.

A number of countries in the former Soviet Union have made it clear that they have wanted no part of Russia since they became independent in 1991.

Georgia and the Baltic states are prime examples. Other Russian neighbors however, cannot be as outspoken, for fear of the kind of Kremlin retaliation that is occurring in Ukraine. An example is Armenia, which gave up its dream of joining the European Union under pressure from Moscow to become a member of the Russian-led Eurasian Economic Union.

It is not just the Kremlin’s political dominance that countries like Georgia and the Baltic states object to. It is the entire Russian approach to the world, including its corruption, which Transparency International says is among the world’s worst.

Unfortunately for its neighbors, Russia has long exported the mentality that corruption is not only fine but is the way of doing things. Transparency International recently gave Russia a corruption rating of 136 out of the 177 countries it follows—placing Russia at the top 25 percent of countries that are the most corrupt.

Corruption can take many forms—from cheating on business deals, to illegally confiscating property, to filing trumped-up criminal charges against political or business opponents, to letting judges know which way they need to decide a case, and so on.

Many Western corporations doing business in Russia have faced extortion. The typical scenario is an official telling a company that if he does not receive a payoff, the company’s business may be damaged.

A textbook example of Russian corruption damaging international companies was Moscow’s takeover of the Sakhalin-2 oil and gas project in 2007. The move obviously came at the behest of Vladimir Putin, under whose presidency Russia has nationalized much of its petroleum industry.

The three international companies that owned Sakhalin-2—Shell, Mitsui, and Mitsubishi—were forced to sell 50 percent of their shares plus one to Russian’s national petroleum company Gazprom. That gave Gazprom effective control of the project.

The sale came after environmental inspectors harassed the consortium for years, and threatened to shut the development down.

Alexandra Wrage, whose non-profit organization TRACE International advises companies on how to avoid bribery, summed up Russian corruption in an interview with Reuters in 2010. She said it was a “rampant epidemic” that was much worse than in other emerging economies.

“My recommendation is: ‘Maybe you should reconsider doing business in Russia,’” she told many of the international companies asking her advice. “I am considerably more optimistic about Nigeria than I am about Russia on this issue,” she said.

Rather than addressing corruption, the Russian response has been to get angry toward those who bring it up.

Just last month, prosecutors in Moscow demanded that Transparency International’s Russia chapter register as a foreign agent. That designation means that Russia views the organization as one that engages in political activities.

Russia has ordered a number of democracy-championing international non-governmental organizations in the country to register as foreign agents. Many NGOs, which have criticized the country’s human rights and freedom-of-expression record, have closed their Russia offices rather than register, which is exactly what Russia wanted.

The corruption that is endemic in Russia has also taken root in the countries it continues to influence. That is in contrast to countries like Estonia, Latvia, and Lithuania, which joined the EU and NATO partly because they believed that looking westward would improve their peoples’ lives and partly because they never wanted to fall under Russian influence again. Their Transparency International ratings have improved considerably.

Armenia, on the other hand is a fitting example of how Russia has exported its corruption in the region. The United Nations Development Programme considers the problem so pervasive that it declared it “a serious challenge” to Armenia’s development. Cozy ties between government officials and the business community have encouraged influence peddling, the UNDP says. Another problem has been selective and non-transparent application of tax and customs regulations.

Reports of corruption in Armenia surface often. One of the latest involved the country’s non-transparent procedure for selecting recipients of government research grants. Armenia has a Council of Experts that decides who gets research funding. Some of those on the Council apply for, and win, grants—a blatantly corrupt practice. In addition, the Council uses ratings of research-proposal reviewers to decide which projects to fund, but refuses to disclose the reviewers’ identities.

Allegations of corruption recently enveloped the head of the Apostolic Church that most Armenians are members of. In a scandal that is still damaging the international financial institution HSBC, the bank had to pay multibillion-dollar fines for helping wealthy clients use Swiss accounts to hide money from tax authorities in their home countries. The International Consortium of Investigative Journalists has done a number of investigative stories about the Swiss accounts. One that surfaced recently was about a $1.1-million account in the name of the Armenian Apostolic Church’s Patriarch Karekin II. The church is scrambling to explain to its followers why its head needed a secret Swiss bank account.

Another example of Armenian corruption that has surfaced recently involves President Serzh Sarkisian’s announcement that he would take steps to throw prominent politician Gagik Tsaukian out of parliament and have tax authorities audit Tsaukian’s businesses. The move came after Sarkisian had a falling out with Tsaukian, whose Prosperous Armenian Party was once part of the ruling coalition.

As a country, Armenia has had little choice but to grow closer to Russia in recent years. Russian troops on Armenia’s soil are a tacit threat to its independence while also constituting a warning to other neighbors not to interfere with Armenia. But the price of closer ties has meant more trappings of Russia’s way of doing things. One of those trappings—corruption—is something Armenia could do without.

Armine Sahakyan is a human rights activist based in Armenia.

Photo Credit: Photo by Wikimedia Commons.

The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.

