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Russia: Gold Sales Benefit Kremlin Officials

Moscow, 29 September 1997 (RFE/RL) -- The latest report from Russia's independent state auditor reveals the Kremlin has been busier selling gold abroad than it has told parliament. One reason for the sales has also been revealed: Kremlin officials have had urgent needs for holiday homes, German limousines, dishes, and potted plants for their offices.

According to details released by the Accounting Chamber -- Russia's equivalent of the General Accounting Office in Washington -- Russian gold sales in 1995 and 1996 included sales of approximately 800,000 million rubles ($160 million) that were not covered by legislative authority.

The Chamber has also reported to the Duma that the state agency for trading precious metals, Almazjuvelirexport (Almaz), and the former State Committee for Precious Metals and Gemstones (Komdragmet), unlawfully retained $99.2 million in commissions on foreign sales. The money should have been returned to the federal treasury, the Chamber's report claims.

According to this audit, one-third of the cash generated by unauthorized sales of state gold was spent on perquisites for high officials. Among the items of government spending from gold sales uncovered in the Account Chamber report were: Imported tableware and porcelain services for the Kremlin and White House ($4 million). Purchase of homes for senior government officials ($2 million). Reconstruction of the Kremlin, Bolshoi Theater, the Duma dacha at the Moscow lakeside resort of Serebryany Bor, and a presidential dacha outside Moscow ($30 million). Decoration of the Kremlin's winter garden ($550,000). In addition, there was renovation of the presidential aircraft ($2 million), purchase of two VIP cars from Germany ($1 million), and computer and communication technologies for the Ministry of Foreign Affairs ($2 million).

The Accounting Chamber audit also calls into question official claims about the size and movement of state gold reserves, apart from the so-called monetary reserves which are held by Russia's Central Bank, and their level regularly monitored by the International Monetary Fund.

According to the government version, in January 1995 the state gold reserve amounted to 300 tons. However, according to the latest audited figures, actual reserves at the time amounted to 78.4 tons of gold, including 14 tons of ingots. In 1994, it is now reported, 140 tons of gold ingots were sold out of state stocks, while another 120 tons were swapped for short-term loans from Swiss banks. By January 1, 1997, the state precious metals fund (Gokhran) held 84 tons of gold, including 75 tons delivered from the mines, and 9 tons smelted from the other gold objects.

In response to criticism of laxness in the government's gold stocking and trading policies, President Boris Yeltsin signed a decree in March this year, ordering: "The money received for the sales of gold is to be used to finance the spending of the federal budget, first of all; to pay the gold-extracting organizations; and to pay for the precious metals and gemstones for the State fund of precious metals and gemstones.

Although not yet accounted for by the auditors, government spending this year has required an increase in planned gold sales. It is now reported -- without official confirmation -- that 45 tons of gold will be sold abroad by the end of 1997. Deputy Minister of Finance, Alexei Kudrin, has told a Moscow newspaper that 31 tons of gold have already been sold.

This compares with the government's original gold sale plan for the year, authorized in Yeltsin's March decree. That document authorized the sale of 31.2 tons of gold to the Bank for Foreign Trade to be sold for export. Another 54.8 tons of gold was ordered to the Central Bank for adding to monetary reserves.