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Analysis & Opinion
19.08.10 Shotgun Philanthropy
By Tai Adelaja

Russian President Dmitry Medvedev sought help on Monday from some of the country’s business leaders to rebuild communities destroyed by recent wild fires. But analysts criticize the move as an attempt to shift responsibility and extract funds from businesses whose survival depends on state patronage.

The president invited a narrow circle of business elites to the Black Sea resort of Sochi earlier this week, to urge them to consider how the nation’s business community could be of assistance in view of “the scale of the disaster” and the “attitude toward the problem in society.”

He assured participants at the meeting, which was televised nationally, that the government would follow through on its promise to help citizens who lost their property, rebuilding their homes, and compensating bereaved families “to the last dime.” However, Medvedev challenged the business community to participate directly in rehabilitating areas affected by the wildfires, in creating, wherever possible, better conditions than those that existed before the natural disaster struck.

"Honestly speaking, there was no sweet life [in those places] before the fire – these were rather hardscrabble towns with old wooden houses [and] without any social conveniences. We need to discuss how to make life in these localities more attractive in light of what happened,” Medvedev said. The president also wants the businessmen to give affected areas a new lease of life through construction projects that can become “evidence of the rebirth of life.” “For instance, a club could be renovated, sports and fitness complexes could be built on a small scale, but at a qualitatively new level,” Medvedev said. The government, he added, was not interested in private businesses simply donating funds, but in their direct involvement in rehabilitation work.

“The choice of invitees to the meeting speaks volumes,” Nikolai Petrov, a political analyst at Carnegie Moscow Centre, said. “It depends not just on the availability of a particular business executive in Sochi for a meeting with the president; it also falls in line with some unwritten principle of distribution of social responsibility in the Kremlin as well as the economic interests of particular companies in particular regions.”

Petrov said while the heads of big state corporations like Gazprom, Rosneft, Transneft and Russian Railways were conspicuously absent, some of the country’s Forbes-listed billionaires were in attendance, including head of Basic Element, Oleg Deripaska, Sistema Chairman Vladimir Yevtushenkov, Interros president Vladimir Potanin and Severstal CEO, Alexei Mordashov. The President of EvrazInvest Alexander Abramov, General Director of Surgutneftegas Vladimir Bogdanov and Novatek Chairman Leonid Michelson, were also present, as was Vladislav Surkov, the Kremlin's first deputy chief of staff. “The common denominator is that all those invited have something at stake in the regions ravaged by wildfires,” Petrov said. “Deripaska, for instance, has wide ranging economic interests in the Nizhny Novgorod region, which explains why he eagerly ‘took patronage’ of the area.”

Despite what looked like impromptu requests, the industrialists attending Monday’s meeting responded with alacrity and enthusiasm to president Medvedev’s bidding. Vladimir Yevtushenkov, chairman of the board of directors of Sistema, said that the business community is already taking steps to help victims of the fires, adding that his company has issued $10 to $20 million dollars worth of certificates that would allow victims to acquire free houses. Vladimir Potanin, president of Interros, said his company intends to rebuild areas in Tver region, where peat bog fires have caused destruction to lives and property. Leonid Michelson, chairman of the board of Novatek said the company's shareholders have decided to provide charitable assistance by building 25 houses in the Nizhny Novgorod region and another 25 houses in the Republic of Mordovia, at the company’s expense.

Basic Element Chief Oleg Deripaska said that Rusal plans to help residents of a village in the Nizhny Novgorod region, promising that 200 homes will be built by mid-November. "We decided to take on the patronage of these villages in order to follow how their reconstruction goes over the next three to four years," Deripaska said at the meeting. President Medvedev gave a nod to Deripaska’s initiative. "You used a very precise term. It's, perhaps, a little Soviet, but there's nothing bad about that. This is exactly patronage. That is what it was called earlier when large companies, which had the wherewithal, took on suffering communities and offered a patron's help to rebuild, to create normal living conditions," Medvedev said. What the president didn’t say, according to many analysts, was that “taking on patronage” is also a win-win situation for private businesses, as it cements their relations with the state in a legitimate way, while allowing them to publicize their involvement in social projects to a public that sometimes disapproves of their activities.

Some analysts have pointed out that by asking businessmen to take on the patronage of various state projects without recompense, Medvedev was in fact demonstrating the ineffectiveness of state power. “The Sochi meeting underscores the fact that the authorities are in no position to fulfill those promises made, or fulfill its legitimate functions,” Petrov said. “This is why the government was not merely asking for money from businessmen, but was asking them to mobilize their own resources to rebuild destroyed homes.”

Petrov said that while the meeting has been deliberately televised to demonstrate the concerns of the government about the plight of its citizens and highlight the participation of private business in solving big social problems, it could have the opposite effect because people know that the government routinely collects money from businesses for various political projects.

Other analysts, like Vladimir Pribylovsky, the head of the Panorama think tank, said Medvedev’s request is a classic case of shotgun philanthropy, as Russian businessmen are long aware of the nation’s weak property rights and the consequences of falling out of favor. "The government is used to doing everything at the expense of business, although not always in such an open form," Pribylovsky said. "Private business exists only by the grace of the state.

These businessmen knew that they could not refuse requests for help from the government, because that could trigger undesirable visits to their companies from tax or ecology inspectors." Pribylovsky added that the blas? attitude of Kremlin officials is borne out by the fact that the public activities of all the established pro-Kremlin youth groups like Nashi, Young Russia and Young Guard are bankrolled by private businessmen. “In most cases, a single call from Vladislav Surkov is enough to make things happen," he said.
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