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State Led Corruption in Russia

The highly publicized cases of Sergei Magnitsky -- a 37-year-old lawyer who died in pretrial detention in November 2009 after exposing a multimillion-dollar fraud against the Russian taxpayer -- and Mikhail Khodorkovsky, the jailed business magnate who was sentenced at the end of 2010 to remain in prison through 2017, have again put the international spotlight on corruption in the Russian state.

By the time of his death, the ailing Magnitsky had been complaining for weeks that he was being denied adequate medical treatment for acute stomach pain. The subsequent inquiry into his demise represented a serious miscarriage of justice. Khodorkovsky’s latest case gained notoriety for the brazenly irregular manner in which he was charged and convicted of embezzling his own company’s oil, apparently with the predetermined goal of keeping him behind bars at all costs.

In one sense, these were simply the latest in a long list of cases involving independent-minded Russians who ran afoul of powerful interests and were subsequently silenced.  ut there was more at work here than mere lawlessness.  More than a decade into the “vertical of power” governance model forged by Vladimir Putin (and now maintained in tandem with Dmitry Medvedev), these two episodes signify the extent to which Russia’s entire institutional apparatus -- including the judiciary, law-enforcement agencies, security services, and news media -- conspires to fuel state-led corruption.

With venal Middle East authoritarians coming under greater pressure and, in some cases, giving way, Russia’s systemic corruption is becoming especially conspicuous. The former Soviet states, Russia included, suffer from many of the institutional weaknesses found in the Middle East region, including poor governance and the accumulation of economic power around ruling elites.

Meaningful governance reforms have yet to be achieved under Russia’s current leadership. If anything, institutional accountability has been eroded over the Putin years. Media and judicial independence have been reduced, along with virtually all other voices critical of the authorities.

While the need for serious reform is clear, its prospects are darkened by the reality that Russia’s authoritarian system has adapted in important ways over the past decade and grown deep roots. It contains governance habits of Soviet vintage, such as a dominant executive, obedient judiciary, and opaque and arbitrary administrative decision-making.

At the same time, the system now includes features forged by the new Russian leadership in an environment with far more economic openness and international integration than during the Soviet period. It is notable that the money at stake in both the Khodorkovsky and Magnitsky affairs was tied to trade with and investment from the democratic world.

Russia’s post-Soviet authoritarian rulers have come to understand that allowing a degree of private enterprise and commercial opportunity extends the patience of its public, while expanding the opportunities for graft and personal enrichment.

Policymakers in the United States and Europe therefore face a conundrum: encouraging economic integration and development with Russia, while ensuring the Kremlin improves rule of law and adheres to basic standards of transparency and accountability. 

Oil Windfall

In the immediate term, Russia’s windfalls from rising oil prices will likely have the effect of kicking reforms even further down the road. The Kremlin may be tempted to follow the course of Saudi Arabia, which dipped heavily into its own windfalls in early March to distribute billions of dollars in social benefits to ease the pain of inflation and unemployment and avert the popular unrest that has spread across the Arab world.

There are no simple answers for jump-starting reform in Russia. The United States and the EU, for their part, can address these problems by showing more resolve in their policies. Policymakers in the trans-Atlantic community have been too quick to place democratic rights and good governance on the back burner when pursuing economic or security cooperation with authoritarian regimes.

A good start would be reinvigorated efforts to restore press freedom, which is integral for governmental and market transparency. A free press, among other things, represents a critical anticorruption tool but is seen by Russian leadership as a threat rather than a boon. Stronger efforts should be made to hold the Russian authorities to their electoral process, starting with registration of parties. Such steps are no panacea, but in a political environment that is increasingly bereft of independent institutions, these would represent an important, and achievable, place to start.

These and other reform steps are essential because Russia’s track record shows that economic opening without political reform simply feeds kleptocratic authoritarian institutions, giving rulers the wherewithal not only to tighten their grip on their own populations but also to extend their corrupting influence across international borders.

With a year to go until presidential elections, whether or not the Russian system can successfully reform from within has serious implications for ordinary Russians, as well as Europe and the United States. Another six years, or more, of Putinism would likely consign Russia to a fate like those of the ossifying Middle Eastern states, where presidential tenure has been measured in decades rather than years, and where the postponement of reform only intensifies the need for it.

By. Christopher Walker

Christopher Walker is director of studies at Freedom House. The views expressed in this commentary -- which was adapted from a longer essay that will appear in “Corruption C,” a journal published by the Latvia-based think tank Providus -- are the author's own and do not necessarily reflect those of RFE/RL or OilPrice.com

Copyright (c) 2010. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

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  • Anonymous on March 29 2011 said:
    My only respons to this is;SO WHAT?Haven't you guys at RFE etc. got anythung better to do than dish out this pointless nonsense every so often? I mean, get real... Its almost as pointless as for example telling us how bad the Chinese gulag is...duh.Philip

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