THE KREMLIN CREATES A NEW PYRAMID OF CONTROL OVER THE DEFENSE SECTOR’S MONEY

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As is known, the High Commander-in-Chief signed decrees to appoint the key officials of federal services of the Defense Ministry on April 9. The Federal service for military-technical cooperation, which accumulates around $5 million a year, will be headed by Mikhail Dmitriyev, who previously headed the committee for military-technical cooperation. The federal state defense order service, which controls around 412 billion rubles, will be controlled by Andrei Belyaninov, who previously was general director of Rosoboronexprt. The federal special construction agency, which spends 50 to 100 billion rubles a year, will be headed by General of the Army Nikolai Abroskin, former head of the Special Construction Department.

As we see, these people will control substantial financial resources, which can be compared with the budget’s annual expenses on the national defense. This is a serious responsibility for the officials. In the meantime, it is evident that these appointments are just the beginning of a structural reform of the Defense Ministry, which will probably be transformed according to new principles. At present new principles of the development and financing of the Armed Forces lag behind the actual capabilities of military structures. For instance, Sergei Ivanov announced the idea of expanding the reserves of off-budget financing a few years ago. According to the defense minister, the Defense Ministry can earn money by selling its property and real-estate released as a result of reforms. Meanwhile, a report by the State Auditing Chamber shows that the Defense Ministry does not cope with this task yet.

The State Auditing Chamber states that the pace of the release of military property does not correspond to the pace of reforming of the Armed Forces. In particular, the Defense Ministry had 16 million hectares of land plots (around 15 hectares per serviceman) as of January 1, 2002. It should be noted that the area of land plots has increased by 200,000 hectares over the past five years. In addition, the Defense Ministry has over 200,000 buildings (around 144 million square meters; over 130 square meters per serviceman), and annual expenses on their maintenance amount to over 25 billion rubles. The State Auditing Chamber also reports that the Defense Ministry does not register land plots and military property properly. The Defense Ministry states that it needs around 65 billion rubles for arranging the necessary documents.

It seemed that the Defense Ministry must receive profit by selling its property and real estate. Meanwhile, the State Auditing Chamber states that only 156 out of 4,511 buildings offered at auctions in 2001-02 were sold (3.5%). At the same time, expenses linked with the protection and maintenance of the remaining 4,355 buildings amounted to 200 million rubles (55% of the sum received as a result of selling these 156 buildings).

Negative facts announced by the State Auditing Chamber are not surprising. Auditors announced the results of inspections in the Central military-medical department of the Defense Ministry in 2002. As is known, auditors uncovered the loss of $3.7 million caused by the failure to deliver medicines from Latvia. However, no one has been punished yet. The State Auditing Chamber checked howthe Defense Ministry spent money allocated from the budget for building housing for Russian servicemen in 2003. It turned out that many violations were committed in the department headed by General of the Army Alexander Kosovan. It was not ruled out that he would be prosecuted for these violations. However, he was dismissed from the Army without scandals, and he currently heads the Moscow building complex. The State Auditing Chamber has inspected the Defense Ministry three times in 2004.

What are the conclusions? Where are officials responsible for these violations? There are no answers to these questions. In the meantime, sources in the Defense Ministry state that the president plans to enact a decree to cut the quantity of deputies defense ministers. In particular, the chief of the Logistic Service of the Armed Forces will be dismissed. Colonel-General Anatoly Grebenyuk, Chief of the Construction and Billeting Department, Colonel-General Alexei Moskovsky, Chief of the Armament Department, Lyubov KUdelina, Chief of the Financial-Economic Department, and Colonel-General Nikolai Pankov, Chief of the Central Personnel Department, will lose the status of deputy defense minister.

It is intended that the main off-budget reserves will be controlled by the Defense Ministry – it will spend the money on the defense order, social programs and combat training. These reserves will be controlled by the federal services for military-technical cooperation and state defense order, and the special construction agency. At the same time, the activities of the new structures is a field of new inspections by the State Auditing Chamber. It should be noted that the Defense Ministry has not yet passed an efficient program of realizing the Chamber’s conclusions. Is it possible that off-budget reserves will be misused, and no one will be responsible for this?

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