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Book Extract: Till the Cows Came Home - Part 2

Till the Cows Came Home by Wellington journalist Clive Lind tells the story of how the New Zealand dairy industry changed in the 40 years to the formation of Fonterra in 2001.

In 1961, when Britain first sought to join the European Economic Community (now the EU), New Zealand's dairy industry and other exporters had to face the reality that their main customer base was about to disappear. It had to find new markets in countries, which placed all possible barriers in front of importers to protect their own inefficient, heavily subsidised industries or which had little history of dairy consumption.

One country that did encourage imports, albeit erratically, in the 1970s and 1980s was the Soviet Union, but that presented other challenges for New Zealand, mainly a heavily-skewed trade imbalance.

The Soviets expected some quid pro quo for relieving this country of its butter stocks in a world saturated with subsidised butter. The New Zealand Dairy Board - the country's sole exporter - decided one way to help would be to form a company which would trade in Soviet goods while selling as many dairy products as it could with the Soviet Union.

Part 2 contines as Joe Walding meets the Soviet Minister of Trade:

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Till the Cows Came Home 
Clive Lind

Steele Roberts, $34.99
To buy a copy, go to www.overlandpublishing.co.nz

In 1975 Walding lost his seat in parliament but was hired by Fletchers to continue developing their Soviet-New Zealand business. Even though he was hell-bent on getting his seat back three years later — which he duly did — he helped start Soviet fishing ventures in New Zealand. Bruce Gaffikin became his assistant, and subsequently moved on to an associated Australian company, Commercial Bureau, and worked as its representative in Moscow.

One of only a few traders registered in the Soviet Union at the time, Commercial Bureau had direct access to Prodintorg, which made an enormous difference. Prodintorg’s entire meat buying department, responsible for a fair proportion of the world’s meat trade, had just a single telephone line. It could take two days of constant dialling before a call reached the right person. It was often easier to fly in people from Frankfurt with messages, particularly over sensitive pricing issues, than to try to phone.

Gaffikin was the right person to recruit when Dairy Board directors agreed to establish a more structured two-way trading relationship with the USSR. His brief was amazingly simple — he was to raise the status, presence and reputation of the Dairy Board in the Soviet Union and thereby increase sales.

Gaffikin could remember asking Murray Gough for some guidance on how the Board expected him to operate: “And … ?” There was nothing to add. Gough replied: “You’re the expert. You tell me how it’s going to be done.” Gaffikin regarded it as the brief of a lifetime.

With Mikhail Gorbachev’s arrival and huge changes looming, Gaffikin believed the timing was right. For six months from late 1986 he worked on establishing a new company, Sovenz. Parker and Gough would be directors, along with Ross Finlayson, an Auckland meat trader with solid experience of the Soviet market. Gaffikin would have a great deal of freedom. A critical early move was the acquisition of Amalgamated Marketing, an Auckland company with links to Amalgamated Dairies, a company that had had strong associations with the dairy industry — its dairy interests had been bought by the Dairy Products Marketing Commission in 1946.

Amalgamated Marketing had existing mechanisms to sell into the Soviet Union and was already importing Lada cars, as well other products. Under the aegis of Finlayson, who had worked for Amalgamated, and Gaffikin, with his Australian connections, Sovenz became the sole officially accredited agency for goods coming into the Soviet Union from both Australia and New Zealand, a hugely advantageous situation.

Sovenz’s trading office in Moscow would also act as the agent for the New Zealand Trade Development Board. Among its duties would be organising Soviet trade delegations to New Zealand, an activity which, to the mirth of John Parker, would attract the attention of the New Zealand Security Intelligence Service. A promising business began with Gaffikin as Sovenz’s chief executive and John Hebron running Lada New Zealand, later replaced by Larry Coombes.

Parker was to liken Gaffikin to a superferret when it came to finding deals to be done and trades to be made. Many of the arrangements were not particularly profitable, but each one helped create political goodwill. Timing was excellent. Mike Moore had led a group of New Zealand business leaders, including Jim Graham, to Russia in 1986. A subsequent parliamentary delegation had been followed by a visit by Deputy Prime Minister Geoffrey Palmer.

The improving relationship between the two countries meant Palmer could visit Vladivostok, a closed city normally out of bounds for western visitors. Graham would remember how John Parker introduced Lada cars to New Zealand under the new arrangement. At the official launch, the chairman of Sovenz had a powerful message: “Lada cars are something you should seriously think about if you’ve got children,” he told the launch gathering. “They’re built like a brick shithouse and your children will come to no harm if they have a crash.”

