r, p. 94).
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 comprehensive legal structure. The Russian economy was then taking the very first steps away from what Yergin and Gustafson call "a command economy, which was run by planners of the center . . . to a free market" (1993, p. 4). Yergin and Gustafson described this 'free for all' investment environment of the early 1990s:
In the West, it is assumed that a contract, once signed, is a contract and thus enforceable. This concept of 'sanctity of contract' appears exotic to many Russians, as does the notion of 'conflict of interest.' Taxes are high; worse, they are apt to be changed at a moment's notice . . . The Russian banking system is chaotic . . . When laws or regulations change, there is no central source to which the investor can refer to find out what is happening. Bills frequently go unpaid. Corruption is a plague. In the event of a dispute, there is no reliable pat...