Subject: Summary of "Who governs the Russian economy?"
Date: Wed, 17 Jun 2009
From: Marika.Heikkila@tse.fi
A summary of:
Who governs the Russian economy?
A cross-section of Russia's largest corporations
By: Kari Liuhto and Peeter Vahtra
Pan-European Institute (Finland)
The objective of the report is to describe the significance of the largest companies in Russia, analyse their relationships and make a brief prediction of the role of big business in Russia tomorrow. The analysis of the largest corporations and financial-industrial groups lead to seven main conclusions:
(1) The concentration of business power in Russia is high in international comparison, and the results of this decade do not show that the power concentration would have diminished, but vice versa.
(2) The state controls small and medium-sized enterprises via the legal system, whilst large companies are controlled by state ownership. The current crisis will obviously lead to the state’s stronger ownership participation in the commanding heights of the economy, at least in the medium run, since certain assets of the troubled oligarchs will drop into the hands of the state-owned banks.
(3) The role of foreign ownership in the Russian economy has increased in this millennium, though the position of foreign corporations has become more restricted in strategic sectors, and this trend is probably to continue in the foreseeable future, with the exception of the business deals backed by the Russian Government with certain EU member states in strategic sectors.
(4) Ownership and corporate governance arrangements between the major business groups in Russia are not particularly intensive, i.e. initial findings suggest that the major industrial groups have so far focused on building their own business empires instead of building close business ties with each other.
(5) The raw material-based industries dominate among the activities of the 100 largest corporations i.e. the economic diversification has been slow at the commanding heights of the economy, excluding perhaps the telecom corporations.
(6) The current crisis gives an opportunity for Russia to move towards a more middle-class society by weakening the oligarchic system, but this window of opportunity does not necessarily materialise in a new ownership landscape, i.e. a further consolidation of business power is likely.
(7) Russia’s foreign trade and outward investments have been concentrated in the hands of a few.
The report can be accessed in the website of Pan-European Institute at http://www.tse.fi/EN/Pages/Default.aspx.
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