Daniel Satinsky: Right. So, how did you go about understanding Russian reality, what the reality was that Alfa Bank had to live in? How did you go about learning about that?
Patricia Dowden: Well, I became very friendly with a number of them, and some of whom I’m friends with today. I also, this one particularly effective guy, the one that had been in Afghanistan, ended up, after the whole thing had ended, he ended up taking a job with a man who was Putin’s economic advisor, his personal assistant, and so he was introducing—and so this guy had been a part of the Gaidar team, and through that I got introduced to about half of the Gaidar team, which is quite an interesting bunch of people, and very thoughtful people, very bright people, and people who thought a lot about—had been thinking for ten years before—the Gaidar team came together well before the Soviet Union collapsed and were sort of meeting in secret, and talking about the future of Russia and so on and so forth.
And so that’s why, when the Soviet Union collapsed, Yeltsin turned to Gaidar, who already had the team put together, and they’d been working together, you know, discussing these matters. They were in concert with, they were called the Zmeinaya [gorka], which means Snake Hill, and they worked with a university in St. Petersburg, St. Petersburg State University of Economics then, it’s now called UNECON. And so, these people were very thoughtful, very interesting people who had, you know, and we just…you can have wonderful conversations with Russians. I mean, they like to discuss ideas more than, way more than Americans do, and so the conversations were always just fascinating.
And so, I spent a lot of time with those guys, and there was one woman, just talking about their experiences, and what had happened during the… They had some astonishing experiences during the Gaidar period, you know, kidnappings and… I mean, very just…I could write my own book about all that stuff. So, I got to know them, and I had my Alfa Bank friends, and then I got involved with Sharon Tennison. And her scope was teaching entrepreneurs from the region. She didn’t get people from Moscow because she figured they had enough opportunities. They recruited from St. Petersburg and the regions. And so, I traveled around a lot with her to the regions and got to know—
Daniel Satinsky: And this was after—
Patricia Dowden: After Alfa Bank.
Daniel Satinsky: —the World Bank program ended.
Patricia Dowden: Yes.
Daniel Satinsky: Okay. And it ended because of the crisis?
Patricia Dowden: Yes.
Daniel Satinsky: Okay, all right. But that was your platform to then move on with Sharon Tennison.
Patricia Dowden: Yeah. Well, yeah, yeah, lots of other—
Daniel Satinsky: Okay, I’m sorry. I just wanted to get it straight.
Patricia Dowden: Yeah.
But, you know, here’s another piece of that, the ending of that project. Our project was going full steam ahead. We had made huge gains, and Alfa Bank was on record about it, and they wrote to the World Bank, and we went to the World Bank and said please let us keep this project going. It’s a great success, we’ve saved this bank in this crisis, so on and so forth, they want us—you know, they’d written and asked for it to continue. And here’s what they said to us. They said Alfa Bank was on one of our suspect lists, something like that. And I said, well, how many of the banks that are alive today were not on your suspect list. I mean, you know, the answer being clear. They’d all folded. The suspect list wasn’t worth the paper it was written on.
And they didn’t like Alfa Bank because Alfa Bank refused to tell them who the owners were. And so, they were always, that was always a big source of suspicion. Well, of course they didn’t want to tell them who the owners were. It’s like painting a target on your back. You just don’t do it. And if you understood anything about Russia in those days, when these guys are driving around in armor-plated cars with whole battalions around them to protect them, and bankers are getting murdered on the streets of Moscow with rockets. I mean, you had to…it was a dangerous business. I mean, Fridman had armed men sitting outside his office.
Daniel Satinsky: Yeah.
Patricia Dowden: And we had armed people all over the place, to get in our hotel and everything. But anyway, the World Bank had decided that although it was the bank—and that was the bank that everybody went to, by the way, when everything crashed, and all these international agencies had personnel over there, and they wanted to pay their people off and close down the offices. And who did they call to help them get the money out? They called me because they knew I could get it done through Alfa Bank. In other words, they had sent money over, it had disappeared in some of their good banks. Anyway, the point is that their list was worthless.
