Publication: Eurasia Daily Monitor Volume: 4 Issue: 4

Moscow is slowly realizing that rampant corruption is sapping the country’s economic vitality and tarnishing its image among potential Western investors. This week United Russia’s Mikhail Grishankov, chair of the Duma’s anti-corruption commission, declared, “We are confident that in 2007 we will continue a full-scale offensive against corruption. During February Russia will become a full-fledged member of GRECO [the Council of Europe’s Group of States against Corruption], and during the Duma’s spring session a packet of bills will be introduced that will begin our legislation’s implementation of anti-corruption standards, which have received positive recommendations abroad.” Furthermore, under the new legislation no one will be “untouchable, whatever posts they occupied.” Grishankov reminded his colleagues that in 2006 Russia ratified two international anti-corruption pacts, adding, “The level of corruption in the country is unacceptably high” (Interfax, January 3).

In late 2006 public discussion of corruption was spurred by two burgeoning scandals involving government social funds dealing with compulsory medical insurance and pensions. Accounts Chamber Auditor Valery Goreglyad stated that a medical insurance fraud scheme had awarded no-bid contracts for drugs and medical equipment to “friendly” companies, which resulted in some cases of markups 20 times the items’ true value, with the scammers splitting the proceeds (RIA-Novosti, December 13). The chairman of the Duma’s committee on industry, building, and energy, Martin Shakkum, condemned the scheme, declaring, “This is not simple failure — this is the disgrace of this year” (RBK Ezhednevnaia delovaya gazeta, December 29).

The Ministry of the Interior is also investigating a possible conspiracy among Pension Fund bosses, middleman companies, and equipment manufacturers, including IBM. Computers were reportedly purchased at inflated costs, with the fraud participants sharing the profits.

The scale of the problem is staggering. Last month First Deputy Prosecutor-General Alexander Buksman estimated that corruption cost the country $240 billion annually, an amount only slightly less than the government’s yearly revenues. He added that prosecutors had uncovered 28,000 cases of corruption among state officials in the first eight months of 2006 (Rossiiskaya gazeta, December 27).

The issue is no longer solely an internal matter. In addition to the GRECO Convention on Corruption, Russia is one of more than 80 states to ratify the United Nations Convention Against Corruption (UNCAC), which requires countries to criminalize a wide range of acts, including bribery, embezzlement of public funds, money laundering, and obstruction of justice (Hankookilbo [Seoul], January 3). For many Russians, Putin’s signal failure to rein-in corruption is one of his administration’s most glaring failures.

The Berlin-based Transparency International estimates that corruption in Russia has grown 700% since 2001. In its fall 2006 Corruption Perceptions Index, Transparency International ranked Russia 121st out of 163 countries, based on perceptions of corruption.

Corruption has been a problem since the founding of the modern Russian state bureaucracy under Tsar Peter the Great, who deliberately underpaid his civil servants in the expectation that they would recoup the salary gap under the table. Corruption went underground during the Soviet era, when corrupt party members could be executed for massive economic malfeasance, but the issue reemerged full-blown during the rampant kleptomania of the post-Soviet Yeltsin era, when massive amounts of state-owned properties passed into private hands for pennies on the dollar in return for political support.

Fuelling the problem are record high-energy prices, which provide more opportunities for bureaucrats to demand bribes, and the explosive growth of the Russian bureaucracy under Putin, which provides more bureaucrats to bribe. Kyril Kabanov, chairman of Russia’s National Anti-Corruption Committee, a non-governmental group, said the problem penetrates every aspect of daily life: “Corruption begins with the traffic cop, who for $1,000 releases a drunk driver, and ends with the militiaman, who lets terrorist board aircraft for one and a half thousand rubles.” (RBK Ezhednevnaia delovaya gazeta, December 29).

There are signs that the Putin administration is belatedly beginning to address the issue, as corruption is perceived as a blight on the country’s economic advancement. At an April 10, 2006, Cabinet of Ministers meeting Putin demanded a halt to corruption and collusion between customs and business structures (, April 10, 2006). Nor was Putin’s criticism limited to inner governmental circles, in his annual address to the Federal Assembly the following month Putin called corruption a major hindrance to Russia’s economic development (, May 10, 2006).

The subsequent crackdown was swift in coming. In June Attorney General Vladimir Ustinov, Russia’s leading law enforcement officer, was replaced by Yuri Chaika, who stated that the procuratorship would deepen its commitment to combating corruption. On July 6 Russian Prime Minister Mikhail Fradkov fired the head of Russia’s Federal Customs Service (FTS), Alexander Zherikhov, and replaced him with the former boss of arms trader Rosoboroneksport, Andrei Belyaninov. In May and June high-ranking customs officials in the Primorsk krai and Bryansk, Irkutsk, Kaluga, Leningrad, Novosibirsk, Penza, Yaroslavl, and Bryansk oblasts were arrested (, May 19, 2006). Customs offices at Moscow’s Sheremetyevo, Vnukovo, and Domodedovo airports were also raided and officials arrested (Nezavisimaya gazeta, June 19, 2006).

Putin’s administration continued its anti-graft efforts throughout the year. On November 21 the Kremlin held a meeting of the All-Russian coordination conference of the leaders of law-enforcement agencies. A topic on the agenda was “the state and the measures for intensification of crime control and corruption.” Nine days later the board of the Ministry of Internal Affairs held a session examining the work of the police in combating corruption at the state and local level.

The anti-corruption campaign also snared some regional bosses; in December the mayor of Tomsk, Alexander Makarov, was arrested and charged with extortion and abusing his official position (RBK Ezhednevnaia delovaya gazeta, December 28).

It is unclear how the Putin’s administration’s efforts will finally unfold, as they are directed against a deeply institutionalized problem. In the “global village,” however, if Russia is to be a full team player, it must somehow find a way to improve its dismal standing in Transparency International’s ratings.