Go back in time and be a chaebol

Chapter 2697 Moscow's Strategic Trap (Two Chapters Combined, Requesting Monthly Tickets and Subscriptions)

In September, Moscow already had a touch of autumn chill in the air, but the sun was shining brightly, and many slender Russian women were seizing the last moments of the day, wearing beautiful dresses and showing off their beauty to the world.

The female translator sitting in the passenger seat was the same, wearing a floral dress and with exquisite makeup.

If I hadn't known the other person's identity, I might have actually fallen for it.

They soon arrived at their destination—the Soviet Ministry of Foreign Trade.

After getting off the car, Gao Huaiyuan and Tian Xinghan walked side by side up the granite steps, with the female translator following beside them.

Because it was his first time participating in such a meeting, Tian Xinghan couldn't hide the nervousness on his face, while Gao Huaiyuan remained calm and composed, as he was already used to such occasions.

The Malaysian National Trading Company he represented had cooperated with the Soviet Union before, but each negotiation felt like a war without gunfire.

Upon entering the office, three Soviet officials were already waiting. The one in the lead was Petrov, an official from the Southern Ocean Department of the Ministry of Foreign Trade. He was slightly overweight, and a smile immediately appeared on his face when the two entered.

"Mr. Gao Huaiyuan, Mr. Tian Xinghan, welcome to Moscow."

Petrov spoke Russian with a strong Baltic accent, and although his pace was slow, it carried an undeniable air of authority as he said:

"Let's get straight to the point. We have already drafted a preliminary plan regarding your company's payment settlement for this year."

He raised his hand to signal his secretary to distribute the documents.

Gao Huaiyuan took the documents and quickly scanned them, while Tian Xinghan leaned over to examine them together. As they expected, they were all industrial products.

This was to be expected, given that the Soviet Union had always been accustomed to using industrial or mineral products to offset trade debts. However, the vast majority of their products were not well-received by the outside world.

"We propose to use 20 tons of pine pulp as part of the settlement materials."

Petrov spoke first, tapping his fingers lightly on the table, and said:
"The Siberian forests are in the peak logging season. The quality of this batch of pulp not only fully meets international standards, but also far exceeds them. At the same time, the price is currently 5% lower than the international market price."

Just as Tian Xinghan was about to ask for details, Gao Huaiyuan nodded slightly.
"Okay, we accept this proposal."

He seemed to have anticipated this outcome, so his response was swift.

"However, I hope to receive further discounts on the price. After all, with your country's entry into the international pulp market, the current price of pine pulp is trending downwards. A mere 5% concession is clearly insufficient to protect our interests."

Tian Xinghan looked at him with some surprise, then remembered the urgent need for pine pulp in the domestic cardboard manufacturing industry, and the fact that the Soviet Union would provide pulp was within their expectations. Several years ago, Western media reported that the Soviet Union had imported large-scale pulp manufacturing equipment from West Germany and established a modern factory in the heart of the Siberian coniferous forest, forming an industrial chain with wood processing as its core. It could not only produce pulp, but also refine lignocellulose.

The section chief was able to respond in such a short time because he had memorized all this information and had already come up with corresponding countermeasures.

Now, recalling the relevant information provided by the company and the section chief's reaction, Tian Xinghan silently reminded himself:

"Oh dear, how could we overlook such details? We must pay attention to details next time—details are crucial in negotiations; it's essential to have all the details in advance."

"This one……"

Petrov thought for a moment before speaking.

"Alright, since Mr. Gao has already brought it up, how could we, as friends, possibly refuse? 8%, what do you think?"

"Nine percent, you know I don't like haggling, but I think this price is very reasonable. After all, your country's raw material and labor costs are far lower than those of Canada and Norway. Based on this offer, your profit margin is still very large."

Gao Huaiyuan bluntly exposed the other party's cost advantage, and that was all. He did not continue to pressure the other party to make greater concessions on price, because the purpose of business negotiations is not always to get the other party to give the lowest price, but to get a price that satisfies the client within a reasonable range.