Daniel Satinsky: Was worthless. Right. But still they used that as a justification then to stop the program?
Patricia Dowden: To stop the project, yeah.
Daniel Satinsky: Yeah. So, why do you think the World Bank was so ill informed? I mean, I think that—I’m not sure how you would characterize it, but was it…? It just occurs to me that you had insights that they just as well could have had. Do you have any idea why?
Patricia Dowden: Well, I don’t know. I don’t know if they could just as well have had. I mean, bureaucracies are bureaucracies. And with respect to Russia, there was not much of a foundation to build on about knowledge inside of Russia, and so I don’t really know how they got whatever knowledge they had. I mean, I will tell you that the Russians are very contemptuous—it might be too strong a word—but of all these people who write books about Russia, they don’t, and I, you know. And some of them, I read them, and I think good Lord, where do they, you know. But you take three courses in one of the big universities and you can write a book. And you can speak the language, and you can write a book on Russia. I don’t speak Russian, and I’m sure a lot of people would disqualify me as being knowledgeable just because I don’t speak Russian, but…I don’t know. I don’t know how people claimed to get knowledge about Russia back in that day.
And I think I was astonishingly lucky to happen to fall into this couple of really astonishing nests, Alfa Bank being one, and this Gaidar group being the other. And then the third leg of it was these entrepreneurs who were quite remarkable people, and to watch how that was developing.
And there again, you know, people’s attitudes about what goes on in Russia just didn’t match up with what I saw. I’d go to these small towns and there would be nice restaurants, and nice hotels, and nice people, and so on and so forth. I remember there was a man named Edward Lucas, who used to write for
The Economist, just the most astonishingly horrible articles about Russia, and he was a laughingstock at anybody who was there. He just, you know. I don’t know why they thought he was competent to write about Russia. It certainly dampened my attitude towards
The Economist, I have to say.
Daniel Satinsky: Yeah. So, I mean, you were coming back and forth in these years. I want to come back to Sharon Tennison. I don’t want to let that go. I just am curious about this and…because I guess maybe because of my own experience. You had direct experience. You had conversations at a pretty high level with people there. And what was the reaction when you came home and talked to people in Philadelphia about Russia?
Patricia Dowden: That question has a sad answer. I’d say that even though I think I have a very educated, sophisticated group of friends who travel widely, there wasn’t much interest in the days when it was considered more interesting, and as time went on and Putin became the bad guy and all that, then, you know, there’s a lot of bigotry in this country towards Russia, and certainly among my friends, too. It’s rare that I find somebody that I really can talk to about Russia.
Daniel Satinsky: Yeah. That also was my experience, so I don’t want to dwell on that because I want to make sure we cover what that experience is that you had. And I want to come back to Sharon Tennison. Am I correct that she developed this entrepreneurship program in the regions—in a way it was different than the U.S. government programs which required that people speak English, that she didn’t require people to speak English, and that she, I believe, did some work with the Rotary Club to help her with it.
Patricia Dowden: She did, yeah.
Daniel Satinsky: Okay. So, maybe you could just kind of describe this program and what she developed, and then what you experienced with it.
Patricia Dowden: Well, by the time I got involved it was pretty widely considered to be the most successful internship program between the United States and Russia. There were a number of programs going on, and mostly they ended up being opportunities for people to come over here and go shopping. The program that—one of the things that was different about the program that Sharon developed was that the entrepreneurs had to pay part of their own way. I think they had to pay half, maybe. And so, they had some skin in the game. And her book will describe to you how she managed to get connected with Rotary.
And I’m not sure exactly when she started to get government funding. I think by the time I met her and became involved in it that we already had government funding. And I know that I went with her on calls to government officials fairly regularly to talk about the program. And everybody was very complimentary of it and said it was the best program that we were doing there. And they trained something like 6,000 entrepreneurs, all over the country, and developed quite a loyal group. She has had reunions, big reunions where people come all the way to the United States for these reunions. So, they—
Daniel Satinsky: How long a program was it? Were they in…was it like a short educational program? Was it an internship program? Can you describe—
Patricia Dowden: It was an internship program.
