Greasing Russian palms 'costs firms 7% of turnover'

Companies operating in Russia must put aside 7 per cent of their annual turn-over for bribing corrupt officials and the bribe- takers themselves have only a 0.0013 per cent chance of being jailed for corruption, a damning new report has claimed.

The report, issued by the Indem think tank, alleged that corruption levels rose by 50 per cent in 2002-2005 and cited anonymous business sources complaining that the need to grease official palms was strangling innovation.

The report's authors interviewed some 3,000 businessmen in Moscow, Volgograd, and Smolensk, and calculated that firms operating in Russia were forced to conclude more than 39 million under-the-table deals last year in the course of day-to-day business.

It claimed that the construction and property industries were the most bribe-heavy and concluded that what it called a "corruption tax" amounted to 1.1 per cent of Russia's gross domestic product.

Bribe-takers operated in a climate of virtual impunity, it added, and only one in 100,000 corrupt officials ever went to prison.

In 2005 there were 39 million alleged corporate bribes and a mere 3,600 bribery-related convictions - and in most cases it was the person who agreed to give the bribe who was punished. Out of those convictions only 507 led to custodial sentences.

The report suggested that Russia's infamously bureaucratic procedures for registering a business and for obtaining licences and permits from the authorities were a bribe-taker's paradise.

Officials cite hold-ups and snags in such procedures and make it clear that without a bribe there is nothing they can do to speed things along. Georgy Satarov, the president of the Indem foundation which produced the report, estimated it would take Russia 40 years to reduce its corruption levels to those of Portugal and a full century before it was on a par with Sweden.

Such reports have traditionally created anger in government circles and Indem's was no different. An official at the interior ministry's organised crime division, who refused to be named, played down the findings, casting doubt on their accuracy. "I can't confirm or deny the figures. These are fantasies of the Indem foundation," he said.

Russia's corporate bribe culture does not appear to have put off foreign investors, though, who write-off the need to grease official palms as an unavoidable "operating cost".