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Putin wants all companies to be tested for corruption, starts with energy industry

December 20, 2011, 16:18 UTC+3 Alexandrova Lyudmila

Russian Prime Minister Vladimir Putin, a 2012 presidential candidate, has actively joined the struggle against corruption to have started with abuse in the energy industry. All public companies will be tested for corruption, including the presence of a conflict of interest. It is nakedly clear that the theme of corruption, which, as opinion polls indicate, is one of the most acute for Russians, will feature prominently on the agenda of his election campaign. So far the struggle against corruption has been a priority of President Dmitry Medvedev’s policy.

On Monday, Putin cracked down on energy industry officials at a meeting of the government commission for the development of electric power industry at the Sayano-Shushenskaya Hydro. In his opinion, the main problems of state-owned companies in the industry are off-shore schemes and affiliation of top managers with commercial structures, involved in the chain of payments for electricity and with contractors. “If we really wish to have a normal investment climate in the country, we should no longer tolerate the possibility of off-shore schemes, in the first place, those in the affiliated structures,” Putin said.

He claimed that some chiefs of Russia’s largest energy companies were responsible for money laundering. The Economic Development Ministry, the industrial ministries and state-run companies were given two months to conduct probes into the existence of connections with off-shore funds and organizations affiliated with top managers.

Putin said he had found that in the public companies one in two top managers controlled affiliated structures, often having business relations with state-run energy companies. He demanded to “make personnel decisions as soon as possible” and to plug law enforcement agencies in this work.

The prime minister also proposed several remedies, such as withdrawal of assets from off-shore funds, disclosure of information about the incomes of top managers and their families and the possibility of involving law enforcement agencies into the solution of money laundering problems. Putin suggested beginning the elimination of “grey schemes” within the energy sector companies (earlier, a probe by the Energy Ministry found that the management of many companies used their relatives to establish a number of firms to control the energy of whole regions). “Of the 352 persons holding senior positions in the energy complex 169 – one in two – proved to have affiliation with 385 commercial organizations, apart from those where they have full-time jobs,” Putin said, adding that such a situation existed in the whole of the country.

For instance, the energy system of the North Caucasus was in control of one family – dismissed general director of the state-run inter-regional network company of the North Caucasus, Magomed Kaitov. And in West Siberia some managers of the Tyumenenergo power provider had created several companies that acted in the capacity of recipients of funds that were being invested in private businesses and spent abroad.

On the same black list is one of the heads of the holding company of the inter-regional network company and non-commercial partnership Energostroi, Alexei Sannikov, who together with his relatives established a family-run business to control electric engineering work and transmit electric power (both companies are affiliated at least with two off-shore organizations).

As the daily Kommersant says, the most high-ranking manager to have come under fire from the prime minister was the head of the non-commercial partnership Market Council (which controls the wholesale market of electric power), Dmitry Ponomaryov. Putin said the man in fact owned the Moscow Energy Exchange (which specializes in the whole resale of electric power).

Also, the prime minister had many question to ask about the state-run company RusHydro, which “for several years has extended multi-billion loans and purchased zero interest promissory notes of some off-shore company in Cyprus.”

The prime minister suggested spreading the probes into affiliate schemes to other branches of the economy. Putin demanded he should have before him in two months from now similar information regarding Gazprom, Transneft, the Russian Railways Company, Sovcomflot, the VEB, the VTB, Sberbank and Rosatom. Also, Energy Minister Sergei Shmatko was asked to pool efforts with the law enforcement agencies. There where there is no direct abuse of the law, but certainly exists a conflict of interest, “personnel decisions” should be made.

Just recently, the daily Moskovsky Komsomolets published the findings of a VTSIOM survey regarding corruption. Experts have studied bribes and kickbacks in the middle of the chain between energy producers and the end consumers. Judging by the findings of sociologists, it has turned out that more than half of Russia’s firms acting as counter-agents of major energy companies resorted to illegal schemes.

Putin pointed out that the probe was initiated not by the regulators of the industry, but by the people. “The whole of Russia is complaining,” he said.

Quite a few hot questions about the struggle with corruption were put to the prime minister in last Thursday’s question-and-answer marathon on TV.

TV host Vladimir Solovyov asked Putin when the promised jailings of exposed corruption officials would begin. In reply Putin quoted the following statistics: over 4,000 cases had been opened over corruption, 300 taken to courts and dozens convicted and jailed. This is quite indicative, he said. Even governors or deputy ministers may go to prison, he said. However, he added that short-lived campaign attitudes would be impermissible. Putin believes that the solution of the problem would require a balance, a fundamental approach, and rhythmical, firm and systematic work.”

The market responded with a two-percent fall in the prices of energy companies’ shares. The companies, as the RBC Daily says, have promised that the facts the prime minster mentioned would be closely analyzed.

The deputy general director of Transparency International, Ivan Ninenko, is quoted by the daily as saying that Putin’s initiative is a good one, but it has many chances of proving “just words,” the way it happened to the much publicized rule the civil servants shall declare their spending.

The head of the National Reserve Corporation, Alexander Lebedev, said on the Kommersant FM radio station that in his opinion there were two likely scenarios.

“One is they will find nothing. Remember Medvedev two years ago issue orders to the prosecutor-general to investigate state corporations and state companies? Nothing has been found for pretty clear reasons.” The other option is all cases of abuse in the public companies that have practically been investigated will be handed over to courts. “Then we shall see what all this is about – grand stand play or real work that has begun in the Putin-3 format. If this struggle with corruption in the public sector is in earnest.”

“There is no public company without abuse,” Levedev claims.

 

MOSCOW, December 20