As for the other party's profit... if everyone is satisfied, it will be easier to lower the price next time, after all, it's a long-term cooperation, not a one-off deal.

"Oh dear, Mr. Gao, your offer puts me in a very difficult position. But since we're friends, fine, we'll go with your offer."

A barely perceptible smile flickered in Petrov's eyes, clearly satisfied with this smooth start:
"In addition, we can also provide various industrial products, including heavy machinery, fertilizer production lines and some electronic components, at prices that are 15% lower than those in the international market."

He listed the products one by one, speaking at a gradually faster pace, trying to impress the other party with a wide range of options and favorable prices.

Tian Xinghan's eyes lit up. The prices of these industrial products were indeed tempting. Moreover, there was a domestic demand for these devices. Even if there wasn't, they could be sold to other countries.

Moreover, it's 15% cheaper. With such a low price, the profit margin is naturally very large.

But faced with such temptation, Gao Huaiyuan simply shook his head slowly.

"The precision of most of your heavy machinery does not meet our standards. If we need heavy machinery, we can set aside a portion of the quota for separate negotiations. As for fertilizer production lines, their energy consumption is too high and does not meet the needs of the international market. Even if we accept them, they would have no practical value, and there are also compatibility issues with the electronic components."

He wasn't rejecting them point by point; in fact, he couldn't possibly accept these industrial equipment. The issues he raised were just nitpicking.

Because of the fundamental principles governing the Southeast Asian countries, when it comes to large-scale industrial equipment and manufactured goods, the local industries in Southeast Asia are considered first.

In this situation, even if the German price were 50% lower and the performance were the same, I wouldn't consider it at all.

Free trade has corresponding laws regarding this type of technology and equipment, so the deal proposed by the Russians is nothing more than wishful thinking.

Of course, Petrov made this suggestion not because he was unaware that there were corresponding plans for free trade zones, but because he wanted to leverage the other party's mature sales channels in the international market to sell complete sets of Soviet equipment to other countries. This was precisely why he hoped to complete the transaction with low-priced industrial equipment.

In response to Gao Huaiyuan's refusal, Petrov said:

"Mr. Gao, can we discuss the price? Ah? If you are willing to accept these industrial equipment, we can make even greater concessions on the price."

Although he didn't say how much he could concede, it was very clear from his words.

They can make at least 30%, or even half, concessions.

This is actually a common practice in business dealings between the Soviet Union and other countries.

They can always sell any product at prices lower than you can imagine. The reason for this is not just because their production costs are lower; the most important and core reason is that they want to obtain the profits they need in the international market by selling industrial products.

This was precisely the biggest predicament faced by Eastern countries, including the Soviet Union. Apart from mineral raw materials, they had almost no channels for obtaining foreign exchange.

After all, their industrial equipment is essentially produced by importing Western technology and then upgrading it, but most of the time, they are technologically behind the West.

In this situation, they prefer to use low-cost methods to explore international markets and obtain valuable foreign exchange.

Foreign exchange is valuable because it enables the import of more technology and resources from the international market.

Under these circumstances, they would naturally be willing to sell industrial products at lower prices.

So sometimes, when doing business with them, they can always offer an unbelievably low price.

However, the Soviet Union wasn't enough to entice them.

Because all trade was controlled by the Ministry of Foreign Trade. In this situation, all prices were also controlled by the Ministry of Foreign Trade, a stark contrast to the situation in another major power.

Because in Moscow, you're dealing with one negotiating partner, while on the other side, you're dealing with countless negotiating partners. On the other side, to obtain foreign exchange, they can compete to lower prices.

“Mr. Petrov, I cannot deny that your price is very competitive, but at the same time, we are all very clear that while you can offer this low price, you cannot guarantee the technical support for these production lines in terms of maintenance, upkeep, operation, and other aspects in the later stages.”

Gao Huaiyuan pointed out the biggest problem with the product provided by the other party.

"Regarding after-sales service, you have never provided comprehensive after-sales service. Under such circumstances, how can I face our customers after accepting your industrial equipment?"

In fact, it's not just that there's no complete after-sales service; Russian after-sales service has always been extortionate.

