Paul Holmes 08 Mar 2022 // 1:21PM GMT
In the past two weeks, amid global public outrage at the Russian invasion of Ukraine, the business world generally and the public relations industry in particular have moved to sever all ties with Russian companies, including Russian PR agencies.
The International Communications Consultancy Organization has suspended the Russian PR association. The Public Relations and Communications Association has warned that it will expel members working with sanctioned clients. The Cannes Lions has said that it will not accept entries from Russia. And global PR agencies such as Hill+Knowlton Strategies and FleishmanHillard have parted company with their longtime Russian affiliates.
With the Russian PR industry now almost completely isolated from the international public relations community, I sat down for a conversation with Peter Necarsulmer, who probably knows more about the history of public relations in Russia than any other western practitioner.
I first came across Peter when he and his wife, Susan Thurman, were running an up-and-coming public affairs firm in San Francisco. They would go on to launch the first western-style public relations firm in Moscow, pioneer public affairs and marketing communications techniques in the Russian market, work on the privatization of former state-owned Soviet enterprises, and expand his firm PBN into Ukraine and Kazakhstan before its sale to H+K.
In this conversation, he provides some historical context about the public relations business in Russia, offers his insights on the events of the past few days—and looks ahead to what the future might hold for global and Russian PR firms.
Paul Holmes: First of all, tell me a little bit about how you got into the Russian market back in the Gorbachev era.
Peter Necarsulmer: We were asked by the US White House to basically handle all aspects of the Gorbachev visit to the United States [in 1990]. It was the first summit between the George Bush Sr White House and Gorbachev, and about 10 days out we were asked if we would take over everything but security.
It was quite successful. He was a rock star at that time. And we built very good relations with Georgy Organov [head of press advance for Gorbachev] and his people and we were asked a few months later by the Soviet side to handle a visit by Secretary of Commerce [Robert] Mosbacher and 25 top CEOs of US Fortune 500 companies on their first business visit to the Soviet Union.
I had not been in Russia before, but I agreed to that one too and that went extremely well and all these Soviet operatives who had relied on us for insight and operations and logistics, asked us if we wanted to open an office and become permanent there. So by January 1991 we had opened an office there and that was the beginning.
PH: As I remember it, the first phase of PR in Eastern Europe and Russia was very much about the privatization of state-owned business and the establishment of financial markets.
PN: In the case of the USSR, their primary motivation was to gain the expertise of people like us on handling big, international first-time and second-time meetings at the senior level. Gorbachev had so little experience of handling international summits and so on—though he had a heck of a lot more than Yeltsin, who followed him [in July of 1991]. So it was to understand the international communications business for government, first and foremost.
Prior to that the only thing that came close to public relations was the ideology department of the central committee. And I remember meeting with Communist Party ideology department people and they did not have a clue, because you were never to be open about anything, you were only there to support the political decisions. That was the role of PR.
But as you said, the next phase was privatization of previously exclusively state-owned assets. There was no private property. And that is when a lot of funding from the World Bank and the European Union and especially USAID began and that’s when we began establishing ourselves and making serious money.
But at the same time there were these really forward-looking, primarily US companies: the Pepsis and the Cokes, Chevron, Chiquita, sponsors who were associated with things like the ATP Tour, Chiquita bananas—we were introducing the first shipment of 10 million bananas into the Soviet Union. And then there were some limited opportunities with Russian companies.
PH: Some of the critiques I have read recently argue that the focus on privatization and private enterprise did not serve the interests of the Russian people well, and sowed the seeds for the autocracy we’re seeing today. That there was not enough on creating the civil society and legal infrastructure to support that. And that laid the groundwork for someone like Putin to come in and create a more autocratic system.
PN: I think I would look at that differently. The first phase of recovery was the transfer of state assets into private hands.
[The privatization effort had begun in the early-90s] and Russia is an obvious case of where things went corrupt and wrong, the privatization ended up benefiting a very small group of people who became known as the oligarchs. But as part of the privatization process—and we worked in Russia and Ukraine and Armenia and Moldova and Kazakhstan—to make that happen, institutions had to be developed simultaneously.
There were humongous efforts by local governments and by the donor agencies and by USAID to build these institutions that are so fundamental to a free market economy and protecting property rights. So I would say that earlier stages in the 90s there was a lot of effort to build all kinds of institutions. But all of these institutions in Russia became corrupted again and driven by the political and financial interests of the people in power: Putin for example. Today, the only NGOs left are entirely Russian and non-political.
PH: It was against that backdrop that Putin came into power [as acting president in 1999 and later in the election of May 2000]. And initially at least that appeared to be a period of increasing westernization and certainly of growth in the PR business.
PN: In terms of the PR and communications profession and industry, things just exploded, initially primarily with international firms, where the senior management was international but the rank-and-file was primarily Russian nationals. Whether it was PBN or Ketchum or Fleishman or Grayling and its predecessor firm Mmd, they created the modern profession in Russia.
