Every Russian child grows up knowing that humanity is divided into two parts. Family members, friends, close classmates and your parents’ coworkers are svoi. You trust them, you help them, and you stick your neck out for them. Everyone else is chuzhie. You might help them if you’re a kind person, but it isn’t expected of you, and it will be no surprise if you get burned. Russian parents generally try to instill the same morality as families do around the world. You shouldn’t hurt chuzhie or steal from them, but unlike svoi, you don’t know if they hold the same values that you do. Chuzhie might hurt you.[1]
The same understanding applies in business and politics. Partners and allies protect each other. They are svoi. You don’t necessarily go out looking to harm the others, but there are winners and losers and eventually some chuzhie will become your enemies. Organized crime functions on the same principle, except that stealing from chuzhie is a part of the job. Protect svoi, prey upon chuzhie.
The secret to stability under Putin has been applying this basic cultural concept, which all Russians share, to politics and big business. Putin protects his circle of svoi, the members of which protect their circles of svoi, and so on. All political connections ultimately lead to the boss, and he resolves disputes among his friends. Svoi can steal from chuzhie, as long as they share amongst themselves. Svoi cannot steal from or punish each other by their own authority. That’s how Putin has kept his system from falling into chaos. It is based on a concept so central to Russian life that nobody could possibly forget it.
Then Igor Sechin started treating his friends like strangers. As head of the state-owned oil company ROSNEFT, Putin’s old right-hand man went after fellow oilman Vladimir Yevtushenkov in court. That case was ultimately settled from the top, with Yevtushenkov handing over a large portion of his wealth to Sechin. Not so with Sechin’s claim against Economic Development Minister Alexei Ulyukaev. The former minister is now doing eight years in Siberia on the preposterous charge that he tried to extort a bribe from the more powerful Sechin.
Photo originally posted on sports website championat.com and hastily taken down.
See HBDR case study, “Authorities take whatever they want.”
See HBDR case study,
“A minister’s conviction for a crime that never was.”
The past year has shown that it’s no longer safe to be svoi. The old system of business and politics is breaking down. The businessmen brothers Magomed and Ziyavudin Magometov wend down for fraud. Senator Rauf Arashukov, who was a child during the heyday of the Russian mafia, stands accused of founding an organized criminal group, fraud, racketeering and murder, alongside his father and cousin, executives of a GAZPROM subsidiary in their native Cherkessia. Foreign businesspeople were considered off-limits to avoid interrupting the flow of foreign investment, but the arrest of Michael Calvey shows that this rule, too, is no longer in effect.
See HBDR case study, “Dividing the spoils.”
Photo: The Council of the Federation of the Federal Assembly of the Russian Federation
Photo: open.gov.ru
March 2019 marks the beginning of a new stage in Russia’s ongoing political crisis. First, former State Minister Mikhail Abyzov was arrested. Then the FSB came for a true heavyweight of Russian politics, Viktor Ishaev, who as governor of Khabarovsk Territory (1991-2009) and Minister Plenipotentiary of the Russian Far East (2009-2013) was as big a player as Tatarstan President Mintimer Shaimiev or Moscow Mayor Yuri Luzhkov. The big names of Post-Soviet Russian politics are dropping like never before. What is going on?
These events raise a few questions: “Who made the decision to lock these guys up?”; “Does this mean the rules of the game have changed for Russian politics?” And, if they’ve changed, “What does this mean for people living and doing business in Russia?”
The cases against Abyzov and Ishayev have a lot in common. They’ve been accused of crimes committed many years ago. Anything they might have done back then would have been standard practice in those criminal times. Everybody, without exception, was in the muck. Are they all going to be declared criminals, locked up and have their property confiscated? If so, we’re looking at a new Time of Troubles.
Photo: Government.ru
“It can all be solved,” we used to say. “You need either money or connections.” Now, money won’t save you, and neither will connections. It doesn’t matter whether you do things the right way or the wrong way. There is no standard of evidence and no statute of limitations. Any honest deal you’ve done in your life might be construed as corruption, fraud or racketeering.
In any normal business situation, law enforcement might choose to see a criminal conspiracy. Since they can’t be too tough on organized crime, the cops choose a victim, take him in, and punch him in the kidneys until he starts shouting names and asking for a confession to sign. By that point, the guy won’t mind sitting in lockup while his property is expropriated.
What are businessmen hoping for, going on with their dealings in Russia? “We won’t be touched,” they think. “We stay out of politics. We pay what’s demanded of us. We’ve made our peace with the authorities.” That kept them safe in the past. Now, though, the rules are different. What was good yesterday is insufficient today.
Judging from events, I’d say law enforcement has the go ahead to take in anyone they have kompromat on. And there’s kompromat on everyone. The softer targets fall first. As they are eliminated, stronger victims will be found.
The order is to eliminate. Earlier the victims were undesirables and nobodies. Outsiders. Chuzhie. Now the hunt is on among the connected, among svoi. The boss can’t pay his underlings, so they’re robbing each other. The country has turned into gangland, and the rules of the game have become the Law of the Jungle.
The appetites of the predators in power have not lessened, but the herds of prey have been thinned to exhaustion. When predators run out of their regular prey, they turn on each other. First, they pick off the weakest in the pack. Then a massive brawl begins, each one for himself against all the others. Once the pack has turned on itself, the top dog is no longer safe. He has made the most enemies, and his flesh is the sweetest.
-Lev Lester and Steven McGrath
To learn more about the Russian business world, check out the book HOW BUSINESS IS DONE IN RUSSIA: SECRETS OF A RUSSIAN AMERICAN EXECUTIVE, which includes case studies about several of the people mentioned here.
[1] Translator’s note: Both here and in the book, I have used svoi (sva-YEE) and chuzhie (choo-JEE-yeh, “j” as in “bonjour”), as nominalized adjectives in the nominative plural to avoid unnecessary explanations of Russian grammar.
How Business Is Done in Russia 