Otzhim (Russia)

Otzhim 🇷🇺
Location: Russia
Definition: Seizing private property by extortion and other by legal or illegal methods
Keywords: Russia – FSU – Entrepreneurship – Corporate informality – Extortion – Violence – Protection – Intimidation – Organised crime
Author: Irina Jantayeva
Affiliation: Alumna, School of Slavonic and East European Studies, University College London, UK

By Irina Jantayeva , Alumna, School of Slavonic and East European Studies, University College London, UK

The Russian term otzhim is a noun derived from the verb otzhat’ which means to squeeze, wring out, press, or extract. The slang meaning of the word is to take possession of something by force, take away an asset, or to steal private property (Karabelnikov 2009). The closest to otzhim in this latter sense is the term extortion – appropriating one’s property or property rights under duress (Volkov 2016). Although the property is protected by law in modern Russia, in practice the ownership is not guaranteed because of property otzhim. A well-known example of the alleged otzhim gained publicity during the court proceedings between Boris Berezovsky and Roman Abramovich in London in 2012. Berezovsky claimed that he was forced to sell his stake in the Russian oil and gas company Sibneft because of threats made by Abramovich. Berezovsky lost his case. The property law in Russia was first codified in the eleventh century in Russkaya Pravda (Russian Justice). It had a significant impact on the social and economic development of the country. Most of the private property rights were abolished after the Russian Revolution in 1917, when the Bolsheviks issued the Land Decree and the Decree on the Abolition of Private Property in Cities (Walter & Sartania 2018). With some exceptions, Soviet Union citizens did not have ownership rights to the means of production or income-bearing estate. The private property rights in Russia were formally fully re-instated after the Soviet Union collapsed in 1991, but the corresponding laws and regulations were underdeveloped or did not exist. Moreover, the privatisation of the state assets, legal vacuum, and a wave of criminal violence that swept Russia during the 1990s created an environment in which otzhim emerged and evolved. Mass unemployment and reduction in the number of the military, police, and special forces personnel provided a steady supply of young qualified men to join criminal groups.

During the 1990s, otzhim of property was mainly associated with violent crimes, such as physical intimidation, kidnapping and murders of entrepreneurs (komersanty) and other asset owners. Numerous criminal groups fought for opportunities to receive protection payments from business owners – an activity known as racketeering. Racketeers offered to komersants protection from other competing criminal gangs – a service which business owners could not refuse and for which they had to pay the asking price. The crimes evolved when racketeers realised that they could take control over profitable assets and become entrepreneurs themselves. The Russian term for this is byt v dole (to have a share).

Otzhim changed during the 2000s. In this period, the role of the state strengthened. During the first and the second terms of Putin’s presidency, the government took the path of enhancing the rule of law and reinforcing the vertical of power. As a result, criminal activities of organised crime groups reduced. The otzhim stage received two new figures, the state official and the former military or security staff turned politician, called silovic, who started performing the ‘protective’ function for business (Sakwa 2014).

In this period, reiderstvo, a ‘Russian style’ corporate hostile takeover, became the main form of property otzhim. While raiding existed before 2000, in the 2000s the attacks on property and business owners’ rights surged. The full scale of reiderstvo is difficult to establish. According to some estimates, there were 70,000 corporate raids a year between 2000 and 2008 (Ledeneva 2013).

Several high-profile cases of private property otzhim took place in 2000s. Initially, during 2000-2001, the state took control over several major media outlets, such as the TV channels ORT and NTV. The owners of both channels, Vladimir Gusinsky and Boris Berezovsky, were put under pressure of criminal prosecution and had to sell their businesses and go into exile. Subsequently, the state took back control of other industries, such as oil and gas (e.g. Yukos case in 2003). Political scientists disagree on whether the primary purpose of this move was to eliminate an alternative power centre and a possible threat to the regime or to take control over valuable assets for the benefit of the new power elite – silovics, or, possibly, both (see Sakwa 2014, Markus 2015).

Otzhim is not confined to high-profile cases but penetrates day-to-day life, affecting millions of people in Russia. Low-level bureaucrats use various means of putting pressure on business owners to gain a share in their businesses. Their methods include: threats to shut down a firm; zakaznoe bankrotstvo ('made-to-measure' bankruptcy), a bankruptcy brought about by the means of imposing costly fines; stopping the firm's production through electricity cut-offs, property arrests, freezing bank accounts, giving an unfair administrative assistance to rivals, imposing one’s relatives as shareholders in a targeted company, or harassment through unexpected tax and other inspections (Markus 2015).

Although high-profile raids on companies have become less common in the 2010s, individuals and businesses are still suffering from insufficient property rights protection. While in the 1990s the methods that were used in property otzhim were illegal, nowadays, the state officials and silovics prefer ‘absolutely legal’ instruments such as the arrest of owners and intimidation by criminal prosecution. Businesses and citizens feel unprotected from such threats. A survey of 500 owners and top managers of small, medium-sized and large businesses, conducted in May 2019 by the Russian Public Opinion Research Centre (RPORC) and Social Design Centre Platforma, showed that 71 percent of respondents regarded conditions for doing business in Russia as unfavourable. Moreover, 60 percent said that conditions have deteriorated in the last year (Tsenter Sotsial'nogo Proektirovaniya 'Platforma' 2019:8- 9). The survey showed that one of the main causes of business anxiety in Russia was abuse of power by officials. There were several recent criminal cases against businessmen in Russia mentioned by the survey respondents, which had influenced their opinion. One case, the arrest of US citizen Michael Calvey, the director of Baring Private Equity International and Baring Vostok Capital Partners in February 2019, had importance for foreign investors (Kazarnovskyi 2019). The criminal charges against Calvey were publicly understood as resulting from corporate disputes with Artem Avetisyan, an investor with alleged Kremlin connections. Calvey remained under house arrest until November 2020 and the case against him was still ongoing as of November 2020. The survey respondents’ assessment of effectiveness of protection of the property rights in Russia was 4.8 on average (on the scale from 1 to 10). The main reason given by the respondents was the state of the country’s judicial system, rated at 3.7. One respondent said: ‘Nowadays business can be taken away from anyone. You know, tax authorities would come, impose fines, penalties, etc. and then arrest your property. If you have no money, they would arrest you, put you in prison. The whole thing would last a year. And then you would collapse…’ (Tsenter Sotsial'nogo Proektirovaniya 'Platforma' 2019:17).

Otzhim practice in Russia is highly visible. Otzhim is also employed in appropriation of ownership rights with regard to other kinds of property. A Google search for 'otzhat …' returned the following top results in January 2020: otzhat’ zemlyu (land, 1,330,000 results), otzhat’ biznes (business, 813,000 results), otzhat’ kvartiru (apartment, 550,000 results) and otzhat’ mobil’nyi telefone (mobile phone, 374,000 results). The term has also obtained a special political connotation. In 2014 it was used in the context of Crimea annexation, which generated media headlines such as ‘Otzhali Crimea - got the legal vacuum’ (Shulipa 2014) and ‘Crimean otzim technique and the Russian gopnik’ (Skaternoy 2014).

Entries in the online encyclopaedia similar to otzhim

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Tal (Serbia and countries of former Yugoslavia)

Chelnoki (Russia and FSU)

References

Karabelnikov, Y. 2009. ‘Slovar' molodezhnogo slenga’, 28 January, https://teenslang.su/id/8452

Kazarnovskyi, P. 2019. ‘Kalvi vyrazil nadezhdu na reformy v Rossii posle dela Baring Vostok’, rbc.ru, 26 December https://www.rbc.ru/finances/26/12/2019/5e032c909a79475c390a0130

Ledeneva, A., 2013. Can Russia Modernise? New York: Cambridge University Press.

Markus, S., 2015. Property, Predation, and Protection: Piranha Capitalism in Russia and Ukraine. New York: Cambridge University Press.

Sakwa, R., 2014. Putin Redux: Power and Contradiction in Contemporary Russia. Oxon and New York: Taylor and Francis.

Skaternoy. 2014. Asket Blog: [Discussion post]. Crimean otzim technique and the Russian gopnik’, 24 March, http://asket.in.ua/?p=488&cpage=

Shulipa. 2014. Echo of Moscow: [Discussion post]. Otzhali Crimea - got the legal vacuum’, 25 March, https://echo.msk.ru/blog/yshulipa/1286792-echo/

pltf.ru. Tsenter Sotsial'nogo Proektirovaniya 'Platforma'. 2019. ‘Investitsionnyi klimat v Rossii glazami rossiiskogo biznesa’.http://pltf.ru/2019/07/22/investicionnyj-klimat-v-rossii-glazami-rossijskogo-biznesa/

Volkov, V., 2016. Violent Entrepreneurs. Ithaka and London: Cornell University Press.

Walter, A. K. & Sartania, D. G., 2018. Historical development of property rights in Russia. Young Scientist, Issue 19.