And then, I would say starting in early 2000s [Russian nationals] began to build firms, in some cases better and faster than the Western firms. These were firms, some of them would do things that the Western firms wouldn’t or couldn’t do like pating cash to journalists and publishers. Increasingly they would operate outside of what you or I would consider ethical. It was a different method of operating, and they grew because they would do deals with government, and government contracts were handed out based on how much you were going to kick back to the person who awarded the contract and Western firms simply could not do that, or at least we couldn’t.
But one interesting thing is that Putin, in his first eight years, I was a fan because he cleaned up a lot of government. He got rid of all the drunks, I mean probably a third of the governors of the entire country were a bunch of drunks. I remember one of our key advisors saying that Putin was the most liberal guy in government—Chehnya aside, and that’s a big aside. That was horrible, and a precursor of what’s happening now.
But the economy grew incredibly, opportunity grew incredibly, many of the legal institutions flourished in his early days. There was a period when he was a very positive influence.
PH: We came into the EMA market in the mid-2000s and at this time it was quite natural for us to view Russia and the other former Soviet republics as one market. Many clients approached them that way. PBN was a great example, growing from Russia to Ukraine and Kazakhstan. You even had a Ukrainian [Myron Wasylyk] in charge of the whole operation after you stepped away. I had friends in both markets and they went to the same conferences and awards dinners…
PN: I think that’s fair, but not 100% of the story. There was always some tension between Ukrainians and Russians, regardless of the fact that many of them had family or friends in both countries, and Crimea [annexed by Russia in 2014] totally changed the state of everything.
I think we were able to continue because we had always maintained that PBN was operating not as an American firm, not as a Russian firm or as a Ukrainian firm, but as an international firm, according to international standards and practices. But with each passing year it became more apparent, the contradictions, but over the past year the Ukrainian team has been emphasizing Hill+Knowlton, not because that’s a more famous name than PBN in Ukraine, but because of the tensions.
Myron headed the firm for five years. I think it worked because he’s a Ukrainian-American and in part because—I know this sounds corny—we had always operated as a family and he was able to do that as part of the PBN family. I don’t think a Russian could have headed the Ukrainian office and I don’t think a Ukrainian could have headed the Russia office.
PH: There was an effort over the past few years to address the ethical issues in Russian PR, to bring the Russian industry into closer alignment with the business in the west. How sincere was that? And how successful.
PN: One of the objectives of the Russian Association of PR Consultants, founded about 10 years ago, a group chaired by [Ketchum’s] Michael Maslov, is to address ethical practices in the profession.
The association’s website is akospr.ru which lists its membership and some of the issues facing the profession. I was only able to get on the site’s English language version for about five minutes today. Although Maslov, PBN H+K, and a couple of others internationals belong, the group includes Cros, Mikhailov Parters and a majority of the bigger Russian firms.
Michael Maslov, Maria Kuzkina of PBN and perhaps others tried over recent years to lead efforts to improve the profession’s ethics and standards. To the very best of my knowledge they achieved little or no success. No surprise. The strong all-Russian firms in the association are the reason why. Under today’s conditions with fewer and fewer western companies operating in Russia as potential clients, the incentive for Russian firms to appear ethical and perform accordingly will diminish further.
PH: What are you hearing now, as you speak to your colleagues?
PN: As you can imagine in Ukraine it’s a totally unique horror story, the constant fear of what’s going to happen today, in a week or 10 days, when Russia really zeroes in on Kyiv. But in terms of their business, I think they wish to stay together and will very properly associate with Hill+Knowlton, which now owns 100% of the firm.
I have been in more contact with Russian colleagues and first of all they are still in shock this happened. I can tell you two days before, one day before a number of my Russian friends and colleagues said they were sure there was no way Putin would invade Ukraine. I would say that the majority of Russians are collateral damage in this situation, and of course the instigator, the source maximus is Putin himself. I had some hard conversations with friends, because it looked absolutely inevitable. And they are still in shock, and now they see and think about their future.
They are locked into their land mass, their rubles are worth next to nothing, they are pariahs. The world too much associates Russian individuals and citizens with the government. Having said that, now that they’ve had time to think I think people at PBN, and people at Ketchum and Fleishman and Grayling, these are supremely talented, experienced people, top global type talent. They have had 20 years or more in the business, and I think it would be a great pity if they don’t move forward.
I think all of them are contemplating how to do that. We think that WPP is providing them with an opportunity to move forward, obviously as a Russian agency, representing local businesses. The need is very much there. I know some firms are moving quickly to work for Russian companies, offering much-needed crisis communications advice. The communications industry will continue. There’s still a need to communicate.
Our people have all the talent, all the reputation. PBN is still a very strong name. and the big international conglomerates will want to make sure, if they’re smart, that their clients in Russia who they can’t wait for any longer are taken care of. And—this may seem outrageous—but in three years or 10 years they are going to have to come back to Russia for the same reason they came in the first place, but with their eyes more wide open and a lot smarter.
PH: How does this play out? What happens next?
PN: Ultimately I think that’s going to be a function of whether a considerable portion of Russian citizens, despite the oppression, but if there’s enough sustained protest, there’s going to be a revolution in Russia, or a coup. That’s the only way you get rid of Putin. It’s not going to be negotiations or accommodations.