Category: Business and Finance

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Business and Finance

Corruption in Russia: Business as Usual?

Anti-corruption poster in Saint Petersburg, photo: mutatdjellyfish/flickr

Transparency International’s latest Corruption Perceptions Index saw the ratings of many western countries drop. Scoring worst among the G20 countries, Russia’s ranking dropped to 154, its lowest ranking since the index began in 1995.

Naturally, there are limits to how useful measuring a population’s perception of how corrupt their government actually is. Transparency International’s Francois Valerian acknowledges that “a drop in ranking can often result from the exposure of corruption that had already existed for some time.”

And corruption in Russia has existed for a very long time. For millions of Russians corruption is often seen as the norm. Russian authors have explored the theme of corruption in Russia over centuries. Nikolai Gogol exposed corruption in tsarist Russia in Dead Souls and The Inspector General, while Mikhail Bulgakov satirized the greed and corruption of Stalin’s Soviet Union in Master and Margarita.

According to one Russian polling station, the Levada Center, “nearly 80 percent of Russians say that corruption is a major problem and that it is much worse than it was 10 years ago.” Recent years have seen a rise in coverage of corruption scandals in Russia. So have Russians become increasingly critical of the government’s failure to deal with the problem of lingering corruption?

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From ESPO to Druzhba?

Close-up of a pipeline
Close-up of a pipeline

Some of Russia’s pipelines have names that reflect more than just technical realities – such as the Druzhba (Friendship) pipeline system that brings oil to Central Europe. Yet, others are of a more prosaic kind, including the recently opened Eastern Siberia-Pacific Ocean Pipeline (ESPO). ESPO will bring the black gold from Eastern Russia to China and Russia’s Pacific Coast. Whether this new pipeline is the beginning of a new Russian-Chinese energy-friendship remains to be seen.

China’s growing appetite for gas and oil will be hard to saturate in the next decades. According to projections of the International Energy Agency, China’s demand for primary energy will nearly double from 1,765 million tons of oil equivalent (Mtoe) in 2007 to 2,539 Mtoe in 2020 and 3,451 Mtoe in 2035. The country will account for 30 percent of the increase in global primary energy demand for that period. Oil demand is expected to more than double while the demand for natural gas will more than triple.

Before that backdrop one would expect Russia, home to 5 percent of the world’s proven oil reserves and 24 percent of all proven gas resources, to be eager to enter this growing market; even more so, since the focus of Russia’s oil and gas production is moving eastwards. There are untapped hydrocarbon resources in Eastern Siberia and Russia’s Far East that are expected to cover falling production elsewhere. Furthermore, hooking up with China holds major potential for developing an economically backward region and would add another trump to Russia’s hand when bargaining with its European energy customers.

But that’s not how Russia seems to view the situation.

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Haiti and the Meaning of Generosity

Haiti Earthquake: Who's Given What?
Haiti Earthquake: Who's Given What?

The Haiti earthquake has become the new measure of generosity.

The country’s big northern neighbours have earned much praise for their effort: The US has pledged $168 million to date, and Canada $131 million. The bronze medal goes to Spain, with ‘only’ $45 million, although the latest data from ReliefWeb indicates that Saudi Arabia has caught up.

But data journalist David McCandless puts things into perspective: Measured as a percentage of GDP, the most generous countries in the Haiti crisis have been… Guyana and Ghana! Canada and all Nordic countries make it to the top ten in this wealth-corrected ranking as well, but not Uncle Sam.

Beyond its primary purpose of disaster relief, the donation campaign has lifted Haiti out of the realm of forgotten poverty-stricken nations. This is a chance for the country, but I am worried about two potential pitfalls.

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LNG from PNG

You may know that Papua New Guinea (PNG) is a tropical country located on the world’s second largest island in Oceania. You may also know that most of PNG’s 7 million inhabitants live in rural areas. You could call PNG a developing country: In the 2007 Human Development Index it is ranked 148 of 182, between Kenya and Haiti. You may know that PNG is rich of natural resources, including precious metals, timber and oil. What you would not expect, however, is PNG to be a major hydrocarbon producer.

Well, it’s time to revise your knowledge.

In a joint venture with firms from Japan, Australia and Papua, ExxonMobil plans “to develop gas fields in the Southern Highlands and Western Province of PNG and transport the gas via pipeline to an LNG (liquified natural gas) facility near Port Moresby (the capital) for shipment to markets overseas. The project will provide energy for the Asia-Pacific region, jobs and economic benefits for PNG.”

Economic benefits indeed; the question is for whom. According to a study, the project will double the country’s GDP and increase its exports of oil and gas four-fold. This gigantic endeavor – total capital investment is thought to amount to $10 billion, which is as much as the country’s annual GDP – raises two questions. First: Why is PNG’s oil and gas only now being exploited so intensively? Second: What is the project’s overall impact on PNG and its people?

The PNG LNG project / Illustration: screenshot from www.pnglng.com
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Mobile Phones Transform Development

Before the internet comes the mobile phone / Photo: Esthr, flickr

They are among the most underdeveloped countries in the world. Only a minority of their people has access to electricity. Clean drinking water remains a distant dream. Many of their children continue to die of diseases that have long become extinct here in the West or are easily preventable.

But in one area, developing countries are clearly ahead of the industrialized world: the use of mobile phone applications.

Three-quarters of the world’s mobile phones are believed to be owned by people in developing countries.

In Africa, more people own mobile phones (37 percent) than have access to electricity (25 percent). (Note: Phones are often charged using rather ingenious methods, such as old car batteries). According to one estimate, about a billion people, most of them in the developing world, don’t have a bank account but – guess what? – own a cell phone.

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