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September 21st, 2016

Sincerely yours at your expense

Dmitry Medvedev / Photo by nnm.me

Dmitry Medvedev / Photo by nnm.me

Russian officials’ increasingly frequent statements about the lack of funds in the country’s budget to cover even the bare necessities of life make one almost believe their sincerity. It is not that officials themselves experience money problems. The most recent examples with Medvedev’s 35-billion-ruble country house or 8 billion rubles in cash discovered in the possession of the temporary acting head of Russia’s anti-corruption agency, colonel Zakharchenko, do not leave any doubts regarding  Russian officials’ success in siphoning off the national wealth. However, besides a few million of ministers, lawmakers, policemen and prison officers who are comfortably settled in life, there are some 140 million citizens in Russia, whose living standards directly depend on budget funds left over after officials’ rent-seeking activities.

In late 2015 and early 2016, the country’s budget was adopted with a deficit and later subject to sequestration. According to the most recent official figures, in the first half of 2016, Russia’s budget deficit has reached 1.52 trillion rubles. Over this period, Russian tax and customs services have collected around 5.24 trillion rubles, and, all other revenues included, the country’s gross national income reached the lower-than-expected 5.87 trillion rubles, since the 2016 draft budget envisaged 13.74 trillion rubles in revenues. It is obvious that at the end of the year, this figure will prove to be unattainable, as Medvedev sincerely admits.

The government traditionally rejects the option of increasing taxes and thus suggests balancing the budget for the next three years by cutting spending by 3.5 trillion rubles. >> Read more

July 26th, 2016

Hydroelectric Power in Service of Cooperative Ozero

Bratsk Hydroelectric Power Station / Photo by evrosib.ru

Bratsk Hydroelectric Power Station / Photo by evrosib.ru

Hydroelectric power plants – gigantic dams across the country’s biggest rivers that supply cheap energy to entire Russian regions and their extremely energy-intensive industrial enterprises – used to be one of the key symbols of the Soviet Union’s industrial might. Up to this day, Russia’s hydroelectric power plants have been cumulatively providing around 20 percent of the country’s energy.

Out of more than 100 major hydroelectric power plants, with the total number of them in Russia reaching almost 200, most are owned by RusHydro PJSC that was founded as a public company by chief architect of the Russian privatization, Anatoli Chubais. However, the state still owns 67 percent of the company’s shares.  Another three major hydroelectric power plants belong to En+ Group controlled by Oleg Deripaska who is also president of the world’s second largest aluminum company Rusal. Deripaska’s interest toward hydroelectric power industry is not surprising since aluminum production is a highly energy-consuming process, and Rusal uses most of the electricity generated by Deripaska’s hydroelectric plants. Deripaska’s Russian assets can be considered private only nominally. A classic Russian oligarch of the 1990s, Deripaska is well-known for a statement he made in his 2007 interview to the Financial Times: “If the state says we need to give it up, we’ll give it up. I don’t separate myself from the state. I have no other interests.” Since in recent years global demand for aluminum has been steadily decreasing, Deripaska has no plans to extend his energy assets. As to the situation with RusHydro, its future is less clear. What is obvious that it shows much more signs of corruption and lack of professionalism. >> Read more

July 13th, 2016

The Russian Orthodox Church during the Tsar (President) Putin’s era

Photo by asianews.it

Photo by asianews.it

The newly established authoritarian regime in Russia has chosen to make the promotion of spirituality that is being served up as an intrinsic part of Russian culture and self-identification of the Russian nation as one of its priorities. It is obvious however that the regime’s real purpose consists in using this simple method to force its nationalist and patriotic rhetoric onto the population by glorifying the county’s past successes and inspiring pride in the “centuries-long history of the Russian empire” which in its turn allows the regime to draw the population’s attention away from the authorities’ lack of competence in governing the country and to cover up the most flagrant corruption by top Russian officials.

Responsible for spirituality, the Russian Orthodox Church (ROC) is formally separated from state institutions that, according to the law, are supposed to be secular by nature. However, ROC enjoys a number of economic advantages that have been granted to the Church during the Putin’s era. Thus, for example, it is impossible to use standards methods to calculate its “market capitalization” because legally, ROC is divided into more than 30,000 different organizations and since the mid-1990s it has not been disclosing either its gross budget or expenses. According to certain estimates, ROC’s income possibly reaches 5.6 billion rubles (or around $87 million) a year, without including federal funds that are being allocated annually to ROC and structures close to it which amount to another 3.5 billion rubles (or about $54 million). This does not seem such a large sum for a Church with more than 50 million faithful, does it?

