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Why Locate in Alaska for Projects in Russia
By Steve Borell
Executive Director, Alaska Miners Association
Alaska and Russia share
a very special relationship and companies wishing to do business
in the eastern half of Russia should strongly consider locating
their Russia contact office in Alaska. This applies
not just to mining companies and mining industry suppliers but anyone
wishing to do business in Russia. In July, 1993 the Alaska Miners
Association sponsored a tour of mines in the Magadan Region of the
Russian Far East. I had had the sense that there was an Alaska advantage
for several years and our tour confirmed this in many ways. I now
estimate that this is worth at least five and possibly a ten-percent
advantage over having a contact office in another location.
Proximity
The first obvious reason is the close proximity of Alaska to Russia.
This is important for travel and for communications. For instance,
Magadan is four time zones west of Alaska. This is the same time
difference between Alaska and the East Coast of the U.S. We in Alaska
have a four-hour business day overlap with the East Coast and the
same with the Russian Far East. The further east one moves from
Alaska, the more difficult it will be to keep good contact with
a project, partner or customer in Russia.
Air travel for personnel
is another area where Alaska has a distinct advantage. Magadan is
about four flying hours from Anchorage and there are now regularly
scheduled flights between Anchorage and Magadan, Khabarovsk, Vladivostok,
Petropavlovsk-Kamchatsky and Yuzhno-Sakhalinsk on Mavial (Magadan
Airlines), Aeroflot Russian International Airlines and Reeve Aleutian
Airways. The time lost traveling back and forth is significantly
increased when one adds the various connections required when coming
from Canada or the lower 48. And although a four-hour jet lag is
still a bother, it is far better than a six or eight hour jet lag.
There are also significant
arguments that favor Alaska when shipping parts, supplies and products
to or from the Russian Far East or Siberia. Which would you prefer:
1) shipping your parts or products through New York, where there
are 10,000 customs employees in a no-man's zone covering an area
of several square miles, into Moscow where there are 15,000 customs
employees and a similar area, or, 2) shipping directly from Anchorage
where there are a half dozen customs agents, whom you get to know
by name after a few shipments, and into Magadan, Khabarovsk, Vladivostok,
Petropavlovsk-Kamchatsky or Yuzhno-Sakhalinsk where your partner
similarly knows the local agents by name?
Keeping tabs on the whereabouts
of your shipment will be much easier from Alaska. The problems are
just an extension of the problems involved in shipping to the bush
and Alaskans understand that process. Also, wouldn't you prefer
to track your shipment through the U.S. or Canada for most of its
journey and then in Russia for the least possible time? At the very
worst you could visit the airport every day until you see that your
pallet of parts is gone and call your Russian partner to tell him
it is on the way. Try that in New York, Seattle, Vancouver or Moscow.
It should also be noted
that Alaska-based cargo carriers, including Northern Air Cargo,
Lynden International and Panalpina, have established cargo shipment
routes between Anchorage and several Russian Far East cities. The
passenger flights scheduled by Aeroflot, Mavial and Reeve also carry
cargo.
Similar Conditions
On a purely technical level there are many reasons Alaska's Arctic-experienced
miners, geologists, civil engineers, architects, etc., have an advantage
over their counterparts from other areas of the country. When you
mention discontinuous permafrost to an engineer in the lower 48
you may get a blank stare. For Alaskans such a phrase raises a series
of red flags and brings to mind many additional considerations.
The same can be said for design and operation in an area where the
average temperature in January may be minus 32 degrees F. People
who have not experienced this do not understand the implications!
For the miner, geologist
and prospector, the mineral terrains of the Russian Far East in
particular are similar to and an extension of those found in Alaska,
the Yukon and British Columbia. The same kinds of rocks appear and
one would expect to search for the same ore deposit models. Geologists
acquainted with the rocks and associations in Alaska will be the
obvious choice for work in Russia and conversely. Here again Alaska
bush logistics, challenges and local hazards (grizzly bear) experience
will be invaluable.
Benefits For Alaska
Minerals Industry
The benefits for the Alaska minerals industry are many. The transfer
of experience and expertise will assist both Russian and Alaskan
projects. Minerals companies with a Russia contact office in Alaska
will likely take interest in Alaska prospects that may come along.
The knowledge they gain working on Russian ore deposits and geologic
models will be readily transferable to Alaska and will increase
their effectiveness in exploring for deposits in Alaska.
