San Francisco Chronicle: Bribery thrives as big business in Putin’s Russia

Michael Mainville, Chronicle Foreign Service
Tuesday, January 2, 2007

(01-02) 04:00 PST Moscow — Like many Russians, Nikolai can’t even count the number of bribes he has paid in his lifetime.

He remembers the big ones, like the $1,000 he paid to avoid mandatory military service or the $1,200 he gave his wife’s obstetrician to ensure her a place at one of Moscow’s state-run maternity hospitals. But the small ones, like the dozens of $10 to $20 bribes he’s handed to traffic police over the years, are instantly forgotten.

“It’s not even something you think about,” said Nikolai, a 29-year-old account manager for an office supplies wholesaler who didn’t want his last name published. “It’s just the way the system works in Russia.”

Whether it’s getting your child into a good school, passing your driving test and or even making sure you get medical treatment, there are few areas of life in Russia where a well-placed bribe isn’t essential. Experts say corruption in Russia is endemic, especially in the corporate world — where big companies, both domestic and foreign, often have to shell out hundreds of thousands of dollars to get permission for a project or win a government contract.

When President Vladimir Putin came to power seven years ago, many Russians hoped he would lead a crackdown on the corruption that had flourished since the collapse of the Soviet Union. Putin, a former KGB colonel who projected an image of incorruptibility, was seen as a much-needed antidote to the chaos of the 1990s.

But instead of decreasing, graft is actually flourishing under Putin.

Corruption has increased sevenfold since he came to power, corruption monitoring group Transparency International said recently, and a top state official has reported that the value of bribes paid to government officials is now estimated to be almost equal to the Russian state’s entire annual revenues. In a Gallup poll of 101 countries, released on Dec. 5, Russia was perceived as the third-most corrupt nation, after Morocco and Romania.

In recent weeks, Russia’s Health Ministry has been embroiled in a slew of corruption scandals. Several senior officials were arrested last month on charges of taking kickbacks from pharmaceutical companies and computer firms bidding for contracts to provide high-tech equipment. On Dec. 10, police said they also were investigating the possible embezzlement at the ministry of millions of dollars in funds meant to pay for children’s summer vacations at health resorts.

“Russia is more corrupt now than at any time in the last 10 years. It’s part of the system and it’s one of most profitable businesses in the country,” said Kirill Kabanov, chairman of Russia’s National Anti-Corruption Committee, a nongovernmental group.

Russian officials put a monetary figure on the problem of bribery for the first time in October, when Deputy Prosecutor General Alexander Buksman estimated that corrupt bureaucrats are taking bribes worth $240 billion a year, slightly less than the government’s yearly revenues. He did not specify how he came up with that figure, but said prosecutors uncovered 28,000 cases of corruption among state officials in the first eight months of last year.

“We are confronting mass disrespect for the law,” Buksman told newspaper Rossiiskaya Gazeta. “The scale of bribes has reached such a level that within a year a midranking corrupt bureaucrat can buy himself a 200-square-meter (2,150-square-foot) apartment.” Based on current market rates, an apartment of that size in Moscow would cost nearly $800,000. The average salary in Moscow is about $800 a month.

Transparency International estimates that corruption in Russia has grown sevenfold since 2001, the year after Putin came to power.

In a global corruption survey released in the fall, the group ranked Russia 121st out of 163 countries based on perceptions of corruption, in the same league as Rwanda and Burundi. Four years ago, Russia ranked 71st. Experts say there are two reasons corruption is soaring in Russia.

With the economy booming thanks to high oil prices, there is more opportunity for bureaucrats to demand bribes. At the same time, Putin’s drive to concentrate more power in the hands of the state has created thousands more government employees looking for handouts. Since 2002, the number of Russian bureaucrats has grown from 1.1 million to 1.5 million, said Elena Panfilova, the head of Transparency International’s Russia office.

“There is a lot more money floating around, and there are a lot more people looking for kickbacks,” she said.

Business-related bribes are contributing the most to the corruption boom.

Independent Russian think tank INDEM estimates that, on average, businesses operating in Russia spend 7 percent of their budgets on bribes. The group also reported that the average sum being paid in business-related bribes has risen to $146,000, up from $11,000 four years ago.
Kabanov, of the National Anti-Corruption Committee, said so much bribe money can be made in government that department heads are now demanding large sums from anyone who wants to work for them. A high-ranking position in the government’s economic development department can be bought for $50,000, he said. Even getting a job as a traffic police officer costs about $3,000.

Panfilova said there are signs that Putin may be gearing up for a more serious fight against corruption before his final term as president ends in 2008. Russia signed on this year to the United Nations Convention Against Corruption and ratified the Council of Europe’s Convention on Corruption.

The recent arrests at the Health Ministry also may be the harbinger of a growing crackdown.
“Putin is leaving in 2008 and he knows he hasn’t managed to tackle corruption,” Panfilova said. “He doesn’t want it to be remembered as one of his major failures.”

But many are skeptical the president will be able to push through reforms in time. Nikolai Petrov, a political analyst with the Moscow Carnegie Center, said that if Putin wanted to fight corruption, he should have taken the necessary steps — for example, increasing prosecutions and raising state salaries — years ago. “The closer he gets to the end of his term, the less influence Putin has,” Petrov said.

Meanwhile, ordinary Russians are bearing the brunt of increasing demand for bribes. When 82-year-old pensioner Viktor brought his ailing wife to the hospital for blood tests earlier this year, he was told that unless he paid a $100 bribe, his wife would spend months on a waiting list. “It doesn’t hurt that much for people who can afford to hand over the money,” he said. “The rest of us are suffering.”