At the September 2009 Committee for Russian Economic Freedome event, Jamison Firestone spoke about the need for greater respect and adherence to the rule of law in Russia and how institutional corruption worked to seize Hermitage Capital’s assets.
VLAST (Power) is a documentary on how liberty and the rule of law have become casualties in modern Russia through the lens of Mikhail Khodorkovsky’s imprisonment. Director Cathryn Collins interviews Khodorkovsky’s family, associates and politicians to create a picture of how Khodorkovsky’s pro-democracy actions were stiffled as Russia marched towards a more authoritative government.
Vlast (Power) takes an unvarnished look at the consolidation of power in an oil-dependent Russia, revealing a frightening picture of repression and retribution reminiscent of Stalin’s regime.
VLAST (Power) premiers at the Museum of Modern Art in New York City on Monday, February 22, 2010 at 8:30pm with another showing on Wednesday, February 24, 1010 at 4:30p at MoMA. Director Cathryn Collins and other Khodorkovsky associates will be on hand to answer questions after each showing. Tickets can be purchased here. More information here.
Today’s Bloomberg article details Jamison Firestone’s revelation that Russian Interior Ministry officials tried to collect $21 million in taxes using forgery and theft. The method the government officials used were similar to the expropriation in the Hermitage Capital case through taxes. In April 2009 and again in October 2009, Firestone filed complaints with the tax authorities and the General Prosecutor’s office but neither offices responded.
Russia’s issues with government, institutionalized corruption is well-known. Ranked 146th in Transparency International’s 2009 Corruption Perception Index is having a real financial effect on the Russian economy. According to data by EPFR Global,
Perceived lack of law is one reason Russia has attracted less than one-fifth the investment in China and Brazil and half of what’s invested in India, its fellow members of the so-called BRIC group of emerging nations.
Firestone supported this assertion with,
Corrupt law enforcement is the single biggest risk to business in Russia.
At last September’s Committee for Russian Economic Freedom event in New York, Firestone had this to say about the rule of law in Russia.
IKEA, the global furniture giant, recently fired their two executives who turned a blind eye on government bribes, but only to move their expansion project forward. Mikael Ohlsson, the chief executive and president for the Ikea Group, Ikea’s largest franchisee, which includes the Russian operation, said in a statement, “Corruption is totally unacceptable for Ikea.”
Corruption is a serious issue in Russia and it is routinely discussed by President Medvedev as a top priority for his government, however, not much as changed. The investment environment in Russia remains toxic and Russia is now falling behind economically and academically its BRIC rivals Brazil, India and China. In a recent Financial Times article, a large pension fund manager asked this question,
Russia defaulted in ’91, restructured in ’95, defaulted in ’98, took assets away from Yukos, from Shell from BP. If you cmplain, you get expelled from the country and then if you continue to complain you may die in London from polonium poisoning, or die in pre-trial detention in Russia. Now tell me why I should invest in Russia?
Keeping Khodorkovsky in Prison Hurts Business
Bill Browder of Hermitage Capital, whose attorney Sergei Magnitsky died in Russian custody last November was interviewed by Reuters TV about doing business in Russia.
From my own perspective, for every investor that’s there – there are probably 20 that are not there for reasons of Khodorkovsky, what happened to Sergei [Magnitsky] and other things.
At World Economic Forum this year, Russian officials headed by Finance Minister Alexei Kudrin were no where to be seen. Ian Bremmer, head of the foreign policy think tank Eurasia Group blogged that
Russia as a topic generally comes across as a negative in global circles–revisionist geopolitics, resource nationalism, and strongly authoritarian (albeit charismatic, in a fashion) domestic leadership.
Those negative sentiments were backed up by 75% of Russian businessmen attending Davos and predicting another year of stagnation or further economic decline. This mood was backed up by dismal economic numbers in 2009. The Russian economy shrank 7.9%, the most in 15 years and analysts forecast the economy to shrink by 8.5% in 2010.
Although President Dmitry Medvedev keeps up the positive drumbeat on foreign investment in Russia, business leaders are more circumspect, expressing concerns over instiutional corruption stifling economic development and entrepreneurial spirit. German Gref, CEO of Russia’s largest bank Sberbank talked about
…the mood of fear gripping the private sector since the state take over oil major YUKOS several years ago.
Former YUKOS CEO Mikhail Khodorkovsky wrote in last week’s New York Times op-ed piece that Russia only exports gas and corruption and its refusal to see the limits of a state-controlled petro-economy is taking Russia down the path to becoming
a classic third-world style, raw materials-based economy, where corruption is the norm rather than the exception and there is no working system of democratic and social institutions.
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