ST. PETERSBURG, Russia — Two weeks into the coronavirus lockdown, Aleksandr B. Zatulivetrov, a Russian businessman, had had sufficient.
In defiance of President Vladimir V. Putin’s orders, he introduced that he would reopen one among his two eating places within the middle of St. Petersburg except the Kremlin declared a state of emergency, a authorized provision that might permit him to cease funds to banks and landlords and power the federal government to supply compensation.
“The place are your voices? All of us have tens of employees who want jobs!” Mr. Zatulivetrov, 48, wrote in a plea to other restaurant owners to affix him. ‘We’re dying!”
Due to a “wet day fund” of more than $550 billion, amassed from the sale of oil when the costs have been excessive, Russia is likely to weather the economic storm created by the coronavirus higher than many nations. However it dangers dropping a lot of a sector that Mr. Putin has for years touted as the key to Russia’s long-term financial success — small and midsize companies.
Not like many Western governments, the Kremlin has up to now supplied little help to enterprise. The general aid package deal in Russia has amounted to lower than 1 / 4 of what’s being injected in Germany, and a lot of the help has been geared toward serving to massive firms, lots of them owned or carefully entwined with the state. Solely round $10 billion has been pledged to small companies up to now.
Aleksei A. Navalny, one among Mr. Putin’s most vocal critics, has stated that the help ought to be pumped as much as $27 billion, however the Kremlin has accused him of populism.
Because the coronavirus pandemic started to advance by way of Russian cities on the finish of March, Mr. Putin issued orders that required companies to each shut down and proceed paying salaries. However he didn’t specify the place homeowners have been presupposed to get the cash.
“I paid all the pieces I needed to my workers,” Mr. Zatulivetrov, 48, stated in an interview.
With entrepreneurs like Mr. Zatulivetrov largely left to fend for themselves, the pandemic is threatening to undo a long time of effort to diversify Russia’s economic system. If small and medium companies fail, the well being disaster will go away Russia’s economic system disfigured and much more depending on the Kremlin.
These companies account for a small a part of Russia’s output in contrast with state-run behemoths like Gazprom and Rosneft, however they’re a very vibrant a part of the economic system, using greater than 18 million folks, or 1 / 4 of the work power, and pioneering new fields past oil and pure fuel.
Because the “shock therapy” market overhaul of the early 1990s, Russian entrepreneurs have gone from shady trades equivalent to promoting tainted alcohol in kiosks to, in some instances, operating internationally acclaimed eating places and producing high-quality clothes and meals. Nonetheless, the angle of the Russian authorities towards them has modified little because the instances when the Soviet monetary police, the Division Towards Misappropriation of Socialist Property, fought ruthlessly towards “profiteers” reselling American denims.
In March, Mr. Putin reversed his earlier reward for small companies, saying in an interview that “there are particular grounds” to treat enterprise homeowners as swindlers, echoing the Soviet bias towards entrepreneurs however considerably undercutting his personal cheerleading of smaller trade.
“The federal government believes folks in retail are all crooks,” stated Irina M. Nurullayeva, proprietor of a series of 4 flower outlets in St. Petersburg. “The issue is that each one these officers haven’t been in contact with regular life because the 1990s, when this might have been the case.”
Lalya N. Sadykova, an proprietor of a series of 12 barbershops and three magnificence salons in St. Petersburg, stated she had up to now acquired no assist in any respect. Her a number of letters to the local authorities have gone unanswered. With little cash left, she purchased about 4 kilos of rice, flour, buckwheat and a bottle of cooking oil for every of her 17 neediest employees, lots of them younger single moms.
She complained that taxes had been deferred, quite than waived, in the course of the lockdown.
“They needed to cancel taxes at some point of quarantine, not merely supply a deferral,” Ms. Sadykova, 36, who began her enterprise in 2002 with solely $500 in her pocket, stated in an interview in one among her closed salons. “We scream all over the place that we’re such a terrific nation, however when push involves shove, the federal government can not assume accountability.”
