A brief summary of just how bad corruption is in Russia

Apologies to readers outside the UK, you might not be able to view this video.

For those of you who can, it’s an excellent two and a half minute BBC summary of why big companies like IKEA are having huge trouble living their values whilst expanding into emerging markets such as Russia.

Corruption is estimated to be worth $300 billion a year in Russia, the same as Denmark’s GDP.

15,000 cases have been reported in Russia this year alone.

The news report, which features allegations that government officials demanded $5-10 million to set up a meeting between IKEA Russia’s President and the Russian leader, shows you just how deep the problems go.

The BBC report linked above says that IKEA needed 300 permits approved to build a new store in Russia.

It’s well known that bureaucracy is one of the biggest barriers to development in emerging economies, and is commonly used to extort bribes from individuals and companies.

I’ve seen this first hand myself in many such countries, including Russia, where I personally paid a three dollar bribe in 1993 to a border guard to let me cross into Poland, aged 17.

I had little choice, since a train delay had meant my transit visa had expired and I had no other money. I’m not proud of paying it, but had I not I would have been in big trouble and I was pretty scared at the time. It was my last three dollars aside from a credit card so I was rather lucky.

Not much has changed for the better since then, in fact the situation for business has got a whole lot worse in Russia.

Medvedev says he wants to tackle the problem, and has made some steps. But his position appears too weak to really change things so far, and it’s not clear how much Putin supports his plans.

We published a report on how business can try to deal with corruption in Russia last year, if you are interested, have a look at this link.

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