Crisis Could Take a Bite Out of Corruption

Editor's note: This is the third in a series of reports about the effect of the global financial crisis on Russia.

Punctuality in making payments had always been Dmitry's pride, but in April he was forced to delay employee salaries by more than a month.

The sanitary inspector, who he usually bribed, had demanded an extra $15,000 to buy a new car for his wife. Dmitry had little choice but to hand over the money or see his shop closed for "sanitary reasons." But the bribe left no funds to pay the wages of his 15 employees.

"I had to ask the employees to wait, and I paid them back bit by bit," Dmitry said.

But Dmitry and other small business owners hope that times will change — and not because the Kremlin has promised to crack down on corruption. They said the financial crisis could actually help their companies by lowering the cost of bribes.

"I hope that this crisis that is hitting every sector of our economy brings some order. I hope that it makes our bureaucrats understand the real value of money," said Artyom, who like Dmitry asked that his last name be withheld in order to speak candidly.

Business owners interviewed for this article said they regularly pay bribes to avoid being shut down over infractions both real and imaginary. The cost is written off as a business expense.

But the size of bribes has shot up over the past three to four years, forcing companies at times to borrow money or delay salaries and other payments, the business owners said. What's more, they said, corruption has become so open and blatant that it has become the main scourge of small and midsized firms.

Nikolai Khalchenia, who owns a small grocery store, said corrupt officials turn their noses up at a $10,000 bribe these days.

"It is money for us, but not for them. A policeman can ask for much more, and you'll pay if you don't want to end up in prison," Khalchenia said. "We don't have any other choice."

Corrupt officials blatantly seek bribes and are unafraid of being punished, he added. "They are not afraid of anything," he said.

Artyom, the owner of a small factory in the Moscow region, said the police officer he usually pays demanded an extra $5,000 earlier this year, and the fire and sanitary inspectors also asked for several thousand dollars more.

"Our bureaucrats knock on our doors anytime they have extra personal expenses. It has become a habit," Artyom said.

Dmitry said he had complained to the sanitary inspector who sought the extra $15,000 to buy a car for his wife, but the inspector had replied that following the law would be even more expensive.

"Policemen, fire inspectors and others think that we pick money from trees and don't realize that we work hard to earn it," Dmitry said. "If you tell them that you cannot pay your workers, they laugh in your face. They only think about how to feed themselves, and they are never full."

He and Artyom said bribes were relatively high before the 1998 crisis, and in the months after corrupt officials slashed bribes by more than 30 percent.

Corruption is deeply engrained in everyday life, and everyone pays bribes, according to a study carried out last year by Transparency International, a corruption watchdog. Indem, a Moscow-based research center that tracks corruption, estimates that the amount of money changing hands has sharply increased in recent years, surpassing $319 billion per year. That amounts to about $2,250 for each of the country's 142 million citizens.

Interior Minister Rashid Nurgaliyev, speaking in Chelyabinsk on Thursday, said 70 percent of entrepreneurs give corrupt officials 50 percent of their gray incomes, costing the government 40 billion rubles ($20 billion) a year. He also said criminal groups spend 50 percent of their criminal incomes to bribe officials.

Ilya Khandrikov, who owns a clothing factory with 110 workers, is not optimistic that the crisis will reduce bribes, saying the Kremlin's anti-corruption campaign could drive up the cost of bribes. "With the government fighting against corruption, the risks our bureaucrats are facing are higher, so they will raise the price," said Khandrikov, an anomaly in Russian business because he stopped paying bribes in 2006.

He said he refuses to pay officials who ask for bribes, and when he needs to get a new permit he hires a firm to sort out the bureaucracy — a method more expensive than paying bribes.

A senior police officer agreed with Khandrikov that corrupt officials were not afraid of the Kremlin's fight against corruption. "I have seen so many fights in this country, but I've never seen improvements in anything. This time will not be an exception," said the officer, who serves in the Moscow force's anti-organized crime division.

Kirill Kabanov, head of the National Anti-Corruption Committee, also voiced skepticism that the Kremlin's efforts might reduce bribes. "More risk means more money," he said.

It remains unclear whether the crisis will affect bribes. The business owners interviewed for this article said they had not been asked for any bribes since the financial crisis started in September. Some of them weren't expecting visits from inspectors until early next year.

But they are hoping for a break. "I really hope the crisis will hit them the way it is hitting us," Dmitry said. "If they ask for what they wanted before the crisis, they'll lose a main source of income because I'll need to close my shop."

Previous crisis-related reports can be found at www.themoscowtimes.com.