Russian Business Power

The Role of Russian Business in Foreign and Security Relations

Andreas Wenger, Robert Orttung, Jeronim Perovic, Andreas Wenger, Robert Orttung, Jeronim Perovic

• Publisher: Routledge
• Year: 2006
• ISBN:
  9781134188895
• Edition: 1
• Topic: Business
• Subtopic: International Business
• Index: Business

Since the collapse of the Soviet Union, Russia has developed a powerful business community and a potent network of transnational organized groups.

Russian Business Power explores the powerful impact these new actors are having on the evolution of the Russian state and its foreign behaviour. Unlike other books, which focus either on Russia's foreign and security policy, or on the evolution of Russian business, legal and illegal, within the context of Russia's domestic transition, this book considers how far Russia's foreign and security policy is shaped by business. It considers a wide range of issues, including energy, the arms trade, international drug flows, and human trafficking, and examines the impact of Russian business in Russia's dealings with Western and Eastern Europe, the Caspian, the Caucasus and the Far East.

Part I
Introduction

1 Russian business power as a source of transnational conflict and cooperation

Andreas Wenger

This book describes the role of Russian business in all its manifestations and its impact on Russia’s foreign and security relations. Russian business power reflects a domestic situation shaped by the rise of powerful business networks, both legal and illegal, and by the fact that Russia’s integration into the world is increasingly driven by economic factors. The new perspective is in what the book tells us about two important topics that are addressed in the subsequent chapters: The first is the distinct link between Russia’s legitimate and criminal business development and the evolution of the Russian state and its foreign relations. The second is the impact of Russian business power on the balance of transnational conflict and cooperation in Russia’s foreign relations.

The book is distinct in focusing on the link between the development of new patterns of interaction among the Russian state, a powerful business community, and organized crime networks and their impact on the dynamics of conflict and cooperation within Russia and along its borders. Most of the existing literature focuses either on foreign and security relations or on business development, but does not bring these two topics together. Several existing books discuss the dilemmas of Russia’s foreign and security policies, shaped by the gap between the aspirations of a political elite focused on upholding the image of a great power and the political, economic, and social realities of a fundamentally weak state.¹ Likewise, there are several studies on the evolution of Russian business within the context of a domestic transformation marked by strong recentralization efforts since Vladimir Putin’s rise to power.²

Examining the role of Russian state representatives, businessmen, and organized crime groups and their international operations raises a host of questions: To what extent are Russian corporations acting in the interests of the Russian state and to what extent are they simply pursuing normal business interests? How effective has the state been in using corporations to pursue larger political goals and exert influence over its neighbors? What is the role of organized crime in foreign operations of the Russian state and business and as a separate entity? And, most importantly, do Russian business operations abroad lead to more violent conflict between or within countries or do they promote mutually beneficial exchange and increase regional stability? The subsequent chapters of the book will address these questions.

Business and conflict in a globalizing world

The book’s focus on the impact of Russian business power on the security environment along Russia’s borders is part of an emerging, more general research agenda that focuses on the link between business and conflict.³ The growing interest in the multifaceted nexus between business interests and political stability comes as a reflection of two global trends that dominated the evolution of an increasingly pluralist international system after the end of the Cold War: On the one hand, the twin forces of globalization and localization led to the empowerment of business as an international actor.⁴ On the other hand, the changing nature of conflict meant that deadly conflicts would have to be dealt with in the context of a broadening concept of international security.⁵ With business intrinsically involved in conflict-related matters, new forms of governance patterns in the area of the peaceful transformation of violent conflicts are in demand.

Over the past decade, the role of business as an international actor increased considerably. To a large extent, the increased importance of business was the result of an accelerated transfer of assets and services from public to private hands and a dramatic expansion of transborder flows of capital, services, goods, ideas, and people as a result of the opening of national markets to foreign investments. More than ever before, business actors are deeply involved in world politics – however, with ambiguous and sometimes even contradictory effects on the balance of conflict and cooperation in international affairs. Few would dispute that economic growth and opportunity, generated by private enterprises, are essential to the reduction of poverty and the enhancement of social and political stability. Conversely, big companies, especially from the extractive industries, are frequently accused of harming the social and ecological interests of local communities, backing repressive regimes or deliberately prolonging conflict in order to pursue their parochial financial agendas.⁶

For many businesses, the general shift from a national economic focus to an international and global economic perspective and their own increasing geographic diversification of interests and operations have meant that they tend to find themselves confronted with conflict situations much more frequently. On the one hand, businesses are much more likely to be adversely affected by the transnational impact of faraway conflicts, and they are also more likely to have business interests in conflict-prone areas. In addition, many private actors – so-called business mercenaries and war entrepreneurs – take on the function of security providers. This new phenomenon has fueled concerns with regard to the legitimacy and accountability of their activities, reinforcing a predominantly negative perception of the link between business and conflict.⁷

In the early 1990s, the triumph of the market and the ever-increasing interdependence of world economic and financial forces were largely praised as mitigating conflicts. Yet such liberal views in favor of global governance and security were soon upset by the sobering realization that globalization does not necessarily foster global security. The very unevenness of globalization increases inequalities between and within states, and contributes to instability in regions that are shaped by processes of marginalization and fragmentation. The fact that borders have become more porous not only provides economic opportunity, but also increases the complexities of proliferation and export control issues and of the fight against transnational organized crime or terrorist networks.

