Russian president pushes RusHydro to step up corruption probe

By bne IntelliNews February 14, 2013

bne -

Russian President Vladimir Putin ordered Interior Minister Vladimir Kolokoltsev on February 13 to step up the investigation into graft allocations at state-controlled power utility RusHydro, as he pushes to bring top officials into line with his drive to stamp out stealing from the state.

Putin has been turning up the heat on an anti-corruption drive that he is now making his own, after co-opting it from Prime Minister Dmitry Medvedev, who instigated it during his term in the presidential office. Putin knocked the campaign up a notch in November with the sacking of Defence Minister Anatoly Serdyukov, after kicking it off in December 2011 when he named the power sector the "most corrupt in Russia."

Kolokoltsev has been charged with investigating the embezzlement of billions of rubles from hydropower company RusHydro, RIA Novosti reports. In particular, investigators will look at the development of the Zagorskaya hydropower plant in the Moscow region.

The state-controlled company racked up huge losses on the project, with developer Gidrostroy accused of hiring contractors with no real staff or infrastructure. Putin says that out of a total of RUB12bn ($400m) allocated for the construction of the plant, RUB6bn was allotted to Gidrostroy.

During an energy commission meeting, the president dragged RusHydro CEO Yevgeny Dod over the coals for the company's inaction, despite a call from the interior ministry that it should bring charges against the developer.

"You should be fighting with your teeth to recover these funds," Putin told Dod. "Your investigation is too long. A billion (rubles) has been stolen, a billion (rubles) has thus been given to a fake firm, a billion (rubles) has been dissolved. And you are still investigating and do not think that it is necessary to protect the interests of the company."

By way of contrast, work on the 840-megawatt Zagorskaya power plant was completed at the end of 2012, but the plant is now waiting to be connected to the grid. RusHydro has been swift to sue the grid operator by Unified Energy System for the delay.

The case illustrates how Putin's anti-corruption drive is increasingly reaching into the inner circles of Russia's elite. The president reiterated that point in his in his annual State of the Nation Address to the Federal Assembly on December 12, telling those that hold high public office they can no longer use foreign bank accounts nor hold foreign assets. Legislation on these rules was submitted to the Duma this week.

Last month's speech is looking increasingly like a second "oligarch meeting". At the start of his first presidency in 2000, Putin met with leading businessmen and told them to stop the stealing. The difference his time it is his own government receiving the warning.

The pressure building over the RusHydro case appears to highlight the change, bringing to mind an old Russian proverb: "The fish rots from the head." In the past the deal with Putin was that top officials would show Putin loyalty, and he would then turn a blind eye to their misdemeanors. Since the "oligarch meeting II" that deal looks to be over. Now Putins seems to be saying: "stop the stealing and make your company/office work or you will go to jail."

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more