As the world awaits the outcome of high-level negotiations over Putin’s land-grab in Ukraine, it’s worth remembering there was a brief, intoxicating moment when Russia seemed poised to become something entirely different — a market democracy integrated into the global economy. That window slammed shut not by accident, but by design.

Charles Hecker, former Moscow Times journalist and author of Zero Sum: The Arc of International Business in Russia, joins us on this WhoWhatWhy podcast. He witnessed this transformation firsthand during what he calls the “exhilarating chaos” of post-Soviet Russia, when Western corporations rushed into the Wild East after 1991, convinced they could remake a communist nation while reaping astronomical profits.

The early signs were promising, Hecker recalls. With foreign investment flowing freely to a budding Russian entrepreneurial class, Western governments believed economic integration would foster genuine democracy. 

But Putin had different plans. What emerged wasn’t the competitive market economy the West envisioned, Hecker explains, but a throwback to 19th century autocracy.

Hecker’s story of Russia’s authoritarian capture offers a chilling preview of what might happen here as Trump, abetted by his own circle of oligarchs, tries to bend America’s business sector to his political will.

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[00:00:04] Jeff Schechtman: Welcome to the WhoWhatWhy podcast. I’m your host, Jeff Schechtman. It was Francis Fukuyama who famously announced the end of history when the Berlin Wall fell and the Soviet Union Capitalism had triumphed, or so we believed, and Russia became the great new frontier, a colossal experiment where the ideals of market liberalism collided head-on with corruption, crime, and authoritarian impulses lurking beneath the surface. This wasn’t merely a transition. It was capitalism on steroids, a wild east where Big Macs symbolized freedom and suitcases of cash symbolized reality. Over three decades, Western corporations charged headlong into Russia’s exhilarating chaos, confident they could change the nation, only to find themselves changed instead. Putin rose, democracy faded, and yet companies stayed put, shrugging off political brutality as the cost of doing business. When tanks rolled into Ukraine in 2022, illusions shattered, businesses fled, fortunes evaporated, and the hard lesson remained elusive. Even now, many firms stand eager on the sidelines, impatient to return, indifferent to the ethical quagmire, so long as profit beckons. My guest, Charles Hecker, witnessed this saga unfold not from a safe distance, but from the tumultuous streets of Moscow itself. As a journalist for the Moscow Times, and later as a geopolitical consultant guiding businesses through Russia’s labyrinth, Hecker saw firsthand the intoxicating allure of easy money and moral compromise. His book, Zero Sum, The Arc of International Business in Russia, isn’t just a cautionary tale. It’s a provocative indictment of corporate complicity and geopolitical naivete. Even today, corporations still find it so difficult to resist Russia’s poisoned golden promise. It is my pleasure to welcome Charles Hecker here to the program to talk about his new book, Zero Sum. Charles, thanks for joining us today here on the WhoWhatWhy podcast.

[00:02:24] Charles Hecker: Jeff, thank you so much for having me, and thank you for that fantastic introduction and summary of the book. It’s a pleasure to be with you.

[00:02:30] Jeff Schechtman: Well, it is a delight to have you here. Talk a little bit about what the atmosphere was, because I think it is something that people completely and absolutely forget what the atmosphere in Russia was at that time after the Berlin Wall fell, after the collapse of the Soviet Union.

