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East: In Russia, Former Soviet Bloc, The Ruling Clique Heads Corruption

  • Askold Krushelnycky



Our series on the widespread corruption in post-communist societies today examines the relation between political power and high-level government fraud. RFE/RL correspondent Askold Krushelnycky reports that perhaps the most insidious form of corruption in transition countries occurs when those who govern are themselves deeply involved in corruption.

Prague, 5 September 2000 (RFE/RL) -- The states which emerged from the former Soviet bloc have shed their Communist characters in varying degrees. In each country's case, its communist -- and pre-communist -- history has done much to determine how quickly it is able to implement true democratic and free-market reforms. Those with a shorter experience of Communist rule are doing better, especially when dealing with the problem of corruption.

Asked by our correspondent how he would explain the differences between the former republics of the Soviet Union and the former Soviet satellite states, one-time U.S. Ambassador to Hungary Mark Palmer said:

"Why is it different? Well, I think it's partly that these countries have had different stages of development. The Czechs, of course, before the Second World War -- the Bohemians -- had the highest per capita income in the world, higher even than Germany or the United States."

Palmer, who was ambassador to Budapest in the 1980s, said post-communist nations that had previous acquaintance with democracy and a market economy were finding it easier to rebuild those institutions.

"So, there was a different tradition, and it was easier to restore in countries like the Czech Republic, Hungary, Poland, Estonia, Slovenia. It was easier to get back to civil society somewhat more quickly than for Ukraine and Russia, which didn't have large middle classes before and didn't have established legal and political systems."

Palmer said that, although bureaucratic corruption existed to different degrees in every post-Communist country, the level of corruption involving the top political strata varied.

"If you look at Ukraine and Russia, there is more evidence of it (corruption) going to the ministerial and prime ministerial level than in places like Hungary and the Czech Republic and Poland." In most of the former Soviet republics, with the exception of the Baltic states, there is no history of deeply rooted democratic institutions. In Belarus and the Central Asian states, parliaments are largely sycophantic or toothless bodies with little or no power. In Russia and Ukraine, many seek to become deputies because of the parliamentary immunity it affords them from prosecution for questionable business dealings.

Some of these corrupt parliamentarians have enriched themselves by selling their votes and loyalty to the highest bidder. Former Russian Interior Minister Anatoly Kulikov said that, after last December's parliamentary elections, deputies were offered $50,000 plus $5,000 per month "salary" as a bribe to join other parties.

A former long-time Russian deputy from the democratic Yabloko Party, Viktor Gitin, described to RFERL how he was offered a $500,000 bribe in 1998 by associates of then Deputy Finance Minister [and now Prime Minister] Mikhail Kasyanov. Gitin, who was then a member of the State Duma's powerful budget and finance committee, said the person offering the bribe wanted Gitin's support over a critical decision involving thousands of millions of dollars.

"It's very easy to do. It's not that difficult to get into the Duma. It's always possible to arrange for a deputy or for a deputy's aide to write out a pass. So I was in my office in the Duma when a man came to see me, introduced himself -- saying that he had been working with Mikhail Mikhailovitch [Kasyanov] for a long time, not at the ministry, but that they had business affairs together -- and explained that what I was doing really upset their affairs. He didn't know how I would react. He offered to work out this problem and wrote down a number on a piece of paper, it's not the kind of thing you say out loud -- walls can have ears. So he wrote down the sum. And he said, "This is the price of the problem."

Gitin said he refused the offer but, out of fear of what might happen, had to appear to agree not to obstruct the scheme.

"There's only one way out of this situation. I said thank you for the tempting offer, I said that I don't want to meddle in all of these affairs, and that I'm stepping back. That is, that I don't need the money but wouldn't meddle anymore in these affairs. But you can say one thing and do something completely different. There are ways of not openly but covertly hampering processes. In this situation it was necessary that I act not alone but with the help of my [Duma] colleagues to -- let's say, impede -- the credit. And they helped me, and that credit was not handed out."

Gitlin's allegations of widespread corruption in the Russian parliament have not been independently confirmed. Nor have legal proceedings been initiated against Kasyanov or his associates, or against any Duma deputy suspected of taking bribes.

While Russia and Ukraine say they have thoroughly democratic parliaments, many Central Asian leaders encourage the belief that they are the source of all power. Last month, for example, President Saparmurat Niyazov of Turkmenistan, who calls himself Turkmenbashi -- or Father of all Turkmen -- announced that the mayor of the capital, Ashgabat, and eight other senior officials, would not get their pay that month because they had not fulfilled their duties properly.

