Double Standards as Modus Operandi: Mixing Business and Politics in Russia

Abstract

Based on expert interviews (n = 75) conducted between October 2018 and July 2019 in selected Russian regions, the authors identify several types of strategies used by businesses while dealing with the government. These include collusion, revolving-door affiliations, conflict of interest, ‘voluntary’ donations and other forms of support to the ruling party (and sometimes the opposition parties) in exchange for public contracts or preferential treatment. The study outcomes suggest that it is almost impossible to do business in Russia without using these types of strategies. The authors trace some of these forms back to the Soviet period and discuss possible remedies.

This study was conducted with financial support provided by the Hamovniki Social Research Support Foundation (Russia). The sponsor influenced neither the research design nor the interpretation of the results.

Notes

1 ‘Doing Business and Investing in the Russian Federation’, PriceWaterHouse, 2017, available at: https://www.pwc.ru/en/publications/doing-business-in-russia.html, accessed 30 March 2020; ‘Pulling Fraud out of the Shadows. Global Economic Crime and Fraud Survey 2020’, PriceWaterHouse, 2020, available at: https://www.pwc.com/gx/en/services/advisory/forensics/economic-crime-survey.html, accessed 30 March 2020; Shekshnia et al. (2013, 2014, 2017); ‘Kak borot’sya s otkatami v zakupkach?’, HBR Russia, 22 September 2017, available at: http://hbr-russia.ru/biznes-i-obshchestvo/ekonomika/a22371/, accessed 30 March 2020.

2 ‘Austria’s Far-right Freedom Party Ministers All Resign Amid Scandal’, BBC, 20 May 2019, available at: https://www.bbc.com/news/world-europe-48335316, accessed 30 March 2020.

3 See the recent discussions in Ariely (2010), Tavits (2010), John et al. (2014), Denisova-Schmidt et al. (2015, 2019), Corbacho et al. (2016), Denisova-Schmidt and Prytula (2018), Zaloznaya et al. (2018).

4 See previous works of Granovetter on weak ties (1982), the concept of informal institutions suggested by Helmke and Levitsky (2004) and the importance of ethnographic research for management studies highlighted in Torcello and Venard (2016).

5 See Gel’man (2004), Polese (2005), Aliyev (2015), Morris (2019).

6 The ‘old boys’ networks (United Kingdom), Vetterliwirtschaft/Copinage (Switzerland), Seilschaften (Germany), pulling strings (UK/US) are just a few examples of the various techniques and geographies of informality. The first two volumes of The Global Encyclopaedia of Informality include more than 200 entries from all five continents (Ledeneva 2018a, 2018b).

7 In 2008, the European University at St Petersburg (EUSP)—one of the leading universities in Russia—was closed, officially due to fire safety violations. The real problem, however, was ‘a grant, given to one of the EUSP professors by the European Union for studying electoral behavior in Russia … the crisis was successfully resolved once the EUSP declined the grant’ (Dubrovsky 2017, p. 190).

8 There are two types of opposition in Russia: non-systemic (based on a bottom-up social movement and having almost no seats in parliament) and systemic (based on a top-down, more or less loyal relationship to the government), represented in the government (Ross 2015). Gel’man (2015) suggests an even narrower definition: the systemic opposition are those politicians who are considered to be ‘junior partners of authoritarian regimes’, while non-systemic opposition are those who are ‘explicit rivals to the regime’ (Gel’man 2015, p. 178).

9 Interview with political strategist 1, Moscow, 10 October 2018.

10 DIGIWHIST (The Digital Whistleblower. Fiscal Transparency, Risk Assessment and Impact of Good Governance Policies Assessed)—Horizon 2020 project run from 1 March 2015 to 28 February 2018, available at: https://digiwhist.eu/ and https://cordis.europa.eu/project/id/645852, accessed 30 March 2021.

11 ‘Kak borot’sya s otkatami v zakupkakh?’, HBR Russia, 22 September 2017, available at: http://hbr-russia.ru/biznes-i-obshchestvo/ekonomika/a22371/, accessed 30 March 2020.

12 ‘What is Corruption?’, Transparency International, available at: https://www.transparency.org/en/what-is-corruption, accessed 24 March 2021.

13 Interview with high level government representative, Ulyanovsk, 5 July 2019.

14 Prizes vary, from pens and pencils or other modest souvenirs to expensive gift certificates or even a new car or apartment.

15 Kompromat: ‘Compromising materials used to control or exert power over others’ (Ledeneva 2018b; Mesquita 2018).

16 In Ulyanovsk, as confirmed by all interviews conducted locally, many citizens were opposed to the building of a hotel in a central park. The construction company responsible for the project was associated with the governor; this company was known to be the main sponsor of the governor’s election campaign. Neither party was interested in making this information public.