The mining industry in Alaska will also benefit if equipment suppliers
locate their Russia contact offices in Alaska. If the suppliers
are strong and have larger volumes of sales they will be able to
buy in larger volumes and maintain larger stocks of spare parts.
The increased stock levels will mean improved parts availability
for miners in Alaska.
Companies interested in placer mining or in selling supplies to
this part of the industry will find Alaska and eastern Russia to
be two pages of the same book. Experience gained in either area
will be of major value when doing business in the other.
Family Considerations
Do not forget spouses and families. Living in Russia will be a strain
on even the strongest expatriate family. It may however be feasible
for some families to live in Alaska rather than move to a remote
site in Russia. Or how nice for expatriates living in Russia to
be able to grab a flight to Alaska and enjoy some "America"
while the manager, engineer, geologist, etc., visits the home office
on business. I lived in South America for two years and my wife
and I understand this aspect of foreign assignments -- and culture
shock -- very clearly.
Just living in the north is another aspect of culture shock that
should be recognized. Alaska experience for employees and families
should reduce this hazard. There is often severe culture shock when
lower 48 residents move to Alaska. It will be much easier and less
traumatic if employees and their families are already accustomed
to the high latitude and temperatures of Alaska. Moving a family
to Russia, just as to any new culture, will become a major challenge
for families and marriages. Alaska experience would help ease that
transition.
Cultural Ties
An additional reason
for locating the U.S. contact office for Russia in Alaska is that
the Russians prefer to do business with Alaskans. They dislike the
influence of Moscow just as much as we Alaskans dislike many of
the influences of Washington. This helps explain why the Russians
have a special kinship with Alaskans.
Another less positive but nonetheless real consideration is that
the Russians seem to prefer doing business with their Western counterparts
rather than Asian companies. Russia has had a long history of conflict
with Asian countries and the issues are still not totally resolved.
They may like the products but it appears they prefer to deal with
Alaskans, even when buying products manufactured in Asia.
One must also recall that Alaska was once part of Russia and the
first gold mining in the state was by the Russians in 1848 at the
now famous Russian River salmon fishing stream on the Kenai Peninsula.
The Alaska Commercial Company operating in Alaska today is a descendent
of a Russian company and advertises as operating "Since 1867,"
the year Secretary Seward bought Alaska from Russia.
It is also of note that during the 70-year communist period few
books written in English were allowed to be translated and widely
distributed in Russia. One exception was the writing of Jack London.
As a result there are all manner of lakes, roads, mountains, etc.,
in Russia named after London. One Alaskan mining executive working
in Russia commented that so many people talked to him about the
Jack London stories he had to buy a copy of London's complete works
and reread the stories so he could better relate to the Russians.
Business Support
Structure
There is already a significant
amount of activity between Alaskan and Russian companies. Possibly
200 Alaskan companies of all types are doing business with Russian
companies. A few of these are mining ventures but most involve some
form of import-export sales. Also, various agencies have protocols
with their Russian counterparts to encourage cooperation between
Alaskan and Russian entities.
The State of Alaska Division
of Trade and Development -- with offices in Anchorage, (907) 269-8110;
in Juneau, (907) 465-2017; and in Fairbanks, (907) 451-3050 -- provides
support for Alaskan businesses. The DTD staff includes specialists
in resource development, mining, and export and trade issues, including
Russian trade. The Division of Trade and Development gathers market
intelligence and arranges trade missions, both to and from Russia.
The state maintains a representative office in Sakhalin and maintains
contacts with U.S. consular officials, trade organizations and Russian
regional officials in the Russian Far East. The Alaska Division
of Trade shares offices in Anchorage with the U.S. Dept. of Commerce
Alaska Export Assistance Center, (907) 271-6237, which also works
with U.S. government commercial officers in several cities in eastern
Russia. The American Russian Center, (907) 786-4300, of the University
of Alaska, has branches in the Russian Far East and Alaska to provide
training, short-term technical assistance and act as a small business
information system. Each major campus of the University of Alaska
-- Fairbanks, Anchorage and Juneau -- offers courses in Russian
language, culture and history.
(Steve Borell is the Executive
Director of the Alaska Miners Association. A registered professional
engineer in Alaska, Colorado and North Dakota, he has worked in
coal and metals mining for more than 19 years throughout the United
States and in Canada and South America).
(Revised April 1999)
For more information: Alaska Miners Association, 3305 Arctic
Blvd., Anchorage, AK 99503
(907) 563-9229, fax (907)-563-9225, ama@alaskaminers.org
www.alaskaminers.org
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