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Corruption almost inevitable in Russian business
Researcher Julia V. Bondeli studied corruption in Russia for five years. She was surprised at the scope of the problem. There are even “fixers” who are contracted to facilitate corrupt exchanges.
Bondeli studies international business. For five years, she studied corruption as it plays out between individuals in a medium-sized company and bureaucrats in the country.
“The experience gave me some pretty unique insights,” she says.
At the same time, Bondeli had to be extremely careful out of consideration for her respondents’ anonymity.
She completed her doctorate in February this year and is now a postdoctoral fellow at NTNU in Ålesund.
In-depth interviews with people on the inside
“Researchers usually study corruption from a macro perspective. My approach was to study corruption from a micro perspective,” Bondeli says.
“I limited my focus to corrupt exchanges between two actors in real situations. I wanted to uncover some underlying mechanisms and did a qualitative study and took almost an anthropologically inspired approach,” she said.
“I conducted in-depth interviews and observations. I talked to people who have to deal with corrupt bureaucrats to keep their own business alive,” the researcher says.
Building social capital
For corruption to take place, social capital – or social obligation – has to be built up through personal relationships between a private business person and a publicly employed bureaucrat.
“Bureaucrats have typically been seen as part of an institutional environment outside the business network, whereas I look at them as active participants within the business network,” Bondeli says.
Their administrative authority is a negotiable resource that can potentially be exchanged for material goods in corrupt exchanges.
Obligations and networks
These exchanges are all about social obligations between the actors.
“First the parties create connections, and then they strengthen the connections. They keep in regular contact with each other. The relationship can start with small gifts, perhaps for holidays, and thoughtful gestures, or calling and congratulating each other on birthdays,” the researcher says.
“Eventually you can ask for a small favour, for which you might give a bottle of wine or a box of chocolates in thanks. In the process you create social obligations, and the bureaucrat feels obligated to help the person the next time he or she asks for something. It usually doesn’t happen for free, but the bureaucrat remains available,” says Bondeli.
Bondeli explains that social capital that is built in a relationship between two individuals becomes a viable currency in the bureaucrat’s network.
“It would be challenging to build a relationship with every bureaucrat. The social capital developed through an individual actor can be used in a multitude of vertical and horizontal personal relationships across public and private domains.
Relationships are everything
Social capital is built up over time.
“It’s difficult to quantify how long it takes to build up a relationship. I would imagine it’s usually a matter of months. It’s not like the relationship stops at some point. The process never ends. The greater the social capital, the greater the social obligations between the two individuals,” says Bondeli.
“Sometimes bureaucrats aren’t available to enter into this kind of relationship, because they’re scared,” she says.
“Often a person is introduced by another trusted network connection, and it takes a long time to develop the relationship. And it could be that the bureaucrat has a close relationship with another bigger business player. Then it can be a matter of loyalty.”
Russia also has actors – so-called 'fixers' – that business people can turn to, to help them build these relationships with bureaucrats. By acting as intermediaries, they commercialize the mediation service that enables corrupt exchanges.
Surprised by the scope
Although corruption in Russia is well known, Bondeli was surprised to discover how widespread it is.
“Corruption is systemic. In the public system in Russia it’s not only tolerated, but people usually expect to rake in income from corrupt exchanges that they share with their superiors. This is how you ensure your own protection.”
“At the same time, anyone can be punished anywhere and anytime. Most are incriminated in this system. The fact that anyone can be punished at any time establishes a kind of control on the people involved. Honest employees aren’t very welcome in this kind of a system,” she says.
Bondeli describes the legal frameworks in these situations as a facade. Loyalty in corrupt networks is the governing mechanism rather than the law. Bondeli is personally upset about the corruption, and that was the reason why she chose to focus her doctoral dissertation on the topic.
“Corruption leads to poverty. It’s an incredibly unfair distribution of resources. Especially in a country where corruption is systemic, like in Russia, enormous assets are pumped out of the country and hidden in tax havens or invested in real estate in the West,” she says.
She points out that a lot of research at the macro level shows the enormous sums that end up in the pockets of higher-ups.
Corruption through intermediaries
Bondeli’s insights into how the system works from the inside are already sought-after knowledge among Norwegian companies.
“Some Norwegian companies are exposed and vulnerable in Russia and other corrupt countries. I can’t offer any recipe for how to deal with the corruption. But they can at least learn a bit about how it works and then they can figure out what action to take.”
Bondeli says that many companies choose to delegate corrupt exchanges to local partners, who are used as intermediaries.
“How ethically sound this is, is debatable. Personally, I don’t think it’s ethically justifiable,” she says.
Hard to avoid
As to the question of whether it is even possible to trade with companies in Russia without participating in corruption, Bondeli says it’s possible not to be involved in it directly.
“You don’t have to build a relationship yourself, but to avoid being indirectly involved is tough. It’s one thing to export to Russia, then you can avoid it because a company in Russia buys the goods from you. If you don’t ask, you can remain ignorant, and then it’s not your problem,” she says.
“But as soon as you start to integrate your business more closely with some companies in Russia, such as through a joint venture or opening subsidiaries there, then you’re in a completely different situation. That’s when it’s difficult to avoid getting involved in the corruption.”
Bondeli explains that companies that export to Russia can also end up in a game where Russian importers attempt to gain control over who in Norway can export.
“You could end up in a situation where you risk losing your export license – and you might get a real taste of how things work over there. Then it’ll be your choice whether to accept losing Russia as an import market or being forced to join the corrupt rules of the game.”
Julia V. Bondeli: Capitalising on Socialising: studying the social aspect of business relationships through socioeconomic interaction in corrupt exchange. Doctoral dissertation, NTNU, 2021.
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