By Renfrey Clarke
MOSCOW — Not so long ago, many Russians still believed that if they embraced capitalism, foreign investment would pour in to help modernise and expand their country's decrepit factories.
That's a suggestion the new Russian capitalists have stopped trumpeting lately. In the first quarter of this year, foreign investment in Russia, at an annual level of around US$1 billion, was running at only a tenth of the hoped-for rate.
The great bulk of these funds were going into oil and other extractive industries, or into trade and catering. Only about 13% of foreign investments were going into the manufacturing and engineering sectors, vital to Russia's future as an industrialised country.
If you're wondering which industry accounts for a disproportionate share of the foreign money coming into Russian manufacturing — well, it would take your breath away. It would also boost your susceptibility to cardiovascular diseases, and greatly increase your chances of dying of lung cancer.
Among the few Western firms that have taken to Russia with a passion are the tobacco corporations. Their investments are large, and their perspectives long term. In late May it was announced that the British company Rothmans was to spend $85 million to build a new tobacco products plant in Russia. Rothmans is also to buy a 75% stake in the Nevatabak plant in St Petersburg, where it plans to raise output to 10 billion cigarettes a year.
The US corporation Philip Morris last year agreed to pay $65 million for 90% of the shares in the Krasnodar tobacco products factory in southern Russia. Other Western tobacco companies with major investment programs in Russia include the US firm R.J. Reynolds, and the British B.A.T. Industries.
The former Soviet Union provides Western tobacco firms with one of their few opportunities for a further big expansion of sales. Surveys have put the potential market in the region at 430 billion cigarettes per year. That's a five-a-day habit for every man, woman and child — and to make sure every one of them becomes addicted, the tobacco companies have launched aggressive campaigns of television, press and street advertising.
With their rugged cowboys and laid-back young business executives, the cigarette commercials on Russian television often strike Westerners as naive and stereotyped. But there is no doubt that they work. According to the Health Ministry, the proportion of smokers among younger age groups is rising.
At present about 60% of Russian men smoke, and about 15% of women. But among women of secondary school age, the proportion of smokers is nearly a quarter. Frantic to appear "Western", young Russians rarely appreciate that smoking in the West is increasingly seen as a dying habit — in all senses — and smokers as dupes manipulated by the ad agencies. As a result, growing numbers of young people in Russia shell out from tiny wages to purchase the irresistible symbol of sophistication — Marlboros, real ones, importny.
Rothmans, Philip Morris and the rest of the gang, it might seem, are well on the way to turning all Russia into one big smoke-filled room. Their efforts have encountered a certain resistance, including a successful court suit brought by anti-smoking campaigners against television stations and newspapers which run cigarette advertisements. But the law restricting tobacco and alcohol advertising lacks an enforcement mechanism and is routinely flouted.
To counter opposition, the tobacco giants have lost no time organising a strident and well-funded lobby aimed at influencing law-makers and government officials. To hear the arguments of the lobbyists, cigarette smoking is just about the only thing keeping the Russian economy functioning.
Without revenues from tobacco advertising, television viewers are warned, the stations would be forced to close down. An "independent" Western consulting firm recently predicted losses to the Russian economy of almost $600 million over five years if cigarette advertisements were banned. The consultants did not, it seems, take into account the losses that will be suffered if tobacco use is not curbed — losses which stem mainly from increased health care costs and the early deaths of skilled personnel.
In normal societies, the costs of restricting the operations of the tobacco industry are heavily outweighed by savings in the areas of health and mortality. Anti-smoking measures make good economic sense. Here, there is just a chance that the tobacco lobbyists may be right — at least where costs to the government and the private sector are concerned.
The Russian health system is now being spontaneously privatised, as the state refuses to meet more than a fraction of health care costs. When smokers get sick, they and their families are now free to pay most of the medical costs themselves. As for highly trained workers who die of smoking-related diseases — the collapse of Russian industry means that increasing numbers of such workers are being sacked every month.
As a result, it may well be in the interests of Russian capitalism to invite in Western tobacco firms to boost the advertising revenues of the country's television stations <197> key agents of pro-government propaganda <197> and to help trim the numbers of pensioners and unemployed. But the mass of Russians may turn out to be less impressed with a system that treats them as cattle to be slaughtered for profit.