#12 - JRL 7239
Moscow Times
June 25, 2003
Corruption, Complicity Create Loyalty
By Yulia Latynina

Russian laws are getting better all the time. You want proof? Last week, Russia was admitted into the Financial Action Task Force.

The problem is that this country doesn't have laws, just personal relationships. There are laws on the books, of course, and they are forever being fine-tuned, but no one abides by them.

And you can't have true ownership in a country that has no laws. Russia has no shareholders in the proper sense. Not long ago, I was talking with two businessmen. "What are you bitching about?" one said to the other, who had just been approached by a minister demanding a cut of his business. "You're on his turf, and that gives him the right." If a minister or governor has the right to a share of a factory, he gets it. On the rare occasion when he doesn't, one of three things happens: The minister gets the sack, the factory is taken over or a third party pockets the disputed share in exchange for protection.

Russia has two electoral systems: official and unofficial. It's no secret that the political establishment hits up the oligarchs for campaign funds -- and then pockets the money. If a major company contributes generously at election time, you can bet the authorities will turn a blind eye to its creative bookkeeping. Businesses in Russia are divided into two groups: those that pay taxes and those that make contributions. And the economics of contributions make a lot more sense -- generous donors can expect a return of 1,000 to one.

And instead of the democratic separation of powers, we have clan feuds. There is a Korean novel called "Dream in the Jade Pavilion." The emperor in the book is surrounded by two cliques, the white and the black. Russia also has two cliques: the so-called power ministries (the armed forces, law enforcement and intelligence) and the oligarchs. Only it's hard to tell who's white and who's black.

To call them cliques is something of a stretch, actually. Mostly they fight among themselves -- a particularly brutal, if benign, form of intraspecies competition, in which no blunders no matter how bad are cause for someone in President Vladimir Putin's inner circle to lose their job. For example, terrorists seized the Theater na Dubrovke. And the consequences? The head of the Interior Ministry, which failed to prevent the hostage taking, was picked to head the United Russia party as well.

Alfredo Stroessner, president and dictator of Paraguay for 35 years, once said: "Corruption must be encouraged, because corruption engenders complicity and complicity engenders loyalty." Incompetence also breeds loyalty and is also encouraged.

In the land of the oligarchs, there is less stupidity, more greed and no unity at all. Some have cut deals with the power ministries. Some hover close to the center of power, securing privileges or higher tariffs on imported cars. Some are even prepared to make their businesses transparent and to pay high taxes in order to be free of the whims of the new collective Korzhakov.

Only transparent businesses can save the economy, but they would destroy the current political system. That's why pushing for transparency is seen on high as tantamount to organizing a coup d'etat.

No one political clan or party has any chance of getting rid of another, however. The clans themselves don't matter, just the idea. Where there is something to be gained, people will fight for it, just like the Guelfs and the Ghibellines in medieval Florence. No sooner had the Guelfs expelled the Ghibellines than the Guelfs themselves split into two factions. You guessed it: the black and the white.

Yulia Latynina is a columnist for Yezhenedelny Zhurnal.