Category Archives: Corruption

Storm In A BVI Teacup

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If you remember a couple of weeks ago, the Internet was rocked – for a total of about one or two days – by a wave of leaks from the ICIJ about the identities of offshore account holders in the British Virgin Islands. What juicy revelations did we have about the henchmen of the kleptocratic Putin regime?

Other high profile names identified in the offshore data include the wife of Russia’s deputy prime minister, Igor Shuvalov, and two top executives with Gazprom, the Russian government-owned corporate behemoth that is the world’s largest extractor of natural gas.

Shuvalov’s wife and the Gazprom officials had stakes in BVI companies, documents show. All three declined comment.

So that comes to one Minister who has always been open about the wealth which he made in the 1990′s as a law firm manager and then multiplied by leaving it in a blind trust invested into the Russian stockmarket; and a couple of top executives at one of the world’s biggest companies, are the two most prominent names that have been dredged up.

Rather underwhelming, TBH.

Incidentally, in most countries there is nothing particularly illegal about having offshore bank accounts. Morally questionable? Perhaps. For some, yes. And I can understand why countries like Germany (mistakenly, IMO) might not want to contribute to bailing out alleged tax havens like Cyprus, or why the US demands Switzerland reveal the identities of Swiss secret bank account holders to the IRS.

But is keeping money offshore illegal? No, it isn’t. Not in the US, not in Russia, not practically anywhere else. Not in any country that supports the principle of basically free movements of capital. Now if said money is suspected to have been laundered or otherwise acquired illegally then yes, investigations can follow. But the past few years of pressed government budgets have seen the big countries lean heavily on alleged tax shelters to reveal more information about their clients so it is arguably a much smaller problem than it was, say, a decade ago.

The non-illegal nature of offshore banking is the reason why Romney isn’t being prosecuted for his $250 billion stash in the Cayman Islands, and why revelations that many wealthy Germans keep bank accounts in Panama has led to a lot of media noise but no legal proceedings. Is it because Germany is a kleptocracy in which the elites corruptly protect their own? To ask the question is to mock it.

But funnily enough whenever it comes to Russia even otherwise neoliberal or even Randian commentators start frothing at the mouth and demanding populist, Bolshevik reprisals against any Russian – that is, if he isn’t opposed to Putin – with money abroad.

A Brief Intro To The Navalny Case

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The anti-corruption crusader and best hope of the Russian race Navalny will be on trial for embezzlement on April 17th. And it has to be admitted that even many of us who tend to look at the liberal opposition’s claims of repression with a healthy degree of skepticism are now “plagued by vague suspicions.”

It’s just too convenient. After all, there are now a total of four criminal cases against him, three of them potential (SPS, Yves Roche, Post of Russia) and one in process (Kirovles). Most of them appear to be pretty flimsy. It’s as if the Investigative Committee read through the entire book of his life and placed a laser-like focus on every spelling and grammatical error. Which the IC itself acknowledges:

Interviewer: But if the case didn’t have Navalny, then, probably, the case itself wouldn’t exist?

Vladimir Markin, IC spokesman: Perhaps, it would not have happened so quickly, because unfortunately the numbers and energy of our investigators are quite limited. In an ordinary case of embezzlement and misappropriation perhaps our hands wouldn’t have reached in so quickly. But if the person in question draws attention to himself with all his strength, or we can even say, teases authority – saying that oh I am so white and flawless, then the interest in his past increases and the process of exposing it to the sunlight, understandably, accelerates.

Yet with all that said, the fact of this vastly intensified scrutiny being politically motivated does not – as with Khodorkovsky – absolve the defendant of guilt should he actually have committed the crimes in question. And here is where an objective appraisal of the case parts ways with the narrative that has been presented by the liberal opposition and Western media, which asserts that the case against Navalny has been invented out of thin air on Putin’s orders.

After all, stealing 15 million rubles of timber should, at least in theory, be as bad if done by Navalny as if done by any random Nashist – and as deserving of punishment. IF he did actually steal them. But how to find out if he did?

