Ed Dolan's Econ Blog

Behind the Russian Protests: Rising Economic Expectations and a Business Leader Turned Activist

Last week saw another mass protest in Moscow, the first since Vladimir Putin has returned to the presidency and undertaken tough new measures to curb the opposition. As seen on Western TV, the demonstrations appear to be dominated by the colorful flags of monarchists, anarchists, communists, and other extremist groups, but those images are misleading. Participants on the ground report that the flag-wavers are isolated islands in a much broader sea of demonstrators. The rest are citizens from all walks of life, who are motivated more by economic issues than by ideology. In a country where GDP has doubled in a decade, they expect more than the diet of corruption, poor public services, and the authoritarian style served up by the Kremlin. It is the disaffected middle class, including an increasing number of prominent people from the business community, who are the greatest threat to the Russian authorities.

On the day after the most recent demonstration, I spoke by Skype with Vladimir Ashurkov, a former top financial executive turned anti-corruption activist who represents this new element in the Russian opposition. Ashurkov, who recently turned 40, is in many ways typical of his generation. During the last years of the Soviet Union, he studied lasers and semiconductors at Moscow’s most prestigious technical university. In the early 1990s, just as he was finishing his technical studies, he jumped at a chance to take a series of courses in basic business and economic subjects at a small American institute in Moscow, where I was teaching. After finishing that program at the top of his class, he went on to earn an MBA from Wharton.

Although many young Russians who earned Western MBAs at that time stayed on to make their careers in New York or London, Ashurkov returned to Russia, where he thought he would have a better competitive edge. He was not disappointed. Over the next two decades, he worked his way up rapidly through a series of positions, eventually becoming a top asset manager at Alfa Group, one of Russia’s investment powerhouses. Recently, though, his career has taken a dramatic turn. Here is how he tells the story:

Ed Dolan: Recently you left your position at Alfa Group, apparently because your employer wasn’t happy with your political activities. Can you tell me how that came about?

Vladimir Ashurkov: Throughout my life, I’ve been interested in politics and government, but no political figure excited me enough so that I would actually help them. Then, about two years ago, I started reading Alexey Navalny’s blog, and his approach really resonated with me. He was pragmatic, investigating cases of corporate corruption in big state companies and fighting government graft. He was not just writing about these cases but also submitting claims in court and writing complaints in a way that was more results-oriented than anything I had seen before.

I wrote him an e-mail saying I dealt with corporate governance for a large Russian holding company. We met and became friends. I started helping him more and more both on specific cases and on broader strategies of organization and fundraising.

We never did anything illegal. We wrote letters, arranged meetings, and organized volunteers. Since I understood that all this had political connotations, about a year and a half ago I thought I should disclose it to my employer, Mikhail Fridman, head of Alfa Group. At that time he was OK with it, he said if you do it in your spare time we have no issues with it. But about a year later, he called me to his office and said that although we understand that you are doing nothing illegal, we can’t afford to be seen to be even tacitly supporting such activities, so we will have to let you go.

I guess that is a rational decision if they see a political risk of my association with the company. It’s an employer’s right to terminate a relationship for any reason, so I have no grudge against him. But of course, it is a sign of the autocratic regime that has formed in Russia that an employer has to make decisions based not on the merits of his employees but on their civil activities or political views.

ED: Is your case unique, or are opposition views like yours common among business people of your generation?

VA: Well, in some ways my position is exceptional, in that I am one of the closest allies of Navalny, who has emerged as the most prominent opposition figure, the biggest pain in the neck for the Kremlin. But there are others. One of the things we have been doing is to organize fundraising for the not-for-profit Foundation for Fighting Corruption, established by Alexey Navalny. We wanted to get a critical mass of ten business leaders who would each be willing to contribute $10,000 and who would not be afraid to state publicly that they had contributed. We have succeeded; about two weeks ago we published the names, eleven business leaders plus five writers and opinion leaders who contributed smaller amounts.

ED: What is the relation between the state of the Russian economy and the growing opposition to Putin’s government? What motivates the demonstrators?

VA: First, I would like to say that the Russian economy is enjoying the greatest prosperity in its history. The standard of living is at an all-time high. But when people are doing better, they demand a higher level of political and civil freedoms. They are not satisfied with the disastrous level of services the government provides to its citizens. They are concerned with security; the police are not to be trusted, but rather, something to be afraid of. Public hospitals and health care are abysmal. Given all the riches from natural resources, people understand that they could afford to live much better than they do. There is a general sense of discontent with how things are being managed.

