Financial Times (London, England)

July 22, 2005

Bribery in Russia up tenfold to Dollars 316bn in four years

By ARKADY OSTROVSKY

MOSCOW

Bribery in Russia has multiplied by a factor of 10 during the past four years, and the amount of money changing hands is now twice the size of federal revenues, according to an independent think-tank.

In a repeat of a survey first carried out in 2001, Indem, an independent think-tank, said corruption had thrived under President Vladimir Putin as bureaucrats and law enforcement agencies were demanding ever higher bribes from businesses and private citizens.

Indem calculated that the volume of bribes extracted by various Russian fiscal inspections, police and licensing authorities had reached Dollars 316bn (Euros 260bn, Pounds 180bn), or 10 times the figure four years ago. The report highlighted the failure of the government to tackle corruption despite Mr Putin's promise to make it a priority.

The size of an average bribe paid by companies has gone up 13-fold from Dollars 10,000 to Dollars 136,000 in four years, according to the report. Health, fire and safety inspectors, tax police and law enforcement agencies are the most egregious bribe-takers, it said.

Indem surveyed 1,000 business people and 3,000 private citizens in order to extrapolate the figures.

Georgiy Satarov, the president of Indem and a former aide to President Boris Yeltsin, said the sharp rise in the level of corruption coincided with the government's attack on Yukos and its chief shareholder, Mikhail Khodorkovsky.

"The general tendency of growing corruption is not new, but the Yukos affair has completely untied the hand of bureaucracy in their pursuit of bribes," Mr Satarov said.

But he said the underlying reason for the rise in corruption was the lack of political or civil society control over bureaucrats, who had become the dominant force under Mr Putin.

"Putin is the hostage of the system because he depends on political support from the bureaucrats," Mr Satarov said.

The report showed that the biggest share of all bribes went to the various branches of executive power in the country, including municipal and regional governments and their lower-ranking officials.

Mr Starov said Indem's figures left out bribes paid by oligarchs and politicians who could not be easily surveyed.

Indem also showed that domestic corruption bribes paid by private individuals to traffic police, teachers and doctors had been stable at about Dollars 3bn a year. This appeared to be because private citizens were less prepared to pay bribes for any service that was not essential to their lives or the lives of their families.

"The authorities are increasing corruption pressure on people, and people are trying to escape it," the report said.

One of the fastest-growing bribery areas is among military draft commissions which give exemptions from national service - considered a life threat in Russia.

At the same time, Indem's survey showed that Russians were paying fewer bribes to state hospitals.

"There are millions of people across the country who don't get any medical care because they can't afford to go private, and they can't afford to pay bribes to state hospitals," Mr Satarov said.

Mr Satarov said there was only one way to tackle the problem of corruption: by establishing political control over bureaucracy, allowing freedom to the news media and helping to develop civil society.

"In short, these are the elements of the system that is called democracy," Mr Satarov said.