Those present roared with laughter, but Lada cars were just the beginning as far as Sovenz was concerned. Imports of Belarus tractors and vodka raised the Board’s profile in both the Soviet Union and New Zealand. Sovenz’s objectives were clear — look for deals and opportunities in the Soviet Union that could make money, but which above all could make the Soviets look more favourably on New Zealand as a source of butter and other goods. Parker himself was to visit Russia four or five times a year. It was both exciting and strange.

The head of Prodintorg was Vladimir Golanov, who Parker had met in Geneva while working for Continental Grain. Then, Golanov had seemed an awkward young man; he had become someone far more powerful in the meantime. They would meet quite often, but arrangements for meetings were always erratic. Sometimes Prodintorg representatives would request a meeting but no date would be set. Gaffikin or Parker would fly to Moscow and wait. There was no point in booking a return flight.

Of Golanov himself, they knew nothing personal: whether he was married, how many children he had, or even whether he had children. Everything was friendly, but at a personal level nothing was disclosed. Nor was Moscow itself welcoming. Processing at the airport was slow and tedious. Officials checked everyone and everything. They measured each passenger’s height from a scale on a wall and checked it against their passport.

Parker knew he was on some sort of VIP list because he was better treated than others. There was no finesse — officials thumbed through a thick book to locate each passenger. In the meantime, everyone else waited. Taxis were often non-existent and his hotel looked like a Stalinist wedding cake. Booking in would take an age. Telephones usually didn’t work. An artificial exchange rate seemed designed to defraud the traveller — the ruble was pegged against the US dollar at a ridiculous level.

Everything cost 10 times what it would in New Zealand, and the amount that could be exchanged was strictly limited.

Travellers to Russia could go only where their visa said they could go.

As Parker moved around Moscow, he often knew he was being followed. Hotel rooms were regularly searched.

He had seen enough James Bond movies to figure out when his room had been searched — and they, whoever they were, searched everything. He developed the habit of writing himself instructions from his masters before he left New Zealand — about his price limits, volume restraints and other details in the hope that officials searching his room would read them.

Negotiating was hard work in such a grim environment. On one occasion Parker told the Prodintorg officials that there was no way he could meet their price and that he would go home the next day. One looked him in the eye and said: “No, Mr Parker, you won’t go home tomorrow.

We are in negotiation.” He was advised to talk to his bosses in New Zealand, to which he responded that he couldn’t because the phones didn’t work. “Yes, they will,” one said. And they did.

Over the next few years Sovenz’s initiatives would range from building fish plants in Kamchatka and meat plants in Central Asia to exporting peat moss from Sakhalin Island; from supplying the Russians with tens of thousands of tonnes of American chicken to containing their population through the sale of Chinese condoms.

Gaffikin was aware of the reasons for the freedoms his directors allowed him. The Soviet Union was crumbling, yet the Dairy Board remained heavily dependent on sales there.

Sovenz needed to be nimble and imaginative and some mistakes were inevitably made. As long as it was profitable overall and his Board was kept informed, however, he was free to “go out there and do it.” Another New Zealander, Ray Jenkins, became Sovenz’s Moscow representative and held the fort there.

Later, when Jenkins returned to New Zealand, Gaffikin appointed Rod Cumming, the Trade Commissioner who had introduced the Board to Algeria, to replace him.

The New Zealanders in Sovenz never pretended to be anything other than what they were. They didn’t present as smooth, fasttalking — and often patronising — salesmen, as they noticed some European companies were inclined to do. Russia was experiencing momentous change under Gorbachev, but most local business people were still poorly dressed in crimplene suits. The New Zealanders presented as they were, warts and all, even Jim Graham when he visited to promote a deal. His straightforward easy-going manner won the Soviets over and assisted in no small way in paving the way for further business.

Gaffikin knew that what Sovenz was doing was not traditional Dairy Board practice. Many within Board ranks didn’t agree with the Sovenz style.

But the six or so years of Sovenz’s life would be unforgettable, not just for the hard work and the obstacles overcome but for the impact of the company’s activities on its people.

Hundreds of New Zealanders in many different capacities would become involved in its ventures.

All of them, Gaffikin knew, would have experiences and adventures they would never forget.