You could do a lot worse than avoiding the media din, and instead systemically reading through the documents and arguments offered by both sides. Here are the more important sources I have identified:

The only problem? All this material is in Russian. But despair not! For your fearless Leader (aka myself) is going to do this for you in the coming days, and write informative posts and articles on the basis of his discoveries.

I will not write a lot right now, but there are four things I wish to clear up from the beginning, to set down the correct channels about how to think about the case.

(1) At the most basic level, the allegation is that Navalny, in concert with Ofitserov, set up a shell company to criminally enrich themselves. Originally, Kirovles, a state company headed by Opalev, had a set of agreements with its customers to supply them with timber. Under pressure from Navalny, who was an adviser to Governor Belykh, these agreements were torn up and rewritten at the same prices, but with their shell company as the new partner. Kirovles, in its turn, sold the same amount of timber to the shell company, but at lower prices. The difference, presumably, was pocketed by Navalny and Ofitserov. This scheme only lasted four months before there was a scandal and Opalev was evicted from Kirovles.

(2) It is not clear that this, even if true, would constitute outright theft. As Politrash’s second lawyer Strigov argues, the charges then would not be Article 160, part 4 of the Criminal Code (theft/хищение) – as per the Investigative Committee – but Article 165, part 2 (causing financial loss by way of deceit and misuse of trust/Причинение имущественного ущерба путем обмана или злоупотребления доверием).

(3) There are dozens of witnesses testifying that they were pressured into rewriting timber supply contracts from Kirovles to Navalny and Ofitserov’s shell company. For his part, Navalny alleges that he had nothing to do with the shell company and was only marginally acquainted with Ofitserov. The evidence within the IC’s indictment however overwhelmingly suggests that this was the not case on both counts. Navalny would have been wiser to focus his defense on proving that the shell company did not do anything illegal, as opposed to (falsely) disavowing any involvement with it, and I do not know if it’s now too late to change tactics.

PS. More links:

Navalny’s Promises To Put Putin In Jail

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In a recent interview with the opposition Dozhd TV channel – which is, incidentally, available for public viewing in Russia as part of the NTV Plus satellite TV package – for the first time openly declared he wants to be President. He also speculated about the motivations behind the Kirovles fraud case being brought against him. (He expects to get a suspended jail sentence that will disbar him from electoral politics).

However, I think other parts of the interview were at least equally interesting and telling about what sort of politician Navalny would be. First, he unequivocally said that he would send Putin and his friends to jail. It is rather ironic that the self-appointed leader of the extra-parliamentary Russian opposition doesn’t bother, unlike Putin, to even pay lip service to the rule of law and judicial impartiality that he supposedly espouses. Second, his tendency to intemperately react to critics – even those who support him – is, once again, on full and inglorious display.

Below is a translation from the relevant part of the interview.

Host: Many people interpreted you as saying, I paraphrase, “I am Alexey Navalny and I will put you in prison, once I become President.”

Navalny: I don’t know about a President Navalny, but one day there will come to power those who will put him in prison. It’s a general feeling, I or we altogether, in another regime we would put him…

Host: [interrupting] [unclear] is it we or I?…

Navalny: Well, I, because I feel myself as part of this process, and I will do everything possible to make sure that he, and Putin, and Timchenko, and the entire list go to prison. To me these are all chains in this odious, kleptocratic regime, from the policeman who breaks your arm to Timchenko who steals oil, it’s all related…

Host: [interrupting] Do you want to become President?

Navalny: I do want to become President. I want to change life in this country, I want to change the system of administration, I want to make it so that the 140 million people of in this country – who are surrounded by oil and gas that flows out of the ground – would no longer have to live in destitution and hopeless squalor, but lived normally, like in any European country. We aren’t any worse than Estonians!

Host: Do you have a clear, well-planned program? Because as we know, and I think we raised the issue a year ago with you, you said that one shouldn’t lie and steal, and we got questions from many people like this on air: ”To not steal and lie is all well and good, but what can we concretely do about it?”

Navalny: These “many people” are all idiots. We don’t need to do anything other not lie and not steal.

Host: So everyone will cease to not lie… will cease lying and will cease stealing…

Navalny: [interrupting] It’s the principles that are important.

Host: … and the Sun will start shining?

