Foreign Policy Blogs

Bear-wrestling

Russia holds a unique place in the international economy. It isn’t the largest, fastest, strongest, or even scariest, but it is a heavyweight whose actions matter more than most. It ranked just 146 out of 180 countries on the 2009 Corruption Perceptions Index, and had the 8th largest economy in the world in 2008 according to the World Bank. And yet the government is not a signatory to the OECD anti-bribery convention and it seems to slip farther below the anti-corruption radar than China.

Russia has been at the center of a couple of recent corruption scandals involving major multinationals. The U.S. Justice Department has evidence that German carmaker Daimler paid millions of euros in bribes to Russian government officials related to sales of vehicles for official purposes, and German prosecutors are investigating whether the German branch of Hewlett-Packard paid an €8 million kickback for providing the Russian prosecutor general’s offices with computers. In face of the Russian government’s blasé attitude to such activity, foreign governments that care must rely on local laws such as the FCPA to try to end it.

Companies have taken a different approach. Since many firms don’t want to be the first to stop bribing as they believe it will leave them at a competitive disadvantage, more than 50 have teamed up and agreed collectively to stop offering bribes in Russia. They signed an accord at a ceremony in Moscow last month. Without legal enforcement the agreement only means as much as the word of its signatories, but this is an innovative solution to the challenge of operating in a country that is not especially interested in changing.

Whether bribery in fact makes business more efficient in some environments or is only a short-term fix with longer-term costs is still open to debate. Daniel Kaufman and Shang-Jin Wei argued against the efficiency hypothesis more than ten years ago. Certainly there are firms that have made a clean record work to their advantage. But the Russias of the world continue to lead many on a crooked path.

 

Author

FPB Contributor

americasdiplomats_socialmediaasset