When you buy something, it may only cost a few dollars, but when you need after-sales service, you may find that it costs more than the price of the product itself.

Many people say that Russians are bad at business, which is complete nonsense. From Gao Huaiyuan's understanding, Russians are actually very good at doing business when it comes to complete sets of technical equipment.

Gao Huaiyuan then continued:
“I am a businessman, and all I consider is profit. Your equipment has some parameters unique to your country. This means that many parts on the international market are not compatible with your country's. Under these circumstances, I can only accept materials that meet our technical specifications.”

Despite being directly confronted with some of his own business shortcomings, Petrov still stated:

"Oh, Mr. Gao, we can also provide many products that meet your technical specifications. We can continue to negotiate on this issue."

Since that's the case, we must continue the discussion.

For the next few hours, the negotiations stalled. Soviet officials took turns presenting new product proposals—from machine tools to mining machinery, from chemical raw materials to building materials—in an attempt to find a breakthrough for Gao Huaiyuan.

However, Gao Huaiyuan always adhered to his bottom line and rejected most Soviet industrial products, except for heavy machinery that was not produced in Southeast Asia.

Tian Xinghan sat to the side, watching Gao Huaiyuan and the other person exchange words. At this moment, he was like a student learning.

Of course, that's also why he came here – to study.

After several hours of negotiations, the two sides finally reached a consensus and finalized a barter order totaling nearly $300 million, covering a variety of materials such as pulp, timber, and ore.

Of course, there is also a small portion of heavy industrial equipment. Although Russia lags behind the West in most technological fields, you have to admit that the Russians still have their unique strengths in heavy industrial equipment.

For Malaysia, which is undergoing industrial upgrading, some industrial equipment is still very valuable. Even though Soviet industrial products have short lifespans and poor precision, they are inexpensive enough, and in some industrial applications, high precision is not necessarily required.

So what if someone is big, clumsy, and rough?
As long as basic production needs to be met, that's sufficient. In many cases, heavy industrial products do not have very high precision requirements.

So in the end, both sides got what they needed, and it could be said that both host and guest were happy.

But finally, Petrov put down his pen and said:
“Mr. Gao, your company still has $5000 million in outstanding trade balances for this year.”

He paused, then looked directly at Gao Huaiyuan and said:
"We are willing to offer a more favorable solution—a titanium alloy with a purity of 99.7%. As for the price—let's be friends first. It will be 60% of the international market price."

"What?" Tian Xinghan suddenly looked up, his heart pounding uncontrollably. He knew all too well the value of titanium alloys; this metal was extremely lightweight and incredibly strong, widely used in key fields such as aerospace and defense, and its price remained consistently high.

A 60% price tag means that the company can get a 40% net profit just by reselling it, which is an incredibly lucrative business.

He subconsciously looked at Gao Huaiyuan; with such a favorable offer, the section chief certainly wouldn't refuse.

Just when he thought the section chief would agree, he heard a completely opposite answer.

"No, we don't need this."

Tian Xinghan's expression froze as he stared at Gao Huaiyuan in disbelief. Petrov was also taken aback, seemingly not expecting this outcome; he frowned.
"Mr. Gao, are you sure? This price is already very favorable."

"I'm sure we all know very well that titanium alloys are mainly used in the aerospace field, but we have no need for them in that field."

We only produce ordinary aerospace components for the Southeast Asian aerospace industry. Since there's no demand for them, we don't need titanium alloys.

Gao Huaiyuan's tone remained calm as he said:
"We hope you can prepare more goods that meet our needs and complete the settlement of the remaining payment." With that, he rose to take his leave.
"Let's end the negotiations here for today and continue our discussions tomorrow."

And so the trade negotiations, which had lasted for several hours, came to an end.

Moreover, this was after rejecting a suggestion that could have yielded tens of millions of dollars in profit.
Tian Xinghan mechanically followed Gao Huaiyuan to get up, his mind a complete mess. It wasn't until he walked out of the Ministry of Foreign Trade and felt the cold autumn wind blowing in his face that he finally came to his senses.