For some time, the authorities were able to dampen the discontent with handouts and increased employment in state firms and government agencies. But if the situation were to deteriorate, for example, if oil prices were to go down, it would be more and more difficult for them to do that.

ED: Your LinkedIn page now lists your principal position as Executive Director of the Foundation for Fighting Corruption. What exactly are the fund’s activities?

VA: The first project that Alexey undertook, which gained a lot of traction with the public, was “Russian Saw.” The saw is a sort of code word for graft and corruption.  At the beginning of the last decade, a law was introduced that required all government tenders to follow regular procedures and to be pubished on the Internet. Our idea was to have a team of lawyers analyze the tenders and find those that seemed most skewed toward certain bidders, based either on their own research or on tips they received from whistleblowers. They can then file complaints with the antimonopoly authorities to try to get the tenders cancelled or amended to open them up to more competition. The money for this project was raised through “crowd funding,” that is, small contributions using Yandex Money, similar to PayPal. Our objective was to raise $100,000 in a year, which would be enough to hire a team of five lawyers. In fact, we raised $250,000 in just a few months, so that gives us a reserve to continue our work for a couple of years at least.

Now we have about fifteen people altogether. “Russian Saw” has been quite successful. We have managed to open up about 40 billion rubles of tenders [about 1.3 billion dollars]. Either the terms of those tenders have been amended, or they have been cancelled.

Of course, corruption is deeply rooted. Corruption, both political and economic, is the foundation of the political system in Russia. It is hard to fight it when the system itself is promoting the corruption. For that reason, we have not been able to get anyone arrested or put in jail. Still, just exposing and publicizing the corruption resonates very favorably with the public.

We have another crowd-funded project called “Russian Pothole,” which fights bad road conditions, and also one called “Russian Elections,” which recruits and organizes observers. Some others are in the works.

ED: We have read that Navalny and some other opposition figures were subject to raids on their apartments this week. Has that spilled over to the work of the foundation?

VA: Yes, over the last two days there has been an escalation of the pressure both on Navalny personally and on our foundation. Two days ago, his apartment, and apartments of a few other vocal protesters were raided. Although these people are not charged with anything—they are being treated as witnesses—the conditions of the raids were quite appalling. The raid on Navalny’s place lasted ten hours, and all electronic equipment was taken, mobile phones, i-pads, computers and so on. Yesterday there was a similar search on the premises of the foundation. They searched but they didn’t take anything, so I think it is just another PR disaster for the authorities. Of course, it is inconvenient and puts us under pressure, but those are the tactics we have to face.

ED: So, what lies ahead? We read that Putin is back in control and intends to snuff out this burst of opposition that began with the elections. Is that too pessimistic? How do you feel?

VA: I think the demonstrations are just the tip of the iceberg. They are a sign that people are unhappy with authoritarianism and corruption and are showing their discontent more and more visibly.

What I admire about Navalny is that he can play this game on several chessboards. He is a leader of the mass demonstrations, he is a competent lawyer who is fighting corruption in state companies and procurement, and he is able to launch grassroots efforts like Russian Saw and Russian Pothole.

Our approach is that if you have five minutes a week to help out, why don’t you print out a leaflet and put it in your apartment elevator. If you have a few hours and some expertise, then maybe you can analyze a corruption case for us. If you have a few dollars, then you can make a contribution. If mass protests are your thing, then please, go out. If you are a leader in your local community, try to organize some activity like observing elections, repairing roads, or getting more transparency into your local electric utility. Our idea is that if people are engaged in these grassroots projects, then they will be more engaged in politics as well.

All of these local initiatives feed into a broader effort to organize a mass movement that will eventually turn into a political party. Of course, the possibilities for contesting elections are quite restricted at this point, but inevitably, if there is going to be a peaceful regime change, it will come from the political process, not just mass protests.

For the future I don’t see that the protests will abate. We will continue to see escalation. Eventually the regime will give in. We don’t know if it will be six months or six years, but I have no doubt that it will happen eventually.

The bottom line? The state of the Russian economy puts Putin in a box. As long as it remains healthy, it only raises expectations, and makes people angrier than ever that the fruits of prosperity are not more widely shared. On the other hand, if the economy stagnates (and here are some reasons that it might), The Kremlin will find it harder than ever to deliver the blend of populist handouts for the masses and a generous flow of graft for insiders that keep the current regime in power.

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