Daniel Satinsky: Internship, okay.
Patricia Dowden: Yeah. They were selected to come over. I think the normal stay was about two weeks. I ran one for lawyers myself, which was a strange group, I have to say. I don’t think they did a great job of selection on the other side for that one. But a lot of them were… And I think, and that was coming at a funny time, too, after the economy had collapsed and everything, and so there were a lot of reasons why people were sort of…had a different attitude about stuff.
But they’d come over for a couple weeks. They would be housed with people who lived in that city. They would be matched up with—and they were counterparts, interested counterparts. Cheesemakers would go meet with cheesemakers, and furniture makers would meet furniture makers and that sort of thing. In my case lawyers met lawyers and judges and so on and so forth. And they would meet with them. They would see their facilities, they would ask them questions, just sort of compare notes on how they did things. And the program ultimately sort of died because the entrepreneurs became so sophisticated that they weren’t learning much anymore.
Daniel Satinsky: What were the years that you’re talking about then when you were involved with this?
Patricia Dowden: I was involved 2001, maybe. Maybe 2000. I can’t remember exactly. I could look all that up.
Daniel Satinsky: That’s okay, I don’t need it exactly, but it’s around 2000, 2001, 2002. So, then how long did it continue until it reached the point where they didn’t need it anymore?
Patricia Dowden: I’m not sure I could be explicit about that.
Daniel Satinsky: Okay.
Patricia Dowden: It would probably have been… I’m reluctant to give you that as a part of the record. I could look it up.
Daniel Satinsky: Well, a ball park.
Patricia Dowden: Sorry?
Daniel Satinsky: A ballpark number here.
Patricia Dowden: Well, I don’t know. Well, 2008, of course, was the big global financial crisis. That may have taken a big bite of it out.
Daniel Satinsky: Okay. But the early 2000s.
Patricia Dowden: Oh, yeah.
Daniel Satinsky: And then the people who participated in this, I’m sure that she did follow-up and so on, but I assume that some of them became fairly successful in their localities—
Patricia Dowden: They did, yes.
Daniel Satinsky: —throughout Russia, right?
Patricia Dowden: Yes. Very successful.
Daniel Satinsky: My understanding is that the Rotary Clubs also spread throughout Russia, that there were a lot of active Rotary Clubs throughout Russia, right, to promote local business.
Patricia Dowden: Yeah. I don’t know what’s happened to that now. It would be interesting to find out.
Daniel Satinsky: Yeah. I don’t know. When I was researching the book I contacted some people from the Rotary Club, but my interviews were all done before the war in Ukraine. Before 2022, so I don’t know what has happened since then. I mean, I can guess, but sometimes guessing doesn’t work with Russia, so…
Patricia Dowden: Well, here’s what I would guess. I would guess that the Rotary Club is no longer officially involved, but the seeds were planted. There’re so many seeds that were planted. You know, one of your questions, I’ve forgotten exactly how it was phrased, but, you know, is it all for naught, and we, you know. No, I absolutely don’t believe that. I think they learned an incredible amount. I mean, the changes that I saw in the time I was there—and I was going until right before COVID—the changes were just astonishing. Just, you know, just astonishing. And even if you talk about the regions, the changes were just astonishing. And so you’d have a crisis, and all of a sudden you couldn’t afford imports anymore, and so all of a sudden, they learned how to make their own. I remember when they had the crisis where they couldn’t import cheese from France and all that. Well, then they, all of a sudden, instead of sending Dannon into all the grocery stores you’re seeing the Russian version of it. And they created, they just did—they’d do it overnight. I mean, it’s just fascinating how fast those people can adjust to a crisis.