Today’s security risks no longer emanate predominantly from powerful states, but rather from warring social groups operating in weak and failed states. In reaction to the changing nature of conflict, state actors have been forced to seek new ways of providing peace and stability and to modify their conceptions of security. Proponents of human security acknowledge that while the security of states has improved in recent years, the security of various peoples and citizens has declined considerably. Human security – in contrast to a narrow concept focusing on the security of the state – stands for a broadened security notion that complements military and political measures for ensuring security with efforts at prevention of conflict by social, economic, and ecological means.⁸

As a consequence of these developments, there is an emerging debate about the need for new forms of governance patterns in dealing with the root causes and process factors of entrenched violent conflicts. While business actors, for good reasons related to sovereignty and political legitimacy, will not replace the state as the primary player in the area of war and peace, they are bound to increasingly supplement it when it comes to the socioeconomic aspects of peace building. In the West, this debate is shaped by public actors and institutions that recognize their limitations in dealing with new risks of a primarily political, social, cultural, economic, and ecological nature. The focus is on building partnerships and on those business qualities that can effectively complement the preventive efforts of public and civil society actors. The response from private actors, so far, has been one of restraint, since businesses tend to see their interests as unrelated to the (supposedly public affairs) issues of political risk management and transformation of deadly conflicts.⁹

Russian business and transnational conflict

The Russian case with regard to the link between business and conflict is different from this Western perspective in two important respects: Looking at the domestic situation in Russia, the state has not yet established a stable regulatory framework for business, as well-established Western democracies have. In Russia, the line between the state and business and between legitimate business and organized crime is often blurred.¹⁰ The rules of the game for business frequently change, depending on the balance between key political players. While the Western focus has been on the horizontal redistribution of power away from the nation-state, Russian perceptions have been dominated by the disintegration of centralist state structures and the potential negative consequences of such developments on Russia’s status, influence, and position in Eurasia and on a global level. The power vacuum caused by the economic crisis of the 1990s and the inability of the state to implement structural reform – and not the forces of economic globalization – have dominated Russia’s search for a new equilibrium of power.

When Russia turns away from its inner crisis and addresses potential risks from outside the country, traditional problems seem at least as important as the newly globalized risks – despite the fact that Russia’s political class increasingly recognizes the importance of “nontraditional” security threats. Unequal military balances along Russia’s European and Asian borders transform into a feeling of weakness on the grand geopolitical chessboard. More importantly, Russian elites focus on acute dangers with regard to border problems and regional stability in the Caucasus, in Central Asia, and in the Far East. The mix of anti-Russian tendencies in some of Russia’s own regions in the North Caucasus and in many of its neighboring countries, fragile domestic stability in the Commonweatlh of Independent States (CIS) countries, and a threat of Islamic fundamentalism, often exaggerated, but nonetheless serious, make for a highly complex and fragile situation, especially in view of the energy issues involved.

Russia’s more traditional approach to security reflects its limited integration into the cooperative structures of an economically interdependent Western world. The rise of Russian business power across its borders is shaped by the dilemma between Russia’s relative economic and institutional weaknesses and its Great (military) Power legacy. While the Western debate about power in the information age is founded in Joseph Nye’s distinction between “hard” and “soft” power – the latter reflecting influence that depends less on territory, military, and natural resources than on information, technology, and institutional flexibility – Russia’s foreign and security policy debate is dominated by a more traditional perception of power, vested in the territorial state as the single source of sovereignty and brought to bear through geopolitics and geo-economics.¹¹

While Russia is no longer a superpower, it remains an extremely important factor – as much for its weakness as for its strengths – in addressing the nuclear, biological, and chemical weapons legacy of the Cold War; in securing regional stability in Eastern Europe and the Balkans, in the Caucasus and in Central Asia, as well as in the Middle and the Far East; and in managing transborder security issues such as terrorism, organized crime, drug trafficking, money laundering, and migration. Within this larger context, this book aims at understanding how and in what ways Russia’s murky alliances between state structures, powerful businessmen, and criminal groups reduce or increase the basis for transnational conflict within Russia and along its borders.

Organization and overview of the book

The book is divided into three parts – the first focusing on business–state interactions, the second reviewing energy dependencies and the role of Russian business power across different geographical areas, and the third analyzing the impact of emerging business networks in a variety of economic sectors on Russia’s diplomacy, security, and capacity to deal with nontraditional human security issues. In theoretical and conceptual terms, we argue that the distinct kinds of relations established between the Russian state and Russian business in all its forms have an important impact on promoting conflict and cooperation on Russia’s borders. While business obviously is a very heterogeneous sector, the state is not a homogeneous actor either. The state is strong in some sections of the economy, but weak in others.

The organization of the book reflects the key distinction we draw between the energy sector and the other sections of the Russian economy. Energy is not only by far the most important sector of the Russian economy, but also the most relevant example of the growing influence of business power in Russia’s foreign and security relations. In the energy area, there is basically a structured relationship between a strong state and a highly centralized business community. In contrast, there is a generally weak, often highly corrupt state working with an amorphous business community in the other sectors addressed in this book. This distinction allows for new conclusions on the impact of Russian business power as a source of transnational conflict and cooperation.

Introducing the first part, Robert Orttung explains why the book conceptualizes “business” in the widest possible meaning as including both legitimate companies...