Publication: Monitor Volume: 6 Issue: 233

The political standing of the Russian Defense Ministry took a fresh hit yesterday when charges involving a gross misuse of funds were formally leveled against the head of the ministry’s finance department, Colonel General Georgy Oliynik. Also implicated in the case, which involves the disappearance of some US$450 million in Defense Ministry funds, were three other top Russian generals who had worked with Oliinik. While there was no information immediately available about whether they have been charged, sources in Moscow yesterday said that Oliynik faces up to ten years on a charge of “abuse of power with grave consequences.” In a military established believed to be full of corruption, he is one of the highest-ranking generals yet to be indicted on a corruption charge (Reuters, Russian agencies, December 13; Segodnya, December 14).

The case against Oliynik first came to light this past August in what was then described as perhaps the biggest case of graft ever to be found in the Defense Ministry’s history. The disappearance of the US$450 million–a considerable sum given a total Russian defense budget of about US$5 billion–was said to have occurred amid a complex series of transactions in 1995-1996 under which the Russian Defense Ministry paid out the US$450 million to acquire unspecified military supplies from a Ukrainian company. Those supplies were apparently never delivered, and the search for missing funding led Russia’s military prosecutor’s office to launch the investigation which led to Oliynik’s indictment yesterday (see the Monitor, August 9).

As is true of so much in Russian politics, however, nothing is quite as simple as it seems. It is worth remembering that in August, when the investigation of Oliynik was made public, the Russian military leadership was in the middle of an unseemly public row which pitted the Defense Ministry’s leadership against the Russian General Staff’s. Some commentators intimated at the time that the embezzlement investigation might have had as much a political as a legal motive. They suggested that it might be intended to discredit Oliynik’s boss, Defense Minister Igor Sergeev, who was then involved in an intense power struggle with General Staff Chief Anatoly Kvashnin.

Not much has changed in the intervening four months, except that the battle between Russia’s two top uniformed officers appears to have tilted in Kvashnin’s favor. The indictment of Oliynik could therefore be another blow to Sergeev, though perhaps not an immediate one. Russian prosecutors indicated yesterday that it might be some time yet before Oliynik, who has now been under investigation for about nine months, would actually go on trial.

In the meantime, however, the case has some broader political significance. The whiff of corruption serves first to undermine the Defense Ministry’s frequent complaints about defense funding shortfalls and to weaken its demands for money. Concurrently, it cannot but harm the Defense Ministry’s authority and credibility at a time when the military leadership is launching a major military reduction and restructuring program which will see more than a half million uniformed and civilian Defense Ministry personnel lose their jobs over the next several years. It seems likely, finally, to further fuel press allegations that military leaders are already embezzling millions of dollars from the defense budget and that they are planning to use a recent decision which raises defense funding to grab even more state moneys for themselves. Some of those reports suggest that a billion dollars out the US$8-billion 2001 defense budget could wind up being stolen (Versiya, November 7-13; Vremya MN, October 18).