Giving in Russia - More on the government usurping the role of NGOs and philanthropists

This is an interesting trend. You heard about it here first. The government would like to have a monopoly on providing benefits for Russian citizens - not only does that allow state actors to control all of the flows of funds involved, it also prevents private charities from showing what a poor job the government is doing combating social ills.

Moscow Times, December 7, 2004
"Rich Businessmen Give but Public Isn't Impressed," by Caroline McGregor

Russian philanthropists are thought to give hundreds of millions of dollars a year to charity, but unlike their pre-revolutionary predecessors, public opinion is stacked against them.

It's part of the legacy of Russia's tumultuous post-communist transition. There's a sense that if the wealthy are giving money back to society, it's because they stole their fortunes from society in the first place.

In the tsarist era, wealthy aristocrats like Savva Morozov and Mikhail Ryabushinsky were respected patrons of the arts and the less fortunate. This tradition of metsenatstvo disappeared during the communist period, replaced by a reliance on state institutions.

The government has sought to have more supervisory control on how money is spent, motivated by its suspicion that rich businessmen could undermine the state's strength through their support of civil society, as they believe Mikhail Khodorkovsky did through his Open Russia foundation.

Vladimir Potanin, the head of the Interros holding company, which accounts for 2.5 percent of the country's economy, spent $7 million last year through the Vladimir Potanin Charity Fund on programs to support education and the arts.

Dmitry Zimin, the founder of VimpelCom, whose Bee Line mobile network is the country's second-largest, will spend $2.5 million this year through Dinastia, the family fund he created when he retired from business.

Open Russia has boosted its budget in the past year to give $12 million in the first six months of this year, en route to what director Irina Yasina said will be $30 million this year. Colleagues in the donor community believe that Open Russia gives many times more, but chooses not to disclose much of its activity.

The only numbers that exist are the ones put out by the Donors' Forum, an association of 27 grant-giving organizations from Russia and the West. Natalya Kaminarskaya, the forum's executive director, said its Russian members gave a combined $55 million in 2003. [...]

Yet the $55 million given by Yukos, Dinastia and the Potanin Fund -- the forum's main Russian members -- is only a fraction of total Russian giving. Yelena Chernyshkova, Dinastia's executive director, estimated that the real level of Russian philanthropy is much higher -- somewhere between $200 million and $400 million -- but much is given in cash and untraceable.

There is little political or financial incentive for businessmen to declare their donations. There have been no tax breaks on charitable donations since 2000, when they were revoked to stem the widespread practice of setting up ostensible charities to use as tax shelters. Most prefer to keep their donations off the books, worrying that if they declare a large payment, bureaucrats will start asking where that money came from.

The government seems increasingly to want a say in how money is spent. "The thinking is, if business wants to give money, let them give the money to us and we'll distribute it," Chernyshkova said.

The government is trying to extend the power vertical into the philanthropic community, Yasina said. If the state says, finance this hospital, that's the best-case scenario, she said. More likely, though, she said money will be put in the hands -- and pockets -- of bureaucrats.

"They'll say, 'Here is a drawer, put money in it,' and you'll never see it again," she said.

New legislation that passed a first reading in the State Duma in early August would require Russian donors to be on a government list. Recipients of grants given by organizations that are not on the list would be subject to 24 percent profit tax on the sum.

Since the original donation comes out of a company's or an individual's after-tax income, Kaminarskaya pointed out that in effect, "it's a double tax."

She said a list of 80 foreign donors was "haphazardly compiled" two years ago. Now, in place of a list, they will have to seek the blessing of the government's committee for technical assistance, headed by Deputy Prime Minister Alexander Zhukov, for the grants they give.

She sees a contradiction between President Vladimir Putin's declared goal of lifting people out of poverty and the tightening of screws on the very organizations that have the resources to help make that happen. [...]

Cynics say that for Russian businessmen, charity is just part of their companies' PR campaigns. Even if that's true, Yasina said, it misses a bigger issue. "Buying the Chelsea soccer team and providing Internet training programs for teachers cost about the same and they are both forms of PR," she said. "It's up to society to decide which they'd prefer. For now, it would seem they prefer Chelsea."

