Despite privileges not enjoyed by other Russian entities, such as a two year tax holiday, foreign joint ventures were not very popular prior to the collapse of the Soviet Union. By the end of 1989, 1200 had been formed, 140 involving American investors, and by the end 1990 2500; however, most of these companies were inactive, only about 40 being in operation (Rosten, 1991, Winter, p. 95). According to McCarthy et al, the expectations associated with this first wave of American investment in the new Russia were not met: "unfortunately, the benefits expected by the partners were not as great as had been hoped, and the difficulties were far greater than anticipated" (1993, Fall, p. 101).

These included such elementary problems as a lack of office space, communications facilities and living arrangements for foreigners and acute shortages of materials as well as other problems which continue to plague foreign investors to the present day including an indifferent and often hostile bureaucracy, corruption, criminality, scarcity of hard currency and the lack of a compr

Most of the investors in the first wave of investors were very large companies; however, there was also a sprinkling of small entrepreneurs, some of whom were hurt very badly. Galuszka cited the case of Paul Tatum who formed a joint venture with the Moscow City Property Committee to build and manage hotels in Moscow for Radisson. He said that

Economist Intelligence Unit (1998, Jan. 12). No FDI boom is in prospect. Business Eastern Europe, 6.

Not all American investors were taken in by the propaganda. Harvard economist Goldman warned in 1994 that "with ever- increasing crime and corruption, it is even more difficult to start a joint venture than it was in 1990" (1994, May-June, p. 35). Goldman pointed out that the avowedly communist regime in the People's Republic of China did a much better job of removing red tape and creating a positive climate for foreign direct investment than did the Russians. Yergin and Gustafson said that by 1993, total private foreign investment in Russia was only $1.4 billion ($400 million of which was American), as contrasted with an estimated $100 billion in the PRC.

Articles appeared in leading business publications such as the Harvard Business Review heralding a new age in Russian-American economic cooperation now that the communist dragon had been slain and Russia had turned to capitalism for the solution to its economic problems. Kvint termed Russia a gigantic firesale of undervalued assets with a vast cheap but educated work force and a plethora of natural resources waiting for the taking. He said "the climate for international joint ventures has never been better" (1994, March-April, p. 62). Lawrence & Vlachoutsicos said "the possible gains from investing in Russia today far outweigh the hazards" (1993, Ja