Russia Country Profile

Environment, Natural Resources and Extractive Industry

Business Corruption

According to companies, information on environmental protection requirements is difficult to obtain. Exploitation of natural resources such as oil and gas is controlled largely by the state and by a few large national companies. Particularly in oil and gas investments, Russian officials at both the federal and local levels frequently raise environmental concerns as considerations in the approval process for investments, as pointed out in the US Department of State 2009. According to the report, in some instances, it is difficult to say whether such concerns are genuine. Similarly, according to the Bertelsmann Foundation 2010, environmental concerns are only on the political agenda when they promise to deliver clear material short-term advantages and can be used to put pressure on unwanted investors.

According to Freedom House 2009, the government has forcibly changed the terms of Western oil and gas companies working in Russia.

According to the Prosecutor General Office, compliance with environmental legislation is problematic and illegal resource extraction activities continue.

Political Corruption

Russia is blessed with vast amounts of natural resources, notably oil and gas. The oil and gas sector accounts for more than 40% of its export revenues. In the energy sector, the link between state and private companies is strong, as the state has consolidated its ownership and control through its shareholding of extractive companies, such as Gazprom. Private shareholding (also foreign), however, has been allowed.

Amendments to the subsoil law were adopted in May and July 2008. These amendments specified that only legal entities, which are part of Russia, may use deposits of federal significance. In addition, users are further required to be majority-owned by the state and have at least five years experience in investigating the Russian shelf. Deposits of federal significance include oil and gas, and greenfield sites. According to Vinson & Elkins LLP, this new legislation may deter investment in the exploration of spheres which are considered as having federal significance.

Corruption in relation to natural resources exists also at a political level in Russia. For instance, according to Reuters, kickbacks paid to senior officials who hold sway over Russia's natural resources are common. The existence of a pervasive political corruption in relation to environment in Russia is also supported by Transparency International's Corruption & the Environment 2006 report. According to this report, in some governments, legislation and regulation exist to facilitate corruption rather than to protect the environment. The report presents Russia as an example of such a government; here the laws in place to protect endangered fish are used in practice by officials to profit from bribes.

Frequency

EBRD & World Bank: BEEPS Russia 2005:
- 12% of the companies surveyed stated that bribery was frequent in their dealings with environmental inspections in 2005.

- The companies reported being inspected an average of 0.55 times annually by environmental agencies with the visits averaging about one hour.