Yasina was also frustrated with what she saw as society's stubborn refusal to see the good work philanthropists do, despite any financial benefit to themselves. "So what if people are trying to make amends for past misdeeds?" she said, with irritation in her voice. "Let them absolve whatever they want. At least they're giving money. Why should we care?"

I would add that it's not just society that prefers the "Chelsea" model for oligarchs with excess cash on their hands (for those who are not on this side of the Atlantic, that's a reference to Roman Abramovich's purchase of the Chelsea soccer team in the UK) - there can be no doubt that the current powers-that-be in Russia look upon it as the more favorable option as well. Think of it from the perspective of a cold warrior like Putin - it uses private funds to raise Russia's prestige abroad; prevents those funds from being used in Russia to undermine the government's authority or to provide social benefits in a way competitive with the government's role; and provides a diverting circus for the masses to watch while the Kremlin firms up the power vertical.

I would say that the headline of the MT piece above is slightly off the mark. No surveys are cited to support this assertion about public opinion, and any dim opinion which the public has of private giving is based on received "wisdom." The state-run media encourage the highly cynical mindset that if someone in Russia has excess funds, they will never choose to spend them to benefit someone else for purely altruistic motives - some sinister, ulterior motive must always lurk in the background. Of course, in an authoritarian regime it is in the interest of the rulers to have members of society not trust each other or form informal bonds - such as those created by NGOs and philanthropy more broadly - which do not involve (and therefore cannot be controlled by) the state.

Replacement ads

In the US, liquor purveyors generally stick to using less-strong beverages as surrogate products which they are able to advertise without violating the ban on hard liquor ads - Bacardi Breezer, Smirnoff Ice, JD's Lynchburg Lemonade, etc. In Russia, such surrogate beverages are used also (photo below is of a Smirnoff Ice ad in Moscow), but distillers here are also much, much more creative.



Watching TV and outdoor advertising spaces, one can see ads for Gzhelka mineral water (as well as several other waters bearing the names of vodka brands), Flagman chocolate candies, Nemiroff pickled peppers (Slogan - "it's all about the pepper"), etc. These ads are humorous because the fig leaf is so tiny - it's clear to everyone what's really being promoted, and often the products ostensibly being promoted don't even exist.

Here's a translated article from a local St. Petersburg paper about this phenomenon:

“Eyes half shut”
Diana Kachalova, Editor-in-chief
Oct. 22, 2004, My Region (Moi Raion) newspaper, St. Petersburg - page 6

One of Dovlatov’s characters didn’t know what to say when he was asked which he liked better, vodka or grain alcohol: “Gee, I don’t know,” he said, “Both the one and the other are so tasty…”

Like that Dovlatovian personality, I also don’t know what to say when I have to choose between beer and vodka. Especially when the State Duma complicates my already none-to-easy choice.

I’m sure you would agree that even in a fight it’s better when everything is fair. If the beer magnates have been banned from advertising their products “in athletic and cultural organizations,” then the same needs to be done to the vodka magnates. Beer mugs have indeed disappeared from the broadcasts of soccer and other sports – brewers used to sponsor 27 different sporting events. Why, then, do we see such strange “sponsored by…” messages on our televisions underneath the logos of well-known vodka brands, and then boxing, or hockey, or some other entertainment?

It could be argued that boxing is publicly sponsored not by Nemiroff vodka, but by an identically named food product. If you have time to grab your glasses and get up close to the television, you can read that money for the broadcast was provided by some Nemiroff-brand pickled peppers, which, of course, contain not a single gram of alcohol. But for some reason they are packaged in jars that are reminiscent of vodka bottles. Similarly, Flagman appears on TV as a sponsor of sporting events in the guise of bottled water which you can’t find in a single supermarket.

Experts have already come up with an intelligent name for this fraud: “substitute advertising.” I don’t know whether it’s substitution or deception, but any child can tell the difference between candy and the vodka with the identical brand. Only State Duma deputies are incapable of this; apparently they watch TV without their glasses on. Or with their eyes half shut. Because they have gone after the beer industry fiercely and passed the law on it with insane speed, but as for the pickled peppers, they’ll talk about them, if at all, no sooner than next spring. That, at least, is what the Ministry of antimonopoly policy has said. Maybe the deputies get more harshly hung over from beer than from vodka?