The decisions of this new type of oriental despots go unchallenged and, particularly in the oil-rich states, the potential for corrupt enrichment is enormous. In Kazakhstan, President Nursultan Nazarbaev recently (August) launched an anti-corruption drive. He publicly named local companies involved in oil, metals and banking, which he accused of exporting goods to their own foreign accounts at deflated prices in order to cheat the country of at least $1 billion in taxes.

But Nazarbaev's critics asked why it has taken so long for the Kazakh strongman, who has led his country since independence, to recognize that all is not right. One Kazakh political analyst said that everyone in the ruling clique was linked with what he called "financial-industrial groups." Opposition politician Amirzhan Kosanov suggested that the true reason for the Nazarbaev's campaign was that some of his friends want to redistribute ownership of the most lucrative companies to get a bigger share for themselves.

While living standards for ordinary Kazakhs have been plunging, the country's elite has benefited from thousands of millions of dollars invested by foreign firms, including major oil companies. The foreign companies are seeking a share of profits when Kazakhstan's huge oil production potential is finally realized.

Swiss authorities, recently joined by their U.S. counterparts, are now investigating whether payments of tens of millions of dollars to Nazarbayev and close associates constituted corrupt payments for favors. But Nazarbaev is aided by the fact that the clan system in his country -- and other Central Asian states -- is so deeply entrenched that the kind of nepotism and favoritism regarded as corrupt by Westerners is often viewed as a natural fact of life by local people.

Ukraine also figures high on most lists of the world's most corrupt countries and its inhabitants, according to opinion polls, perceive their country and its government as riddled with corruption. Power in Ukraine, as in Central Asia and Russia, is concentrated in the hands of a relatively small group of people -- mostly former high-ranking Communist apparatchiks, with a strong element as well of former KGB members. Their permission is crucial to operating businesses, thus providing countless opportunities for corrupt abuse of power.

There is much circumstantial evidence -- but no firm proof -- suggesting corruption goes all the way to the top in Ukraine. Some of President Leonid Kuchma's closest associates have been implicated in massive corruption schemes.

The most lucrative area for corruption in Ukraine has been in the energy sector where natural gas -- mainly imported from Russia -- and sometimes oil has been siphoned off and sold privately and secretly. Those in charge of the energy sector are politicians or businessmen with powerful government connections.

Earlier this year, the then chief of the majority state-owned Neftegaz oil and gas company, Ihor Bakai, was forced to resign after a welter of accusations and evidence -- including evidence turned up by an RFE/RL investigation-- about his corrupt dealings. RFE/RL possesses documents showing bank transfers of millions of dollars by Bakai to off-shore accounts and two purchases of property he made -- each worth about $6 million -- in the names of relatives in the U.S. states of Florida and Pennsylvania. When Bakai resigned, President Kuchma defended him and only reluctantly let him go.

Another close Kuchma associate is his former prime minister, Pavlo Lazarenko, who is now in an U.S. jail facing charges of illegally laundering $114 million. He has already been convicted on money laundering charges in Switzerland where investigators believed he was involved in illegal movements of $880 million looted from the Ukrainian economy.

Lazarenko, speaking through his lawyer, has said that Kuchma was aware of all the money movements and benefited from them himself. Kuchma has denied the accusation.

Last month (Aug 18), the state prosecutor arrested two senior members of Ukraine's country's powerful United Energy Systems of Ukraine company on corruption charges. One of those arrested is the husband of Deputy Prime Minister Yulia Tymoshenko, who has been getting in the way of some of Kuchma's closest allies. Allegedly, they profit enormously from the notoriously corrupt energy-sector businesses that have brought Ukraine to the brink of bankruptcy.

RFE/RL's Ukrainian Service Director Roman Kupchinsky believes that the arrest of Tymoshenko's husband is the beginning of measures to discredit her and the country's reformist and popular Prime Minister Viktor Yuschenko, who has shown a low tolerance for official corruption. Kupchinsky says: "Kuchma didn't just discover the extent of corruption in the energy sector -- he's known about it for years. It was simply convenient to raise it at this time."

Kupchinsky also notes that in Ukraine and many other post-communist countries, the political elites -- although corrupt themselves -- use the threat of prosecution for corruption as a weapon to silence former political allies turned critics. He calls this a variation on the old KGB method of gathering "kompromat" -- that is, compromising material on potential opponents -- to be used to blackmail them into compliance at an appropriate moment.

In the next part in our series, we will look at the effects high-level corruption has on countries ostensibly seeking to implement democratic and free-market reforms.

(RFE/RL's Sophie Lambroschini contributed to this report)
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