Window on Eurasia: Fear of Corruption Charges Leads Most Russian Businessmen to Keep Money and Children Abroad, Expert Says

Paul Goble

Vienna, May 28 – Most Russian businessmen prefer to keep their money in offshore banks and their children at foreign schools lest the businessmen be charged with corruption and lose everything, a Moscow specialist on Russian elites says, just one of the ways in which Russian government policies are promoting short-term thinking and undermining development.
Olga Kryshtanovskaya, the head of the Center for the Study of Elites at the Academy of Sciences Institute of Sociology, drew those and other conclusions during an interview with “Svobodnaya pressa” today on the basis of a survey of 25 leading Russian businessmen conducted by UBS and Camden Research (svpressa.ru/society/article/25774/).
Those two firms, which conducted the study for “Vedomosti” which published the results in its edition today (www.vedomosti.ru/newspaper/article/2010/05/28/235758), queried 25 Russians who own privately held businesses with annual turnover of 100 to 500 million US dollars in a broad range of fields.
Among the more interesting results were the following: “72 percent are not considering the possibility of expansion abroad in the near future. But all except two are ready to sell their business for a good price and a little more than half are ready to do this in the next two to four years.”
Moreover, “84 percent of them keep their money abroad,” with “the most popular countries being Cyprus, Switzerland, and the Virgin Islands.” And most seek to live modestly – “only two have yachts” – “in order not to attract heightened attention to themselves and their money” by the powers that be.
In addition to keeping their money abroad, “Vedomosti” reports, most also prefer to “educate their children” there “but they try to ensure that their offspring will not lose their national identity,” although most of them do not expect their children to continue the businesses their parents have founded.
“I don’t want to hand over to my children the difficulties and uncertainties which accompany the management of a big business in Russia,” one of those polled said. “In this country, it isn’t necessary to be an entrepreneur in order to become rich; it is simply necessary to get into the ruling circles: the bureaucrats make money.”
Marko Naumann, the co-director of the UBS-Camden survey, said that “Russians often operate as serial businessmen, building one company after another, very much like the situation in the United States” but very different than the one in Europe where “family businesses” often passed down “from generation to generation” predominate.
Moreover, he continued, “wealthy Russians often do not want to hand over their businesses to children because they are not certain that the latter will be able to run them successfully in unstable times” or be able to cope with corruption and bureaucracy. Consequently, these owners themselves seldom plan “more than two years ahead.”
Commenting on these findings, Kryshtanovskaya, who has written widely on Russia’s new elites, said that they show the fear most Russian businessmen have that “something will happen with their money and that someone will grab onto and take away that which they have up until now managed to keep.”
Asked about the political ambitions of a group that has such short-term views, the Moscow sociologist says that their collective views are “very, very weakly expressed,” a reflection of their relative youth as a social group and their lack of a sense that “we are a force in the country and we can unite and put pressure” on the government. “This doesn’t exist.”
“There is,” she says, “a desire to strive toward that but there is also an absolute lack of faith in their own forces and a fear, a fear of the powers that be. [These business owners] understand that this is a danger zone. Therefore, in considering the relative weight of this ambition and the fear of losing everything, fear still wins out.”
Until and unless the Kremlin can change that, not only encouraging Russian business owners to take a longer view about their own operations and to begin to feel their strength as a political group, all the talk about modernization is likely to remain just that, and both the money of Russian business owners and their children will continue to go abroad.