Navalny: If the top echelons of government will no longer lie and steal, but will do what is expected of it, and will at the least start to realize those nice programs of Putin such as Strategy 2020… All the reforms we need have already been compiled, down to roadmap detail. But none of them are being fulfilled.

Host: [interrupting] [unclear] … So the plans suit you. At least as they are on paper.

Navalny: No. They don’t exist. The plan for Russia’s development, and reforms, has been reworked multiple times, and overall everybody pretty much understands and agrees… We have this strange situation where we have a consensus between Left and Right as relates to the reforms we have to carry out, but they aren’t getting carried out, because the essence of the current regime is corruption. Everybody more or less understands how to combat this corruption, and we bring very concrete and constructive proposals on how to combat corruption to Medvedev’s anti-corruption conferences…

Host: For example Rospil.

Navalny: Yes Rospil, and our Anti-Corruption Fund, and many other suggestions, and many people there agree with those suggestions, but nothing happens further.

And They Say Mark Adomanis Is A Putin Stooge

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Anti-corruption efforts have been significantly stepped up in recent months, both in terms of headline making events (e.g. the dismissal of Serdyukov) and the less heralded progress in the introduction of new laws to combat the source. One of these is a ban on Russian bureaucrats holding foreign bank accounts (this represents a watering down of the original provision, which would have also banned foreign property holdings).

Not everybody is happy with this law, as to be expected. What is not to be expected is who exactly that is. For instance, Mark Adomanis, a liberal anti-Putin blogger who is nonetheless one of the most informed and objective Russia watchers out there (which many of his detractors take as evidence that he is a Putin stooge). Well, judge for yourself, based on his reaction to a press conference with Presidential Chief of Staff Sergey Ivanov, in which he said that bureaucrats would have three months to move their assets back to Russia.

“Forcible asset repatriation”? That’s some strong rhetoric there! I must have missed the part where the Kremlin was holding a gun to the heads of those offshore chinovniki forcing them to continue working for the government. Why is no-one being arrested for extortion??

As an informed observer, Mark Adomanis surely knows that quite a number of Duma deputies and other officials have already resigned their seats because they’d rather keep their foreign nest eggs than continue in political life. Nobody is forcing them to make the latter choice, so how does “forcible” describe anything?

Fortunately, he soon clarifies his position.

Oh, I see. Less corrupt bureaucrats equals a more powerful Putin. And because Putin is the Dark Lord of the Kremlin, it’s for the best if bureaucrats were to remain just as corrupt and apatride as they are now. Essentially he would have Russia cut off its nose to spite Putin’s face.

Note also the overt double standards.

Now just to make things absolutely clear, I don’t have an issue with that. Mark Adomanis has a perfect right to his own political views on Russia and to air them on his blog and Twitter account. What I do however want to point out is that many people, including some fairly high profile ones, seriously consider him to be a “Russophile” or even a paid-up stooge of the “Putin regime.” (Some of the more conspiratorial-minded even consider Masha Gessen, who wrote a biography of Putin called “The Man without a Face,” to be a Kremlin flunky). In reality, as far as his priorities go, cleaner and more effective government in Russia takes a clear second place to the prime imperative of politically undermining Putin. All this just serves to illustrate how utterly divorced from reality the mainstream commentary is when it comes to Russia and Putin.

PS. Since I scheduled this to be published, Adomanis has written an entire blog post about it, where he in addition also takes exception to the Russian government not bailing out Russian deposit holders in Cypriot, in addition to expounding on the points he already made on Twitter.

The fact that many Russian officials had accounts in foreign banks acted as a (very!) crude check on Putin and the center’s ability to control things: true autocracy is impossible in a situation in which any mid or high level official can, at a moment’s notice, go abroad and live off the accumulated assets in their foreign bank accounts. … Assuming the Kremlin actually can get officials to “repatriate” their foreign holdings (a very big if, I grant you) they will be in a much weaker position to question or resist anything the President demands. Basically, completely banning the holding of foreign accounts would make the Russian government even more unaccountable, unpredictable, and arbitrary.

