Russia, the syndicate state

Russia has strict anti-corruption laws, but nearly everyone ignores them – including, according to many, the president. We look at the shadowy role of private interests over the past 17 years

 
 

The Ozero cooperative society was formed with Vladimir Putin and friends at its helm. Originally a property group sheltering ownership of its dachas, it became an industrial giant after Putin was elected president in 2000. Within a few years, the society’s members were billionaires (including the Rotenberg brothers, who once coached Putin in martial arts). The vehicle for their wealth – state-owned energy giant Gazprom – ended up under Ozero’s control.

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Yelena Baturina, wife of the Mayor of Moscow and founder of major investment and construction company Inteco, won a tender for the repair and refurbishment of Worker and Kolkhoz Woman, an iconic statue in the capital. A modest project, the winning contract was signed at $100m. Baturina is Russia’s richest woman, with an estimated fortune of $1.1bn. Two years later, her husband, Yuri Luzhkov, was dismissed from office on grounds of corruption.

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Whistleblower and lawyer Sergei Magnitsky died in prison after being denied medical treatment. Two years earlier, 37-year-old Magnitsky had revealed the existence of a syndicate of government officials and organised criminals that had perpetrated a $230m tax fraud. At the top of the syndicate was Defence Minister Anatoly Serdyukov. President Dmitry Medvedev (pictured) dismissed Magnitsky as “just an accountant or corporate lawyer”.

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Agriculture Minister Yelena Skrynnik fled to France after Rossiya 1, a state-owned television channel, alleged she was associated with money laundering activities that emptied $1.3bn from her department’s budget. Having resigned from office, Skrynnik refused to return to Russia for questioning. Oleg Donskikh, the senior official accused of carrying out the theft between 2007 and 2009, went into hiding.

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Five years after Magnitsky’s allegations about Serdyukov, Putin finally acted. Serdyukov was fired but not questioned or charged. His mistress, Yevegeniya Vasileyva, former Head of the Defence Ministry’s property, was put under house arrest. Her ‘house’, however, was a $10m apartment that once belonged to the department and was found to contain $1m worth of jewellery and various art treasures that had belonged to the ministry’s museum.

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In a bad month for Russia’s top brass, the head of Russian Space Systems, Yuri Yurlichich, was fired on suspicion of embezzling $217m intended for the building of a GPS network known as Glonass. With a straight face, Kremlin Chief of Staff Sergei Ivanov described this example of state fraud as a betrayal and condemned corruption as “a direct threat to national security”. Yurlichich’s dismissal came amid a wider supposed‘crackdown on corruption.

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It was official: under Putin, corruption had become Russia’s biggest industry. According to the National Anti-Corruption Committee, the total value of systemic state fraud was running at around $300bn a year. The Association of Russian Lawyers for Human Rights put it at no less than half of all GDP – a percentage with which the World Bank agreed. Transparency International’s bribery index put Russia at the top of a 28-strong list of offenders.

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Opposition leader Boris Nemtsov claimed preparations for the 2014 Winter Olympics in Sochi had turned into the biggest misappropriation of public funds ever. Costs were estimated to be four times over budget, and the games, at $50bn, will be the most expensive ever held. Nemtsov said: “Only oligarchs and companies close to Putin got rich.” So far, he added, they had stolen $25bn to $30bn in contracts awarded behind closed doors.