EDITORIAL: Russian Corruption Leads the World


Russian Corruption Leads the World

He never once complained to investigators about the state of his health.  His death was completely unexpected.

Irina V. Dudukina, a spokeswoman for the Interior Ministry, on November 25th, responding to questions about the death of attorney Sergei Magnitsky

This was a deplorable incident, which has left a serious stain on the entire work of our judicial system.  We are not in any sense playing down our guilt, which clearly exists.

Alexander Smirnov, the deputy head of Russia’s prison service, on November 27th responding to similar questions.

No sooner had Transparency International come out with its most recent ranking of 180 world nations for corruption, placing Russia in the bottom quintile of all countries on the planet, and no sooner had the Russophile rubbish come forth with their tired drivel about TI’s alleged methodological flaws, than PricewaterhouseCoopers released its own study of 55 countries and, using an entirely different methodology, found Russia to be the very most corrupt of all of them.

It was almost as if the world had baited the Russophile trash into a trap and then snapped shut steely jaws right around their crooked necks.  It was truly a beautiful thing to see.  And the Russian government’s humiliating about-face on the Magnitsky killing only underlined the absolute incompetence which characterizes the government of Vladimir Putin.

Reuters reports on the PWC report:

Companies in Russia experienced more economic crime this year than anywhere else in the world, according to a report released Thursday, which underscores the difficulties facing an ambitious Kremlin plan to curb corruption and lawlessness.

Of 86 companies surveyed in Russia, 71 percent said they had been subjected to at least one major economic crime in the past 12 months, according to a report released by PricewaterhouseCoopers.

“This is a shocking 12 percentage-point increase compared with our 2007 research (59 percent), and is well above the global (30 percent), Central and Eastern Europe (34 percent) and BRIC countries (34 percent),” the report said. The BRIC countries are Brazil, Russia, India and China. The figures also exceed results in South Africa, where 62 percent of firms reported economic crimes, and Kenya, with 67 percent.

It’s estimated that corruption costs the Russian GDP at least $300 billion per year, and inflates production costs by 40%.  It’s for this reason that Russia continues to see horrifying consumer price inflation even when its level of demand has crashed because the population is out of work due to the national economic crisis that has stripped away half the stock market’s value.  Despite this economic reality, corruption goes on unabated, forcing prices much higher than they should be as a result, with devastating consequences on living standards.

So the Kremlin is panicking.  It realizes that time is running out on the Putin illusion, and it has no idea how to react as the facade begins to crumble.  One minute we get pathetic Soviet-style denials in regad to the Magnitsky killing, and the next the Kremlin is unable to deny reality with a straight face.    Corruption is eating into the very Russia soul itself, destroying Russia just as it did the USSR.  Indeed, given the craven silence of the Russian people in regard to the Putin crackdown, it seeems that this corruption is actually a good thing, the only chance Russia has to rid itself of dictatorship, rid itself the same way the USSR did. Not with courage but by destroying itself.

5 responses to “EDITORIAL: Russian Corruption Leads the World

  1. Corruption in Russia, Part 1: A Normal Part Of Everyday Life

    November 27, 2009
    By Gregory Feifer
    Russian President Dmitry Medvedev has made fighting corruption a centerpiece of his presidency. But many Russians don’t believe he’ll make good on his word, saying corruption is central to the way business and politics function. In the first of a three-part series, RFE/RL’s Gregory Feifer reports from Moscow on a culture of corruption that even Medvedev says is threatening Russia’s viability as a state.

    MOSCOW — Just about every driver in Moscow knows the procedure.

    Stopped by the traffic police and threatened with a large fine — or worse, confiscation of your license — you contritely wait for the right moment to negotiate the price of a bribe, usually around $20.

    Sitting in his car on a central Moscow street, Vladimir Maltsev says that happens almost every day.

    “As a driver, I deal with the traffic police all the time,” he says. “They’re all corrupt. Absolutely every one is a bribe-taker.”

    Maltsev says police often set up obstacles on the road that force drivers to break the law by crossing double lines, then wait nearby to pull over their victims.

    But he says that’s trifling compared to the corruption that threatens his personal livelihood. A small-business owner, Maltsev says the tax police recently blocked his company’s bank account, claiming his company failed to file a vital document.

    When Maltsev showed up with the proper paper, bearing a stamp proving it had indeed been filed, he was still made to wait in line at an office that never appeared to open.

    “I kept returning for three weeks,” he says, “until someone came up to me and suggested where I should go to pay a bribe. After that, everything was fine.”