[00:02:47] Charles Hecker: Well, I think you phrased it perfectly when you called it exhilarating chaos. I mean, imagine the Soviet Union essentially overnight ceases to exist. This is one of the world’s largest countries. And the next day, the Russian Federation becomes its largest successor state, and is essentially, without too much exaggeration, Jeff, sort of making it up as it goes along. Very little of the Soviet template was useful or worthwhile or worth anything in Russia. And you had a country that was trying very hard to move away from its Soviet past, but wasn’t really sure or didn’t really have the know-how of how to get there or what the destination even might be. I mean, it is sort of difficult to overstate the level of chaos. You had complete government collapse. You had a collapse in law enforcement. The country was becoming rampantly criminalized, politically rudderless. And before I paint too pessimistic a picture, a few things were happening at the same time. And that is that Russia, it turns out, had a pretty robust and resilient or emerging entrepreneur class that was learning as it went and how to do business. Foreigners were pouring into Russia, particularly Moscow and St. Petersburg, by the plane load. And this sort of hormonal atmosphere of a country entering its sort of childhood and early teen years produced some amazing moments. I mean, Moscow for a while had one of the most exciting nightlifes you could imagine. It had an incredibly creative arts scene. Socially, the country was remaking itself. And I guess really just to sort of draw the point home here, no matter how difficult the environment was in Russia from a business perspective or from a political perspective, this was all happening at a time when business was globalizing everywhere. And so countries that we had never thought of doing business in, that were either too far or too opaque or too risky, were suddenly becoming hot topics. And Russia was smack in the middle of all of that.

[00:05:32] Jeff Schechtman: And yet, even though there was no template for what was about to happen, it seems that there was something in the Russian cultural DNA that profoundly impacted the way business evolved and ultimately the way corruption evolved.

[00:05:49] Charles Hecker: Yeah. I mean, this is sort of interesting. What you saw was, you know, in spite of the efforts to create what looked like or a facsimile of or a Russian version of a market economy, it was difficult to overcome some of the habits and templates and patterns of the Soviet economy. Central planning was certainly gone. And a lot of Soviet enterprises collapsed completely, never to be seen again. What survived, though, was a series of networks. These were networks that were forged inside the Soviet bureaucracy. They were networks that were formed inside communist party circles, where people knew each other and sort of helped each other get through the chaos of the Soviet period. There were university relationships formed in the Soviet period that crossed over into the post-Soviet and sort of proto-capitalist Russia. And it was those networks, those relationships that helped build the earliest days of the Russian economy. And you’re right to point out that one of the other things that carried over from the Soviet past was sort of corruption and the criminalization that greased the wheels of a very sort of sclerotic Soviet economy. Forgive me, I’m sort of mixing my metaphors there a little bit. And those shortcuts through centralized communist party planning were the same sort of shortcuts ultimately that were deployed to work through and around the market system.

[00:07:30] Jeff Schechtman: What was the attitude, not of the corporations that came into Russia, but talk about what the attitude at the time was on the part of the U.S. government, on the part of the West in general, towards what was about to happen inside Russia?

[00:07:46] Charles Hecker: Well, I think the attitude in the West, in political circles, was fairly unanimous for quite some time. And that was, we should embrace Russia, we should invest in Russia, we should draw Russia into the global economy for a number of reasons. Maybe first and foremost, a Russia that we’re engaged with commercially would be less of a military threat than the Soviet Union was. That theory about how countries with McDonald’s, two countries that have McDonald’s restaurants don’t invade each other, that sadly has been put to rest. But the thinking was, if we integrate Russia into the global economy, then it’s less of a military threat. The other thing that we thought is, with more Western money, with more Western expertise, Russia would get better at building an open market economy. And then I guess, finally, the assumption that we made, and that we were encouraged to believe by Western governments, was that if we could build a market economy in Russia, we could also, and should also, simultaneously build a liberal democracy. And in fact, that the two had to exist side by side, and that you really couldn’t have one without the other. So we were told by presidents and prime ministers in Europe and the United States, the business community was told, go invest in Russia. And the public sector in the United States and across Europe spent billions and billions of dollars in financial and technical assistance to Russia to get the country off its feet in the wake of the Soviet collapse. And we all thought, at the end of the day, this would pay a huge dividend to all of us in the face of a peaceful and prosperous Russia that we could do business with.

[00:09:48] Jeff Schechtman: And what consideration was there on the part of governments, but particularly on the part of business, towards Russian leadership, Russian government, and Putin specifically?

[00:10:00] Charles Hecker: Well, I mean, in the early days, I mean, just very briefly about Yeltsin. Yeltsin was an unreliable political partner, and the Russian economy was an unpredictable place to do business. But generally speaking, the business that the West did in the 1990s was phenomenally profitable. And so the political chaos and the criminality and all of the other sort of political and geopolitical risks at the time were tolerable because the returns were astronomical. When Putin came to power, following the turn of the millennium in 2000, Yeltsin famously resigned on New Year’s Eve of 1999 to 2000 and appointed Putin, who was his prime minister, to be president. Initially, the West’s reception of Putin was quite enthusiastic. First of all, he was a great physical contrast to Yeltsin. Yeltsin was extremely unhealthy. Late in the days, he was publicly drunk. He didn’t always show up to work. And Putin was robustly healthy, didn’t drink, and was in the Kremlin every day at his desk. So that was a big win right there. Secondly, Putin in the early days surrounded himself with a lot of liberal reformers, economists and lawyers who were making changes to the country’s tax regime and to other aspects of doing business that the West really liked. And I guess the thing that the West really liked the most was that they anticipated that Putin would be there for a while. And the one thing that businesses like to do more than anything else is they like to make plans. And it’s easier to make plans in countries and in markets where you’ve at least got some political and economic consistency. And in the early days, that’s what we expected from Putin. The big question really is, did Putin become who he is today, or was he always that guy? And it just took us a while to spot it. And people are of varying opinions on that question. But slowly but surely, Putin began to reveal himself as less of a democratizer and a reformer and a sort of market economist and little d democratic politician than we thought he might be. But up until the global financial crisis of 2008, again, the numbers in Russia were phenomenal. You know, plant any seed and it would grow kind of thing. And so some companies look the other way. Some companies chose not to look at all. And some companies knew exactly what was going on with Putin. And they said, well, you know what, the quarterly reports look fantastic. So let’s keep going.

[00:12:58] Jeff Schechtman: And was there a sense that things were changing in Russia during these early days of Putin? Or was it more like the frog in the boiling water?

[00:13:09] Charles Hecker: Yeah, that’s a good one. I think it was a little bit the frog in the boiling water, although I kind of hurried to add that I think there were certain moments when we knew the temperature just went up a couple of notches. One of them, for example, came in 2003. And that’s just three years into Putin’s first term. And that’s when he nationalized the oil firm Yukos and imprisoned its majority owner and CEO, Mikhail Khodorkovsky. And, you know, that was a real shocker to the international business community. And for a while, Western investors were thinking, well, what does this mean for us? And who’s going to be nationalized next? Could it be a Western company? What other Russian companies might he seize and nationalize? And what does this tell us about the direction of politics and business in general? There was a moment in 2007, the very famous Munich Security Conference speech that Putin gave, where he said, it is no longer in Russia’s national interests to participate in a system that has been largely designed by and to favor the West. Those were moments when, if you’re a frog in the pot, you felt the temperature go up. But I think what we found in Western companies, and this happens in lots of places, not just in Russia, but I think that we found is that Western companies just sort of recalibrated their risk thermometers, if you will, and kept going.

[00:15:02] Jeff Schechtman: Talk a little bit about how Putin viewed what was happening in terms of businesses there, that everybody was making money, that there were vast riches to be had. How did Putin see that? Yeah, thanks. That’s a really good question.

[00:15:20] Charles Hecker: I think there came a moment when Putin became concerned that allowing too many foreigners and too many Russian private sector players, you know, the oligarchs, allowing too much control over the economy to private hands, whether they were local or foreign, was a threat to the Russian state and potentially a threat to him. And, you know, this triggered not only the nationalization of Yukos, but the subsequent and ongoing crackdown on the oligarchs, and then a sort of gradual tightening of the rules of foreign investment in Russia. You know, what sectors would international companies be welcome in? What sectors wouldn’t they be welcome in? And what kind of caps might Russia put, or did Russia did indeed put, on investments in strategic Russian sectors? And I think that, you know, and this, again, happens in lots of other countries, and that is political leaders with autocratic inclinations see the massing of private wealth and power as a threat. And, you know, at a certain point, somewhere in the mid 2000s, in the middle of the first decade of the century, more than half of Russian GDP started to come from state-owned companies. And so that was a big switch. And so I think, you know, the answer to your question, Jeff, is that Putin saw a threat in the prosperity of private money in Russia, and he moved to control it.

[00:17:08] Jeff Schechtman: Were there any business leaders, either global, international leaders, American leaders in the business community that had a sense of what was to come that could foreshadow what was about to happen?

[00:17:22] Charles Hecker: Well, I mean, if we’re talking about the full scale invasion of Ukraine, very few people, including a lot of Russians, saw this coming. In the business community, I mean, there were individual business leaders and business organizations that met with Putin, and that met with him periodically. And, you know, these are big things like, you know, European business associations, and chambers of commerce, and the American chamber of commerce, and, you know, the heads of big American banks, and big American industrialists, and, you know, their European counterparts, they met with Putin periodically. And, you know, but those weren’t the sorts of meetings where you could really get a sense of his broader strategy and macro politics. Some of these meetings were largely polite. They were to help discuss individual transactions, or just sort of formalities in the diplomacy of business. But broadly speaking, even after the illegal annexation of Crimea, first of all, very few companies left Russia. And secondly, nobody saw that as a prelude to the full scale invasion of Ukraine.

[00:18:47] Jeff Schechtman: And the companies that stayed, talk about their attitude. I know it’s generalizing to a certain extent, but talk about what they were willing to compromise in order to stay, in order to keep the money flowing.

[00:19:02] Charles Hecker: Yeah. Interesting question, because you kind of want to wonder now, you know, who’s smart, the companies that stayed or the companies that left? There were a lot of different reasons that companies gave for staying in Russia. You know, some of them said, look, you know, we’re just here selling consumer goods, you know, selling floor cleaners, or, you know, cookies. We don’t really have anything to do with this war. You know, we don’t support the war, but we’re not involved in a strategic Russian sector. So leave us out of it. And some of those companies even got backing from their shareholders who said, look, you know, we don’t care that much that you’re staying in Russia, you know, keep your heads down, make your cookies and make your floor polish, and, you know, just get on with business. There were other companies that said leaving Russia will be enormously damaging to the company, because exiting Russia became a brutally bureaucratic procedure. Companies were being allowed to exit only after taking a major haircut and selling their companies at a huge discount. So they sort of thought, you know, leaving is just as damaging as staying. There were some companies that said, you know, our turnover here isn’t really all that big. So let’s just keep our heads down and hope that nobody worries about us. You know, by and large, the companies that left were the big, you know, B2C companies, business to consumer companies, you know, big brands that felt the heat of potential boycotts as a driver to leave. And there were other companies that left because sanctions made it illegal for them to do business in Russia. Other than that, if you were outside those sort of hotspots, um, companies were content to stay. They cut back on investment. They cut back on sales and marketing. They cut back on sort of HR and recruitment. And, you know, they didn’t, they wouldn’t, the promise that they made essentially was, we’ll stay, but we won’t invest in our Russia business, and we won’t grow our Russia business. So please don’t think badly of us.

[00:21:34] Jeff Schechtman: Talk about the human element. As Putin’s authoritarian grip on power in Russia continued to grow, and certainly the sense of it continued, how did international executives of these companies respond to it? And was there concern for their own personal well-being?

[00:21:53] Charles Hecker: Yeah. I mean, I think that, that for companies that were conscious of the impact of working with an authoritarian government, um, with the impact that that would have on their brands, um, that was one of the reasons why they left. Um, you know, they saw the crackdowns on public protests, um, and they knew that paying taxes in Russia was funding the war on Ukraine. Um, and they really didn’t want to see that happen. Um, as far as the personal security of individual executives, you know, the security environment in Moscow became incredibly uncertain and unstable and unpredictable, and became increasingly, I guess the word you could use is uncomfortable, when President Putin started calling the countries that were supporting Ukraine hostile nations. And the companies that came from those countries were also seen as sort of hostile companies or emissaries of hostile countries. And you couldn’t help but wonder whether that would have an impact on your personal security. And, and to be sure, even though there are Western executives who continue to live and work in Russia, um, and say that by and large, they’re getting along okay right now, um, at the beginning of the war, um, it was really unsure that this is how that would turn out. And so a lot of Western executives packed up and left. Um, and, you know, it was as their companies left, they left with them.