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Among Russia’s Exports to Its Neighbors Is Corruption

March 30, 2015

A number of countries in the former Soviet Union have made it clear that they have wanted no part of Russia since they became independent in 1991.

Georgia and the Baltic states are prime examples. Other Russian neighbors however, cannot be as outspoken, for fear of the kind of Kremlin retaliation that is occurring in Ukraine. An example is Armenia, which gave up its dream of joining the European Union under pressure from Moscow to become a member of the Russian-led Eurasian Economic Union.

It is not just the Kremlin’s political dominance that countries like Georgia and the Baltic states object to. It is the entire Russian approach to the world, including its corruption, which Transparency International says is among the world’s worst.

Unfortunately for its neighbors, Russia has long exported the mentality that corruption is not only fine but is the way of doing things. Transparency International recently gave Russia a corruption rating of 136 out of the 177 countries it follows—placing Russia at the top 25 percent of countries that are the most corrupt.

Corruption can take many forms—from cheating on business deals, to illegally confiscating property, to filing trumped-up criminal charges against political or business opponents, to letting judges know which way they need to decide a case, and so on.

Many Western corporations doing business in Russia have faced extortion. The typical scenario is an official telling a company that if he does not receive a payoff, the company’s business may be damaged.

A textbook example of Russian corruption damaging international companies was Moscow’s takeover of the Sakhalin-2 oil and gas project in 2007. The move obviously came at the behest of Vladimir Putin, under whose presidency Russia has nationalized much of its petroleum industry.

The three international companies that owned Sakhalin-2—Shell, Mitsui, and Mitsubishi—were forced to sell 50 percent of their shares plus one to Russian’s national petroleum company Gazprom. That gave Gazprom effective control of the project.

The sale came after environmental inspectors harassed the consortium for years, and threatened to shut the development down.

Alexandra Wrage, whose non-profit organization TRACE International advises companies on how to avoid bribery, summed up Russian corruption in an interview with Reuters in 2010. She said it was a “rampant epidemic” that was much worse than in other emerging economies.

“My recommendation is: ‘Maybe you should reconsider doing business in Russia,’” she told many of the international companies asking her advice. “I am considerably more optimistic about Nigeria than I am about Russia on this issue,” she said.

Rather than addressing corruption, the Russian response has been to get angry toward those who bring it up.

Just last month, prosecutors in Moscow demanded that Transparency International’s Russia chapter register as a foreign agent. That designation means that Russia views the organization as one that engages in political activities.

Russia has ordered a number of democracy-championing international non-governmental organizations in the country to register as foreign agents. Many NGOs, which have criticized the country’s human rights and freedom-of-expression record, have closed their Russia offices rather than register, which is exactly what Russia wanted.

The corruption that is endemic in Russia has also taken root in the countries it continues to influence. That is in contrast to countries like Estonia, Latvia, and Lithuania, which joined the EU and NATO partly because they believed that looking westward would improve their peoples’ lives and partly because they never wanted to fall under Russian influence again. Their Transparency International ratings have improved considerably.

Armenia, on the other hand is a fitting example of how Russia has exported its corruption in the region. The United Nations Development Programme considers the problem so pervasive that it declared it “a serious challenge” to Armenia’s development. Cozy ties between government officials and the business community have encouraged influence peddling, the UNDP says. Another problem has been selective and non-transparent application of tax and customs regulations.

Reports of corruption in Armenia surface often. One of the latest involved the country’s non-transparent procedure for selecting recipients of government research grants. Armenia has a Council of Experts that decides who gets research funding. Some of those on the Council apply for, and win, grants—a blatantly corrupt practice. In addition, the Council uses ratings of research-proposal reviewers to decide which projects to fund, but refuses to disclose the reviewers’ identities.

Allegations of corruption recently enveloped the head of the Apostolic Church that most Armenians are members of. In a scandal that is still damaging the international financial institution HSBC, the bank had to pay multibillion-dollar fines for helping wealthy clients use Swiss accounts to hide money from tax authorities in their home countries. The International Consortium of Investigative Journalists has done a number of investigative stories about the Swiss accounts. One that surfaced recently was about a $1.1-million account in the name of the Armenian Apostolic Church’s Patriarch Karekin II. The church is scrambling to explain to its followers why its head needed a secret Swiss bank account.

Another example of Armenian corruption that has surfaced recently involves President Serzh Sarkisian’s announcement that he would take steps to throw prominent politician Gagik Tsaukian out of parliament and have tax authorities audit Tsaukian’s businesses. The move came after Sarkisian had a falling out with Tsaukian, whose Prosperous Armenian Party was once part of the ruling coalition.

As a country, Armenia has had little choice but to grow closer to Russia in recent years. Russian troops on Armenia’s soil are a tacit threat to its independence while also constituting a warning to other neighbors not to interfere with Armenia. But the price of closer ties has meant more trappings of Russia’s way of doing things. One of those trappings—corruption—is something Armenia could do without.

Armine Sahakyan is a human rights activist based in Armenia.

Photo Credit: Photo by Wikimedia Commons.

The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.