However, this is only a part of the Church’s budget that different sources or ROC representatives themselves disclose from time to time in their statements. >> Read more

July 6th, 2016

A Lesson in Political Science: On Merging Black Cashboxes into the Kremlin’s Common Cash Funds

Nikita Belykh / Photo by TASS/Getty

Nikita Belykh / Photo by TASS/Getty

In political science, the term “democratic transition” is used to describe a transition period in the history of a country that has recently gotten rid of a totalitarian regime and is “in transit” toward the formation of democratic institutions, that is a regime that is neither totalitarian nor yet democratic. There probably should be another term to describe the reverse process from half-established democracy to a dictatorship. This is the totalitarian transition we are witnessing in today’s Russia, and the authorities have not yet tightened screws enough to prevent the information about different aspects of this process from reaching the population. Thus, the much-publicized arrest of former leader of the Union of Right Forces opposition political party and Kirov Region governor Nikita Belykh brought to light a sensitive topic of “black cashboxes” controlled by government structures.

What exactly is a “black cashbox” of a Russian governor? First, it is worth noting that according to official estimates, 40 percent of monetary assets in Russia are circulating in the shadow sector of the economy. Unofficially, this number is much higher. According to Russia’s Central Bank, in 2015, the volume of cash in open circulation reached 400 billion rubles. It has to be said, however, that in 2014, it amounted to 1.8 trillion rubles. Russia is a recognized leader in illicit financial flows. A report released by Global Financial Integrity (GFI) examines Russia alongside India, Brazil, Mexico and Philippines. More than 40 percent >> Read more

June 16th, 2016

Putin’s Regime Thumbs its Nose

Russian Prime Minister Dmitri Medvedev during a visit to Crimea. Photo by A. Pupysheva / kafanews.ru

Russian Prime Minister Dmitri Medvedev during a visit to Crimea. Photo by A. Pupysheva / kafanews.com

On May 23, during a visit to Crimea, Russian Prime Minister Dmitri Medvedev made a fool of himself with a cynical and provocative phrase that quickly became one of the most popular hits on Russian Internet. Answering the question from an elderly lady about why pensions are not being raised, Medvedev, without so much as a thought, retorted: “There’s simply no money. If we find the money, we will raise pensions. You hold on here, I wish you all the best, good spirits and good health.” But the money is lacking not only for pensioners: all those who had for years depended on the needle of “Putinomics” are experiencing problems.

Russia’s largest car manufacturer, AvtoVAZ, is once again finding itself in a difficult situation: beginning on June 6, its workers were transferred from a four-day to a three-day week; layoffs of between 5,000 and 8,000 people are expected. According to AvtoVAZ’s report, the company’s debt arrears of more than 45 days after the first quarter of 2016 has reached 25.3 billion rubles—3.8 times greater than during the same period of 2015. The company’s total debt to suppliers and contractors during the same period amounted to 66.5 billion rubles (including arrears of 25.3 billion.) After the first quarter of 2016, the company’s net loss has increased 48 times, reaching 8.6 billion rubles. To cover its losses, AvtoVAZ will ask its French partner, Renault-Nissan, for a loan of 20 billion rubles. If it is unable to pay that loan back, AvtoVAZ will have to pay with its shares and assets. >> Read more

March 23rd, 2016

Doctors of Science in Corruption

Picture by comm-art.ru

“Education reform” / Picture by comm-art.ru

The population’s educational attainment is commonly considered as a key indicator of the country’s investment attractiveness. When in the early 1990s, Russia opened its domestic market for foreign investment, its population’s universal literacy and a considerably higher percentage of college-educated specialists  than in other BRICS countries, that is in China, India, Brazil and South Africa, was seen as an important competitive advantage.

Unfortunately, Putin came to power at the exact moment when the country’s protective layer of quality education, that had been built over the previous years and was worn down considerably by a drastic transition to a market economy, demanded government attention financing and reform.  Although prior to 2000 corruption had already blossomed in Russian universities, the country’s secondary and higher education system has been completely destroyed over the following 16 years. It was replaced by a new system, built under the national leader’s supervision, in which graduates’ actual level of knowledge does not matter since it is much more important for government employees to know how to please their superiors and how to take and give bribes.

Today, corruption calls the shots in science and education. Thus, according to the Dissernet project, plagiarism in dissertations of Russian officials has become a mass phenomenon affecting all three branches of power: extensive copying of sections of text from a source without quotation marks or proper citation has been found in dissertations belonging to >> Read more

March 2nd, 2016

Deplorable State of Russia’s Road Network

February 9th, 2016

CHECHNYA, The One-Man Stand-Up Thriller

December 1st, 2015

Long-Haul Truckers vs. Rotenberg Family Business

Categories: Corruption, Economics Tags:
November 11th, 2015

The Kremlin’s Kogan(ate)

Categories: Corruption, Investment Tags: