Background Knowledge of Russian Business Practices and the “Right Russian Person” Approach

25.02.2013

According to various pragmatic criteria, Russia should be an attractive country for foreign investment: its increasing transit economy, significant energy sources, and the availability of undeveloped territory are all important factors. However, experts believe that the percentage of foreign investment in Russia remains fairly low. There are other aspects of Russian business that are not translated or described in textbooks.

According to various pragmatic criteria, Russia should be an attractive country for foreign investment: its increasing transit economy, significant energy sources, and the availability of undeveloped territory are all important factors. The ‘wild 1990s,’ when doing business in Russia could be life-threatening, have long gone. In the past 20 years since the collapse of the Soviet Union, Russia has been improving its legislation and reforming the court system. However, experts believe that the percentage of foreign investment in Russia remains fairly low. “In 2004 foreign companies invested only 5% of all fixed capital, as compared to 30% in Brazil, almost 25% in Poland, 20% in the United States and 10-15% in China”. [1] 

At the United Nations Conference on Trade and Development, Russia was included in the group of countries with extensive potential and insignificant investment (www.unctad.org). The question is: What factors diminish Russia’s investment attractiveness? The usual answers include such reasons as imperfect legal institutions, economic risks, the country’s poor investment image or the culture of doing business. All these things matter but the real problem goes deeper than business etiquette, such as recommendations not to be late for business meetings, not to show the V-sign or to maintain eye contact during negotiations with Russian partners. [2] All of that is undoubtedly important, but there are other aspects of Russian business that are not translated or described in textbooks.

There is a notion of background knowledge and background practices in sociology. The author of the concept, John Searle, defines the background as a set of abilities, capacities, trends and dispositions that humans have and that are not intentional in themselves. This is usually not verbalized, a set of ideas about normal operation with words and their meanings shared by all members of a culture. There is some background knowledge behind every action and every piece of communication. In other words, what is important is not only the business etiquette and gestures, but also the tone of messages, the time of day when a telephone conversation is held, the attitude of the inspector who comes to check the paperwork, the chosen method of delivering correspondence, etc. In order to recognize the encrypted codes of everyday life, it is not enough to speak Russian or to peruse the instructions and manuals for foreign businessmen going to Russia on business. Most contain warnings about the abundance of unusual customs that require constant attention, both in business and in everyday life.

Despite the modernization and globalization processes in Russian society, background knowledge still plays a significant role in determining the rules of the game. Without knowing the background, it is difficult to understand the system of subordination or to track the cause-and-effect relationships between events. For example, an attempt to conduct business in line with the law in Russia may lead to unexpected results. The problem may arise not from the absence of formal rules or bad regulation, but from the law implementation practice. Thus, according to sociological research, the anti-corruption laws passed by the Russian government are able to generate new types of corruption. [3]

One way or another, foreign companies operating in Russia prefer to employ at least one Russian lawyer and/or manager. Often, they are professionals who were educated abroad and have extensive foreign experience, but ... they were socialized in Russia. It means that they fit into the social and cultural context, and have unique knowledge of the rules of life in Russian society.

In interviews [4] the representatives of international companies operating in Russia use the notion of the “right Russian person”. This may not be a person. In the case of a large business, it can be a Russian company serving as a representative and operating in Russia. However, the presence of a Russian guide is one of the main conditions of foreign companies’ entry to the Russian market. In this case, the experts from international companies agree that in addition to professional knowledge, Russian background and social skills, the “right Russian person” must possess a mandatory set of moral qualities: honesty, integrity, predictability and loyalty. A good partner is always important in business but the increased demand for moral qualities obviously speaks about the need for additional security guarantees where state institutions are not able to provide them.

1 Andrei Shastitko, Evgeniia Iakovleva. 2008. “Russia’s Investment Image”. Russian Politics and Law, vol. 46, no. 1:79–92.

2 See for ex. Katz Lothar. 2008. “Negotiating International Business - Russia”. Negotiating International Business - The Negotiator’s Reference Guide to 50 Countries Around the World. March. Retrieved January 20, 2013 ( http://www.globalnegotiationresources.com/cou/Russia.pdf ).

3 Svetlana Tulaeva. 2011. How anti-corruption laws work in Russia. Russian Analytical Digest, 92.

4 The interviews were collected during the research project «International Cooperation and Contracting: Legal, Social and Institutional Aspects of Investment Climate in Russia», financed by the Foundation for Development and Support “Valdai”.


Elena Bogdanova is Leader of the research group “Law and Society”, Centre for Independent Social Research.

The author is a laureate of the Valdai Club Foundation Grant Program.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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