Russia is often described in the West and by its own “non-systemic” opposition as a police state and an autocracy, and with good reason. The suppression of street protests in Moscow last summer was demonstratively brutal, but it was also ineffectual and counterproductive. The monopolization of political power by the Kremlin is also heavy, but President Vladimir Putin is often reduced to acting as an arbiter in the feuds between clans of siloviki (security services personnel) and other interest groups. It is corruption that makes the regime work and keeps the elites obedient to the often capricious arbiter. Indeed, another accurate designation for Russia’s political order could be “militarized kleptocracy.” Thus, Putin’s anger and exasperation last week (November 11), at a meeting with government ministers about persistent corruption at the Vostochny cosmodrome, came off as hypocritical at best. Despite the systemic foundations of corruption under Putinism, the Kremlin leader complained that the Russian spaceport’s managers “were told a hundred times” to work transparently to complete construction at the site, but instead they continue stealing “hundreds of millions” (Kremlin.ru, November 11).
This ongoing space launch mega-project in Amur Oblast has, indeed, become famous for the scale of embezzlement (Moscow Echo, November 13). The president visited it last September, after which the head of the Roscosmos state corporation, Dmitry Rogozin, hinted that the cosmodrome could be named after Putin (RBC, September 26). Now Rogozin claims there is nothing to worry about regarding further construction since all thieves had been duly punished (Interfax, November 12). Rogozin himself, however, has good reason to fret because the Russian Ministry of Defense seeks to wrestle control over this project from Roscosmos and allocate massive funding to the Amur spaceport from the state budget as it sees fit (Vedomosti, September 1). This inter-agency competition will hardly rein in the enormous corruption, which flourishes in the military bureaucracy no less fruitfully than, for instance, in the Federal Security Service (FSB). One internal investigation, for example, recently discovered an illegal cache of money in different currencies possessed by an FSB colonel that weighed 911 kilograms (Novaya Gazeta, November 11).
This top-down bureaucratic predation has severe economic consequences going beyond enervating Putin’s “national projects” (Ezhednevny Zhurnal, November 12). The Kremlin expected that channeling budget investments into a set of priority projects would generate powerful stimuli for economic growth, which actually remains feeble and shows greater propensity toward falling below zero than accelerating (Nezavisimaya Gazeta, November 13). Putin claimed credit at the recent BRICS summit in Brasilia, Brazil, for preventing a slide into recession; but in reality, his rigid economic policy prevented a recovery after the 2014–2017 recession (Forbes.ru, November 15). Moreover, the success of keeping inflation relatively low was achieved at the expense of the still continuing contraction of real incomes and massive outflows of illegally earned money (Meduza.io, November 11).
Russian public opinion, meanwhile, is becoming less worried about costs of goods and services and more concerned about corruption, recognizing it as a major cause of economic stagnation (Levada.ru, September 29). The authorities try to pacify this indignation by staging some show trials of low-level embezzlers, but their main effort goes to suppressing any independent investigation (RBC, October 15). Opposition blogger and politician Alexei Navalny, a key figure in the public fight against corruption, works under constant heavy pressure but has managed to expose, for instance, illegal and undeclared real estate in Montenegro and Spain owned by Moscow city’s chief prosecutor, Denis Popov (Navalny.com, November 11). This exposure probably will not damage Popov’s career, because the Kremlin treats Navalny’s investigations as the hostile activities of a “foreign agent.”
The squabbling of rapacious lobbies in the corridors of the Kremlin increasingly affects Russian foreign policy, which not only takes into account but eagerly serves various corrupt interests. The “principled” and costly support for the Bashar al-Assad regime in Syria generates a trickle-back of money to Moscow, as the dictator’s family invests in luxurious apartments in the Russian capital (The Bell, November 11). Venezuela seeks to circumvent international sanctions via clandestine petroleum export channels with the help of Rosneft, the Russian oil major controlled by the highly corrupt Putin associate Igor Sechin (Svoboda.org, November 15).
Ukraine presents not only a political challenge to Putin’s regime but also a problem for corrupt profit-harvesting, first of all in the construction of hugely over-priced alternative energy pipelines, including Nord Stream Two (RBC, November 11). These pipelines are not yet ready, and a new contract on natural gas transit through Ukraine needs to be negotiated, but common economic sense is not the most important issue at play here (Novaya Gazeta, November 13). Gazprom refuses to pay the $2.6 billion in compensation awarded to Ukraine by the Stockholm arbitrage court, and the Russian gas giant rejects all other Ukrainian claims related to breaches of its contractual obligations on pumping high volumes of gas through the latter’s pipeline system, which remains entirely safe from the armed hostilities in Donbas (Nezavisimaya Gazeta, November 6). Seeking to encourage European consumers to put pressure on Ukraine, Putin drops ominous hints about potential supply interruptions (Rossiiskaya Gazeta, November 15). Alexei Miller, Gazprom’s long-serving CEO, tries to reinforce these threats by questioning and overruling the Russian meteorological service’s forecasts of a mild winter this year (Vedomosti, November 14). Baseless Russian denials of both the effects of climate change and the fast growth of “green energy” supplies in Europe are underpinned by an ardent desire for profit maximization.
Putin tends to see monstrous corruption as a pillar for his oligarchic regime and as an asset for his foreign policy. He finds it increasingly difficult, however, to utilize this asset, as European institutions—frequently overcoming the reluctance of their elites—expand investigations into the flows of dirty Russian money. Moscow’s success in obtaining approvals for the Nord Stream Two project remains highly conditional, and even Cyprus has started canceling the passports issued to dubious Russian investors (RBC, November 14). The domestic benefits of systemic corruption are also weakening, as predatory appetites of competing clans progressively exceed the volume of rents produced by the stagnant economy. The stolen money is not invested in any homegrown business because the thieves do not believe in the profitability or safety of such investments; thus, the net drain of capital aggravates the stagnation. Instructions from the Kremlin to reduce such embezzlement are entirely senseless since Putin-connected elites show no inclination toward moderation. While essentially all top-level bureaucrat are likely implicated in corruption, that does not mean they will loyally band together around the “throne”; betrayal and desertion are much more probable.