Re-Sovietization

Scratch the surface of an expat from a Western country who chooses to live in Russia, even in the relatively civilized metropolis of Moscow, for any amount of time, and you’ll often find a thrillseeker, someone who doesn't like to stay between the lines. These people are attracted to the unpredictability of life in Russia, the fact that it often seems anything can happen, which carries with it the possibility for challenges which don’t arise in “developed” countries and also for unexpected excitement.

As we move deeper into the Putin era, with its trademark stability and order, the pleasant feeling of unpredictability is diminishing. It used to be that you couldn't expect to get things done as efficiently as in the West, but the compensation for that was that you could get away with things here that you couldn't get away with there. Now it feels more like the little guy is no longer able to get away with anything, but the authorities still have the right to be as capricious as they want in preventing business from operating normally.

Individual operators are being kept "within the lines," but there have been no corresponding restrictions on the way the authorities operate. For example, there has been a great deal of talk about introducing open container laws in Russia lately - for those of you not familiar with American terminology, those are laws which prevent people from drinking beer outside - but no one talks about bringing any order to the activities of the shakedown artists in militia uniforms who stop people for document checks with no probable cause and demand that they have a local registration, an institution that was declared unconstitutional years ago. I guess it's all part of the creeping re-Sovietization of society.

More on the situation with Ikea and Mega Mall 2, which seems somehow relevant to these random musings:

The Independent (UK)
December 15, 2004
In fear of his life: Ikea's man in Moscow tells of threats and bribes
By Andrew Osborn in Moscow

Russia's "wild East" image as a place where doing business can cost you your life as well as your life-savings was resurrected yesterday by the head of Ikea's local operations who claimed he was living in fear of his life.
Lennart Dahlgren suggested that Ikea, the Swedish retail giant which is the largest foreign retail investor in Russia, was being blackmailed for bribes by corrupt officials who were blocking the opening of a new shopping mall in the crucial run-up to the new year.

Mr Dahlgren, a Swede, did not spell out exactly who had threatened him but hinted that Ikea had run into problems because it had refused to hand over bribes to officials, who routinely supplement their miserly salaries by extorting money from the people they are supposed to be helping.

The situation came to a head last Friday when Ikea was supposed to open a new superstore on the outskirts of northern Moscow as part of an R7bn (£130m) shopping complex called Mega-2. Scores of guests were invited, including the Swedish and German ambassadors. At the last minute, however, local authorities intervened and ordered the firm to cancel the opening because the store was deemed to be "unfinished". It was the second time in a month that the opening had been cancelled. The authorities alleged that
Ikea had failed to make good on a series of investment obligations, including building a road junction and making an underground gas pipe safe.

Ikea claims it has not been able to comply with such demands because the same authorities have repeatedly denied it planning permission.

Mr Dahlgren told the daily Izvestia yesterday he was now frightened for his safety. "I fear for my own life. I don't understand what is going on and I consider the current situation to be sabotage - against Russia," he said. "You need to have a certain amount of courage to speak out about an unfair situation that has been created by the authorities."

Though cagey about the precise nature of the problem in Russia, Mr Dahlgren has spoken openly about it in Sweden. "Like all Western companies [in Russia] we're subject to blackmail, sabotage and pressure for bribes. In many cases we're totally in the hands of local chieftains. Ikea is big [in Russia] and doesn't pay bribes." [...]

Russia's business climate is considered safer than it was in the 1990s, but bribery remains a core part of doing business here and Russian businessmen are still regularly shot by rivals in order to settle a score or win new market share.

The last para is a bit of a non sequitur, as the whole article is about the threat of extortionate actions not by rival businessmen but by local authorities, who, if they had the interests of their community at heart, would be working harder to facilitate the opening of something that throws off as much money and jobs into the community as a large shopping mall.

