Corruption and Informal Practices in Russia by Elena Denisova-Schmidt, University of St. Gallen he 19th century Russian writer Niko- the doctors they cooperate with on a regular Tlai Gogol is said to have lamented once: basis through gift vouchers – with a value of ‘There are two misfortunes in Russia: fools perhaps 500 Rubles (about CHF 15) - which and roads’. Former president Dmitry Medve- might be distributed several times a day. dev recently added another misfortune: cor- From an ethical perspective, Russian law pro- ruption.1 All state leaders, from the Russian hibits a pharmaceutical company from pro- Tsars through the Soviet General Secretaries viding direct financial support to a hospital. to the current Presidents, have been trying An indirect donation, such as through a third to fight corruption. So far, they have not had party (e.g. a club or a patients’ association) is much success: In its 2011 index of 183 coun- still a possibility, however. Consider the ex- tries, Transparency International ranked Rus- ample of a hospital undergoing renovation: Its sian corruption on a par with Nigeria, Togo, budget is unfortunately not sufficient to mod- Uganda and other countries in 143rd place. ernize the infrastructure, so a third-party asso- Corruption and informal practices are an inte- ciation might make an offer of new furniture gral part of Russian business life. (hospital beds, examination chairs, etc.) on the condition that the hospital buys a certain amount of drugs from one of the association’s 1. Definition of corruption sponsors, or increases the number of patients that are of interest to the sponsors. It is not only very difficult to measure corrup- From a cultural perspective, some scholars tion but also hard to define it. Transparency have argued that a western concept of cor- International defines corruption as ‘the abuse ruption might not be applicable to the rest of of entrusted power for private gain’. Academ- the world, because corruption is also a cul- ics, on the other hand, might use juridical, ture based phenomenon. They might be right: ethical or other definitions depending on their What is and is not corrupt might differ from discipline and the research questions asked. country to country. A prominent case in point As seen from a juridical perspective, Russian is the power network of the Russian president law treats a gift to a decision maker with a Vladimir Putin. On paper, Putin only owns a value of more than 3,000 Rubles (about CHF modest apartment of 77 m2 and a small dacha 90) as a bribe. However, the law does not (cottage). However, he is allowed to build new specify how often it is allowed to make such villas and palaces using state funds. New resi- gifts which gives a great amount of wiggle dences are, for example, built for international room for ‘creative’ Russian businesspeople. events held in Russia. The summit of the Asia- For example, some pharmaceutical companies Pacific Economic Cooperation (APEC) of Sep- might use this loophole in the law to support tember 8-9, 2012, which will take place in the Russian Far East, will require a new ’conven- 1 http://korrespondent.net/russia/1282099- tion center’ with estimated costs of about 200 duraki-dorogi-i-korrupciya-medvedev-nazval- million EUR. To date, more than ten ‘houses’ glavnye-bedy-rossii accessed 30 August 2012 Euxeinos 7 (2012) 4 Elena Denisova-Schmidt have been built in different Russian regions Putin’s power is based on personal relations from the state budget.2 The same holds true and system of loyalty. Kryshtanovskaya (2008) for Putin’s official income. He declares earn- confirms that almost 80% of all administrative ings 140,000 USD per year, but his real fortune positions are held by Putin’s people. Albats is considerably higher, with estimates up to 40 and Ermolin (2011) developed a scheme for billion USD.3 representing Putin’s friends in key positions in Putin does not interact with ‘curious’ journal- government and business structures (see Fig- ists directly. His staff usually does this. More- ure 1). The two authors divide Putin’s friends over there is a special policy when covering Pu- into four categories: 1) people with ‘shoulder tin’s activities. Journalists who do not adhere boards’ (i.e., from Putin’s career in the KGB); to these rules might lose their jobs and even 2) people from St. Petersburg without shoul- their lives (Tregubova, 2003, 2004). According der boards (Putin’s career in the St. Petersburg to the Committee to Protect Journalists, Russia government); 3) cooperative ‘Ozero’ (the soci- is one of the most dangerous countries to work ety Putin and his friends established consoli- as a journalist. Physical attacks occur often and dating their dachas near St. Petersburg); 4) chil- it is almost