many Russians.
(6) THE RUSSIAN SATELLITES
________________________ Russia has invested in a huge Global Space Communications Satellite Network. While the Western powers and companies have more transponders per satellite on average than the Russians do, the Russians have many satellites and cheaper launch vehicles.
SATELLITE COMMUNICATIONS 1993 INDUSTRY DIRECTORY AND BUYERS GUIDE: Attachment to Same Global Communications Group Inc. is the commercial representative for Moscow Global Productions Inc. Moscow Global Productions was established by the Russian Government to obtain contracts from users for Russian satellites. These satellites cover the globe and are capable of uplinking and downlinking telecommunications, data, television signals, and voice telephone traffic. The satellites are guaranteed to be reliable on all bandwidths and types. To acquire short or long term use, the user need only designate geographic points between which the signal is to be transmitted. The Russian Satellite systems are generally less expensive than other comparable satellite systems. No catalog is yet available. Purchase orders for Russian satellites may be sent to: Global Communications Group, Inc. 4335 Global Ct., Norcross, GA. 30093
(7) THE AIRCRAFT DEALS
Russia is in the process of selling more than 2,000 aircraft of varying types. Among the types that have been offered for sale are IL-76 transports, MIG 28 fighters, MIG 29 fighters, MI-8 helicopters, AN-2 single engine biplanes, and AN-10 transports. Because Russia is in need of hard currency right now and they also need to keep their production lines rolling in the aerospace industry, these planes can be had at bargain prices. The market for the Russian planes in the U.S. is limited since the U.S. Federal Aviation Administration will not grant them anything but an "experimental" license, at this time. This means that these planes cannot be used for commercial purposes such as passenger or freight lines. However the planes can be used by collectors and for such things as air shows and sports avaitions. Bilateral licensing agreements may be signed in or around 1996. Aircraft produced after that will be able to acquire commercial permits if the treaties are signed. ( References: Transport Airplane Certificate Office ((F.A.A. Phone (206) 277-2104)), Flight Standards Office ((F.A.A. Phone (202) 267-8237)) ) Any warplanes sold through the United States have to be sold to designated end users. This is to insure that only countries friendly to the U.S. will be able to purchase them. Any aircraft brought into the U.S. in this way will be "grounded" until the State Department, the Defense Department and Customs have the proper paperwork. They may be stored on U.S. military bases until such time as all legal matters are cleared up. Senator Sam Nunn's office has been very helpful in clearing the way for dealers. A dealer must have a Class 8 Import/Export License. Since Russian warplanes are classified as weapons in the U.S., one must have clearance from the Treasury Department's Bureau of Alcohol, Tobacco and Firearms, to have one in this country. Special permits to do such things as airshows with these aircraft may be obtained. However, all documents must be in order. ( See the June/July 1992 issue of Smithsonian Air and Space magazine, "Happiness is a Hot Jet", pp. 22-23.) (8) Russian Fighter Aircraft are made to operate out in the field. They are among the most operable aircraft in the world. As their very name implies, they were made for warfare. However there are many civilian purposes that these aircraft can and should be used for, such as museum shows and air shows. Collectors and organizations interested in supersonic research for civilian use could also benefit much by investing in these aircraft. The Russian Passenger Aircraft and Cargo Planes, on the other hand, should be used for their original purpose. With some avionics changes and some modifying of the engining it may be possible for these aircraft to get clearance to operate in U.S. space. ( We contacted G.E. Aircraft Engines. Their representative told us that CFM-56 engines were already being fitted in Russian airplanes in Snecca, G.E.'s plant in Paris, France.) Many foreign countries allow Russian aircraft to operate without any modifications. It therefore might be wise for Americans who are interested in acquiring these airplanes to explore the international market for a place to operate their planes. Light aircraft, sport aircraft and gliders are also for sale in Russia. These are easier to obtain and get the necessary licenses for than is the case with the bigger Russian aircraft. An experimental license is not a major handicap for a sports pilot. Russian aircraft was first offered for sale to Global in or around January 1992, at various prices. When we test marketed these aircraft on a national scale, we had overwhelming response from interested companies and individuals. There were many questions asked. Most concerned one or more of the following things: 1) Licensing requirements 2) Types of aircraft available and numbers on hand 3) Specifications - e.g. requirements for engines, equipment, loads, fuel, crew members, technical support, the availability of instrument overlays in English, technical manuals, spare parts, training 4) Special requirements, e.g. "hot ejection seats" , egress equipment, oxygen equipment, aerospace ground support, special tools, etc. (9) 5) Noise and landing weights - Not all airports have the capacity to take heavy and/or high performance aircraft because of considerations of noise pollution, runway length and type, load bearing capacity, etc. 6) Future availability of aircraft 7) Availability of military aircraft vs. demilitarized versions of military aircraft in operational condition 8) Possibility of training 9) Delivery destinations and costs 10) Availability of translated "technical orders" and manuals 11) Storage (i.e. where and what kind) and storage fees 12) Possibility of bartering for aircraft 13) Possibility of brokering aircraft We at Global spent many hours, with varying degrees of success, attempting to obtain the answers to the above questions. Over 200 phone calls were made on local and national levels. At this point, we are able to make the following observations: 1) There seems to be a bias in the U.S. government toward the U.S. Aircraft Industry special interest groups. This makes it harder for private individuals and companies to purchase these planes than would otherwise be the case. 2) Of the options discussed thus far, among the easiest way to acquire these aircraft and permits for same, involves their use in airshows. 