Russia in the English-language weeklies

Masha Gessen has an excellent piece in The New Republic about the Orange Revolution's implications for the Russian political scene:

...the message for anti-Putin Russians was less encouraging. The miracle cannot be repeated in Russia, not only because of the cowed Russian media but also because Russia no longer has an independent judiciary, such as Ukraine's, capable of upholding the rule of law. Indeed, the Kremlin has recently staged what amounts to a series of rigged show trials--most prominently of oil tycoon Mikhail Khodorkhovsky and of two scholars convicted of high treason despite virtually no evidence against them. In these and other cases, the Russian courts, which had gone through some reform in the 1990s, have been returned to their roles as Kremlin helpers. The courts have been intimidated into submission, and judicial leadership has been stacked with appointees close to Putin. The Russian president has recently even unveiled plans to do away with any pretense of judicial independence altogether by eliminating judicial confirmation.

Kuchma may have wanted to neuter Ukraine's courts as well, but he never had the capability, or the media backing, to do so. But at least Russians are now likely to have a nice place to flee to should things get really bad. Until, that is, Ukraine joins the European Union and closes its border to the East.

And the Economist is none too optimistic, either, about goings-on in Putin's Russia, vis a vis the situation in Ukraine and otherwise:

As the tide moves towards a presidential election victory for the opposition leader, Victor Yushchenko, on December 26th, the efforts of Russia's president, Vladimir Putin, to thwart him have looked ever more cack-handed. But they have also depressed those who still hoped that Mr Putin's Russia might move, slowly and tortuously, on to a path leading to political liberalism—and that he might prove an ally not a foe of the West.

As if Russia's intervention in Ukraine were not enough, the Kremlin's anti-western rhetoric has also risen. In an excess of hypocrisy even by Soviet standards, Mr Putin and his foreign minister, Sergei Lavrov, have accused the West of meddling in Ukraine in order to destabilise the region (see article).

The conclusion is inescapable. Far from being a political and economic reformer who runs an admittedly flawed but still recognisable democracy, Mr Putin has become an obstacle to change who is in charge of an ill-managed autocracy. The question is, what can the West do about it?
The short answer is, not much. However ineffectual Mr Putin's foreign policy looks after Ukraine, his authority at home is unchallenged. Indeed, there is now talk of his finding some way to run for a third term in office (see article). Moreover, compared with the Yeltsin period, when Russia depended on the IMF, the West has few economic or financial levers to pull. Instead, its growing dependence on Russian energy may actually be putting some levers into the Kremlin's hands.

Even so, firm recognition that Mr Putin is going in the wrong direction is much better than meek acquiescence. Western leaders have been encouragingly robust over Ukraine, rebutting Mr Putin's moans of interference. They can do more to help pro-democracy forces in Russia, especially the non-governmental organisations that are increasingly being harassed. They should extend no favours to Russia in its negotiations to join the World Trade Organisation; nor should they indulge Mr Putin as he prepares to preside over the G8 summit in Moscow in 2006. It may not be time to talk of a new cold war—Russia is not the threat that the Soviet Union was. But it is time to see Mr Putin as a challenger, and not a friend.

"Cack-handed," indeed. Those British brothers are telling it like it is.

All the news...

The Moscow Times often has notably funny and sometimes depressing combinations of front-page stories, but the issue of December 14 takes the prize for most depressing in quite a while. The two above-the-fold stories are visible in the graphic above, and the below-the-fold headline reads "Doctors: Yushchenko Was Poisoned."

To sum up: one of the major symbol's of Moscow's prosperity, the second Mega Mall, has had its opening substantially delayed because its Scandinavian managers will not play ball with the local bribe-seekers; the Prosecutor's office, far from being content to quietly orchestrate the transfer of Yukos' key assets to more state-friendly ownership, has aimed a gratuitous public broadside at the stricken company - in addition to the bon mot mentioned in the headline, the Prosecutor also declared in a rather judgement-pronouncing manner that "Now it's time to reap what you sowed"; and below the fold, the story, if true, is of one of the more sensationally foul "dirty tricks" in the history of modern electoral politics, and one in which the role of Russia or Russian agents is yet to be determined (hey, if the US can take flak for allegedly sending money the way of the Orangemen, we might as well not pull any punches when assessing Russia's possible role here).

Since the Moscow Times website is rather restrictive about letting you read the full text of articles, I'm not going to bother linking to the individual stories - in any event, the headlines alone are enough to capture the general mood. While the photo between the two articles (the banner reads "Russia for democracy, against dictatorship") might seem to strike an optimistic note, the page 3 story on the conference shown here talks about the concern and disarray in the ranks of the current Russian opposition, such as it is.