[00:23:39] Jeff Schechtman: And talk about the way in which the chaos, the sort of capitalistic chaos of those early days evolved. Did the companies become more stable? Did that chaos resolve? Talk about that.

[00:23:53] Charles Hecker: Yeah, that’s the thing. I mean, Russia did evolve as a market, you know, even though it was evolving in a sort of different direction, politically and geopolitically. Um, as you get into the 2010s, the 20 teens, you know, and sort of towards the annexation of Crimea, a lot of Western businesses and business people were saying, look, you know, this isn’t an easy place to do business, but it’s a lot less difficult than it used to be. And that it was a place where with a certain amount of due diligence and a certain amount of kind of, you know, legal safeguards and, you know, crossing your T’s and dotting your I’s very, very carefully. It was a place where you could get deals done. I mean, in the reporting of the book, I talked to a lot of executives from all over the world. And a number of them said that, you know, Russia, you know, it wasn’t a slam dunk. But compared to the 90s, doing business in Russia became much more predictable. But what about the corruption? Yeah. What about that? Thank you for. Hmm. Yeah. So we haven’t really touched on that yet. And you’re right. Look, in 19 in the 1990s, corruption was absolutely rampant, sort of in the private sector and in the public sector. I mean, you had all kinds of people holding their hands out for bribes to grease business deals. And that was everything from government officials to gangsters to, you know, petty bureaucrats who, you know, approving visa applications and residence permits and all of that kind of stuff. It was really bad. And, you know, Russia was was globally raked over the coals for that. It was ranked, you know, close to the bottom of the ease of doing business and transparency, internationals, corruption perceptions index. I think what happened over time is that Putin kind of brought the corruption in house, if you will. And, you know, what used to be sort of organized criminal gangsterism and corruption, you know, the gangsters went to work for the government. And, you know, Putin nationalized corruption to a certain degree, I think it’s fair to say. Look, again, there are business people who I spoke to for the book who said they were able to do deals and very big deals in Russia without paying bribes. And, you know, perhaps the bigger the deal, the easier it was, the more high profile your deal, the easier it was to avoid corruption because people didn’t want to touch a big high profile deal that was politically significant. And then also, you know, there were companies that knew how to do business in a clean fashion that were compliant with U.S. law or European laws and with Russian laws and, you know, were able slowly but surely to do business in a clean manner. And again, that was expensive and time consuming and difficult. And so not every company spent the time and the effort to resist and work around corruption. And that’s why it still remained an issue and remains an issue to this day.

[00:27:23] Jeff Schechtman: And who’s still there? I mean, how many international companies still are doing business in Russia today?

[00:27:30] Charles Hecker: Yeah, I mean, there are still hundreds of international companies doing business in Russia. I mean, hundreds left, to be sure. And, you know, but for all of the high profile exits like McDonald’s and Coca-Cola and Boeing and Airbus and, you know, that list is pretty long. A lot of the companies that stayed are companies we’ve never heard of, you know, small European manufacturers and, you know, below the radar kind of companies that are also, you know, they’re also companies that have not been affected by sanctions. Although I should correct myself by saying that it is very, very difficult for any company to get money into and out of Russia right now. All Western companies, all international companies are suffering under the blockade of the export of profits and dividends. So, you know, even if you aren’t specifically, you know, worried about sanctions by, you know, by who you do business with in Russia, doing business there is now much more time consuming and expensive as a result of having to work around the sanctions that, you know, the G7, essentially all the G7 countries have put on Russia. But there, you know, there is still a Western presence on the ground in Russia. And, you know, some of them say life is incredibly difficult. Others say that, you know, they’re just getting on with business and things aren’t as bad as we might believe.