3) According to the Atlanta branch of the F.A.A., the F.A.A. limits to one the number of Russian aircraft of one type able to be purchased by a private company or individual in the U.S. Whether this limitation is countrywide or merely local was unable to be determined. What the F.A.A. policy is concerning purchase of one of different types of aircraft was also unable to be ascertained. (10) 4) From the "Bear Bombers" for museums, to such things as soarcraft and helicopters, virtually all types of Russian aircraft are available for sale. No catalogs for these are as yet available. We suggest interested parties take a look at "Jane's Aircraft of the World", a book which is available in most libraries. 5) Regarding specifications and special requirements for these aircraft, we were given to understand that things such as instrument overlays, manuals, technical orders, etc. are available from the Russian factories. The instrument overlays are in English. Manuals, technical orders, etc. are most likely untranslated. Technical support and crew members are available. Again, we suggest looking at "Jane's Aircraft of the World". 6) We could not get any specific answers regarding the numbers of aircraft on hand and the future availability of these aircraft. Interested parties should send a pro forma purchase order. 7) Noise and landing weight requirements vary from one airport to another. Therefore, before purchasing a Russian aircraft one should call the airport he wishes to operate from and check on its particular requirements. 8) A large number of people have approached us wishing to trade various things for Russian airplanes. However, since the Russian government owns these airplanes, it is almost impossible to purchase one of these without cold cash. Nevertheless, a barter could be accomplished by a three-way deal in which goods are traded for cash credits which in turn go to the Russian government. 9) Brokers are needed on an international to a local scale. 10) Some full military Russian aircraft have been grounded until the arms were stripped. The Russian government wishes to be in charge of all removal of this military hardware. In Russia, the airframes are still flyable after demilitarization. These aircraft still have things such as hard points. 11) Spare parts are available. No known catalog for these is as yet available. If the Russian name and number of the desired spare part is known, this will be helpful in its aquisition. Otherwise a simple statement in English of the desired part should suffice. In any case, include purchase order and letter of credit. (11) 12) Training is available. 13) Delivery costs vary. The cost depends partially on the mode of transportation of the aircraft i.e. whether it will be flown or shipped. If flown, plan for these costs over and above the flat cost: crew, ground support, fuel, fluids, maintenance, landing rights, storage, insurance, licensing, title and customs fees, among other things. 14) Interested parties should indicate the desired place of delivery for the aircraft. 15) Things such as availability of special requirement items and cross compatibility issues are unable to be determined at this time. 16) Specific tools for the Russian aircraft are for sale. 17) In the United States, storage fees vary from one facility to another. Hanger storage is more expensive than open air storage but keeps the aircraft in better condition. Check prices locally. Some facilities charge by the month and others charge by the year. Some place liens on aircraft if they are not paid for in a timely manner. Some fixed base operators allow free space in return for their being allowed to sell the plane for the owner or simply being allowed to display it in a prominent place. (A novelty such as a Russian airplane draws big crowds generating more fuel sales.) Purchase orders for Russian Aircraft may be made to: AEROSPACE ATLANTA a division of Global Communications Group, Inc., 4335 Global Ct., Norcross, GA. 30093, (404) 925-4827. (12) PROBLEMS/SOLUTIONS Being a relatively small American player in the potentially huge market of Russian trade, is a proposition fraught with problems. Some of the major problems that we at Global have encountered follow, along with possible solutions. (1) Because of the language and alphabet differences, questions are often not easily answered. Legal documents have to be translated three times and then retranslated three times, i.e. from Russian legal to Russian to English to corrected English to Russian and back to Russian legal. As one can well imagine, many salient points are diluted and/or lost in all of these translations. To combat the possible misunderstandings arising from this, we suggest that standardized contracts be used. These need not be deal specific. (2) Only by using fair market pricing, will the seller continue to remain in a flourishing business and maintain a good relationship with his customers. The Russians are not used to fair market and market driven prices. They tend to make absurdly low offers on a specific list of items. This is not a good technique unless one is bartering salvage. We therefore suggest that American businessmen interested in trading with Russia define the deals on their end, providing consistent contracts, order forms and catalog prices so that both buyer and seller understand the terms, conditions, quantity, quality and price. (3) Many Russian projects are of the short-fuse variety i.e. the price or quantity available is apt to change quickly. Time limits should therefore be specified (usually 30 days or less to closing). (4) Interested parties should be aware of the fact that this market is saturated with amateurs on both sides. These range from the businessman who is inexperienced in market economy to the person who is simply eager for a quick, painless road to riches. Many are severely undercapitalized. (5) Blockage by special interest groups pollutes the playing field. (6) Companies will not invest time with no money deals.
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