17 ‘Analiticheskii doklad. Finansirovanie izbiratel'nykh kampanii po vyboram glav sub'ektov Rossiiskoi Federatsii’, Golos, 2015, available at: https://www.golosinfo.org/articles/35351, accessed 30 March 2020.

18 Interview with CEO, Ulyanovsk, 24 November 2018.

19 United Russia (established in 2001) is the largest political party in Russia. The seventh State Duma—since 2016 until 2021 (the lower house of Russian Parliament)—has four parties: in addition to UR (341 seats), the Communist Party (Kommunisticheskaya Partiya Rossiiskoi Federatsii—KPRF) (established in 1993, 43 seats), the Liberal Democratic Party (Liberal’no-demokraticheskaya partiya Rossii—LDPR) (established in 1992, 40 seats) and A Just Russia (Spravedlivaya Rossiya—SR) (established in 2003, 23 seats) (see, Gosudarstvennaya Duma. Fraktsii, State Duma, 2019, available at: http://duma.gov.ru/duma/factions, accessed 30 March 2020).

20 The Russian media often calls such winners ‘kings of government orders’ (koroli goszakazov). They exist at both the federal and regional levels. Regular and impressive ‘victories’ are paid for through unconditional loyalty and willingness to participate in any government projects, from the construction of the Crimean bridge to the Olympic facilities, including payment for election campaigns (Barsukova 2019).

21 Interview with high-profile government representative, Ulyanovsk, 6 April 2019.

22 Interview with political strategist 2, Moscow, 27 April 2019.

23 Interview with political strategist 2, Moscow, 27 April 2019.

24 Interview with political strategist 2, Moscow, 27 April 2019.

25 Interview with political strategist 2, Moscow, 27 April 2019.

26 Interview with CEO, Kemerovo, 18 February 2019.

27 ‘Sakhalinskogo polittekhnologa arestovali v Gruzii po rossiiskomu zaprosu v ramkakh dela o “chernoi kasse” vyborov’, Infopressa, 8 December 2018, available at: http://infopressa.com/2018/12/08/sahalinskogo-polittehnologa-arestovali-v-gryzii-po-rossiiskomy-zaprosy-v-ramkah-dela-o-chernoi-kasse-vyborov/, accessed 24 March 2021.

28 Interview with political strategist 3, Moscow, 20 February 2019.

29 In 2018, the average old-age pension [R14,100] in Russia was one-third of an average salary [R43,700] (see, ‘Zarabotnaya plata’, Rosstat, 2018, available at: https://rosstat.gov.ru/labour_costs, accessed 1 April 2021; ‘Uroven’ zhizni. Osnovnye pokazateli pensionnogo obespecheniya, srednii i real’nyi razmer naznachennoi pensii (god)’, Rosstat, 2018, available at: https://rosstat.gov.ru/folder/13397, accessed 1 April 2021).

30 In 2017, the average life expectancy of Russians was 72.7 years: 67.5 years for men and 77.6 for women. At the same time, life expectancy for men in the Siberian and Far Eastern federal districts is less than 65 years (‘Regiony Rossii. Sotsial’no-ekonomicheskie polkazateli’, Regions of Russia, 2018, available at: www.gks.ru/free_doc/doc_2018/region/reg-pok18.pdf, accessed 30 March 2020). That is to say, the average man in Siberia and the Far East will not live to receive a pension.

31 There were gubernatorial elections in 22 regions, mayoral elections in five cities, and elections for regional parliamentary deputies in 16 regions.

32 Interview with political strategist, Ulyanovsk, 15 November 2018.

33 Popilit, from raspil, ‘refers to a range of practices such as fraud and theft of taxpayers’ money through the state purchase of hugely over-priced goods and services; schemes used by commercial, banking and investment companies based on trading at negotiated rather than market prices’ (Ledeneva 2013, p. 276).

34 Interview with high-profile government representative, Moscow, 15 February 2019.

35 Nor is mixing business and politics a new challenge: consider the case of French president Jules Grévy (in office 1879–1887), who resigned due to several corruption scandals, including political opportunism (Barsukova et al. 2018).

36 Interview with CEO, Ulyanovsk, 24 November 2018.

Additional information

Notes on contributors

Svetlana Barsukova

Svetlana Barsukova, HSE University, ul. Myasnitskaya, 9/11, 101000 Moscow, Russian Federation. Email: [email protected]

Elena Denisova-Schmidt

Elena Denisova-Schmidt, University of St Gallen (HSG), Müller-Friedberg-Strasse 8, 9000 St Gallen, Switzerland. Email: [email protected]