Ikea Attempts To Create Public Case Against Russian Decay
Written by Author on September 28th, 2009MOSCOW — Weeks before the creating of its flagship market outside Moscow in 2000, Ikea was approached by employees of a urban utility firm . If the Swedish retailer wanted to have power for its grand opening, it had to pay a graft .
Instead, Ikea rented diesel engines large enough to power a shopping avenue . The generators roared to life in a loud rebuke to the corrupt executives who thought they had the retailer cornered, and soon the utility turned on the electricity .
As Ikea opened stores across Russia, and became one of the most outspoken Western corporate critics of Russian decay , renting engines to thwart extortion from electricity companies became standard practice. Ikea executives took great pride in their creative solution — renting engines “instead of putting ourselves into a squeeze,” as Christer Thordson, an Ikea board member and global director of legal affairs, put it in an interview.
But Russian graft may have proved more stubborn than Ikea.
The board of Ikea’s operating firm , which is based in the Netherlands, has concluded that the Russian executive hired to control the generators was taking kickbacks from the rental firm to substantially inflate the price of the service. Ikea said that such a deception could cost it about $196 million over two years.
Ikea canceled the contract and sought redress in Russian civil court. But in rulings over the last two weeks, Ikea has lost another 5 million euros in damages that the judges awarded the generator rental firm for breach of contract .
Ikea hired the details of its loss to The New York Times last month, saying that it hoped publicity might compel the Russian authorities to investigate.
“We have encountered something here that is outside the scope of what we normally encounter,” Mr. Thordson said, describing the global retailer’s situation in Russia. “I have never experienced anything like this.”
The leader of the generator rental company and the former Ikea employee accused of accepting bribes denied any wrongdoing.
Russia is a maddeningly dark but potentially profitable stock of 140 million people, whose incomes are supported by trickle-down oil wealth . Many universal businesses contend they must have a presence in Russia to remain competitive. On Thursday, Carrefour, the French hypermarket line , opened its second store in Russia. Wal-Mart, the world’s largest gossip , has an advance team in Moscow but has yet to invest .
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