Watson Institute for International and Public Affairs

Russian Energy Companies See Mixed Success in Corporate Social Responsibility

February 28, 2011

In a recent talk at the Institute, Yale University Assistant Anthropology Professor Doug Rogers compared the impact of corporate social responsibility (CSR) campaigns by an oil company and a natural gas company in Russia’s west-central region of Perm. If Lukoil’s efforts at gaining local support were more successful than PRG’s, he concluded, it was at least in part because of differences between oil and natural gas and their methods of extraction and distribution.

When Lukoil acquired holdings in Perm through a ruling by Boris Yeltsin in 1991, the people of Perm initially perceived it as an appropriation, in part because of corresponding changes in the Russian tax code that “made money flow to the central government.” The fear among locals was that oil and the profits associated with its processing “would flow out and never return,” Rogers said in a talk titled “Socializing Hydrocarbons: Energy Infrastructures, Corporate Social Responsibility, and the Remaking of a Russian Region.”

However, Lukoil responded to these worries by making sure that some capital was reintegrated to the communities from which it extracted oil, Rogers said. The company provided several grants for museums in the region, sponsored town festivals, and promoted local businesses. Eventually, Lukoil Perm even funded Pages of History, a history of the region that also “trumpeted the social involvement of the company in the region,” Rogers said.

The narrative constructed by the company – and often perceived by people associated with its cultural involvement – was one of progress from shortage to bounty, driven by the social engagement of Lukoil Perm. Such oil-sponsored development provided Lukoil with a deep level of social legitimacy, which was further bolstered by the company’s use of the “depth of oil wells as a metaphor for the depth of [their own] ties to the region,” Rogers said. This metaphor and others comparing a feature of Lukoil’s connection to Perm with a geographic feature of the region “formed new articulations of authority and legitimacy.”

In contrast, PRG was unable to establish similar links with the region after it took over gas extraction and circulation in Perm, in part due to the nature of natural gas and the way it is distributed, Rogers said. Fields of pipeline carrying the gas were “highly fragmented,” since natural gas is drawn from many smaller deposits than a typical oil deposit. Towns thus were not as directly linked to this natural resource as they were to their oil deposits. PRG’s corporate social responsibility projects were also more fragmented – at least until the head of PRG decided to run for office in one locality. At that point, Rogers said, PRG’s CSR projects and gas pipelines became more associated with his electoral campaign.

Nor did PRG develop the symbolic power that Lukoil had achieved, Rogers said. For instance, natural gas did not lend itself to the same sort of spatial metaphors that oil wells could invoke.

The companies’ relative ability to tap into local culture was even manifested, albeit subtly, in company calendars. PRG calendars showed pictures of new benches, fences, and other such impersonal construction initiatives. Lukoil calendars featured land and “old women and children in traditional garb,” overtly signaling a connection to the people and history.

Remnants of old Soviet attitudes toward speculation also hindered PRG’s attempts to legitimize its wealth. Despite the fact that the growth of oil and gas industries is generally due to external factors, Rogers said, PRG’s growth raised local suspicions. Because it was harder to see what went into producing natural gas, for instance, the people of Perm saw PRG as profiting illegitimately simply by moving a resource around.

In conclusion, differences between oil and gas – and resulting differences in Lukoil and PRG’s abilities to link them to political and social structures – contributed to dramatic differences in the impact of their CSR projects on culture, society, and the social legitimacy of the companies.

His talk was part of the Colloquium on Comparative Research.

By Watson Institute Student Rapporteur Joseph Bendaña