impossible to seek protection. dren, relatives and friends of ‘svoi liudi’ (Engl.: Figure 1: Putin’s personal ‘our people’). web of power (adapted People with shoulder boards People of St. Petersburg without Corruption is often version of Albats and shoulder boards Ermolaev 2011) Igor Sechin (vice-premier), Sergei Ivanov, considered within (vice-premier), Andrei Kostin (Bank VTB, Dmitri Medvedev (president), Viktor Zub- the context of in- CEO), Nikolai Tokarev (Transneft, CEO), kov (vice-premier), Dmitri Kozak (vice- Vladimir Iakunin (Russian Railways, premier), German Gref (Sberbank, CEO stitutional theory. CEO), Igor Levitin (International Airport and director), Aleksei Miller (Gazprom, In each social com- Sheremetyevo, director), Sergei Che- director), Vitalii Savel’ev (Aeroflot, direc- munity there are mezov (Rostechnologii, CEO), Vladimir tor), Sergei Soldatenkov (Megafon, CEO) Strazhalkovskii (Norilsk Nickel, CEO) not only formal but also informal institutions in exis- Putin tence (North, 1990). Informal institu- tions may be more or less in evidence, Cooperative ‘Ozero’ Children, relatives and friends of ‘svoi liudi’ but together with Andrei Fursenko (minister of education), formal institutions, Sergei Fursenko (Lentransgaz, CEO), Yurii Anatolii Serdiukov (minister of defense), Koval’chuk (Nationalnaia Media-Group, Valerii Musin (Gazprom, board mem- they influence the owner), Sergei Fursenko (Russian footbal ber), Andrei Murov, (Aiport Pulkovo, St. functions of a state association, CEO), Petersburg, CEO), Alexander Nekipelov and life in the state (Rosneft, director) in general (see Fig- ure 2). Informal in- 2 http://www.putin-itogi.ru/putin- stitutions might include corruption, personal korrupciya-2/#4 accessed 30 August 2012 networks; clans and mafia;kompromat (the col- 3 http://www.reuters.com/ lection of compromising evidence), telephone article/2011/12/22/us-russia-putin-income- justice, or informal pressure from representa- idUSTRE7BL12920111222, tives of federal and regional authorities; and http://www.guardian.co.uk/world/2007/dec/21/ russia.topstories3 accessed 30 August 2012 Euxeinos 7 (2012) 5 Elena Denisova-Schmidt legislative, judicial, and bureaucratic norms. kidnapped in Chechnya in 1997, the French Informal institutions are ‘socially shared rules, president Jacques Chirac personally asked the usually unwritten, that are created, communi- Russian president Boris Yeltsin for help. Yelt- cated, and enforced outside of officially sanc- sin was not able to manage it, but Leonid Bilu- tioned channels’ (Helmke/Levitsky, 2004, p. nov – ‘the thief in law’4 – was able to assist in 727). Put another way, informal practices are obtaining the release of these people: All came concrete steps for assuring activities within in- home alive and healthy. With regard to cor- formal institutions (Denisova-Schmidt, 2011b). ruption, informal institutions usually compete with formal ones, because in order to function, Helmke/Levitsky (2004) enumerated the a law must be broken. spheres in which formal and informal institu- tions overlap and under what circumstances: 2. Measurement of corruption Informal institutions might occur even where formal institutions are in existence and func- Corruption is a phenomenon that is usually tion effectively. In this case informal institu- hidden, and can be difficult to document. There are some methodological tools for mea- Figure 2: Outcomes Effective Ineffective suring corruption, though. Karklins (2005) Typology of informal Formal Formal institutions Helmke, Institutions Institutions suggests the following instruments: Levitsky 2004, p. 728. 1. Representative sociological surveys Convergent Complementary Substitutive 2. Targeted surveys of firms, experts, and of- ficials 3. The compilation of case study data Divergent Accomodating Competing 4. The collection of ethnographic and dis- course data 5. Reviews by the press tions might complement formal institutions, 2.1 Representative sociological surveys for example, through loopholes in official laws and procedures, or they might accommodate According to Karklins (2005) representative formal institutions by applying some prac- sociological surveys are a major source of tices that deviate from official procedures but gathering data. This technique indicates un- do not break them, such as blat in the USSR: lawful acts people are involved in, their fre- the use of informal networks ‘to obtain goods quency and how actors judge it. This tool usu- and services in short supply and to find a way ally helps to discover low-level corruption in around formal procedures’ (Ledeneva 1998, p. everyday contexts. 1). Informal institutions come into being when formal institutions do not function properly. In some cases, informal institutions might