    Maltsev says such routine corruption paralyzes companies. “Business owners are ready to do anything to unblock their bank accounts,” he says.

    Bribery is an institution in Russia: students pay teachers for better grades, patients pay doctors for health care supposedly provided free by the state, families pay off draft boards to keep their sons out of military service.

    Sixty percent of Russians admitted to giving bribes in a recent poll. Earlier this year, President Dmitry Medvedev said corruption is so bad it threatens Russia’s very stability.

    “The battle against corruption in our country,” he said, “is an especially difficult task that will demand colossal efforts and perseverance over many years. But today, I can say that we’re already seeing some progress.”

    Medvedev first promised a major campaign against corruption when he took office last year. He and other top officials publicly declared their incomes and assets for the first time, in a widely publicized show of action. But some of the results strained credulity: Chechen leader Ramzan Kadyrov, who lives in a palatial, marble-clad mansion, admitted to owning only a small apartment and a Lada car.

    Business owner Maltsev believes that like other recent anticorruption drives, Medvedev’s campaign is only window-dressing. “It’s only words,” he says. “Corruption has always been all-pervasive. It’s an integral part of our state.”

    History Of Anti-Corruption Drives

    Medvedev is far from the first Russian leader to promise tackling corruption. Ten years ago, his predecessor and mentor Vladimir Putin came to power promising to wipe out corruption by enacting a “dictatorship of the law.”

    But the problem has grown far worse since then: a decade-long, oil-fueled economic boom has emboldened the country’s bureaucrats to demand even bigger bribes, even after the global financial crisis sent the economy into a tailspin. Today, Transparency International ranks Russia one of the world’s most corrupt countries, 146th out of 180 on its corruption perception index.

    Even the government’s own figures say the average bribe has tripled in size since last year, to $32,000. Russia’s “corruption market,” officials say, is estimated at $300 billion a year, and inflates the price of everything from real estate to food, as companies pass on the hidden costs of doing business.

    Former First Deputy Prime Minister Boris Nemtsov, now an opposition leader, points to the price tag of a kilometer of road now under construction in Moscow — $570 million.

    “If you compare the cost of Moscow’s roads to the Large Hadron particle collider in Switzerland,” he says, “the collider is cheaper, as is the Channel Tunnel [between Britain and France], another grandiose construction project.”

    Moscow was rated the third-most expensive city in the world in 2009, behind only Tokyo and Osaka. Nemtsov says it’s no accident the Russian capital remains one of the priciest places on earth. He says its costs reflect a closed political system in which construction companies enjoy close ties to Mayor Yury Luzhkov.

    Nemtsov recently published a report about Luzhkov, who he says funnels contracts to his wife, the head of a large construction firm that’s made her Russia’s richest woman.

    “In any country in the world — the Czech Republic, Britain, Germany, even Italy,” he says, “it would be cause for a criminal investigation. Those two would be sitting in jail instead of City Hall. But not in Russia.”

    Nemtsov says Luzhkov and his wife Yelena Baturina are “so odious” that any move against them would send a loud signal to politicians and law enforcers across the country. But so far, Nemtsov’s claims have only earned him a libel suit filed by the mayor, hearings for which began on November 25.

    Few Russians believe Luzhkov, Baturina, or any other high-placed officials will be called on the carpet for corruption. Last year, a watchdog called the Anti-Corruption Committee set up hotlines across the country. The group’s director, Yevgeny Arkhipov, says the opinions of thousands of callers show the lack of perceptible change following Medvedev’s promise to fight corruption is disenchanting an increasing number of Russians.

    “Many have stopped believing it’s possible to defend their rights if they’re the victims of corruption,” he says.

    Arkhipov and other members of his group were forced to flee the country last year, just as they were preparing to publish a report on corruption, after being warned they would be investigated. They released their findings in Ukraine, where they took refuge for two months.

    Arkhipov says such intimidation is making Russians afraid even to discuss corruption in public. He says the authorities have marginalized civil society, eroded public institutions, and cracked down on freedom of speech to such an extent that many Russians no longer know even how to go about defending their rights.

    “The stricter the authorities’ control, the more their activities are hidden from the public,” he says, “the more difficult it is for people to fight corruption. Better to pay a bribe than start a conflict with an official.”

    Fighting Back

    Some are taking matters into their own hands.

    In a small Moscow textile factory that produces uniforms for the likes of McDonald’s, Pepsi, and Procter & Gamble, workers hunch over sewing machines.

    In his cramped office near the factory floor, owner Ilya Handrikov says his company is regularly visited by fire inspectors and financial regulators who demand bribes to stop them from reporting fabricated violations.

