Vladivostok’s Used-Car Dealers Are Mad as Hell

VLADIVOSTOK, Russia—The most remarkable thing about Vladivostok is how thoroughly Russian it is. It’s 4,000 miles from Moscow, but only 600 miles from Tokyo and just a couple of hours’ drive from both China and North Korea. Still, you’d be hard-pressed to find many signs of Asian-ness amid the concrete block apartment buildings, Soviet war memorials, and overwhelmingly white faces. My translator, a freelance tour guide, said her charges are often disappointed by how “un-Asian” Vladivostok looks.

Russia’s firm control over this remote outpost has to be counted as a great achievement, first by the Russian Empire, which founded Vladivostok in 1859 and made it the terminus of the Trans-Siberian Railway, and then by the Soviets, who made the city a naval base, closed it off to foreigners, and gave it the distinctive look it has today: concrete high-rises perched on the lush, steep hills that overlook the Pacific Ocean.

But today, Vladivostok’s identity as a Russian city is undergoing a transformation. The city represents Russia’s purported desire to open up to Asia—Vladimir Putin has dubbed Vladivostok the “Gateway to the Pacific.” And Moscow has promised to back up that rhetoric, choosing Vladivostok to host the Asia-Pacific Economic Cooperation summit in 2012 and undertaking several ambitious new infrastructure projects, like business-class hotels and new bridges and roads, to help the city prepare for the event.

But in front of that “gateway” are some metaphorical barbed wire and guard dogs, as Moscow tries to figure out how to maintain its control over this strategic part of Russia in the face of a declining population and a rising China.

The European part of Russia can feel pretty far away. When Vladivostok’s businesspeople and bureaucrats show up to work at 9 a.m., their colleagues in Moscow are sound asleep—it’s 2 a.m. there—which makes it difficult to conduct business with the capital. Recently, President Dmitry Medvedev proposed a reduction in the number of time zones from 11 to three or four.

The government has tried other schemes to beef up ties between the Russian Far East and the rest of the country. One, designed to shore up the Russian population here, encourages ethnic Russians living in former Soviet republics, particularly in Central Asia, to move to strategically important but depopulated areas, most of which are in the Far East.

Another program tries to encourage people in the Far East to visit the capital by halving airfares on flights to Moscow. For whatever reason, the discounts are available only to people under 24 or over 60. Or, as Svetlana Kosikhina, the dean of the international relations department at Amur State University, put it, “The young, who don’t have enough money to travel, and the old, who aren’t healthy enough to travel.”

Unfortunately, whatever effect these measures have had on winning over hearts and minds has been far outweighed by Moscow’s attempts to shut down car imports from Japan.

It’s not quite accurate to say that there is nothing Asian about Vladivostok—if you look carefully at the cars on the street, you will see that well over 95 percent of them have the steering wheel on the right-hand side, even though traffic, as in the rest of Russia, travels on the right side of the road. That’s because the cars are from Japan, the fruit of Vladivostok’s most dynamic industry: used-car sales.

Until the beginning of 2009, hundreds of thousands of cars were imported every year from Japan to Vladivostok, where they were sold on to buyers in other parts of Russia. This trade provided people in Vladivostok with a good living (boosters say 100,000 of the city’s 600,000 residents were employed in some kind of car-related work) and with cheap, high-quality cars.

(I asked several drivers of right-hand-drive cars if they felt it was dangerous—passing, for example, would seem to become much more treacherous when you’re on the right side of the car. But every single one of them claimed that the cars were perfectly safe. One person even argued that right-hand-drive cars were safer, because when you parallel parked at a curb, you got out at the curb rather than in traffic. Official government statistics tell a different story, however: Right-hand-drive cars are twice as likely to be in an accident.)

Nevertheless, the Russian government is cracking down in an attempt to bolster the Russian domestic auto industry. At the beginning of 2009, the government increased customs duties on imported cars, prompting protests so serious that the government flew in riot police from Moscow to break them up.

At the beginning of 2010, the government is planning to prohibit the importation of cars without Vehicle Identification Numbers. Cars produced for the Japanese market don’t have them. The 2009 fee increases “hurt this business, but the new rules will kill it,” said Alex, a car dealer at Vladivostok’s Green Corner, the open-air car market on the outskirts of Vladivostok that got its name from the large amounts of money that change hands there.

One company that imports cars from Japan, VladTrek, has cut its work force from 200 to 30 over the last year, and it sells only about a tenth the cars it used to, Roman Sultanov, the company’s vice general director, told me. He received me in his office, which is dominated by a huge schedule of car auctions across Japan. The company is now shifting gears to import parts for the cars already in Russia, he said, but that is a far less lucrative business.

In all my stops before Vladivostok, I had heard about the problems with the car import business; the stories were usually offered up as Exhibit A in the case for “Why Moscow Doesn’t Care About the Far East.” As on America’s frontier, there is a bit of a libertarian streak here, and government interference has stirred up a lot of resentment. “We [in the Far East] like to be independent,” Sultanov said. “We don’t need help, but we don’t want the government to interfere with our business.”

The fallout over car imports has had a clear political impact. In stark contrast to my previous stops in Russia, where I often faced reticent interviewees and dark warnings about the KGB, in Vladivostok, people freely and frequently volunteered slanderous opinions of the Russian government.

I heard anti-government sentiment all over town, but understandably, it’s most prominent at the Green Corner, where business was down so much that there were more dealers sunning their paunchy bellies in the warm September sun than attending to customers.

One dealer told me that Putin shut down the Japanese imports because he has stock in AvtoVAZ, Russia’s main car manufacturer, and thus loses money from Japanese imports. “Putin says, ‘Why do I have to care about the Russian Far East? Just one Lada factory has more voters than the whole Far East,’ ” another, Andrey, told me. A third, Dmitry, told me that the government is just trying to horn in on the action: “This business will always exist, because people want used cars. But the question is, who will control it? It has been a private business until now, but probably some government people are going to come and run it.”

Sultanov said flatly, “I’m against Putin. He’s not smart, he’s like Hugo Chávez or Alexander Lukashenko or the president of some African banana republic. People in other Russian cities don’t know anything; they just watch TV. We can go abroad and see real freedom.”

And he said something I had already heard several times in Russia: “Even in Communist China, it’s more free than here.” He described how in China, new businesses are exempt from taxes for three years, and interest rates are a fraction of the Russia rate. “In China, it’s getting easier to do business. Here, it’s getting harder.”

Click here to view a slide show about where Russia meets China.