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. Last Updated: 07/27/2016

Bunkers, Banyas and the Gas-Pistol Economy

I have an old friend named Vasily who is the director of a chicken-processing plant about a day's drive from Moscow. He's a little over 30, a big guy who loves the banya. On my last business trip out that way, I stopped by his office and he immediately blurted out, "We have our own banya now!" Naturally, we set right out.

His factory is about 20 kilometers from the town, and every time I go there, there is something new to see. Either a new addition is being added to the workshop, or a whole new workshop is going up. "But a banya?" I thought. "That's a bit of an over-indulgence in these difficult times."

After all, it wasn't so long ago that Vasily had nothing with which to pay his workers. At that time, his factory was highly specialized, producing only eggs. Every time he would estimate his costs and set his prices, he would run up against increases in the cost of feed, electricity, etc. He would have to raise prices, sales would drop -- in short, planning was impossible.

But Vasily does not give up easily. He conferred with his specialists and decided to build an addition to the factory that would enable them to produce sandwich meats from chicken. Next, they opened a small store in town and paid their workers from the money they netted. Moreover, they were able to use the chicken as barter to pay for electricity and chicken feed. This arrangement turned out so profitable for everyone that, the next thing they knew, they had a banya.

We arrived at the banya, but there was no new building in sight. Instead, Vasily led me to an iron door that seemed to lead straight into the side of a hill. There was a jangling of keys and the door opened. A set of steep steps lit by a dim lamp descended before us. Then there was another door with a huge round handle, like a wheel, in the middle. Vasily struggled with it for quite a while, finally pushing it open with his shoulder. Again, there was another seemingly endless set of steps going down. Finally we arrived in a spacious room, brightly lit with wooden benches and lockers along the walls. Through some half-open curtains I could see another room with a long table set with a colorful tablecloth and a shining samovar and tea service.

There was another door, a large wooden door with an elaborately carved and inlaid pattern that looked something like the legendary firebird. "Isn't it nice? I designed it myself," said Vasily as he took off his pants and shirt. Behind the beautiful door was the steam room and bath.

All of this, deep underground, was once a bomb shelter. "We did it ourselves, after work," Vasily told me. "Conversion."

While we were steaming ourselves and swimming in the pool, Vasily told me about his life as a director. One story struck me as something out of a surreal novel.

One day three guys came to his office and sat down without waiting to be invited. They were big guys, of course, with close-cropped hair. They looked like athletes. Vasily immediately pulled a gas pistol out from under a stack of papers and laid it on the desk. The three guys just smiled. "We didn't come for that," one said. "We heard that you have a great banya and we wanted to try it out."

Naturally, Vasily didn't believe them and said that the banya was just for employees. "Well, then, why not give us jobs. In the sales department," they answered. Of course, the sales department -- that is where they can most easily carry on their illegal dealings.

Vasily's first thought was to shoot them -- the gas would keep them still for an hour or so until the police came. Then he thought that most likely they would not even have a pocketknife on them. They would just say they came by looking for work and there wouldn't be anything to arrest them for. After all, they had done absolutely nothing wrong.

"Don't worry," the most talkative one said. "We are serious people. We know that you have two kids. It would be too bad if anything happened to them. Hire us and no one will touch them. Understand? And nothing will happen to your factory either."

Vasily asked how much they wanted. They named a figure. "I'll tell you what," Vasily countered. "I'll give you that much in sandwich meat. You sell it and you'll make three times as much. One third for me and two-thirds for you."

A moment of silence. "You can sell it here, on the highway near the factory. We'll set up a kiosk. You can add some imported liquor to make it look more impressive." This last bit, it seems, really impressed the three thugs and they agreed. Two days later, a kiosk stood about a hundred meters from the factory gate. Vasily persuaded them to do everything by the book in order to avoid problems with the police. They even signed a contract.

"Now I have three thugs working here," Vasily laughed. "They do two jobs at once. Sales and security."

"You know," he continued, "these guys are only scary in dark alleys. The really scary ones are the bureaucrats in Moscow, the 'state racketeers.' They don't understand anything about what business is like here and the taxes they come up with seemed designed to put us out of business. Naturally, the bigger one's profits are, the more incentive one has to hide it and avoid taxes. They are just pushing us to break the law."

"And then they come around and torment us with their inspections. The factory isn't my property, so I can't chase them off. What can I do? Give them sandwich meat? I can't pay off all the ones that come around now; in the old days, there were a lot fewer."

Vasily then recalled another incident. He knew of a cigarette factory that began to hide its true production figures. They hired some fearless people -- former convicts -- to work in distribution. Those guys, in turn, hired 19 other guys, many of them respectable people, warehouse workers, even two policemen. They distributed the cigarettes on the side, setting their own prices and terms. The factory, of course, had to explain why it was consuming so much tobacco: They sent the tax inspectors the most distressing reports describing how the factory was virtually falling apart, on the edge of bankruptcy.

In the end, the authorities caught up with the gang and it turned out that, during their reign, the factory had worked much more efficiently, saving 30 tons of tobacco each month. On the one hand, these men were criminals conducting secret dealings, but on the other, the factory was prospering. And what would have happened if they had worked honestly and paid their taxes?

I myself had heard a similar story in Moscow about the head of a small agricultural cooperative who used a false letter of credit to get a hold of several billion rubles. This was a high-class swindle involving the false letter of credit complete with all the necessary account numbers and code words. It sailed through the Central Bank, which in turn passed it on to a commercial bank.

The director quickly and efficiently distributed the money. He invested some in other cooperatives and used the rest to build three brick-producing factories in southern Russia. Those factories soon filled the local demand for bricks, leading to something of a local construction boom. In order to build his factories, he had to bring gaslines to the entire region -- the region where he was born -- which made him a huge celebrity among his neighbors, who until then had had to rely on wood and coal for heat. He also, by the way, built a mosque, which firmly established his reputation as a man who cared not only for the material, but for the spiritual well-being of his neighbors.

For a year, he was held in prison while the authorities investigated him. They established that he did indeed execute a swindle and that on the stolen money he bought himself a new Chrysler and an apartment in Moscow. But what a lot of good he had done! To this day, the authorities have not decided whether to bring charges against him.

There are many such stories of businesspeople who, working through the "shadow" economy, managed to do quite a bit for Russia. Naturally, though, they are tired of working in the shadows. The are beginning to invest in real estate, build hotels on the seashore, open bars and casinos and to create social funds and charities. In short, they are trying to become civilized.

But what is our government doing to help the process of remaking our economy? What is needed is a comprehensive package of laws aimed at civilizing our semi-underground Soviet economy. But the State Duma does not seem to be in a hurry to pass these laws. Most likely, this is because such laws are not in the interests of our government bureaucrats. Or maybe it is just because our deputies are preoccupied with the petty struggles between various political factions.

Toward the end of our discussion in the banya, I said to Vasily, "You know, you should get a patent for your banya. After all, it is a really original form of conversion."

He just laughed. "If only we could find such a good way to convert our totalitarian economy into a market economy!"

Back on the surface, after we made the long trek up out of the bunker, it was already twilight. Vasily sat behind the wheel and the car began to make its way between the buildings of the chicken factory. As he pulled out onto the highway, he leaned over into the glove compartment and pulled out his gas pistol, which he placed on the seat between us.

"What do you need that for?" I asked. "The police and all the crooks around here already know you."

"Just in case," he said without looking away from the pitted road, illuminated only by our faint headlights.

Igor Gamayunov is a reporter for Literaturnaya Gazeta and the author of several books on social themes. He contributed this article to The Moscow Times.