On doing business (or not) in Russia

Andrei Loshak at Open Democracy discusses the baffling irrationality, yet amazing resiliency, of corruption.

In this context events at the Russian branch of IKEA are revealing. From the start the company announced that even in Russia it would be adhering to its clearly-formulated Swedish rules, based on the Protestant work ethic and unanswerable logic. As a result, Khimki officials turned off the electricity just before the first Moscow shop opened. There was no practical reason for this. They just wanted to give them a hard time for their excessively strict principles. By the time they opened in Petersburg, the Swedes already knew that they had to have their own generator in each of their Russian stores – just in case.

A further blow was in store for Ingvar Kamprad (5th in Forbes Magazine Rich List) a couple of months later. It emerged that the company had overpaid 200 million USD for the use of their generators – IKEA's prize-winning idea – which virtually wiped out the profit from all their Eastern European stores for the last few years. The Swedes had seen themselves as Sir Lancelots cutting the head off the dragon of corruption. What they forgot was that through the looking glass the rules dictate that another head immediately grows in its place. Forensic investigation revealed that the Russian employee responsible for the hire of the generators was receiving kickbacks from the leasing company, so had been considerably inflating the service costs. The company tore up the contract with that firm and was fined 5 million euros by a Russian court for breach of contract. “We had come up against something way outside what we usually encounter,” said a puzzled Krister Tordson.