Russian businessmen challenge Kremlin with anti-corruption fund

By bne IntelliNews June 13, 2012

Ben Aris in Moscow -

A group of leading Russian businessmen have put their necks on the line with a public stand against the government's failures to deal with corruption.

Eleven prominent business leaders and public figures have contributed RUB300,000 ($10,000) each to a fund managed by opposition firebrand and famous blogger Alexei Navalny to finance an organisation that exposes corruption in state procurement. "Corruption is a national tragedy and it could be getting into a downward spiral that would end in catastrophe," believes Roman Borisovich, vice president of Rosgosstrakh, Russia's biggest private insurance company. "Corruption is eroding our society so that it is not an economic problem any more; it is becoming morally acceptable."

Borisovich is typical of the contributors. He is not an oligarch nor does his business depend on connections with the state for success; rather, he is a senior member of the business community running a strategically important company that relies on Russia's general prosperity for success.

Born in Russia, Borisovich's family left in 1992 during the chaos that followed the collapse of Soviet Union to live in both the UK and US. He studied at Columbia University and went on to have a successful career as a banker before returning in 2007 because he felt Russia had matured. "I convinced my family it was a good idea to return," he says.

But now he is worried. "Corruption is out of hand. I used to be optimistic about the future of Russia, but now I am not so sure."


Russia is rapidly becoming a normal country. The consumer market is growing fast and quality of life is rising steadily. But cutting down on corruption is not keeping pace with the transformation of everything else.

Ivan Tchakarov, chief economist with Renaissance Capital, argues that the level of corruption in Russia is on a par with its income bracket, and Russia has moved up from 154th place on Transparency International's Corruption Perceptions Index to its current 143rd place, yet it is still near the bottom of the table of 182 countries. "What really worries me is Russians increasingly don't want their children to grow up in this environment and immigration is increasingly being driven by the desire of parents to get their kids out of Russia," says Borisovich. "It's like the Jewish emigration in the 1970s and 1980s - they left for the sake of the kids and it is starting to happen again."

An obvious example of the high-level corruption was the recent revelation that the wife of First Deputy Prime Minister Igor Shuvalov earned millions of dollars trading Gazprom shares in 2004 just before the "ring fence" that excluded foreigners from buying the stock was dismantled - a decision her husband was privy to. She is also a big landowner around Skolkovo, the region where the government is investing over a $1bn to build a high tech park.

Shuvalov has breezily admitted to the trading and land holdings - an admission that would have at the very least lost him his job in the West and possibly landed him in jail. But rather than being punished he was promoted in President Vladimir Putin's new government in May and is now the third most powerful man in Russia, acting as Putin's "go-to" man in PM Dmitry Medvedev's cabinet.

In general, anecdotal evidence suggests that Russian companies spend about a third of their cash flow on paying bribes. In the West, executives pay bribes to win more business, but have the option of remaining honest; in Russia, businesses pay bribes simply to stop problems being artificially created and can't be honest if they wanted to - this is what the contributors to the new fund complain about.

The fund will be used to pay for lawyers working on uncovering corruption as part of anti-corruption campaigner Navalny's RosPil initiative, the website of which collects information on obvious violations within the state procurement system. RosPil is a badly needed mechanism to expose corrupt practices and hold officials to account - something the government has failed to do.

Borisovich, like many contributors, says that the fund is not a political statement; rather, it is an expression of frustration with the lack of progress the government has made tackling the corruption issue. "The last government came in with lots promises to do something about corruption, but next to nothing has happened," says Borisovich, who believes the Kremlin will not attack the businesses of the contributors. "If you listen to the complaints of the members of the group, they are identical to what Russian Prime Minister Dmitry Medvedev has been talking about. This is not political in the sense we are talking about the same thing as the government."

Still, the contributors are taking a risk by sticking their heads so publicly above the parapet. Everyone is conscious that the Kremlin could choose to take issue with group. The minimum size of the contributions was set to be meaningful, but small enough to remain below the Kremlin's political radar. "Now we are taking things to the next level. It is normal in other countries to raise funds for political parties - but not in Russia," says Borisovich. "We are the catalyst and after us it will be possible for companies to contribute to parties that represent their interests."

Russian businessmen challenge Kremlin with anti-corruption fund

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