Russia’s shocking corruption belies Medvedev’s tough rhetoric

November 20, 2009

Everyone knows that Russia is corrupt, but did you know just how corrupt? The short answer is: more than any other country. That, at least, is the conclusion of a survey just published by PricewaterhouseCoopers, which examines the level of economic crime around the world.


PwC canvassed more than 3,000 companies in 55 countries, 89 of them in Russia. It asked them if they had been the victim of frauds such as embezzlement, bribery and crooked accounting. Russia topped the list, with 71% of respondents reporting at least one instance of fraud during the previous twelve months.


The PwC report makes alarming reading for potential investors. The extent of fraud in Russia is even worse than in Kenya (67%) or South Africa (62%), the next countries down the list. Russia’s score was also far above the global average (30%), as well as the averages for Central and Eastern Europe (34%) and BRIC countries (34%). What’s more, there has been a “shocking” rise in the prevelance of fraud in Russia since the last PwC survey in 2007. 


The report comes just a few days after Transparency International published its annual Corruption Perceptions Index, in which Russia scored lamentably in 146th place, level-pegging with Zimbabwe and Sierra Leone.


As if to ram home the point, the two reports also came the same week that Russian authorities reported an audacious attempt to embezzle $44 million from Russia’s Pensions Fund. (Unlike a similar swindle in March, this one was foiled at the last minute).


The recent surveys illustrate the huge gap that exists between official rhetoric and depressing reality in Russia. During his election campaign last year, President Medvedev made great play of his determination to fight what he called “legal nihilism”. He returned to this theme last week in his annual state-of-the-nation address, garnering rapturous applause with a promise “to sling [corrupt officials] into jail”.


But it’s hardly surprising that these fine-sounding words are met with weary scepticism by both ordinary Russians and foreign investors. Although Medvedev has drafted a package of new laws designed to fight corruption, Russia already has many laws that look wonderful on paper, but are never properly enforced.


Medvedev’s crackdown will in any case remain superficial, unless he also links it with wider democratic reforms, aimed at bolstering independent civil and political institutions capable of keeping the authorities in check. For example, greater public disclosure of information will be useless, unless there is also a strong and independent media, willing to use such information to campaign energetically against bent officials.


That is hardly a description of modern Russia. Even when newspapers do report about corruption – often at great risk to their journalists – the political reaction is usually non-existent. Russia’s most important medium, television, is firmly under state control, ignoring news that might embarrass the authorities. So far, Medvedev has shown no great inclination to break with this tradition.


The second fundamental problem is that Russia’s law enforcement agencies are themselves among the most corrupt institutions in the country, frequently aiding and abetting corporate fraud. A powerful call for action is published today in The Moscow Times by Jamison Firestone, a colleague of the lawyer Sergei Magnitsky, whose death in police custody this week has sparked an international outcry.


The need for police reform has become more obvious than ever over recent weeks, after a wave of police whistleblowers took to Youtube. Although Medvedev has acknowledged that there are widespread problems in the law enforcement agencies, he has proposed no serious reforms, calling instead for rigorous “internal investigations”. Such a timid, hands-off approach explains why corruption in Russia is today more rampant than ever.





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