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$300 Billion And Rising

With markets tanking around the world and commodities prices in free fall, it certainly would be nice to find a sure thing to invest in. That's why it is a bit of shame that you can't place bets on Russia's burgeoning kleptocracy: it is one market that just keeps on booming.

Last June the Investigative Committee of the Prosecutor-General's Office made headlines at home and abroad with its estimate that official corruption in Russia amounts to about one-third of annual budget expenditures. For 2008, that meant about $120 billion was disappearing each year.

Yesterday, Kirill Kabanov, head of the National Anticorruption Committee (NAK, a project of the independent INDEM think tank), estimated that the scope of corruption now is between $240 billion and $300 billion. In other words, if you'd invested $100 in Russia's corruption market eight months ago, you'd have at least $200 now!

At the time of last summer's dire corruption report, "Forbes" magazine spoke to a Russia analyst at Control Risks who said the main causes of corruption in Russia are the size and influence of the bureaucracy, the compromised court system ("nontransparent and closely linked to the executive"), and the lack of independent media. Independent experts agree: INDEM Director Georgy Satarov has said the problem is "the lack of control over the bureaucracy," which stems from "a lack of political competition, the lack of [a political] opposition, the lack of a free press." Former Deputy Prime Minister Boris Nemtsov -- whose latest damning condemnation of Putinism can be found in English here, courtesy of La Russophobe -- said in a 2007 interview that the solution to corruption involves "ending censorship" and "the restoration of political competition."

President Dmitry Medvedev, of course, has made occasional condemnations of corruption a regular feature of his presidency and has even introduced a few purportedly anticorruption measures in the Duma. Last week he even said the fight against corruption has become even more important as the global economic crisis bears down on Russia. He admits that corruption is a "systemic problem," but seems to be stuck on showcase measures.

At the latest meeting of his presidential anticorruption council, Medvedev emphasized the need for state officials to issue assets declarations. He went so far as to say that he, as president, will issue an annual statement, which he argued "will stimulate state officials to themselves observe the applicable laws." Satarov wasn't impressed by this initiative: "Of course, in this whole action there is an element of public relations. It will be played up in the press," he said. "But if you look at the law, at the articles that regulate the presentation of these declarations, then you see that, unlike in other countries, in our law it is written that this information is not open [to the public]."

Despite the apparent fecklessness of his anticorruption approach, Medvedev is right that combating corruption is becoming increasingly important as the government tries to cope with the economic crisis. The government can hardly hope to mitigate the crisis if one-third or more of its anticrisis money is being siphoned right off the top.

"In the current conditions of economic crisis, the scale of corruption will only grow," NAK's Kabanov said yesterday, "since the amount of budgetary money devoted to anticrisis programs is growing, but there is not yet an effective system of controlling how it is spent."

-- Robert Coalson

About This Blog

The Power Vertical
The Power Vertical

The Power Vertical is a blog written especially for Russia wonks and obsessive Kremlin watchers by Brian Whitmore. It offers Brian's personal take on emerging and developing trends in Russian politics, shining a spotlight on the high-stakes power struggles, machinations, and clashing interests that shape Kremlin policy today. Check out The Power Vertical Facebook page or


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