Corruption in Russia

Corruption and red tape have severely limited the development of small businesses in Russia. Take a report from the World Bank as one example of the problems business owners face. The report estimates that it takes more than 700 days to get licenses, fill out paperwork, and connect utilities just to build a warehouse. Bribes are necessary for local officials, and additional money must be handed over to local gangs for "protection." In fact, in terms of corruption, Russia ranks equal with Gambia, Indonesia, and Togo at 143rd place out of 180.

Russia's president, Dmitry Medvedev, wants a change. Small businesses make up a scant 15% of the country's GDP. He wants to increase this figure to 50%, and so intends to seek out blatant and less obvious forms of corruption. As a result, small firms will be able to thrive better in the oil boom that has begun to develop a middle class with disposable income. Medvedev correctly believes that a strong middle class and a diverse range of businesses will make Russia less dependent on natural resources like oil. And although oil probably won't drop to $20 a barrel, the country could still suffer from price fluctuations. It's expected that revenues from oil and natural gas will supply 41% of the country's income this year.

Big businesses face similar worries, and have moved investments planned for Russia to countries with less corruption. Rex Tillerson, the chairman and CEO of Exxon Mobil Corporation, said that there isn't much confidence in Russia's rule of law. Foreign investment has dropped 43% as a result.