American Express did not confront the difficulties other companies experienced when establishing itself in post-Soviet Russia. The reason? The company had nearly a century of experience in the region, albeit with some long interruptions.

In 1887, American Express opened a cargo-handling outlet and travelers' checks cashier via an agent in St. Petersburg, later establishing its own travel office in the former imperial capital in 1916. The business was swept away the following year, however, when the Bolsheviks seized power.

Richard Weden, general director of American Express in Russia, said he believed the office was briefly re-established in 1921. But AmEx did not seriously return to the Soviet Union until 1954, operating out of what is now the Metropol Hotel as the U.S. representative for Intourist, the Soviet-run travel agency.

In those days, the company's business revolved around inbound foreign tourists, but by the mid-1990s, the company's focus changed completely.

"By that time [1994-95], there was a larger number of multinational accounts coming here," Weden explained. "And they wanted the same level of professional travel management services here that they had in Singapore or London or Tokyo."

In response, the company restructured its travel business and established a professional business travel program, a responsibility assigned to Weden. He had already successfully achieved similar undertakings for American Express in the emerging markets of Latin America and China, and Russia was the next great frontier.

Today, American Express in Russia has four businesses: the card business (for foreigners spending money in Russia); the business travel section (for Russians and multinational accounts, of which the company has 185 major clients); the travelers' checks business (arranging for banks here to sell travelers' checks on the company's behalf), and the representative office of the American Express Bank.

A Russian staff

American Express employs 100 people in Moscow and St. Petersburg. Weden said the company focuses heavily on training its staff, and he noted with some pride that the expatriates on his staff have been reduced from five to two.

"Essentially, this is a Russian company. So we want to make sure it's staffed, run and managed by Russians, and that is one of my jobs."

The staff at American Express in Russia includes a mining engineer, a physicist and some business school graduates. It also has some employees (around half a dozen, according to Weden) who have been with the company since Soviet days.

Prior to the crisis, American Express' travel business was achieving compound annual growth of 75 percent.

"We started with the [business travel] section when I came here [in 1995] at a little over $3 million and were on $40 million pace for 1998," Weden said. "That is where we would have ended up ... but as a result of the crisis, our growth was not as strong as we were expecting. Still, [we had] a big number.

"With the card business, we were doing a sizable [turnover] number and that is also down about half."

Weden said the decline in the credit card business was driven by the decline in hotel occupancy rates. Most hotels are now running at about 40 percent occupancy rate, and room rates are down about 20 to 25 percent. The decline in volumes is the biggest contributor.

Still, Weden believes matters will improve, describing himself as a "continuous optimist" and saying that applies to Russia as well.

"I've worked all my life internationally: in Mexico, Venezuela, Argentina, Hong Kong, China and have seen two financial crises similar to the one that hit Russia last year," he recalled.

"With Russia, the writing was on the wall. Perhaps it wasn't expected in August, maybe later on in the year. But in my experience, things always bottom out and come back again, and I believe this will happen with Russia.

"So I'm not too worried. We're here for the long haul - for at least another 100 years."

Weden described doing business in Russia as something that presents "constant challenges." He said one of the major obstacles is the lack of legislation governing the card business in Russia, particularly for a company such as American Express.

"We do our own business, whereas Visa, MasterCard and Diners have local businesses here with local banks. In other words, they are exposed to local forces. So we are sort of a stand-alone here, and dealing with the Central Bank and various government authorities [who do not understand] why we operate differently from other companies presents 'challenges.'"

Surviving the crisis

But there was an upside to the compnay's "stand-alone" policy. When Russian banks collapsed after the country's financial meltdown, everyone stopped paying their "merchants," Weden said

"Because we were paying our merchants through Citibank, we were the only card accepted in this country for about six weeks."

Weden said it is sometimes hard to convince the authorities why the company has chosen this route, despite the fact that it allowed AmEx to weather the crisis. Weden said the company does intend to create closer ties with Russian banks. But that will take time.

"In the future, we intend to establish deeper relations with Russian banks and allow them to issue American Express cards. But that is temporarily on the backburner until things stabilize. But that will come; this country is too big for us not to forge closer links [with domestic banks]."

Weden said he remains somewhat in awe of how Russians, despite their hardships, have begun to adapt to the new economic environment.

"You have to keep things in perspective. I am 58 years old and if I was told that capitalism was finished because socialism had triumphed, I would be completely lost. I don't honestly believe I could cope.

"That is what has happened to this country. And people are beginning to adapt - at least in Moscow and Petersburg. The improvement in wealth is not happening anywhere near as fast as everyone hoped, but I believe there is no going back and the situation will improve."