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. Last Updated: 07/27/2016

Grease, Russian-style Business faces rise in corruption

While in Russian the similar phrases Nado zhdat', ("you must wait") and Nado zhe dat' ("Of course you must give") are common commands of the bureaucratic process, for businesses here the difference between a syllable can mean making or breaking a deal.


From avoiding traffic tickets, to cutting in line, to closing a deal, payoffs are an integral part of Russian life. But with living standards plummeting and no end in sight, corruption is rising to unworkable and intolerable levels.


"This is the Nigeria of the 20s. It will be interesting to see who gets caught", said one U. S. executive who requested anonymity.


Virtually all businesses here acknowledge rising corruption, but say they have not succumbed to bribes. Still, "grease" gifts, such as alcohol, souvenirs, cigarettes and even trips abroad are admitted and justified as a frequent and necessary part of doing business.


While prevalent in every industry, nowhere is it stronger than in oil and


gas, where payoffs are known to open pipelines.


"The extent and amount of corruption is unbelievable", said a Western oil industry source. "It's from the top to the very bottom, in order to sign a contract or even load a ship. I disagree with it and can't comply with it, but it's the reality of the situation. What our Russian trading partners do to get us the oil is their business".


U. S. companies, bound by the Foreign Corrupt Practices Act, say they won't give in, given the U. S. government's demonstrated ability to enforce it as it has with such companies as Lockheed and Young & Rubicam. In some instances the law has lost potential deals for U. S. companies.


"Because of the law, U. S. companies are at a disadvantage. I've never seen it happen, but sometimes clients keep you away from certain situations. Americans do have a hard time closing deals here", said one U. S. lawyer. "Other foreign nationals are much freer".


While no country is entirely free of abuses, such inherent corruption here mires any chance of a competitive bidding system, an integral part of a democracy and free market.


"I wish the Russians would realize that democracy is competition and competition spurs technology", said Richard Williamson Jr. , managering director, international, for American International Manufacturing Corp. , an oil equipment exporter that has lost some sales opportunities here to what it terms a less than competitive atmosphere.


Another executive detailed an encounter with a Russian banker, who promised a deal worth more than 26


million rubles if 9 million rubles were kicked back to him. "I told him I couldn't do it, but if he wanted to structure the deal creatively, then I couldn't stop him", the executive said.


A computer industry source said business for him would be impossible without "expediting action".


"If you did business by the book here, it would take up so much time and resources that it would be completely unprofitable", he said.


At a May conference in Meunster, Germany, members of the Group of Seven leading industrial nations even expressed concern.


"G-7 members stated their concern for corruptness here, particularly at the grass-roots level", Andrei Nechayev, Russia's economics minister told reporters after the conference.