A Russian ruble with the spires of the Kremlin in the background. As Russia's war on Ukraine continues, default rates are likely to rise. Photo: AFP

The economic fallout from the Covid-19 pandemic is only just picking up pace in Russia, and yet it has already delivered unexpected changes. During the past month private philanthropy surged, helping to address the impacts of the Covid-19 outbreak and shortages of clear-cut counter-policies.

The rise of private philanthropy in times of crisis is a rather ordinary phenomenon across the developed economies and Western societies, as it helps to offset occasionally slow governmental measures that might cost lives. During the Ebola outbreak, charity giving topped US$362 million, and the current pandemic has elicited an even greater response.

The latest data reveal that global private philanthropic response to the Covid-19 pandemic has raised more than $1 billion – an unprecedented amount commensurate with the extraordinary disruption of the current crisis. With Twitter founder Jack Dorsey promising a new $1 billion charity and other well-known businesspeople and companies following the pattern, volumes will quite soon hit new highs.

In Russia, the situation is different, as charities there are still in an evolving stage. The CAF (Charities Aid Foundation) World Giving Index has ranked Russia among the world’s lowest-scoring countries over 10 years, placing it in 117th position.

Although the score has been gradually improving, Russia has witnessed an eightfold increase in charity foundations over the past 10 years and the highest number of citizens ever, 40%, participated in philanthropy in 2018, it is evident that local charities still have a long road ahead even to catch up with the global average.

Big parts of the problems are the Soviet legacies, such as weak civil society and the omnipresent and paternalistic state that is still designated to dominate most aspects of life and substitute for civic activism.

Multiple documented crackdowns on non-governmental organizations that were dubbed as hostile and spreading foreign influence underscore the fact that charities are viewed with suspicion by both the state and society. In contrast, the state or state-linked NGOs are perceived as pillars of charity activism, while private philanthropy is somewhat treated with caution due to widespread scams and occasionally poor levels of transparency.

The current pandemic, however, reveals that state influence has its limits. The Russian government shut down the border with China at an early stage and managed to slow the Covid-19 outbreak. Late last month, Russia’s official statistics recorded the biggest increase in the cases, which are overall lower than in many Western nations, but project that the pandemic might be in its early phase.

The Russian Central Bank stated that a no-work April alone will cost 1.5-2% of gross domestic product and it is likely that economic impacts will pose the biggest challenge since the default of 1998.

Nonetheless, the inability to borrow abroad because of Western sanctions, the collapse of oil prices and traditional adherence to fiscal conservatism might restrict state involvement. That has been manifested by Russia’s rather modest support of its citizens and small and medium-sized enterprises to date, and also delegation of responsibilities to the regional authorities.

Expectations about the fallout and lack of clarity in regard to official support measures have contributed to an unprecedented increase in philanthropy giving among the Russian super-wealthy.

Last year, a Credit Suisse report revealed that 1% of the super-rich controlled 83% of all Russian household wealth. In times when multiple charity foundations report struggling for survival because of a collapse in donations, private philanthropy of such a scale might help to offset some negative impacts of the declining wages and shortages of medical equipment.

Oleg Deripaska, a Russian billionaire and head of Rusal, has since early March been a vocal supporter of stricter measures against the virus and argued that quarantine could be the only way to avoid disastrous consequences. Through his Volnoe Delo Foundation he donated fully equipped ambulances and personal protection equipment to 12 Russian regions and also announced construction of a few hospitals in the virus-hit Irkutsk region.

His example was widely covered by the Russian media and underscores other recent cases of the country’s super-rich donating billions to charities, which is perceived as quite extraordinary by local standards.

Alisher Usmanov, a billionaire tycoon, and other shareholders of his holding company USM Group have donated 2 billion rubles ($26 million) to fight the Covid-19 epidemic in Russia. Another example is Mikhail Fridman, co-founder of Alfa-Group, which likewise pledged 1 billion rubles to smooth the impacts of the pandemic.

Victor Rashnikov, chairman of MMK – one of the largest steel producers in the world – has pledged 500 million rubles to fight Covid-19 and support health-care and educational institutions, as well as residents in his native city of Magnitogorsk, where the company is based.

Russia has witnessed multiple slumps during the past 15 years, but the state’s role has always been dominant and managed to avert serious socio-economic disruptions. This time, however, lack of support of the same scale might be catalyzing unusual shifts in the behavior of the super-rich.

Still, it is unclear whether such a trend might be marking the evolving state of philanthropy and growing rates of social responsibility of businessmen and will persist in the long term, or merely reflects the severity of the current situation and the scale of socio-economic disruption. 

Dimitri Frolowscki

The author is a political analyst and independent journalist. He is a consultant on policy and strategy and has written about Russia’s foreign policy.

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