(MOSCOW, RUSSIA)--Bob Wiklund of Caterpillar Financial is in for a white Christmas this year. Even during Thanksgiving, when his family was visiting from Kansas, the temperature outside his upscale office in the Garden Ring business district in Moscow, Russia, dropped to nearly -7 Fahrenheit.

Five months ago, Wiklund, his wife, and son swapped their home in the Nippers Corner neighborhood of southern Davidson County for Moscow. Here he has opened the Russian operation of Nashville-based Cat Financial, where he is operations manager.

Cat Financial began doing business in Russia in 2000 financing purchases of Caterpillar construction equipment by high-rolling Russian oil and gas companies. But because the Nashville financing arm of the worldwide construction giant had no legal presence here, it could work only through a program of offshore, cross-border financing. The complicated process required Geneva-based Caterpillar SARL, the company's European marketing division that employs 90 people in Moscow, first to sell the machine to an offshore dealer, who in turn imported it, paid customs duties and sold it to the onshore dealer. That dealer would then work out financing with the customer. Cat Financial’s Munich office would offer payment terms to the offshore dealer, or mirror financing, making sure its terms matched those of the customer.

Caterpillar Inc. began selling its machines in the Soviet Union in 1972, but didn't need the help of Cat Financial in its dealings with the Soviet government-controlled companies. Today, armed with market reports that trumpet improving business conditions in Russia, the company intends to grow its sales nearly 200% in the former Soviet Union by 2008. And this means the time has come for Cat Financial to step onshore as a full-service lender.

Among the reasons for Cat Financial's delayed entry to the Russian market were leasing laws, a rather confusing bundle of contradictory edicts that were recently amended by the State Duma, the lower house of Parliament. Those changes corrected many of the contradictions and gave western lenders a boost in the Russian market.

Since July, when Cat Financial’s office here opened, Wiklund says he and General Director Detlef Fuchs have struck up 20 to 30 financing deals, a dozen or so less than the total number of offshore contracts that Cat Financial booked offshore in Munich since it began its feasibility studies on the Russian market in 2000. Even though the deal volume remains small, it is offset by the size of financing contracts, ranging between $400,000 and $500,000, nearly four times the size of an average deal in Western Europe, says Wiklund.

Cat Financial's nine-person operation in Moscow currently offers two types of financing that can extend for up to five years. Under its factoring program, Cat Financial purchases receivables from the onshore dealer who bought machines from Caterpillar. The company then offers the dealer 9%-12% financing on those receivables. Under the leasing program, Cat Financial buys machines from the dealer and leases them to customers with 12%-13% financing.

Wiklund says he prefers leasing because it allows for easier repossessions. Since 2000, Cat Financial repossessed two tractors in Russia and is preparing to take action against a company in the city of Saratov, which bought Caterpillar equipment under the old offshore scheme.

Looking ahead, Wiklund remains enthusiastic about Caterpillar's aggressive expansion plan in Russia. For every 100 machines Caterpillar SARL delivers to dealers, Cat Financial would like to finance 70 of them, or 70 percent of dealer deliveries, in industry parlance 70 PODD. Currently at 35 PODD, the Moscow operation is planning to raise this figure to 60 percent by the end of next year.

Amid improving business conditions, Wiklund says Cat Financial's office here remains conservative about branching out into the medium-size sector. So far, the Cat Financial staff has dealt almost exclusively with the larger, more established companies, such as the Gazprom-daughter companies, diamond giant Alrosa, and some mining behemoths.

"These organizations have the financial strength that we feel pretty confident working with" says Wiklund, who earned a 6 Sigma Black Belt – one of the highest ranks in the process-improvement program -- during his two years with Cat Financial in Nashville. "Once you get down to the smaller [companies], the risk obviously goes up significantly."

But exceptions are made for some private construction contractors, such as Moscow-based Satori, which was involved this summer in tearing down the 30 year-old Intourist hotel in downtown Moscow, across the road from the Kremlin and Red Square. Satori leased one of Caterpillar’s mini-excavators, which was lifted to the roof of the building and knocked down the floors from the top to the ground.

Wiklund, 35, notes that there has been a similarly welcome destruction running through the Russian business ethic in the past dozen years. There is no more vodka drinking in the banya (Russian sauna) with business partners, says Wiklund, who earlier worked in Moscow for International Finance Corp. and was here during the 1998 banking crisis. Everything is done in a professional, western manner, though a firm handshake and eye-to-eye contact are valued more here than in the West. "People here like to know who they are doing business with," Wiklund says.

A rapidly growing metropolis, Moscow is becoming a more interesting place to live in, but a less convenient place to drive. Reminiscing about his easy Nashville commute, Wiklund says it takes him 50 minutes to two hours to cover an 8-mile stretch between his home and office in Moscow. Even so, he has not given up driving.

Compared to five years ago, life here has improved dramatically, Wiklund says. "And it's as safe as any big city with 12 million people.