[00:29:17] Jeff Schechtman: And talk about the decline in the economic potential of Russia, the economic prosperity that seemed inevitable at a certain point.

[00:29:27] Charles Hecker: Yeah, I mean, you’re right. The assumption was that Russia had a very prosperous future ahead of it. And that, you know, Russia was for a while, you know, Russia made the G7 into the G8. And Putin and his country had a seat at the big boys table. And, you know, Russia was slowly but surely integrating with the global economy. You know, look, a lot of Russia’s prosperity is dependent on the price of oil. And the price of oil is dropping as we speak. And there’s a cap on what Russian oil can sell for as a result of sanctions. The Russian economy is under enormous pressure right now, Jeff. Inflation is in the low double digits. The central bank interest rate is at 21% for anybody wishing to borrow money or obtain credit in Russia. That’s a massive amount of pressure on business. There’s a labor shortage. Enormous parts of the of the economy have been essentially militarized. And government spending on the war is having an incredibly distorting effect on the Russian economy. From an international perspective, you know, the war on Ukraine has lasted much, much longer than anybody anticipated. And the economy has changed. There are new players that we don’t know that much about, but who have connections in the Kremlin that, you know, that govern how business gets done. Russian intellectual property law has been absolutely gutted. And so fakes and counterfeits and locally produced products of patented Western goods are being made in Russia and sold without the patent holder’s permission. And, you know, I just, I think that the way the Russian economy works has changed. You know, listen, you still have reports of, you know, it’s impossible to get a restaurant booking in Moscow and the traffic jams at midnight and business as usual. But I think it’s a little bit harder to believe that against the backdrop of the macroeconomic picture and also the geopolitical picture.

[00:31:52] Jeff Schechtman: And if the war comes to an end, some kind of end, some kind of ongoing permanent ceasefire, whatever the resolution is, do you anticipate that the economic underpinnings that we’ve been talking about, the way business is done will change?

[00:32:09] Charles Hecker: I do. I think that, you know, under all of the ifs that you mentioned, and they’re all very big ifs, you know, companies will go back. You know, there’s no question if all of those ifs get resolved. But they’re not going back to the Russia of the 1990s. They’re not going back to the Russia of the 2000s. You know, there is no pot of gold anymore in Russia like there was in the early days. Companies will have to do business very differently and under a very different set of assumptions of, you know, how much they can invest, how much they can grow, what they can expect to get out of that investment. You know, the rules of the game, I think, have changed irreversibly for the foreseeable future. You know, look, Jeff, I may be proved wrong and all of this stranger things have happened. If it is politically expedient for Putin and for the Russian elite, they will make accommodations for international business. And maybe, you know, the return won’t be as difficult as it sort of feels it will be right now. But at the current moment and until you tick an awful lot of boxes, you know, and meet an awful lot of preconditions for the return, I think it’s going to be super tough.

[00:33:34] Jeff Schechtman: And in fact, it could wind up being worse. Well, you know, careful what you ask for.

[00:33:40] Charles Hecker: And I think that there are a lot of companies that are thinking to themselves, if I go back to Russia, you know, how long might it be before I’ve got to turn around and leave again? And that’s one of the breaks on the return of companies to Russia. You will really, really want resolutely, if you can, and you probably can’t, but you’ll want as best as possible to rule that scenario out. And that’s very difficult to do.

[00:34:11] Jeff Schechtman: Charles Hecker, his book is Zero Sum, the arc of international business in Russia. Charles, I thank you so very much for spending time with us here on the WhoWhatWhy podcast. Jeff, it’s an absolute pleasure. Thank you very, very much for having me on the show. Thank you. And thank you for listening and joining us here on the WhoWhatWhy podcast. I hope you join us next week for another WhoWhatWhy podcast. I’m Jeff Sheckman. If you like this podcast, please feel free to share and help others find it by rating and reviewing it on iTunes. You can also support this podcast and all the work we do by going to whowhatwhy.org/donate.