The evidence for these assertions that Adomanis brings to the table are precisely zilch. This is especially disappointing coming from a pundit who has based a substantial part of his blogging career on expounding the extremely tenuous nature of the ties between autocracy/democracy, and things like economic performance and demographic health. So why now this supposed link between corruption and democracy? Aside from the general lack of data and incoherence, for a man so concerned with “autocracy” in Russia, I wonder if Adomanis realizes that simply translating his article would make for excellent propaganda for Putin (e.g. by feeding “the good Tsar stymied by his bad boyars” trope).

PPS. And it’s been translated at Inosmi, with most of the reactions as predicted above. E.g. the commentator AndrewGur: “Did I get this right? This journalist is suggesting that one component of democracy – is the possibility not to obey the orders of the President while under the control of a foreign enemy who controls them by dint of them having their money there?”

The Juche Response To British Lawlessness

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My latest for VoR’s Experts Panel. (Incidentally, good to see that site getting revamped, and entering the Web 2.0 era).

London has a reputation as a “safe sanctuary” for shady people of means from the ex-USSR and other less-developed places, and I think it’s loath to lose it – as it would by extraditing the likes of Borodin – in return for the chance of improving its relations with Russia.

In general, I think we should treat the idea that Western countries give political asylum out of genuine humanitarian concerns with skepticism. See the Dutch refusal to give Alexander Dolmatov, wanted in Russia in connection with the May 6th riots, political asylum. Was it because of their respect for Russian judicial sovereignty? Or did it have something to do with his work at military factory – and possibly, his preference for suicide over spilling military secrets?

In short, it’s a very cynical game they play. London calls Russia a “mafia state” while sheltering those very mafiosi in Mayfair. The Europeans lecture Moscow about rule of law, but then see it fit to grab 7-10% of the value of all deposits in Cypriot (where many Russians bank, far from all of whom are money launderers).

From Russia’s perspective, we have to note that concessions and a pacifistic attitude have never brought much in the way of benefits from the West. For instance, Ukraine has allowed in Europeans visa-free for years now, but it is Russia – which insists on mutual reciprocity in relations – that is far more advanced in negotiations to institute visa-free travel with the EU.

As North Korean diplomat Jon Yong Ryong said, “a high-handed policy should be countered by a tough-fist policy.” In other words, nobody will respect you if you don’t first respect yourself. Instead of piteously whining about British “hypocrisy” and “double standards” and other moralistic claptrap, Russia should take a cue from the DPRK and retaliate in kind. In this particular case, it could make it clear that big-time British financial fraudsters and tax evaders (no need to bother with little fishes) are welcome in Moscow provided they make the requisite “investments.” Not only will it feel good to give the “doctor” some of his own medicine, but it actually stands a chance of incentivizing future British cooperation on financial crimes by hitting their Exchequer. As an added bonus, it also wouldn’t hurt Moscow’s quest to become a global financial center.

It’s all nice, civilized, and pathologically passive-aggressive. In other words, if Russia were to follow my advice, it would be all the closer to “convergence” with true Western standards. And I’ve been told that’s a good thing.

Are Caucasians Stealing Russian University Places? The Data Says, “Probably Not.”

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In one of the recent posts on corruption, commentator AP wrote:

Kids from Moscow are having trouble getting into universities now because entrance, based on exam results, skews the chances of acceptance in favor of those students from corrupt regions where they can buy better results. Moscow is less corrupt than, say, Dagestan so Dagestani students perform much better on entrance exams.

Is this true? Seeing as how the Russian state doesn’t release Unified State Exam (USE) results by region, probably due to PC considerations, at first this assertion might appear to be unanswerable. However, there is a way to get round the problem.

(1) We know the PISA-derived IQ’s of some 43 Russian regions (which account for about 75% of its school-age population).

(2) The Russian government DOES release the the numbers of maximum scores in the USE tests by region. In this post we will consider the data for 2012. Furthermore, we know that at least at the federal level, these results tend to form bell curves.

(3) One of the primary “proofs” of electoral fraud in the Russian elections was the presence of spikes at convenient increments of 5%. In the case of USE fraud, we only have access to data for 100% scores and measuring the fatness of that tail should give us a clue as to its relative magnitude. (While it is possible and even likely that school administrators and regions would take care not to create too many maximum marks on the notoriously hard USE tests, far from everybody will follow said precautions. After all, if many regions didn’t even bother to smoothen the spikes to conceal fraud in the elections, is it realistic to posit that they’d take greater care around trifles like exams?).

