Corruption has been a constant factor in Russia’s political economy. From one era to another, the multifarious forms of corruption continue to pervade Russian politics despite sincere and insincere efforts to fight it. The election of Vladimir Putin as president in 2000 brought a new effort at consolidating and organizing authority in the country. However, far from eliminating corruption, politics of the Putin era have merely changed the form of corruption, integrating corruption into the “power vertical” through which Putin governs.
In recent years, corruption has played an ever larger role in the regime’s stability. It serves as a force to co-opt and control the political elite and to replace formal institutions with something more flexible and more amenable to the needs of a consolidated authoritarian regime. Only deep changes, such as higher levels of political competition, have a chance of reducing corruption in the long run. The approaching fourth term of President Putin will continue to increase the role of informal institutions in Russian politics, in which corruption plays an increasingly large role in the Kremlin’s management of the political process.
This paper argues that understanding the business environment in Russia requires putting the government front and center. In response to economic crisis and falling oil prices, the Russian government has gone on the offensive. Through the use of targeted subsidies, protectionist policies, and procedural reforms, it has worked to stem economic collapse and prop up economic production. Some of these efforts have had a tangible impact on the way business is conducted in Russia, though the list of obstacles private firms still must maneuver is sizable.
However, the most important development over the last decade has been the state’s direct takeover of valuable economic assets and the creation of massive state-owned enterprises (SOEs). This (re)nationalization jeopardizes the economic viability of many private firms by concentrating wealth and opportunities in a small group of well-connected SOEs. Private companies have adapted to this reality by devising a set of political strategies to ensure favorable treatment from the government. From mobilizing their workers during elections to running their directors for political office, these companies understand that remaining on good terms with the government is key to survival. Urgent structural reforms are needed to unwind the government’s role in the economy. Without changes, political connections will remain paramount to generating profits in Russia.