There is still concern about the notorious ‘‘dark’’ side of
Russian business affairs, which includes a range of activities that could be regarded as violations of universal codes of human integrity, including extortion and flagrant breach of contract. The Russian phrase ‘nel’zya, no mozhno’ (prohibited, but possible) sums up the attitude of getting around the ‘official system’ where “nothing is legal, but everything is possible”…

What is ‘blat’?

There is a pseudo legitimacy in “blat,” the term for ‘the informal exchange of favours,’ which is the practice of using personal networks and informal contacts to obtain goods and services in short supply and to find a way around formal procedures. It is grounded in personal relationships and in access to public resources – and has become all pervasive.

According to Alena Ledeneva, (author of Russia’ Economy of Favours’) ‘blat’ should be considered as the ‘reverse side’ of an over-controlling centre, a reaction of ordinary people to the structural constraints of the socialist system of distribution – a series of practices which enabled the Soviet system to function and made it tolerable, but also subverted it.

An ordinary Russian sees the ‘official system’ and bureaucracy as making life difficult, so s/he will always find ways to get around it. For most Westerners, the official version and reality are the same. Thus, for us, we have no need to develop the ‘blat’ mechanism or try to get around the system.

Foreigners may think of ‘blat’ as a kind of art, conferring an ability to read between the lines which Westerners are totally lacking – while for the locals it is nothing special at all – just a daily routine, habitual and automatic. Something taken for granted.

My Own Experience

I visited Russia with my husband and were waved through the customs gate, even though most others were being stopped to have their Customs Declaration stamped.  When we came to leave Russia at the end of our stay, a customs official looked at their Customs Declaration (unstamped) and said he would have to confiscate our foreign currency and jewellery.  When we protested that we had been waved through on arrival, and that the cash and jewellery had been brought into Russia from England, he just shrugged and kept repeating, “It’s your problem”.  This went on for several minutes, with mounting frustration on both sides.

Finally, the Russian official decided to take direct action to resolve the situation.  He asked for our dollars, removed $80 and handed the rest back.  Only then did we realise that, when the official said, “It’s your problem” he was expecting to be asked, “What do we have to do to solve it?”  His choice of language provided the prompt, but it could only work with people who knew the system. We couldn’t ‘read between the lines’!

The Anti-Corruption Taskforce

The Russian Government is taking steps to clean up and the anti-corruption taskforce have prosecuted about 15,000 cases in the first few months of this year, 2000 of which were Government officials accepting bribes. This is just a tiny tip on an enormous iceberg.

Western Anti-Corruption Legislation

Unfortunately, Western managers working in Russia face a huge dilemma. The ‘blat’ system, the term for ‘the informal exchange of favours,’ is grounded in personal relationships and in access to public resources – and has become all pervasive. However, the companies they work for and the countries they come from mostly make a strong stand against corruption. This year, in Germany, two Siemens’ executives were found guilty of paying bribes in Russia and Nigeria. In New York, in March, Daimler Benz was fined $185 billion after admitting to paying bribes in various countries including Russia.

See my blogs on:

Russia: Insights Into the ‘Blat’ Economy

Russia: Bribery, Corruption & the High Price Of Bad Business

Russia: Cost of A Bribe Nearly Triples In One Year

What’s Your Country’s Corruption Perception Index

Useful Links:

Book: “Russia’s Economy of Favours: blat, networking, and informal exchange” by Alena V. Ledneva.

Transparency International, the organisation that publishes the world Corruption Perception Index

Trace International, a non-profit organisation providing compliance solutions for multinational companies and their commercial intermediaries

Tags: blat, Bribery, corruption, Russia

This entry was posted on Tuesday, May 25th, 2010 at 1:39 am and is filed under cross-cultural differences, General, international business, Russia/Asia . You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.