(4) We know the number of 16 year old’s per Russian region from the 2010 Census, who would have participated in the 2012 exam season.

(5) We know the normal distribution.

The blue bars below show the number of top-scoring exams per region as a multiple of Russian 18 year olds there with an expected IQ of 130 or more, based on the region’s average PISA scores and a standard deviation of 15. The red bars show the same thing, with the major exception that an average IQ of 96 – that is, the national average – is assumed for ALL Russian regions.

unified-state-exam-fraud

As we can see above, the most suspicious results are mostly from ethnic Russian oblasts such as Stavropol, Kaluga, Rostov, Perm, and Vladimir, with the two big exceptions being Mari El and Chuvashia. To the contrary, Dagestan – the biggest Caucasian Muslim republic – has very few top scores relative to the number of very bright people we can expect to find there relative to most other Russian regions.

Finally, the reason that the red bar is a lot higher than the blue bar in Moscow, and to a lesser extent Saint-Petersburg, probably doesn’t have anything to do with foul play, but with the fact that their average IQ’s are about 106.6 and 102.6, respectively (i.e. considerably higher than the national average of 96). So while they generate a relatively disproportionate number of top USE scores, that is presumably because they attract the bulk of Russia’s most intellectual families (the so-called “cognitive clustering” effect).

Of course one problem is that we don’t have PISA data for all Russian regions. Maybe the Chechens do all the cheating then?

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Russia’s Corruption In Comparative International Perspective

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Continuing from my previous post (which focused mostly on trends), this one focuses exclusively on international comparisons as per the results of Transparency International’s Global Corruption Barometer survey of 2010-11. The graphs represent affirmative answers to the question of whether the respondent had paid a bribe in the past 12 months to each of 9 institutions if he had come into contact with them.

Is Russia the most corrupt of the BRICs?

This is the conventional wisdom, both as per the widely cited CPI as well as numerous pundits. Is it correct? Well, going by the best possibly objective measure of corruption – asking people whether they (or a member of their household) paid bribes in the past year – no, it isn’t. The honor goes to India. China is modestly less corrupt than Russia, while Brazil is basically a First World country in this respect.

brics-corruption-chart-institutions

Is Russia especially corrupt by Central-East European standards?

No, it isn’t. While it’s certainly more corrupt than average, that particular honor has to go to Azerbaijan. The Ukraine is systemically more corrupt than Russia, with a higher percentage of respondents reporting bribing all nine institutions. Even Lithuania is, on average, more corrupt than Russia. (So much for the pro-Western democracy automatically leading to cleanliness and transparency thesis).

cee-corruption-institutions

On the other hand, for the sake of honesty and consistency, one has to acknowledge that Saakashvili’s campaign against corruption in Georgia was a genuine and astoundingly successful achievement. In fact, if these polls are perfectly accurate, Georgia now has less “everyday” corruption than the US!

If Sunlight Is The Best Disinfectant, Why Is The Russian Mafia State Opening The Blinds?

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My latest for the US-Russia.org Expert Discussion Panel. Also as usual it appears at Voice of Russia. The version printed here is a slightly longer one:

There are already a lot of opinions on the topic of Russian corruption, and I see no pressing need to add more to that morass. I do however think it will be useful to ground the scale and trajectory of Russian corruption in quantifiable facts and statistics.

There are three major ways of measuring corruption: (1) Subjective assessments; (2) Objective assessments; and (3) Opinion polls.

The most famous subjective assessment is Transparency International’s Corruption Perceptions Index. Russia might go up and down this index across the years, as per the businesspeople and “experts” it queries, but overall it remains consistently stuck somewhere in between Honduras and Equatorial Guinea. Bearing in mind that they also believe Italy is more corrupt than Saudi Arabia – a country that is owned by its royal family even in name – one must ask to what extent this PERCEPTIONS index reflects actual corruption in any particular country, as opposed to the generosity of the expat packages it offers and its friendliness to the international business community. Is it a complete coincidence that Russia’s already low CPI score started plummeting to new depths about the exact same time it jailed Khodorkovsky?

russia-corruption-subjective

(1) CPI = Corruption Perceptions Index.
(2) WBGI = World Bank Governance Indicators.