Along the way, he wanted to ask several times, but seeing Gao Huaiyuan's serious expression, he swallowed his words.

He knew that the section chief must have his reasons for making this decision, and it would be unwise to ask questions rashly before the right opportunity arose.

Moreover, this taxi had been parked in front of the foreign trade department for a long time, and the driver was very likely a KGB agent.

Thinking of this, Tian Xinghan observed for a moment.

Although the driver had a slightly European appearance, a closer look immediately made Tian Xinghan understand.

This is a Dungan.

When Tian Han was in Central Asia, he had come into contact with these people. When he first arrived in the Soviet Union, they were the ones who acted as his translators during his interrogation by the KGB.

The reason these guys are here now is definitely because they can understand Mandarin.

Well, that's limited to being able to understand what they hear, since they've long forgotten how Chinese characters are written.

That is why he chose to remain silent.

Back at his hotel, the first thing Gao Huaiyuan did was take out an electronic testing device from his briefcase and carefully scan every corner of the room.

He moved the detector slowly in his hand without making a sound until he was sure there were no listening devices in the room. Only then did he breathe a sigh of relief, sit on the sofa, and light a cigarette.

Then Gao Huaiyuan turned his attention to Tian Xinghan. Although the other man was a few years younger than him, as his subordinate, he was definitely in trouble.

"Go ahead."

Gao Huaiyuan said with a smile.

"You have something to say along the way."

Now that the section chief has said so, we definitely have to ask.

"Section Chief, why did you refuse that batch of titanium alloy?"

Unable to contain his curiosity any longer, Tian Xinghan asked urgently:
"A 60% discount? This is a rare opportunity!"

Even now, his mind is filled with doubt. Isn't the point of doing business to make money?

Gao Huaiyuan took a drag of his cigarette, the smoke slowly dissipating before his eyes. Looking at Tian Xinghan's anxious expression, he said directly:

"It's very simple, because it's a Russian low-price trap."

"A low-price trap?"

The section chief's answer left Tian Xinghan's face full of confusion:
"But their price is really too low. Couldn't it be because their production costs are lower? And low price...aren't we in business to make money? Since they've offered such a low price, what's wrong with that?"

"Low prices... are sometimes a good thing, but sometimes they may not be so wonderful."

Gao Huaiyuan smiled and shook his head:
“Even if production costs are low, they can’t be this low. They’re just using low prices to lure us in.”

He flicked his cigarette ash and continued:
"Although titanium alloys have a wide range of applications, the total global demand is relatively fixed. If we import these tens of millions of dollars worth of titanium alloys from the Soviet Union, we will inevitably have to drive down the price in order to sell them as soon as possible, which will directly impact the titanium alloy industry in Southeast Asia."

"Impact?"

Tian Xinghan's brows furrowed even more. He seemed to understand somewhat, but he wasn't entirely sure:

"But can goods worth only tens of millions of dollars cause such a huge impact?"

"It may start as a minor impact, but if this situation continues, the consequences will be unimaginable."

Gao Huaiyuan's tone became serious as he said:
"The Soviet Union could continuously supply low-priced titanium alloys, while our domestic enterprises, in order to compete, could only keep squeezing their profits. In the long run, this would inevitably lead to a production crisis. When international market prices dropped to the point where our enterprises could no longer maintain production, then bankruptcy and closure would be inevitable."

The section chief's explanation did not dispel Tian Xinghan's doubts; instead, it gave him even more questions.

"Section Chief, are you saying that they deliberately offered such a low price to disrupt our industry? But, but what is their purpose in doing this?"

Is it really just about losing money to gain publicity?

Seeing Tian Xinghan's bewildered expression, Gao Huaiyuan explained:

"Losing money? Of course they won't lose money. You have to consider that they have other strategic intentions."

"Other strategic intentions?"

Tian Xinghan looked at the section chief with a face full of questions, his eyes filled with incomprehension and doubt.

"Sometimes in international trade, doing business isn't about making money. Take the oil crisis, for example. Why didn't OPEC sell oil even when international oil prices were high?"

