The Political Economy of Corporate Raiding in Russia
Corporate raiding the shocking phenomenon whereby criminals, business rivals, and even state bureaucrats visit business headquarters and force owners or staff to transfer business assets, land, or property is an increasing problem in Russia. This book, based on extensive original research, provides a comprehensive overview of this activity. It describes the nature of corporate raiding, provides numerous case studies, and discusses the role of the state and government officials. Overall the book argues that the prevailing climate of business and government in Russia leads to a situation where control is closely linked to corruption and coercion.
Ararat L. Osipian is Fellow of the Institute of International Education, United Nations Plaza, New York and Honorary Associate at the University of Wisconsin-Madison College of Letters and Science, Department of Political Science.
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The Political Economy of Corporate Raiding in Russia
Ararat L. Osipian
First published 2018
by Routledge
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2018 Ararat Osipian
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ISBN: 978-1-138-47793-3 (hbk)
ISBN: 978-1-351-10381-7 (ebk)
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The great questions of the day will not be settled by means of speeches and majority decisions but by iron and blood.
Otto Won Bismarck
One of the founding fathers of modern Germany, German Chancellor and Prime Minister Otto Won Bismarck, said in his famous speech entitled Blood and Iron that The great questions of the day will not be settled by means of speeches and majority decisions but by iron and blood (Bismarck, 1862). Bismarck unified the German states into one Empire. Russian raiders divide the enormous wealth inherited from the Soviet Empire by iron and bribe and they do it special, Russian style. They bribe judges, buy state bureaucrats, negotiate with law enforcers, kill entrepreneurs, blackmail managers, threaten shareholders with violence, falsify statutory documents, and infiltrate corporate boards in order to expropriate and own or resell someone elses property. Similar to the Iron Chancellor, they do not expect commercial disputes to be settled by means of speeches and majority decisions. Russian raiders do it by iron and blood.
The explosive blend of Russian M&A worries Western investors, for it is not done Western style. Russian raiders rarely use Wall Street type corporate games and court hearings in mergers and acquisitions. Hostile takeovers over enterprises and territories take place through bribery, violence, and fraud. Corporate, property, and land raiding in Russia transforms in one of the most profitable forms of business. Raiding threatens the very institute of private property, which is still very shaky and unstable even after three decades of market reforms. And raiding is here to stay.
George Soros and the frustration over the lost investment in Svyaz-Invest, Mikhail Khodorkovsky and the ever-lasting Yukos saga, Bill Browder and the endless Hermitage Capital affair, Sergei Magnitskys death and the untouchables. These are just a handful of bold cases of alleged raiding and unsuccessful investment that have become known not only to the business community internationally, but the general public as well, mostly with the help of tabloids. How many more lost businesses, broken lives, and dead bodies will it take to understand the essence of Russias modus operandi?
World tabloids are good in reporting the news on raiding in order to boost their readership base, but they are not particularly good at looking into the essence of the raiding phenomenon. And scholars are not eager to investigate this phenomenon. Finally, businessmen do not pay much attention to what the scholars have to say, even if the latter issue do not invest in Russia warnings. A clear discontent between businessmen and scholars results in lost investment. In order to understand todays Russia one has to dive deep into the beginning, the late 1980s and early 1990s. Both domestic entrepreneurs and foreign investors have the right to make their educated choice. This book is intended to help them in making such a choice. International investors, transnational corporations, investment bankers have the right to act on informed consent when they decide to invest their money, their time, their effort, and their talent in Russia.
Note
Bismarck, Otto Won. Blood and Iron. Speech, 1862. Retrieved June 24, 2009, from http://germanhistorydocs.ghi-dc.org/sub_document.cfm?document_id=250&language=english
The process realizing this book project commenced a decade ago. An extensive media coverage of a raiding case in one of Russias regions served as an initial push for this study. A dispute over a TV company in Tula turned into a criminal investigation, when a group of armed people was storming premises of the company located in a basement of an apartment building at 81 Gogolevskaya Street, city of Tula, the Russian Federation, on July 31, 2008. There were around fifty storm troopers involved in the storming. Police did not interfere initially, but called for backup support. More police officers arrived later and stopped the storming, arresting thirty-five perpetrators. This story once again brought the publics attention to the rising tide of corporate, property, and land raiding in Russia.