Russia does much better on assessments that include precise methodologies for calculating scores, i.e. a particular anti-corruption law either exists – or it doesn’t. On the Global Integrity Index, it scores 71/100, which is comparable to many other middle-income countries like Lithuania (74), Hungary (73), and Mexico (68). On the Open Budget Index, which measures fiscal transparency, Russia improved drastically from 47/100 in 2006 to 74/1000 by 2012, and is now ahead of all the other BRICs, all of East-Central Europe barring the Czech Republic, and even ahead of Germany.

Likewise, widespread tropes of shady siloviki appropriating all the proceeds from the Russian oil industry – typically accompanied by terms such as “Muscovite patrimonialism” or “rent-seeking clans” by those seeking to project an aura of learnedness – to the contrary, Russia is second only to Brazil and Norway in the transparency of its oil and gas accounts, as measured by the Revenue Watch Index.

Now all of this is not, of course, to say that the Germans steal more from their budget than the Russians; that would be ridiculous. These indices try to tally laws that promote integrity and institutional transparency, not corruption per se. It does however mean that Russia releases more information about its budget than a wide array of other middle-income and even developed countries, which – all else being equal – should make any thefts and shady dealings easier to detect. For instance, Navalny’s work to expose corrupt state tenders is hailed in the press – and rightly so! – but had not the kleptocratic Kremlin made those tenders publicly accessible on the Internet, his activities wouldn’t have even been possible in the first place! If Russia truly were the “mafia state” it is frequently painted as by the Western chattering classes, why on earth would it want to shine more light onto its own rotten essence by steadily increasing its integrity and transparency indicators?

russia-corruption-objective

(1) OBI = Open Budget Indicators.
(2) GII = Global Integrity Index.
(3) RW = Revenue Watch Index.

The final method of measuring corruption is both the most direct and democratic – asking ordinary Russians how often they experience it in their everyday lives, as opposed to the musings of ivory tower “experts” and limousine expats. Unfortunately, opinion polls on the matter – most of which come from Transparency International’s Global Corruption Barometer, the Levada Center, and FOM (The Foundation for Public Opinion) – are too irregular and differently worded to confidently discern any decadal trend. On average, as we can see from the graph below, about 20%-25% of Russians tend to say they or their families have experienced corruption in the past year or two.

russia-incidence-of-bribery

(1) GCB = Global Corruption Barometer (“In the past 12 months, have you or anyone living in your household paid a bribe in any form?”)
(2) Levada – “Did you have to pay a bribe anywhere in the past 12 months?”
(3) FOM 1 – “In the past year or two, have you personally met any state servant who asked or expected an unofficial payment or service from you for doing his/her work?”
(4) FOM 2 – “Have you ever given a bribe to a state official or not?”

In the most comprehensive international survey, that of Transparency International’s Global Corruption Barometer, some 26% of Russians said they or a member of their household paid a bribe in the past year. This is directly analogous to countries like Hungary (24%), Romania (31%), and Mexico (33%) – and not far below the worst-performing “old European” country, Greece (18%). This is, of course, nothing to write home about; but neither is this comparable to India (54%), let alone aforementioned Honduras or Equatorial Guinea. Bear this in mind the next time you read some opinion columnist pontificating about Russia as “Zaire with permafrost” or “Nigeria with snow” (for the record, more than 60% of the respondents from those two countries said they or a member of their household paid a bribe in the past year).

If ordinary corruption is difficult to quantify, it is doubly so for elite corruption. And rumors about Putin’s $40 billion dollar Swiss bank accounts – especially if they are sourced from his political opponents like Stanislav Belkovsky and Boris Nemtsov – aren’t going to get us very far. We need concrete sums and figures – say, the total of $100 million or so that appears to have been stolen in the recent Oboronservis scandals. This is an order of magnitude or so higher than the largest corruption scandals in developed Western countries, but on the other hand, it’s unfortunately quite typical of major corruption scandals in places like China, India, and Latin America. (The overall sums are smaller in truly deprived regions of the world because there is far less to steal in the first place).

