Programme Paper

Project: Russia and Eurasia Programme

Associate Fellow, Russia and Eurasia Programme
Dmitry Feoktistov, deputy director of the Department of New Challenges and Threats of the Russian Ministry of Foreign Affairs and co-chair of the G20 Anti-Corruption Working Group, attends the briefing 'The Fight against Corruption on the G20 Agenda' at tDmitry Feoktistov, deputy director of the Department of New Challenges and Threats of the Russian Ministry of Foreign Affairs and co-chair of the G20 Anti-Corruption Working Group, attends the briefing 'The Fight against Corruption on the G20 Agenda' at the G20 Summit on 6 September 2013 in St. Petersburg, Russia. Photo by Mikhail Kireev /Host Photo Agency/Getty Images.

Summary points:

  • The illicit acquisition of a business or part of a business in Russia (known as reiderstvo or asset-grabbing) is widespread and one of the risks of doing business there.
     
  • The common ingredients of reiderstvo are the complicity of any or all of the tax, security, law-enforcement and judicial authorities, and the use of charges that are either freely invented or examples of the highly selective use of accusations that could have been levelled at many other business people but were not.
     
  • Reiderstvo is made possible by corruption and contributes to market-entry barriers and the insufficient restructuring of incumbent firms.
     
  • The lack of protection of property rights that makes reiderstvo possible is one of the risks that make investment in Russia less attractive than it would otherwise be. This contributes to the modest level of fixed investment as a share of GDP, to the net outflow of private capital in all post-Soviet years except in 2005–07 and to the weakness of competition. The disincentives to invest apply to foreign as well as Russian firms.
     
  • Since early 2012 the phenomenon of asset-grabbing has been widely publicized in the Russian media, and calls to reform law enforcement and the courts, and to protect property rights have become commonplace.
     
  • Reiderstvo has elicited significant civil resistance. Business associations have played a role in launching counter-measures. The state has intervened to try and guide the campaign against reiderstvo but it does not monopolise that campaign as it does the broader, official 'anti-corruption campaign'.
     
  • At the same time, developments over the amnesty for economic crimes, the role of commercial courts and the management of tax charges show just how powerful the forces ranged in favour of the status quo can be.