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. Last Updated: 07/27/2016

American Industrialist Pulling Out of Russia

SALT LAKE CITY -- After spending the past four years and $50 million making his mark in Russia, American industrialist Jon M. Huntsman Sr. is pulling out.


Huntsman was acting on promises by former President Mikhail Gorbachev of open economic relations when he expanded his plastics operations into Moscow in 1992. He also built a packaging plant in Ukraine and has donated humanitarian aid to Armenia.


But now Huntsman said he is departing from Russia, primarily because of disappointment with President Boris Yeltsin's performance.


"It is with some disgust that we reach this conclusion," Huntsman said in a copyright story of Saturday's Salt Lake Tribune.


Huntsman International became the first U.S. company to control a majority interest in a Soviet joint-venture enterprise when it opened the Moscow plastics plant.


The plant annually produces 35 million plastic cups and utensils for the airline and hotel industries. But for Huntsman to realize a profit, the Russian economy would have had to improve.


"Our intent was to create a microcosm of free-market activity in the Soviet Union," said Jon Huntsman Jr., vice chairman of the Huntsman Group. "Right now, the situation makes it too difficult to proceed. If the environment improves, we will look at it again."


When Huntsman International made its initial investment, it believed it was operating in a tax-free zone and was promised a five-year tax holiday. But that was repealed by Yeltsin, who has issued hundreds of presidential decrees affecting businesses.


The final blow came when the corporation realized it was faced with a 40 percent tax to the Russian government. The tax would apply retroactively to 1992 assets, including penalties and 250 percent interest.


It totals nearly $500,000 not including interest, Huntsman Jr. said. He said the company -- which operates 75 production plants in 16 countries, generating $3.4 billion in revenues last year -- currently is arbitrating its final tax obligations with the Russian government.


"Once that is finished and we pay whatever we have to pay, we will extricate ourselves," he said.


Huntsman International also is trying to track down the 680,000 kilograms of food it purchased in February to ship from Iran to Armenia."We procured the food in Iran, but because of the political problems in that area it did not arrive in time to be properly warehoused for the winter," Huntsman said. "We are going over in about two weeks and will begin making arrangements for foodstuffs for Armenia."


The Huntsmans plan to remain in Armenia, where they built a $2.5 million concrete plant in Yerevan, and will continue the joint venture with Styrol Production Association in a $40 million packaging plant in Ukraine.