Case in point. In a Twitter argument about whether it was better to live in Russia or India, the Swedish diplomat Mats Staffansson wrote to me, “India has enormous poverty but has one big advantage. A functioning noncorrupt legal system. Good British heritage… Corruption in India is definitely a problem but on a much smaller scale than in Russia.” In response, I challenged him to find a single Russian corruption case from the past decade that is remotely comparable to the theft of food worth $14.5 billion in India that was supposed to have been sold at subsidized prices to the poor – and the poor in India are really poor, as half of India’s children are chronically malnourished - but was instead looted by “corrupt politicians and their criminal syndicates.”

I am still waiting for an answer from him…

As for Vlad Sobell’s question of whether corruption in Russia can ever become “the exception rather than the rule”… Well, where precisely is this threshold? Corruption is part of a continuum, not a set of discrete states. I will venture to say that with the correct incentives and cultural propaganda, it is certainly plausible for Russia to reduce its levels of corruption from the levels of Romania or Mexico today… to the somewhat better levels of Italy or Poland. I do not know if improvements beyond that are possible. Whether it was due to Protestantism, or the out-breeding fertility patterns specific to family life within the Hajnal Line (which according to some theories promoted altruism), the peoples of north-west Europe seem to have reached a level of very low corruption that has been equaled by very few other societies. In Russia’s case, just converging with Mediterranean and Visegrad corruption norms would be an adequate achievement.

Russia’s Budget Is Getting More Transparent

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Not often that you see Russia in some color other than bloody red on a world map of corruption or institutional quality. But according to the Open Budget Index (2012 results), the Russian budget is actually pretty transparent as far as these things go.

Of the major countries, only the UK (88), France (83), and the US (79) are ahead. The other major developed countries in the survey like Germany (71), Spain (63), and Italy (60) are all behind Russia (74), as are its fellow – and supposedly far cleaner – BRICs fellows Brazil (73), India (68), and China (11). Of perhaps greater import, only the Czech Republic (75) edges above Russia in the CEE group, whereas all the others – Slovakia (67), Bulgaria (65), Poland (59), Georgia (55), Ukraine (54), Romania (47), etc. – lag behind it. Also noteworthy is that Russia’s typical neighbors on Transparency International’s CPI, such as Zimbabwe (20), Nigeria (16), and Equatorial Guinea (0), reveal almost nothing in their national budgets.

Now of course the Open Budget Index is not the same thing as corruption. You can have an open budget but still steal from it (and this does happen in Russia frequently), and you can also have a closed budget from which few people steal, at least directly (as was the case in the USSR… or to take a more modern example, while Russia’s OBI is now higher than Germany’s, it is inconceivable that state corruption is even in the same league in these two countries).

Nonetheless, there is surely a very significant degree of correlation between the two. Having an open budget means that it is can be subjected to scrutiny; were Russia’s budget closed like China’s or Saudi Arabia’s, Navalny’s work to expose corrupt state tenders would be simply impossible (as it is, the latest ploy corrupt bureaucrats have been forced to resort to is to sprinkle Latin characters into the Cyrillic texts of state tenders so as to confound search engines).

Second, a high OBI score demonstrates the state’s commitment to fighting corruption. If Putin and Co. really didn’t care and were truly the kleptocrats they are repeatedly labeled as by the Western media, they would instead do everything in their power to hide the budget so as to remove the possibility of scrutinizing it. But they don’t. To the contrary, Russia’s OBI has increased from year to year.

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Andrew Ryvkin’s Strange Ideas About The Russian Economy

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By the usual standards of Guardian reporting on Russia, this one by GQ Russia editor Andrew Ryvkin is… well, about par for the course.

Citing a recent PwC report that Russia will overtake Germany to become Europe’s biggest economy in 2030, he asks, “Should we believe them?“

Well, the PwC is just repeating predictions made almost a decade earlier by Goldman Sachs, which has thus far proved very accurate on the growing prominence of the BRICs in general, and of Russia in particular (regardless of repeated attempts to kick it out of that grouping, against the judgment of Jim O’Neill, the inventor of the BRICs concept himself).

So in effect Ryvkin is asking us whether we should trust a range of organizations with a great predictive record on the issue to the uninformed ravings of a Guardian hack.

Forget Russia’s very reasonable and respectable growth rates compared to the other Central-East European countries. According to Ryvkin, Russia’s downfall will be because it is “politics”, and not “strict economic policies”, that “rule these wintry lands.” What is the primary example he uses to demonstrate this?

One should also have sedatives close to hand while reviewing the figures. Russia has become one of the most corrupt countries in the world, and is barely making an effort to hide it. For instance, one of the Sochi 2014 Olympic projects – a 50 km road – costs nearly $8bn.

This meme was popularized by Julio Ioffe in the Western press on Russia back in 2010. It has also long since been long debunked, including on this very blog – although it continues to float around as a cliche among Russian liberal and journalist circles.

The only problem with looking at Russia through this failed state prism, without bothering to corroborate sources, is that in no sense can the Adler-Krasnaya Polyana route be described as just a “roadway”. Intended to be completed within 3 years in an area with a poorly developed infrastructure, this so-called “road” also includes a high-speed railway, more than 50 bridges, and 27km of tunnels over mountainous, ecologically-fragile terrain!

Then there’s this bizarre statement: “Germany, is currently associated with its policy of austerity, Russia is known for precisely the opposite.” That’s certainly news to me, as Russia has run balanced budgets for the past 2 years* – in stark contrast to, well, pretty much the rest of the developed world (including Germany for that matter).

And here you’re inevitably faced with a question: how would the Russian government act if it became a leading European economy and faced a crisis like the one in we have now in the eurozone, considering that this government has allowed the construction of a $160m/km road?

That is an extraordinarily remote possibility, seeing as Russia has fiscal unity and no significant sovereign debt (i.e. the lack of which define the European crisis). The very question is not only based on a faulty premise (the so-called “caviar road”) but essentially meaningless.

After some of the usual moralizing and content-free platitudes about the absence of Russian democracy, as well as the further extremely bizarre idea that the Chinese economy is not politicized like Russia’s**, Ryvkin wanders back on track with the usual spiel about how Russia is Nigeria with snow.

Here’s a question: who would want a Russian-made car, when even Russians don’t want them? Another one: who wants to fly Russian aeroplanes, when even in Russia people choose to fly on a Boeing or Airbus? But these huge industries still exist, resembling Frankenstein’s monsters of Soviet industrial might, brought to life by heavy injections of oil money and created by businesses that ultimately cannot produce a competitive product.

It goes against almost every aspect of economic, market-oriented logic, but it has nothing to do with the economy, because it aims to keep the workforce loyal to the government and project an image of a neo-Soviet industrial power. So is securing votes at the cost of your country’s economic development today a strategy worthy of someone who is going to lead the European economy in seventeen years? Is the strategy even smart?

Back in the world of hard facts and statistics, Russian car production was at 2.0 million units in 2011 (increasing by a further 15% in 2012) compared to 1.2 million units in 2000. Many foreign automakers have moved manufacturing into Russia, but that one presupposes is a good thing; that indigenous Russian brands haven’t done as well doesn’t mean much (which British brands are doing well apart from Rolls Royce?). There are few countries in which automobiles are a major export staple – incidentally, China with which Ryvkin incessantly compares Russia with isn’t one of them – and there is no good reason to expect Russia to become a major exporter of cars under any government, be it Putin’s or “even [a 10-year-old] (as long as he was smart enough not to stop the flow of oil and gas).”

That is because hydrocarbons are Russia’s comparative advantage, a concept which likewise explains why say Australia and Norway do not export much manufactured goods either. Ironically, the surest way to solve this “resource dependency” would be to get Ryvkin’s 10 year old President to ACTUALLY stop the flow of oil and gas.

That is also the reason why Ryvkin doesn’t work as an analyst at PwC but writes articles for the Guardian.

* Actually latest estimates show that 2012 had a deficit of 0.02% of GDP, but that’s of course basically a rounding error.

** Where to even begin here? For a start, consider the fact that the HQ’s of all the major Chinese companies have a “red machine” with a telephone link to Party functionaries