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Russian "Corruption" in the NYT

by Zwackus Wed Jun 14th, 2006 at 06:34:19 PM EST

I found a somewhat puzzling article in the NYT international pages this morning over coffee.  It's a really quite confusing report about what could either be a trade dispute, a regulatory conflict between the Russian government and transnational capital, or plain old corruption.  So, I thought, maybe somebody here could clarify what exactly is going on.  More on the flip.

Full text of the article should be available here


MOSCOW, June 13 -- On March 29, agents of the Interior Ministry seized 167,500 mobile phones that Motorola had shipped into Sheremetyevo Airport in Moscow, dragging the company into the Kafkaesque world where Russian justice intersects with business.

The phones were first declared counterfeits, then contraband, then a health hazard, and now they are evidence in a criminal investigation focused, again, on suspected smuggling.

In April, the Interior Ministry made a show of destroying some of the phones -- 49,991, officials said -- after saying that one model violated safety standards, though suspicion abounds that not all the phones were destroyed. The same model remains on sale in shops around Moscow.

Then a patent dispute began.

With a shadowy economy, a growing bureaucracy and a capricious embrace of law, Russia has long been a maddening place for businesses to operate, a developing market that is at once lucrative and full of risks.

But the experience of Motorola has highlighted what executives, analysts and even some pro-government lawmakers in a largely pliant Parliament say is a worrisome trend: law enforcement agencies are not only taking sides in commercial disputes, but also precipitating them to enrich corrupt officials and their intermediaries.

So, the NYT seems to be going with the "The Russians are scary and unpredictable" meme, but from the facts presented in the article, I'm not entirely sure what is going on here.

If this is an import/export dispute between Russia and Motorola, what is the main issue over which they are fighting?  Does Russia just want a payoff?  Are IP issues to blame?

If this is a matter of internal regulatory compliance vs. transnational capital, what exactly is the regulation at hand, and why is Motorola challenging it?

If this is corruption at work, than is part of a common pattern, or is this a bizarre and isolated incident?

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I realize maybe this shoulda gone into the next breakfast thread, but given my somewhat inconvenient geo-temporal location (I live in Japan), I really wasn't sure when that would be.  So, if that's a problem, sorry.
by Zwackus on Wed Jun 14th, 2006 at 06:48:26 PM EST
Unsolicited advice - if you can read in Russian - check www.newsru.com or many other internet resources. www.moscowtimes.com and www.kommersant.ru are good for English articles. NYT and FT and Le Monde are usually printing nonsense or determinedly biased articles that may give the flavour of Western attitudes towards Russia and nothing more.

About Motorola incident - this story was developing in spring before Putin's campaign against corruption in Customs.
I don't remember exactly what was the deal about and may recall wrongly but overall it was avout save facing exercises. Officials sized Euroset imported phones on suspicion of contraband because of irregularities in documents. One might suspect covert demands of paybacks from Euroset. Then they found documents were right, however origin of phones - Brazil was still suspicious for Motorola has no factories in that country. Thereafter custom officials could not substantiate their claims though anyone sensible already realized Euroset was indulged in grey imports (probably Chinese phones were reimported through Brazil). Customs hastily arranged non verified expertise on violation of safety standards and rushed to destroy mobile sets. All process was in great details was publicized by Russian media, this is another rebuff for critics accusing Russian press in lack of freedom.
One may only wonder about motives behind recovering such old stories by Western press now. Westerners usually give some facts and spin them around convenient anti Russian lines of thought.    

by FarEasterner on Wed Jun 14th, 2006 at 08:07:08 PM EST
I don't think you really have to wonder too much about the NYT's movtives, given the recent wave of bad press they've been throwing at Russia.

Is Euroset a branch or division of Motorola, then?  If not, than the article is completely misleading as well as being vague and incomprehensible, because it gave the impression that Motorola was the "victim" in this situation.

Thanks for the advice on the sites - I was not of the opinion that the NYT was terribly reliable on Russian news, but I did not know of any better English-language sources, and Russian is beyond me.

by Zwackus on Wed Jun 14th, 2006 at 09:18:29 PM EST
[ Parent ]
So, FarEasterner's comment spurred me to do a little more research on the case.

Here is an article in an industry news site, which mainly presents the case as Motorla vs. unfair Russian regulators.

Here is a link to another article in the St. Petersburg Times, but which I think may have originated at the Moscow Times.  This one focuses on the patent dispute angle, downplaying the original seizure.

Unsurprisingly, once I found a Russian source on the matter, things started to become a bit clearer.  I am not sure where exactly he originally wrote, but at Mobile Review.com, they have translated and (re) published a series of articles by Eldar Muratzin on the Russian celluar industry, and it's difficulties with the government.  One thing that becomes clear is that this, at least originally, was not a dispute with Motorola at all, but between the Russian cellphone distributor Euroset, and the government.

One the particular seizure in question, there is this longish piece which implies that the problem may well be officials in the government looking to shake down the industry.

This piece, from August of 2005, talks of another large scale seizure of cellphones.

What I find really odd, along with FarEasterner, is why the US press decided to pick this issue up recently, and in terms of a patent conflict between the US company Motorola and another Russian firm.  Why, if this seizure was another issue entirely, is it being linked now to the patent dispute case in the US media?  And furthermore, why on Earth is this issue getting as much play in the media as it is?  Googling the issue, I saw that the basic NYT piece had been picked up by a paper in Arkansas! (a small, rural state on the Mississippi)

by Zwackus on Wed Jun 14th, 2006 at 09:55:02 PM EST
Didn't you get the memo?  This is Cold War Redux.

Those who can make you believe absurdities can make you commit atrocities. -Voltaire
by p------- on Wed Jun 14th, 2006 at 10:18:20 PM EST
[ Parent ]
Yeah, yeah, yeah . . . this just seems like a really odd issue to highlight, I guess.
by Zwackus on Wed Jun 14th, 2006 at 11:03:16 PM EST
[ Parent ]
Thanks for the homework, zwackus...just adds to the growing list of "Cold War v.2.0"

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Thu Jun 15th, 2006 at 05:40:06 AM EST
[ Parent ]
This situation is nonsense and is part of something that is happening with frightening regularity in Russia.

A Russian can obtain a patent from Rospatent even thouhg it violates both the Paris Convention and the WTO requirements both of which Russia is supposed to be operating to.

Once he has this patent he can then legally extort money from any Western company even if the product concerned is patented in the West or is indeed not patentable.

If the company concerned does not pay these "licence" fees then the Russian organisation can take him to court under the criminal code. This means that all official legal costs are borne by the state and not the individual.

Because the justice system is so corrupt in Russia any Western company involved in such a fight has the deck loaded against them and has virtually no chance of winning.

Even if the Western company obtains a valid patent, that is not guarantee that he will not fall into this situation as Rospatent is also corrupted and as such a patent can be withdrawn.

It is a very ugly situation and one which the Russian Government seems to be completely dis-interested in. The suspicion is that many of these situations involve high ranking officials in not only the government, but the Police and also the Justice system.

Motorola ia just one of a numbre of companies involved with such situations. Another example which was recently resolved was the infringement of intellectual property involving the Starbucks name.

Anyone seeking to do business in Russia should be aware that what the government says and what actually happens are poles apart.

by Ghurka (ghurka12@hotmail.com) on Wed Jul 5th, 2006 at 09:11:39 AM EST


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