4. Jewelry "Production".

As I've described in the project "Jewelry Import", in the 1990s the key problem of jewelry production, importation and sale was high excise duties, not to mention additional VAT and customs duties (the latter imposed in case of importation).

It is where we found a legal loophole that could be stated as follows: "If ANY goods are made of ANY KIND (!) of Russian materials and are IN FACT re-imported back to Russia, the cost of raw materials is not subject to any taxes or customs duties."

I have no idea who found this solution, when, how and for what purpose they did. As for me, I have learnt it from a fellow who worked for the Ministry of Foreign Economic Relations.

The scheme worked as follows: one took out a bank loan, purchased a good deal of gold in the Gokhran and exported it (licensed by the MFER) to Switzerland where one sold it at a market price of pure gold right away. After that one could repay the bank credit at once, if necessary. This way one was actually granted a permanent quota for duty-free jewelry import to Russia. Duties were imposed on gold treatment, but it was where we used to apply some other tax optimization schemes.

Well, it sounds like nonsense, but it really worked. This was our jewelry import routine until the summer of 1998.

We used to give the jewelry over to consignment stores (dozens of shops in Moscow and St. Petersburg). The shops settled accounts with us upon consignment. It means that we paid for the jewelry in foreign currency and got rubles from the stores. It was like dealing with a delay-action bomb. Until August, 17th, 1998, the ruble was pegged to the US dollar (the USD to the Russian ruble currency exchange rate was 1 to 6). In a couple of weeks the dollar rocketed up to 1 for 20 rubles. Then, after a month of jiggling up and down, the USD has never sunk below 15 rubles.

It was a cool crisis. Crisis is always a great thing. Anyway, that’s another story. For that moment it was really shocking. A lot of money was gone.

We could try and get a number of bank loans in an attempt to save the situation of course. However, I had actually moved abroad by that moment and was no longer interested in working in Russia mostly because of bribing (rather than banditry). It was disgusting to realize that implementation of nearly ANY project presupposes looking for ways to bribe a required person rather than doing business. I couldn't think of any business pattern where we could do without multiple leechlike officials. I had long been dreaming of a business where no "bloodsuckers" would distract my attention from business itself.

To cut it short, the crisis of 1998 was a perfect occasion to decisively leave Russia for good and all. As a matter of fact, I had never visited Russia since 1998 till 2013. It was not my intention, it was just the way it happened.

So, to sum up, I am extremely grateful to the crisis of 1998.