In the blue bar just under the masthead, the consequences of Putin's policies are becoming clear - "Washington Debates Putin" - can we possibly be nearing the end of five years of free passes for VVP? - and "Slowdown: Economic growth being undermined by climate of fear, officials say." The critical question is whether the officials raising red flags about the "climate of fear" will ultimately prove to be more powerful than the ones creating it.

Monorail? Monorail!

The question of whether modern-day cities need monorails was extensively explored in a classic Simpsons episode (The most complete collection of trivia on the episode in no-frills courier font for true Simpsons nerds; a blog which rates it "Best episode ever"; Entertainment Geekly seconds that emotion; while Entertainment Weekly says 4th-best ever; and - gratuitously piling on the links now - TV Tome's page and the BBC's page on the episode), so there's no need to go into all of the previous scholarship on this vexing urban planning question.

In any event, such decisions are made quite easily in Moscow. One can imagine Mayor Luzhkov's thought process: Is the project one which will allow me to (in my own mind) recapture the pioneering spirit and glory of Sputnik and Gagarin? And will it provide the chance for my wife's construction company to oversee a massive project with huge potential for overruns because no one really needs it to be finished? A monorail for Moscow, then - never mind that what city authorities seem to view as cutting-edge looks to sane locals and visitors from other countries like silly, inefficient excess with a 1970's flavor - a $200 million white elephant connecting the Timiryazevskaya metro station on the grey line to the VDNKh station on the orange line. I haven't heard anyone make the case that this was a corridor crying out for more mass transit, and in any event the monorail itself does not have a very high passenger capacity. It has, however, garnered positive attention for Moscow on the Monorail Society's website, so I guess the expenditure was worthwhile.

All of that aside, when we found out - in the weekly Bol'shoi Gorod, where else - that the Moscow monorail (pictured unfinished as line M1 on metro maps for years) was open to the public for test runs, and on a snowy Saturday, no less, we couldn't resist heading out to Timiryazevskaya to take a ride. We got off the metro and walked out into the snow, passed by the usual rows of kiosks and saw the tracks in the distance. Walking closer, we were encouraged - here was the station where we would board the monorail:


Or so we thought until we were able to get closer and read the numerous signs on the station doors:

In the "excursion" mode in which the monorail was working, Timiryazevskaya station was not open for boarding.

Not to be deterred, we waded out into the slush along the shoulder of Dmitrovskoe Shosse and hailed a car. [For those of you who don't live in Moscow, this is one of the best ways of getting around, provided you're not a single woman and can speak enough Russian to explain where you need to go and not get ripped off - sometimes they are referred to in English as "gypsy cabs," although they don't have anything to do with gypsies, and in Russian the drivers are referred to as chastniki]

We figured that if you couldn't get on at one end of the line, you must be able to board at the other end, so we asked the driver to take us to the VDNKh station.

In this photo from the car on the way to VDNKh, you can see the rocket statue in the distance and the Islamic devotional item hanging from the rearview mirror.

After a mere 40 minutes or so in snowbound traffic, we piled out of the car to this scene of contrasts - a monument to humankind's ascent into the cosmos juxtaposed with a decidedly earthbound man:


By this time, Lorina had had to call someone she was supposed to meet downtown and tell them we were hung up far from the city center - our merry monorail jaunt had turned into a bit of a mission and was looking like it could turn out to be a wild goose chase.

We were disheartened to see that the VDNKh station was also not open for boarding, although it did seem to be providing useful shelter for some stray dogs sleeping in between the sets of exit doors:

We had to hail another car and ride about a half-kilometer (we would have walked it if not for the blizzard) to the Ul. Sergeya Eizenshteina station, where we finally got our coveted ticket to ride:



After a mere 20-minute wait, our chariot came into view on the track,

and soon we were on our way above the treetops. The view was indeed nice - first we cruised by the entrance to the VDNKh (in Soviet times, this was the place where national achievements were exhibited, now it has become a more conventional expo center where various conventions and trade shows are held, although there are still some permanent exhibits, not to mention lots of vendors selling overpriced shashlyk made from meat of questionable origin.