    It’s helped drive Handrikov to become one of the country’s most prominent corruption fighters, launching one organization aimed at aiding businesses, and working with numerous others. He points to figures showing the number of state bureaucrats has doubled from 1 to 2 million in the last decade, saying the culture of corruption is choking any hope Russian businesses can be competitive in the world.

    “Manufacturing has been essentially destroyed,” he says. “Small and mid-size businesses have been trampled. How can you expect companies under pressure from taxes, monopolies, and political clans to create innovative ideas? They can’t, because all their energy goes to just trying to survive.”

    Many question how corruption can be measured or even defined in a society in which it’s seen as a normal part of everyday life. Pollster Lev Gudkov maintains it can, but that any measurement must include far more than the amount of money that changes hands. “For example, big business can only function,” he says, “by ‘paying’ with political loyalty to the authorities.”

    Gudkov says Russia’s “cynical climate of immorality” can’t be tackled as long as most Russians see a benefit in corruption as a necessary means of getting things done.

    “It’s like oil in a car’s engine,” he says. “The system can’t work without it. It prefers that kind of relationship, and it makes up for the ineffectiveness of institutions.”

    Gudkov calls Medvedev’s ongoing anticorruption campaign “political theater.” It’s not a question of a deficiency in Russians’ morality,” he says, “but of how Russians’ practical social and political systems are structured.”

    Real change, he says, has to be seen as being in people’s interests. “Who’s going to deprive himself of his own bread and butter?” he says, “That’s just not realistic.”


  2. Well, I can’t say that is a surprise…

  3. Corruption In Russia, Part 2: Law Enforcers Often The Worst Offenders

    November 28, 2009
    By Gregory Feifer
    The authorities in Russia say they’re tackling the country’s endemic corruption. But many Russians believe the very law enforcers who are supposed to fight abuses of office are actually among the country’s most corrupt officials. In the second of a three-part series on Russian corruption, RFE/RL’s Gregory Feifer reports from Moscow on a situation many believe is spiraling out of control.

    MOSCOW — Yevgeny Tkachuk was away on a business trip when the police paid a visit to his suburban Moscow apartment building late one night.

    “It was horrible,” Tkachuk says. “First they went to my mother-in-law’s upstairs. They turned the place upside down. Then they started banging on my door. My small child was inside, and they were yelling that they were going to break down the door.”

    Tkachuk, the director of a small wholesale trade company, had been accused of fraud. He says the allegations were “completely false,” and surfaced only after he’d rebuffed an attempt by one of the company’s partners to extort money from him.

    An investigation dragged on for three years, despite the decision of two successive judges to drop the case for lack of evidence. Tkachuk was barred from leaving the country. He lost his job and racked up debts.

    He says he was powerless in front of corrupt law enforcers. “When I questioned the investigators’ logic, I was told, ‘We are always right,'” Tkachuk recalls.

    “The so-called power vertical the authorities have built in Russia is controlled from the very top,” he says. “Those at the bottom know their superiors will always cover for them and protect them.”

    That’s such a common story in Russia that many agree law enforcers’ main activity isn’t really solving crimes, but using their official positions for profit.

    From drivers forced to pay routine bribes to traffic police, to business owners paying to keep government inspectors from arbitrarily shutting them down, the government itself estimates people in Russia shell out $300 billion in bribes each year.

    ‘Sense Of Impunity’

    Kirill Kabanov, a former security service officer who heads a private group called the National Anticorruption Committee, says state bureaucrats are among the wealthiest people in Russia.

    “You’re appointed to an official position,” Kabanov explains. “You’re given status, a state post, and you don’t have to do anything but collect the money you’re in a position to take. Bureaucrats have the most expensive cars and mansions. And above all, the sense of impunity.”

    That extends to police, who, to cover their activities, are said to regularly fabricate or set up crimes rather than investigating actual crimes. Police are also believed to spend much of their time falsifying statistics to meet Soviet-era quotas for cases they’re required to solve — sometimes by framing innocent people.

    Earlier this month, a police major in southern Russia came to national attention after posting YouTube videos describing a culture of massive corruption. Aleksei Dymovsky criticized his superiors for ordering him to arrest innocent people or be punished by being required to work overtime without pay.

    Dymovsky appealed to officers to confront their superiors about corrupt behavior. He was suspended and is now under investigation.

    Another whistleblower investigating corruption in the Far East port of Vladivostok recently fared even worse. Police Colonel Aleksandr Astafyev was arrested last summer before he was due to release an officially sanctioned report about criminal takeovers of businesses with the help of corrupt officials. He was charged with illegally accepting a gift of three air conditioners and a computer, and is now awaiting trial.

    Law Against ‘Extremists’

    Kabanov, of the National Anticorruption Committee, carries a pistol to work. Investigating corruption is like “going to war,” he says. But abuses of office can be traced only so high in the official hierarchy, he says, because “any further and it’s seen as harming the interests of the state.”

    Kabanov says any doubts were removed by a recent law against extremism outlawing the discrediting of officials. “Now if you call a bureaucrat a thief, you can be prosecuted as an extremist,” he says.

    Experts say the Kremlin enforces the system of corruption through the courts. Lawyer Vladimir Volkov, a former senior investigator, says former President Vladimir Putin put the country’s prosecutors under his control when he came to power a decade ago by systematically firing those with questionable political loyalty. They included Volkov’s former colleagues who refused to drop criminal investigations into corrupt officials.

    “How can there now be a single investigator in the Prosecutor’s Office with an opinion of his own, different from that of his boss?” Volkov asked.

    Officials often have to buy in to the system of corruption to gain entry. Volkov says a former colleague who took a job in Russia’s lucrative customs service was informed he’d have to pay $200,000 to keep the post shortly after taking it. After insisting he couldn’t possibly come up with the money, he was fired.

    Dangerous Officer

    That kind of corruption came under public scrutiny last summer, when a Moscow district police chief went on a shooting spree, killing three people at a supermarket.

    Russian television news reported the police officer had a history of aggression and corruption. There were also rumors he had bought his job, helping prompt public soul-searching about the serious danger posed by unqualified police.

    President Dmitry Medvedev responded by dismissing Moscow’s police chief, part of a promised major crackdown on corruption. But activists say the Kremlin’s numerous anticorruption drives are really aimed not at combating law-breaking, but at getting rid of critics and poor earners within the system.

    Kabanov claims not a single case of high-profile corruption has been prosecuted in recent years, saying state officials are “no longer afraid of anything.” “They believe by taking control of all the money flows and putting loyal people in control, they can create a closed space they can control by force,” Kabanov says.

    Kabanov says he’s most worried by the failure of young Russians to question the system of corruption. “It’s difficult to convey to them that they have rights as citizens,” he says, “and that it’s in their interests to defend them.”

    As a result, Kabanov says, Russian bureaucrats continue to buy yachts and real estate around the world, even during the global financial crisis.

    In Russia, he says, “there’s no such thing left as the idea of a professional reputation to protect.”


  4. Corruption in Russia, Part 3: How Russia Is Ruled

    ovember 28, 2009
    By Gregory Feifer
    The authorities in Russia say corruption there is so rife, it threatens the country’s very stability. But critics say the problem has reached a critical level precisely because it starts at the very top of the political system. In the last of a three-part series, RFE/RL’s Gregory Feifer reports on allegations that corruption is central to how Russia is ruled.

    * Correction appended

    In a small courtroom in northeast Moscow, a judge reads instructions to a witness preparing to take the stand. The youthful, dark-haired man on trial sits in a cage of thick, bulletproof glass, scribbling in a notebook as the judge speeds through the formalities.

    The defendant, Dmitry Dovgy, is a former top investigator arrested on charges of accepting a $1 million bribe in return for dropping a probe into a businessman accused of embezzlement.

    The courtroom is almost empty of observers, but this is no ordinary corruption case. It provides a rare glimpse into a behind-the-scenes turf battle between powerful political clans that control wide swaths of the Russian state.

    Dovgy says he’s innocent. He was fired last year from the Investigative Committee, a powerful agency set up in 2007 by then-President Vladimir Putin, many say to spy on the rival Federal Security Service, or FSB.

    Dovgy says the corruption charges against him are punishment for a newspaper interview he gave after his firing, in which he claimed he was ordered to open investigations into innocent people.

    In a narrow hallway outside the courtroom, Dovgy’s lawyer Yury Bagrayev says the interview was a protest.

    “If he hadn’t started raising a fuss,” he says, “if he didn’t file a suit to try to clear his name and show he was being fired illegally — more than that, if he hadn’t given that interview — he wouldn’t be sitting in prison.”

    Bureaucratic Infighting

    One of Dovgy’s investigations was into the deputy head of Russia’s drug control agency. General Aleksandr Bulbov wasn’t just any bureaucrat, but the right-hand man of a former KGB officer, a close ally of Putin believed to lead one of the Kremlin’s main political clans.

    Bulbov’s supporters say he was arrested in 2007 because he oversaw the wiretapping of several high-profile criminal investigations involving FSB officers, and became victim of a struggle between his boss and rivals inside the Kremlin.

    Soon after Bulbov’s arrest, two officers from his drug control agency died mysteriously from radiation poisoning. Bulbov’s boss, Victor Cherkesov, published an open letter saying infighting among the various groups now threatened to tear the country apart. “There can be no winners in this war,” he wrote.

    But corruption experts say far from being a simple whistleblower, fired investigator Dmitry Dovgy was very much a part of the system he criticized. Former senior investigator Vladimir Volkov says he’s certain Dovgy wasn’t qualified for his job.

    “He didn’t have the right to have any kind of position in the [Investigative Committee], but was appointed anyway,” he says. “I can only believe he got his job for a bribe.”

    Volkov says he suspects Dovgy was sacked for seeking bribes too aggressively, in order to return the large amount of money he must have paid for his position.

    Volkov says Dovgy’s trial exposes the true nature of anticorruption drives in Russia: they’re not about cleaning up abuses of office, he says, as much as getting rid of rivals and critics.

    ‘Feudal System’

    Kirill Kabanov, a former security service officer who now heads the nongovernmental National Anticorruption Committee, says corruption is central to how the Russian political system works. He compares it to feudalism.

    “It’s a system of vassals, headed by a group of high-ranking ‘untouchables,'” he says. “Each group has its own network, a criminal system in which loyalty is bought.”

    Experts say the competing groups are all loyal to Putin. He became prime minster after stepping down from the presidency last year, but is believed to retain power, partly by balancing the interests of the various clans.

    Former FSB officer Mikhail Trepashkin says Putin’s regime is corrupt for placing loyalty and the interests of the political clans above all else.

    “Under Putin, the law became secondary,” he says. “More than that, those laws that got in the way were changed through clearly reactionary legislation.”

    Russia has become a dangerous place for Trepashkin and other critics of the authorities. He says the FSB organized death squads to target critics and rivals, allegations that first came to public attention in a notorious news conference in 1998. Trepashkin took part, as did another former FSB officer and Kremlin critic, Aleksandr Litvinenko. Litvinenko died of a mysterious case of radiation poisoning in London three years ago.

    As he lay dying in the hospital, Litvinenko blamed Putin for ordering his poisoning. So it may come as a surprise to hear that Trepashkin believes the 1998 news conference criticizing the FSB was the idea of none other than Putin himself. Putin was deputy chief of staff for then-President Boris Yeltsin, and Trepashkin says the future president was eager to discredit the FSB leadership.

    “It turns out that with that news conference, Putin opened the way to become FSB director,” he says. “After that, he went into a top position in government. Then he was groomed for the presidency.”

    Trepashkin says after helping publicize criminal activity in the FSB to secure his position as the service’s director, Putin reversed himself by starting to crack down on the agency’s critics.

    Investigation Interrupted

    So Trepashkin, now a lawyer, was almost setting himself up for confrontation with the authorities by investigating a series of apartment building explosions in 1999. They served as a pretext for launching a popular second war in Chechnya that catapulted Putin into the presidency.

    Trepashkin believes the bombings were staged by the FSB, but says he was arrested on false charges of illegal possession of firearms before he was able to complete his investigation.

    He says the judges who convicted him are “bandits.” “Despite the indisputably illegal charges against me,” he says, “they still let them go ahead. Only because, as I was told, the order came from up high.”

    Trepashkin spent four years in jail, partly in Siberia.

    He says after Putin came to power, the state began seizing private companies, among them Yukos, the former No. 1 oil firm. Its head, Mikhail Khodorkovsky, once Russia’s richest man, is now serving an eight-year prison sentence. The president put the state’s new assets in the hands of cronies he’d appointed to top positions in government. The “theft,” Trepashkin says, was sold to the public as a battle against corrupt and greedy business oligarchs.

    Lev Gudkov, head of the Levada polling agency, says that kind of corruption at the top of the political system has become a model for the rest of society.

    “The population believes the higher the authorities, the greater the number and value of corrupt deals,” he says. “As the saying goes, fish rot from the head.”

    Last July, former investigator Dmitry Dovgy was found guilty and sentenced to nine years in jail. Aleksandr Bulbov, the general he says was falsely accused, was released on bail earlier this month. He still faces trial.

    * The original version of this story erroneously suggested that Vladimir Putin was deputy head of the FSB in 1998. In fact, he was deputy chief of staff at the time for then-President Boris Yeltsin.


  5. Well, the Italian system is very similar to Russia’s That’s why Putin and Berlusconi see eye to eye

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