Putin Declares War on Sleaze

MOSCOW — A few days ago I stopped by a low-budget beauty salon in downtown Moscow to sample the popular mood. Last week, President Vladimir Putin introduced a bill into the Duma (the Russian parliament) that aims to block top state bureaucrats and their closest relatives from holding money, shares, or bonds abroad. The ladies in the salon were abuzz about the move, enthralled by the notion that officials famous for their roomy villas and aquamarine swimming pools in Miami, the South of France, or Bulgaria were finally facing a reckoning. "Finally he’s got his act together!" a middle-aged client, Irina, said of Putin’s sally. "I’m sick of reading about [ruling party] United Russia wives spending billions of stolen dollars at foreign resorts." Lena, the hairdresser, denounced one of Putin’s own advisers: "Pavel Astakhov keeps his family in Cannes," she declared. "He goes to visit them every weekend while I have to scrape by just to redecorate my apartment." How she knew this privileged information was somewhat irrelevant; in Russia, indeed, the cynical suppositions of the populace all too often lag far behind the grubby reality. The salon customers went on to ponder whether former Minister of Defense Anatoly Serdyukov or ex-Minister of Agriculture Yelena Skrynnik, both currently under investigation, will actually go to jail for embezzling millions of rubles in state funds. (The photo above shows Putin meeting with the newly appointed minister of defense, Sergei Shoigu, after Serdyukov was sacked.)  

Putin’s move has served to enflame Russians’ smoldering anger over the obvious corruption of the elite. Ordinary Russians have historically obsessed over the division between "us" (ordinary folk) and "them" (the ruling elite). But rarely has the gap inspired as much bile as it does today. Eavesdrop on middle-class Muscovites and you’re bound to hear tirades about sleaze at the top. Corrosive state corruption, which experts claim costs the Russian economy some $400 billion a year for the Russian economy, has permeated all levels of Russian society. The chairman of the Audit Chamber, Sergei Stepashin, says that bureaucrats plunder around one trillion rubles ($33 billion) from state purchases every year: "One-fourteenth of the country’s budget annually goes into the pockets and offshore accounts of state officials and businessmen affiliated with them," he recently told state news agencies. 

In just the past week there have been scandals at three different ministries. The main oncologist of the Ministry of Health, Valery Chissov, quit after investigators accused his deputy of taking a million-ruble bribe from a commercial company in return for guaranteed state contracts for medical equipment. At the Skolkovo high-tech hub, Russia’s answer to Silicon Valley, investigators revealed the embezzlement of $800,000 in development funds and opened a criminal case against the foundation’s finance director, Kirill Lugovets. (Police suspect he paid that amount in rent to a building owned by his own parents.) Skolkovo, which once enjoyed the direct patronage of ex-President Dmitri Medvedev, is supposed to be a showcase of transparency and competitiveness; it has even succeeded in establishing a series of collaborations with MIT. But critics say the whole project has a rotten smell to it. In a recent interview, the vice president of the Skolkovo Foundation, Alexander Chernov, admitted that many remain skeptical about the center’s future. "Anything initiated by the government immediately generates skepticism," Chernov said. 

Even the Bolshoi Theater, that symbol of Russia’s rich cultural legacy, has been drawn into criminal scandals. Soon after an attacker splashed acid on his face, Sergei Filin, the Bolshoi’s creative director, told me that he hopes that the Kremlin will make an exemplary effort to investigate his case and show results. Last year he asked both Vladimir Putin and then-president Dmitry Medvedev, the president at the time, to help put an end to the scandalous corruption conflicts tearing the Bolshoi apart, but nothing had been done. "The question is whether, after what happened to me, the authorities will tackle the bigger problems at the theater," Filin said. "If they don’t manage to solve anything even now, it makes you wonder what else has to happen in order to get the authorities to react." 

Billions of stolen rubles vanish or "dissolve," as Vladimir Putin put it last week, without a trace. He has promised "intense, tough, and consistent" measures to fight high-level corruption in the bureaucracy. As if to demonstrate his resolve, last Wednesday Putin publicly scolded the minister of energy, Alexander Novak, and the CEO of state hydroelectricity company Rus Hydro, Yevgeny Dod. "You should be fighting with your teeth to recover these funds," Putin told them. "A billion rubles (about $33 million) has been stolen, a billion has been given to a fake firm, a billion has vanished. And you’re still investigating, and you sometimes don’t think that it’s necessary to protect the interests of the company." 

The new campaign aims to change the deeply rooted lifestyle of nearly two million Russian officials: Husbands serve the motherland while their wives live abroad and their children attend the best Western private schools. Only last year, the Russian elite purchased overseas property worth $12 billion abroad (much of which was never declared). Capital flight amounted to more than $60 billion. When the Russian sociologist Olga Kryshtanovskaya recently issued a confidential report saying that the real incomes of leading officials are now around $60,000 dollars a month, members of the ruling United Russia party rebuked her. (Kryshtanovskaya, a long-time member of the party, left it in protest.) "After late year’s protests, Putin had to push the elite to make a choice," Kryshtanovskaya told me. "They either had to quit their government jobs or take responsibility for hiding their illegitimate incomes." 

Putin’s new anti-corruption law tries to draw a bright red line between two kinds of officials. On one side are the "exemplary patriots" (as the current parlance has it), who plan to earn and spend their money within the borders of Russia. On the other are the despicable non-patriots, who harbor nefarious secret plans to sneak off one day to a comfortable home in a foreign country with good roads, high-quality medical services, and a nicer climate. One of the patriots, Duma Deputy Mikhail Degtyarev, said that "the country will be sealed for Russian officials completely by the end of this year." The 31-year-old Degtyarev confirmed that dozens of Russian officials, including Igor Shuvalov, the deputy chairman of the Russian government, will have to say goodbye to their foreign assets and their multi-million dollar properties abroad — "or they will have to use their smarts and re-register their property," as he put it. 

Ordinary Russians, who have to pay bribes every time they need surgery or apply for admission to kindergarten for their children, have a hard time believing that any law will stop state bureaucrats from stealing money. After all, hasn’t bribery been illegal all along? Yet the public has welcomed the first victims of the campaign from within the ranks of the ruling party. One of United Russia’s leaders, deputy Vladimir Pekhtin, quit the chairmanship of the Duma earlier this month after opposition leader and anti-corruption blogger Alexei Navalny revealed that Pekhtin owned $2 million worth of real estate in Miami, Florida. Navalny, who has made himself a figure of considerable popularity with his online crusade against graft, has promised to identify hundreds of other officials who own property overseas. But his contributions to the fight against corruption haven’t exactly made him a darling of the government: He is a suspect in one criminal case and under investigation in another (though so far there is no evidence of his guilt in any of them). Stories like his, indeed, suggest that Russia’s struggle against sleaze remains an uphill climb.