To this point, the Russian authorities has supplied backed loans, restricted tax cuts and tax holidays to assist companies. The backed loans grew to become a humiliation when the nation’s economic system minister could not get one himself despite calling two banks to check the system.
Mr. Putin additionally supplied two grants of $160 per employee to cowl a portion of their salaries for April and Could. However few qualify for the grants, which cowl solely corporations which have retained no less than 90 % of their workers as of April 1. In any case, $160 is insufficient for the losses incurred, protecting solely a 3rd of a mean wage and just for two months, enterprise homeowners stated.
“If this lasts for longer than three months, the entire story of small enterprise will turn into a part of the historical past textbooks,” stated Eduard M. Emdin, 50, a co-owner of Wynwood, a hotel in St. Petersburg named after a neighborhood in Miami well-known for its graffiti partitions.
Mr. Emdin continues to be paying salaries and even supplied to place up a few of his 33 workers within the lodge’s 38 rooms, most of which stand empty. In Could, he faces a $100,000 cost to the town authorities, however up to now there was no speak of deferring it.
Propped up by a windfall of petrodollars, the Kremlin has little incentive to rescue small corporations. In 2019, the Russian price range received 39 percent of its income by taxing the sale of oil and fuel. These revenues will drop considerably this yr with the drop in oil costs, however the Russian Finance Ministry stated it might use $27 billion from its wet day fund to make up the distinction.
“Their high precedence, bluntly, is to economize and spend as little as doable with out creating important social and political instability,” stated Vladimir Tikhomirov, a Russian economist working for BCS World Markets in Moscow, stated of the Kremlin. “If it’s a small cafe or restaurant that can by no means be capable to maintain the disaster, they won’t see it as a giant tragedy.”
Nowhere in Russia is the potential power of small enterprises extra evident than in Mr. Putin’s native St. Petersburg, Russia’s grand former imperial capital that now largely lives off tourism.
In 2015, two medical college students and an English instructor from provincial Russian cities got here to St. Petersburg with a dream of opening a bar. Having capital of simply $15,000, they began in a basement underneath one among St. Petersburg’s sprawling courtyards, not removed from the place Fyodor Dostoyevsky wrote “The Brothers Karamazov.”
The Mexican-themed bar, El Copitas, opened on the peak of a home financial disaster, propelled by one other drop in oil costs and Western sanctions over the annexation of Crimea and meddling in Ukraine. Regardless of that, inside a yr, El Copitas was voted one of many high 100 bars on the planet. Final yr, it was ranked No. 27.
Artem V. Peruk, one of many bar’s co-founders, stated that the Mexican authorities had supplied them extra assist than the native one in St. Petersburg.
Many different businesspeople in St. Petersburg stated that they didn’t count on assist from the Russian authorities and can be comfortable simply to be left alone.
“I achieved all the pieces actually and I don’t count on any assist,” stated Denis S. Shevchenko, the proprietor of Gate 31, a model of regionally produced clothes. “Simply give me the foundations and let me open, even for one buyer at a time,” he added.
Mr. Zatulivetrov, the restaurateur, little doubt felt the identical. However 4 days after he introduced his plans to reopen, the police known as him for a chat. Although he had already acquired 177 reservations, he shortly modified his thoughts and, in a sudden turnaround, grew to become involved about public well being.
“Solely by sitting at house can we stop the avalanche-like unfold of the coronavirus,” he said in a Fb publish final week.
One other entrepreneur, Sergei V. Shamakhov, 35, who in 4 years constructed a dental clinic with a employees of 50, described the conundrum.
“In Russia, you’ll be able to develop a enterprise quickly, however there’s a draw back,” he stated. “You possibly can die out as shortly, too.”
Andrew E. Kramer contributed reporting from Moscow.
— to www.nytimes.com