We were also treated to another view of the Kosmos hotel and rocket statue:

Note the internationally oriented warning label on the door - they sure are thinking worldwide with this monorail thing. We also passed the Ostankino TV tower (of towering inferno fame - although I understand it's going to be re-opened for tourists sometime next year), although I couldn't get a good picture of it since it was too large and too close.

It was finally over when we disembarked at Timiryazevskaya and were happy that our (OK, my) obsession had been fulfilled, the mission impossible had been accomplished, and we could get back to our weekend on a more normal note.

Taibbi on Ukraine

An interesting take on the many sides of the Ukraine elections story in this column by ex-eXile scribe Matt Taibbi. The eXile ain't what it used to be, but at least its alumni are off enlightening folks in the US on this part of the world.

Underground Moscow #3

Moscow is a radial city, and the Garden Ring (each segment of which has a different street name) is probably the most heavily traversed of all four of the concentric circles (working in toward the center, they are the MKAD, or Beltway, the 3-rd Transport Ring, the Garden Ring, and the Boulevard Ring) which make up an integral part of Moscow's layout - you can sort of see the rings within rings on this map of the city.

Anyway, this is the underpass crossing under the Garden Ring at the intersection where it changes from Bol'shaya Sadovaya Ul. to Sadovo-Kudrinskaya Ul. Cross streets at this intesection are Ulitsa Krasina and Malaya Bronnaya.


Looking from the Krasina Ul. side toward the Malaya
Bronnaya Ul. side, we see a podzemelka two-fer: a panhandler
AND a street musician..


Looking out on the Malaya Bronnaya Ul. side, toward the
Hotel Pekin - the curious little girl at the top of the stairs
just happened to be there. Both photos from October 16.

Movie madness

Russian TV has kept us up too late again! First Top Gun was on, a cheeseball classic in anyone's book (movie-nerd trivia about the movie here), no doubt, and then U Turn, which probably has a cult following, if that, in the US, but is quite popular on Russian broadcast TV - probably because the film has an unhappy ending where (apparently) everyone dies. Plus J-Lo in one of the major roles (before she was J-Lo), but I would rather think that has nothing to do with it.

This was after we got home from watching the new Russian action movie "Lichniy Nomer" ("Serial Number"), which was actually quite good for what it is - a shoot-em-up with a plot lifted from the headlines and conspiracy theories of Putin-era Russia. I can't really provide a synopsis without ruining the ending, but suffice it to say that it has a Berezovsky-like oligarch-in-exile cutting deals with Arab terrorists and pulling strings to get Chechens involved as well; Brit actress Louise Lombard as a tenacious foreign female journalist for a CNN-like international news network; Arab terrorists who say "Allahu Akhbar" way too much; an FSB agent who is videotaped confessing to the infamous apartment bombings; a hostage takeover in Moscow involving lots of children; and a bit of joint US-Russian ass-kicking, war-on-terror style, featuring American actor John Amos as an admiral with some role in NATO.

Although the foregoing list might make you think otherwise, the movie is definitely worth seeing, so check it out when it comes your way. Given that it was "presented" by Sibneft, ORT (also known as Russian Channel 1 - the upside of this is that Katya Andreeva makes a cameo as...a newsreader!), and at least one Russian veteran's organization, the patriotism is not as overbearing as you might expect, although there are moments when Russian armed forces display rather unrealistic levels of organization and competence. The movie's website is pretty well-done and worth checking out.

Looking back on Ukraine

A few photos from our trip to Kiev a month ago (between the first and second rounds of the election) seem worth sharing in light of how in-the-news Ukraine has been for the past several weeks and how much attention will continue to be there until the end of the year at least.

First, in the underground passageway/metro entrance under Maidan Nezalezhnosti (Independence Square), a flower vendor cleaning up next to a "stolbik" - a rudimentary slot-machine-type gambling apparatus - just after midnight on Nov 7:



Lorina and her accidentally pro-Yushchenko scarf on Maidan Nezalezhnosti that same evening:


The Russian imperial double-headed eagle, looking down on the Caves Monastery from the top of the belltower (this was taken from the highest level to which you're allowed to climb):


This tells you something about Ukrainians' self-image, assuming the mugs sticking out of the plane are intended to be Ukrainian: