After almost a decade of capitalism, there are parts of the Russian economy that have not fallen in line, to such an extent that barter is considered critical to the survival of the country's oil and gas sector.
The barter system has a number of advantages for the entrepreneur, including lack of monetary risk, overcoming the country's shortage of money, the chance of illicit enrichment, and tax evasion.
A typical example of the barter system is the Tutayev engine factory in central Russia, which produces almost nothing, does not make money, and does not pay its labor force; yet it sustains the 50,000 residents of Tutayev.
The company, which produced only 222 engines in 1998, rewards workers with coupons that can be used in the factory's cafeteria, bakery, and grocery store. The plant supplies the stores and cafeteria by trading engines and spare parts for locally produced food and goods.
An official at the Institute For The Economy In Transition (IET) explained that the barter system is difficult to define or analyze yet is an integral part of, or at least affects, almost every aspect of the Russian economy.
Bartering is estimated by IET to form 50-80% of economic transactions; sectors in which barter purchases exceed 40% include petrochemicals, engineering, and construction.
While these sectors sell a large amount of their goods via barter, companies generally do not barter directly with other firms. Instead, most firms rely on intermediaries to set up exchanges.
Barter agents facilitate trades through personal relationships and contacts with other firms and agents. They generally set up the contractual basis of the transaction, which, to be considered legal under the civil code of the Russian Federation, must stipulate the goods or services to be traded, cost, terms of shipment, quality, payments, and claims.
Like middlemen everywhere, Russia's intermediaries use the barter system to create a great deal of personal wealth through the universal 10% rule.
For example, Gov. Yuri Neyolov of the Yamal-Nenets Autonomous Okrug recently received gas instead of cash as payment of royalties from Gazprom, so he turned to an intermediary.
The intermediary signed a contract for a new plane with Aviakor, an aircraft manufacturer in Samara, then traded gas, electricity, cars, buses, tractors, and tires to complete the transaction and get the plane built. The agent then pocketed 10% of the value of the $17 million aircraft.
So wealthy have some of the intermediaries become that they provide loans to barter clients. Adamant Financial Corp., an independent Russian securities firm, even goes so far as to incorporate barter data into company analyses on the grounds that barter agents lend more working capital to Russian enterprises than banks do.
Barter enables many enterprises that should be bankrupted to continue producing goods and employing workers. In one-factory towns where the workforce consists of nearly the entire adult population, barter's value as an alternative to social strife is not lost on local and federal officials.