Publication: Monitor Volume: 7 Issue: 95

Vedomosti was unable to contact the man who had signed off on the proposed list of equipment for the Vatutinki hotel, Aleksandr Balashov, but spoke to his deputy, Viktor Gumin. Asked whether the hotel needed to pay the equivalent of US$2.7 million per Jacuzzi, Gumin answered: “It depends upon the Jacuzzi.” Vladimir Kokunov, the deputy Kremlin property manager, claimed that he had signed off only on a list of medical equipment and would get to the bottom of the more controversial equipment list cited by Vedomosti. A spokeswoman for the Minister of Economic Development and Trade German Gref told the paper that the ministry had not yet examined the request concerning the Vatutinki hotel restoration project.

It is worth noting that there have been other instances of apparent massive overcharging in Kremlin renovation projects. In 1999, an investigation by the Audit Chamber, the state budgetary watchdog agency, found that the UD had spent more than US$14,000 per square meter to renovate Kremlin Building No. 1, which included then President Boris Yeltsin’s residence. The chamber said that the total cost of that renovation project was US$488 million, including US$18 million spent to build two winter gardens alone. Yury Boldyrev, who was then the deputy Audit Chamber head, euphemistically called such spending “irrational usage of budget funds and of state property.” During that same period, then Prosecutor General Yury Skuratov and Swiss prosecutors were investigating whether two of the Kremlin property department’s contractors, the Swiss companies Mabetex and Mercata Trading, had given multimillion-dollar kickbacks to Russian government officials, including Borodin, in return for refurbishment contracts (see the Monitor, June 23, 1999; Moscow Times, June 18, 1999). Borodin’s successor as Kremlin property manager, Vladimir Kozhin, said last June that an audit of the UD found that no significant abuses had occurred during Borodin’s tenure (see the Monitor, June 9, 2000).

According to Vedomosti, President Vladimir Putin has twice stated publicly that he opposes the use of “tied” credits like the more than US$20 million in loans sought for the Vatutinki hotel renovation project under guarantees from the Russian government and Germany’s Hermes state insurance. The paper also quoted a former deputy prime minister, Boris Nemtsov, as saying that in 1998 a government commission had looked into what had happened to US$12 billion in such “tied” credits and found that 85 percent of them had been stolen. Nemtsov also said that the lobbying efforts to keep such credits flowing were greater than the lobbying efforts made against liberalizing the gold market and against mandatory property declarations for state officials (Vedomosti, May 14).