After the crisis of 1998 I was just devastated. I mean, I just thought this is the end, you know, they’ll never survive this. Well, nobody—I remember walking around Red Square on a bright, sunny, wonderful fall day and nobody looked the least bit excited about it. You know, everybody’s out having a nice time and enjoying the fall weather and everything, and looking at me when I would talk to somebody, let it be known that I was pretty upset, they’d look at me like what’s the matter with you?
Some of these entrepreneurs that we were involved with set up barter enterprises within three weeks. They just organized, some way or another, ways to trade truckloads of tires for truckloads of popcorn. I mean, it was just astonishing. Alfa Bank did the same thing. Alfa Bank figured out a way to net out their transactions so that they could cut way down on the amount of capital that was needed to run the system. They did that in three weeks. The Federal Reserve Bank in the United States took years to do that. But boom, Alfa just did it. And suddenly the money was able to move pretty much the rate that it had before the ruble had dropped in value by 75%. I mean, they just, you know, they barely hiccuped over all that.
Daniel Satinsky: Yeah. I have to say I think when you were saying that I was thinking about the ineffectiveness of sanctions, and how the flexibility—
Patricia Dowden: Oh, yeah, Exactly.
Daniel Satinsky: —of Russians has been able to evade the dire impact of sanctions.
Patricia Dowden: Well, not only sanctions, but shutting down their access to the funding for the Central Bank. That’s the one I really thought was going to do them in, and frankly, I think it was a very stupid thing for America to do because I think everybody’s going to think twice about putting their reserves in the dollar. But no, I thought that was going to kill them. I’m just fascinated. By the way, the people, Nabiullina, who was the head person there, was part of this—I never knew—well, met her, I think—but she was a part of that Gaidar group, too. Those people, the group, that group is still, in one way or another, the heads of the banks or heads of the investment banks, or heads of the railroads or whatever. They’ve held on in a lot of positions.
Daniel Satinsky: Right. One theme about that period that maybe, I don’t know if you have an opinion about, but as I interviewed people, then capital markets developed after the collapse of the Soviet Union. There were no capital markets. All capital was allocated by centralized planning. So, there were banks that developed as these adjuncts of the industrial groups, and then there were investment banks, investment groups, and some private equity. And the U.S. government was very active in setting up the stock exchange and run setting up the first RTS
*, and in providing advice about the stock exchange as a way of allocating capital.
And it seemed as if there was a conflict between banks and stock markets as to who was going to be the arbiter of economic input from capital. And it looks like pretty clearly banks won that battle rather than the stock market, as here the stock market has a lot to do with the allocation of capital. I don’t know, did you…am I imagining this, or is this something that you saw or have any thoughts about?
Patricia Dowden: Well,
Bernie Sucher would be a wonderful source for you on this because he partnered, he was one of the partners who started Troika Dialog, which is probably still the largest investment bank in Russia, and they started it from nothing, he and the Armenian guy whose name doesn’t pop into my head, but who is, I think, still a big major player over there. And the guy who started the stock market was the husband of one of the members of the Gaidar group who is still a good friend of mine. He was quite a character.
So, I knew these people when these things were just getting started, and the question that you’re asking about, where capital ended up, I don’t know the answer to that. I can’t… It seems to me that all of them had their ups and downs. I mean, certainly the banks did. But I’m not a historian in economics. I’m sure somebody’s studied all that, but I don’t know the answer.
Daniel Satinsky: Right. It’s okay. I just thought you might have an opinion about it, so that’s all.
Patricia Dowden: Well, I will tell you this. The latest that I can remember—now my information may be out of date now—but the Sberbank bought Troika Capital, so it was a subsidiary. And Sberbank was the old Soviet—
Daniel Satinsky: Right, savings bank.
Patricia Dowden: Yeah. And as far as I know it still owns, so that would suggest to me that—
Daniel Satinsky: The banks were dominant.