"It's because they use oil as a weapon, and then raise oil prices to gain more oil profits."

Gao Huaiyuan nodded and said.

"That's about it, but in terms of titanium alloys, it has nothing to do with making money."

Titanium alloys are not ordinary commodities; they play an irreplaceable role in key fields such as national defense and aerospace.

He paused, took a drag of his cigarette, his eyes sharpened, and his expression and tone became increasingly serious:

"However, as we all know, the production process of titanium alloys is very complex and the production cost is very high, so the price is also very high."

This is why only a handful of countries in the world are currently able to produce titanium alloys on a large scale and put them into the commercial market.

In the entire Western world, there are only a few companies in a few countries. sEA is one of them.

If the titanium alloy industry of Western countries were destroyed or controlled by the Soviet Union, they could use it as a threat to manipulate us when necessary.

After all, titanium alloys are irreplaceable raw materials in many fields.

This is the Russian conspiracy—to destroy our key industries with a low-price trap, costing little but capable of playing a crucial role at a critical moment.

Tian Xinghan listened quietly, recalling Gao Huaiyuan's words and slowly figuring out the logic behind them.

"You mean, their low-priced export of oil and natural gas is based on the same principle?"

“That’s right,” Gao Huaiyuan nodded, “and said:”
The reason they are willing to provide energy to European countries at low prices is essentially to seize the market and control the entire supply chain by using a low-price strategy.

Just like West Germany and other Western European countries today, they rely heavily on Russian natural gas for heating and power generation, which is even cheaper than using coal for heating and power generation in their own countries.

In this context, many European countries, including West Germany, rushed to switch to Russian natural gas.

Even in Germany, some environmentalists believe that coal-fired power generation causes too much pollution and therefore recommend using natural gas. The reason for this is that natural gas is too cheap in Russia.

Who wouldn't welcome such a cheap, abundant, and environmentally friendly energy source?

Once European countries become dependent on their energy, they can exert pressure on political issues at some point in the future, forcing the other side to make concessions.

This is a common tactic used by the Russians, only this time they've targeted the titanium alloy industry.

If we fall into this trap, we won't pay the price now, but who knows what will happen at some point in the future?

Gao Huaiyuan took a cigarette from the pack, lit it, and then said:
"We don't need to consider human nature with the utmost malice. But when it comes to security issues, we must take the safest approach to protect ourselves, wouldn't you agree?"

Faced with this question, Tian Xinghan seemed to understand, but he still had some doubts.

"I understand, but I still have some questions."

So he asked:
"Besides us, would any other company do business with the Soviet Union in titanium alloys? Our single order doesn't seem to be enough to influence the international market; it doesn't seem like a big deal."

Gao Huaiyuan shook his head and said in an extremely calm tone:
"There are quite a few companies in this world that are willing to pursue short-term profits. You should know that as long as there is a 100% profit, capitalists are willing to sell the noose that strangles them."

Do you think we're the only ones who received such a quote?

I'm certain the Soviets used the same bait on other Western companies. If I'm not mistaken, the price of titanium alloys on the international market will definitely drop sharply this year, and this is just the beginning.

Before saying this, Gao Huaiyuan thought for a moment and then said:

"However, this also seems to be an opportunity."

"Chance?"

Tian Xinghan, still in a daze, heard Gao Huaiyuan say:

"I mean futures—that's something we could consider."

"futures?"

Tian Xinghan looked at his superior and understood what the section chief meant. Since its price might fall, investing in futures was definitely an option.

"That's right. Although we lost this profit, we can consider making up for it in this way."

As Gao Huaiyuan spoke of all this, a broad smile graced his face, as if he had already anticipated that most capitalists would be willing to sell that noose to someone else.

In fact, it's not the majority, but almost all of them. That's why they've introduced some rules to protect themselves and avoid falling into such a low-price trap.

But all they can do is restrain themselves; as for the people in other European and American countries...

Who can control them?
However, the most realistic aspect of this world is that you only need to take care of yourself. What do other people's lives and deaths have to do with you...?

(End of this chapter)