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Soviet-era logic is emptying Russia’s shelves

When I travel to Moscow I stay in the Arbat. It is quiet, clean and close to my office, so I mostly avoid the horrendous traffic.

It bills itself as luxurious but the owners don’t quite get it right. The furniture is new but straight out of the 1970’s, the towels are plentiful but thin, breakfast is more rural than at the Holiday Inn and the Hilton, and there is no gym. It is Soviet era luxury.

On page three of The Moscow Times yesterday morning it was reported that the Kremlin had introduced a bill to reduce fines for bribes below $366 by up to 500% and to give offenders up to five years to pay. The rationale: only 15-20% of higher fines had ever been collected. The answer: reduce the fines. Soviet era logic.

This year the rouble has fallen 45% against the dollar. Inflation is at 9% and oil is sub $60 a barrel. The federal budget balances at $100. The Central Bank is forecasting a 4.5% fall in the economy next year and on Monday interest rates were hiked by 7.5%.

Yesterday banks stopped mortgages and FX counters were closed. Car dealers stopped selling cars and Apple stopped selling iPhones. A government minister said the economic crisis was passing rain and criticized the public for panicking. Putin blamed external factors and said, in the worst case the economy would be back on track in two years. Soviet era propaganda.

So, a huge state funded primarily by oil revenues, with millions of “foreign government officials” on its payroll seeing their real income decline, savings decimated and welfare support derailed, yet now is the time to reduce fines for low-level bribery.

The Arbat is still owned by the Russian government.

It’s not like “Hotel California.”

Guests can check in but they can also check out.

If the owners continue Soviet era policies it will not only be the Arbat which is empty.

__________

Bill Waite is a contributing editor of the FCPA Blog. He’s one of the founders of The Risk Advisory Group, established in 1997 with the objective of building Europe’s leading independent risk management consultancy. He serves as the group’s CEO and general counsel. He formerly practiced as a criminal barrister before joining the U.K. Serious Fraud Office in 1991 as a prosecutor. He can be contacted here.

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2 Comments

  1. On practice we see not many reductions of the fine imposed on the company (administrative responsibility). The judge has to consider the ability of the company to pay. What`s so Soviet, tell me, my friend.

    Actually the change described in your post can better help simple people, who are working hard and who actually fund this country, to avoid the prison

    Can you believe that giving 10 dollars to an engineer of RosTechNadzor you both can be put to jail up to 3 years, and your company will pay 20 000 dollar fine. Are these the adequate and reasonable measures?

    I believe not . and there is the other way.

  2. The threshold for what counts as a "small bribe" won't be at $366 tomorrow, and it'll probably be something different the day after that. You just might have to stay glued to your computer and update this post hourly.


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