Patricia Dowden: —the banks would… Well, and—well, the banks and the state. I mean, now, you know, all this stuff is getting taken back over by the state. I mean, I have an economist friend who’s quite expert in all this stuff, and he would be able to answer that, but I can’t. I just remember knowing about it in the baby days.
Daniel Satinsky: Right. Well, so, you know, when you were working with Sharon Tennison in this entrepreneurship program, what was your role in that? Was it to run specific programs, or was it as a trainer, or what were you doing with it?
Patricia Dowden: I was on her board, and I traveled with her and went to the… I mean, I think, to some extent, I was just a warm body that added a certain presence to the thing, as opposed to just Sharon being by herself. And so I learned a lot from it. I’m not so sure how much I was contributing to it, other than just being, you know, a presence. And I had the Alfa Bank experience, which gave me, probably gave me a little weight in the conversation. And I did run one of the projects, you know, for them.
Daniel Satinsky: Right, the lawyers.
Patricia Dowden: Yeah, the lawyer project.
Daniel Satinsky: Do you have any memory of any specific regions that made an impression on you in your travels around the country?
Patricia Dowden: I remember going…we went down to Volgograd, which was just, we had a wonderful trip down there. And first of all, I remember taking the train, and as we were coming into the city, I didn’t know about the statue—and the name’s not popping into my head—but this statue that’s what, two or three times the size of the... You know what I’m talking about?
Daniel Satinsky: The Mother Russia statue.
Patricia Dowden: Yeah. And all of a sudden that came in the window of the train, and I just gasped. I mean, it was incredible. And then one of the oligarchs from our program was in Volgograd, and so he took us out on his yacht. And it was a, you know, it was quite an exciting city.
I remember going to a little—well, I did a lot of work, actually, in Yekaterinburg. That would be the one where I would have the biggest impression. Because after I…I sort of went out on my own after I’d worked with Sharon for a while and worked with some of the—she had representatives in each city that she worked with, and Yekaterinburg was one of the big ones, and one of the more active recruiters for her. And so, this woman would set up seminars for me to teach at universities or, you know, various sponsors, and I would teach courses in business management kind of thing. And I did that a number of times in Yekaterinburg and other places, too, one in Tatarstan, Kazan, which I liked a lot, too.
But every place we went was, as I say, it was always…you know, there’s a little town called Penza which, you know, is not on anybody’s screen, but it was a lovely little place, nice little town, you know. The guy, one of the entrepreneurs, had a bear that he kept in a pit in his backyard, I mean… And drove one of Khrushchev’s old limousines or something like that that was bigger than his mother’s little izba
*, you know, I mean, just real characters involved in her program.
I mean, you had this image of Russians as sort of these cowed people. I mean, they are not. There was so much always going on. Everybody thinks that the state rules everything. They had their own lives completely independent of what the government was doing. They did what they wanted. And seeing how budgets worked and some stuff like that was quite interesting.
Daniel Satinsky: And so, this whole experience, which you had no knowledge, you know, you didn’t know anything about Russia, it changed you, right?
Patricia Dowden: Oh, no, absolutely. Everybody on our team would say that. Everybody on our team and everybody, all the people that we worked on the Russian side, everybody said it was a life-changing experience. Everybody felt that way.
Daniel Satinsky: Yeah. And life-changing not just in the experience, but how else? How else would you say it was life-changing?
Patricia Dowden: Well, understanding Russia, that was my objective in wanting to go over there, aside from the fact that I found, from a project standpoint I thought it was a very interesting project. But I really wanted to understand Russia. You know, people talked about Russia’s soul and this kind of thing, and it was just this big black box. And I was just very curious about what that was, and how people would live under a communist system like they had. I had just no way to imagine it.
And I think I made a…I think my…my Russian friends tell me that I understand Russia pretty well now. And so, I mean, God knows I could have gone further, but to understand another completely different way of thinking and living was just a fascinating cultural experience. And, you know, the friends I made there, just, you know, fascinating people. I don’t know. I’d have to think more about the people to be specific about—