STOLYPIN: Corruption in Russia remains Putin’s biggest threat

STOLYPIN: Corruption in Russia remains Putin’s biggest threat
Alexei Navalny has reached out to constituencies beyond Moscow and St Petersburg.
By Mark Galeotti of the Institute of International Relations Prague March 27, 2017

Three separate but connected pieces of recent news point to a tension within Russian policy. First, the release of the findings of a multi-national journalistic enquiry into the so-called ‘Laundromat’ that washed at least $20bn and possibly as much as $80bn out of Russia, through Moldova.

Second, the reconfirmation of Elvira Nabiullina as chair of the Central Bank and, implicitly, a blessing on her campaign to clamp down on Russia’s toxic and criminal banks.

Third, Sunday’s dramatic protests against corruption in general and that attributed to Prime Minister Dmitry Medvedev in particular.

Is the Kremlin really concerned about the looting of Russia, or is this just pokazukha – a pretence – or even simply a wholly selective process? The answer, needless, to say, it is all of the above, and hence the tension.

Alexei Navalny’s success in regalvanising a protest movement, and in particular managing to reach out to constituencies beyond Moscow and St Petersburg, reflects his success at doing something that evaded the organisers of the ‘Bolotnaya’ protests in 2011-12. All Russians know corruption is endemic within their system. However, the real problem are not the bespoke predations of the fire inspector, traffic cop or pharmacy assistant, but the industrial-scale theft of the great and the not-that-good: the sweetheart contracts for bridges and sports stadia, the government bail-outs, the tax breaks.

For too long, though, this was essentially regarded as something like the weather, a problem to be endured, not open to change. Navalny, though, has succeeded in doing two things: persuading some people that change may be possible (a lack of hope is always the authoritarian’s best friend) and connecting corruption at the top of the system with the growing pressures and hardships experienced by ordinary Russians.

Whether or not the protests are just another bright spark in the gloom or the start of something truly revolutionary remains to be seen. However, what is striking is that they highlight the serious damage corruption does Russia as a nation.

The Laundromat operated between 2011 and 2014, before the recent swing towards economic nationalism and a greater push for ‘de-offshorisation’ in Russia. Since then, capital flight has fallen dramatically, but for reasons economic rather than moral. There is no evidence that Russia’s oligarchs and officials have had an epiphany and renounced their old ways. Rather, they are looking to other ways of self-enrichment. Too many public contracts continue to be assigned based on connections, corruption or the promise of mutual favours, and the frictional cost to an over-strained public purse is still great.

Meanwhile, the size of the average bribe continued to rise – it was RUB328,000 (€5,150) in 2016 – as did the total spend. According to Lt. Gen. Andrei Kurnosenko, head of the police’s Main Directorate for Economic Security and Combating Corruption, in total RUB298bn (€4.7bn) was paid out in bribes last year, but even he had to admit that this was only based on the cases that came to the police’s attention, and the true figure was likely rather higher. Even so, that alone is equivalent to some two-thirds of the total federal healthcare budget for 2017.

The real point

For all that, there are grounds for a certain optimism. Nabiullina is continuing her crusade to clean up the banking system. Meanwhile, the justice ministry is ready to follow the advice of GRECO, the Group of States Against Corruption, and extend the legal definition of bribery in order to include favours and non-material benefits such as promotions.

Beyond that, for all it is tempting to conclude otherwise, there are honest, effective police officers, prosecutors and judges in Russia. There are cases every day being determined on their merits, and genuine crooks and scoundrels being fined or imprisoned. Last year, 69,000 corruption cases were opened.

The problem is that while the government is aware of the extent to which systemic corruption undermines its own position and eats away at programmes that matter to it (the theft or waste of perhaps one ruble in every five spent on defence is a particular concern), it is not willing to address the real issue.

This is not the street-level corruption, nor even the €5,000 bribe. That might, maybe, get your kid into the right university, or the mayor’s office to approve your planning permission. It is the top-level corruption, the sort in which no payments change hands. Rather, it is an exchange of favours, of preference, and of political loyalties.

This is not a crime against the system, the way the street bribes are, it is the way the system – personalised, de-institutionalised, untransparent – is run. As such, it is impossible to address without breaking the whole machine.

When Minister of Economic Development Alexei Ulyukaev was arrested in November and charged with taking a €1.8mn bribe, this sent shock waves through the elite. It was not that one such as he might be involved in such a transaction (frankly, it is the usual kind of ‘gift’ expected for signing off on a major deal such as Rosneft’s purchase of Bashneft) but that he was arrested. Since then, considerable effort has been expended by the Kremlin’s political managers in calming troubled officials, and making it clear that this was an aberration at best, a mistake at worst.

In this context, Nabiullina’s Sisyphean effort to fix the financial system is important, valuable and worthwhile, but missing the real point. The real problem is not in the machine, but in its operators.

And Navalny has precisely understood the point, and the vigour and effectiveness with which he articulates it is precisely why he is dangerous to the Kremlin. This is not the kind of regime in which anti-corruption campaigns become the bloody instruments for factional struggles. Where powerful insiders are caught, generally because they infringed on the interests of others, they soon enough get rehabilitated or rewarded for their troubles, whether we are talking about former Defence Minister Anatoly Serdyukov (sacked in 2012, given a comfortable berth at Rostec in 2015) or Bashneft owner Vladimir Yevtushenkov (arrested 2014, cleared of all charges in 2016 once Bashneft had been renationalised).

Rather, it is a regime based on a shared complicity and interest, in which those in power appreciate the collective advantage of the status quo. What Navalny is seeking to do is mobilise everyone else with a similar appreciation of the collective advantage to them of change. It is unclear how successful he will be, but this is probably the most potentially dangerous political weapon Putin and his sistema could possibly face.

Mark Galeotti is a senior researcher at the Institute of International Relations Prague, a visiting fellow with the European Council on Foreign Relations, and the director of Mayak Intelligence. He blogs at In Moscow’s Shadows and tweets as @MarkGaleotti.




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