What’s the story behind the string of high-profile dismissals?

The Kremlin has been caught in its own trap. When the Federation Council’s membership principles were changed in 2000, that move had only one goal: to weaken the regional elite. But in solving one problem, the Kremlin has ended up with another. Senate seats have become ordinary commodities.

President Putin commented on the sequence of customs-related dismissals as follows: “This is the result of lengthy, purposeful effort by the law enforcement agencies.”

Indeed, it’s been a long time since Russia has seen such a sweeping purge. But is it really a purge? Or could it be a powerful propaganda event timed to coincide with the presidential address to parliament?

Who has been “purged”? Three generals from the Federal Security Service (FSB) and two from the Prosecutor General’s Office, plus five Interior Ministry officers – from colonels to a senior lieutenant.

In other words, a search of the law enforcement army’s millions of personnel has found only ten villains. Plus the director of the Federal Customs Service (FCS) – though he was actually replaced “due to being transferred to another post.”

Can they be serious?

All of the law enforcement agencies and special services, without exception, are corrupt from top to bottom. At the Interior Ministry’s Economic Security Directorate, where some colonels and a senior lieutenant were dismissed, you could simply go in and arrest half the staff – and most of the arrests would be justified. For some reason, however, this purge didn’t affect anyone more senior than the deputy chief of an Operations and Search Bureau.

I can assert with complete confidence that each and every customs terminal pays tribute to the security and law enforcement agencies. Up to half of all smuggling revenue goes into the pockets of those whose job it is to fight smuggling: the police, the FSB, and the prosecutors.

For two years now, we have heard assurances that the state administration reforms are doing nothing but good. When the State Customs Committee (SCC), a separate law enforcement agency, was transformed into the Federal Customs Service, a structural subdivision of the Economic Development and Trade Ministry, everyone applauded – and Economic Development Minister Herman Gref publicly promised to resign if he failed to restore order in that area.

Well, he hasn’t restored order – but he hasn’t resigned either. Politicians have short memories.

The decision was a mistake; that much was clear right from the start. For the first time in post-Soviet history, customs revenue collection started falling short of target. FCS Director Alexander Zherikhov, who started out a Communist Youth League leader in East Germany’s Soviet ex-pat community, was only rescued by the steady rise in oil prices and associated rise in customs excises – but that had nothing to do with the performance of the FCS.

Whatever one thinks of Mikhail Vanin, former SCC chairman and now ambassador in Slovenia, it has to be acknowledged that during his five years in office, his team made every effort to establish some coherent rules of the game in the customs market. For example, they came up with a not entirely legal but quite effective system whereby companies were regularly informed of payment amounts: how much they should pay to the state for each category of imports. Those figures were raise three or four times a year.

With the departure of Vanin and his right-hand man, SCC enforcement chief Boris Gutin, that system was dismantled.

Bribe amounts rose to millions of dollars. A new kind of racket became especially popular: cracking down on some particular customs terminal, then easing up – in return for money.

Some are comparing the latest purge with Operation Werewolves in Uniform, the high-profile campaign against police corruption in 2003. But those police officers were arrested, not dismissed with great fanfare. They were arrested with evidence, with millions found in bank deposit boxes – although they were all below the rank of general.

Maybe there’s something I don’t know. Maybe these dismissals will be followed by a series of arrests. Still, the track record of all previous public anti-corruption campaigns leads me to believe the contrary.

While corruption in customs has become notorious, for some reason it’s not the done thing to talk of corruption in parliament – especially the upper house. So it’s all the more surprising that at the same time as the series of dismissals in the security and law enforcement agencies, the Federation Council’s leaders have initiated the recall of four senators.

Journalists and political analysts immediately linked the two events. Actually, that was the intended effect – although a closer look reveals that the two events have practically nothing in common.

Of the four senators marked for recall, only two (Igor Ivanov and Boris Gutin) have any connection to customs. The Interior Ministry and FSB claim that Ivanov was somehow involved with smuggled goods intercepted in the Russian Far East; the head of the Far East customs department was arrested in that case. Gutin hasn’t worked in customs for two years.

The other two senators, Arkady Sarkisian and Alexander Sabadash, have no more connection to customs than they have to space exploration.

In other words, the lovely “corruption in customs” theory falls apart immediately. But let’s assume that Federation Council Speaker Sergei Mironov has decided to take advantage of the current commotion in order to get rid of a few oligarch representatives. It’s a commendable aim. But why is it only being applied to a few individuals?

Everyone can see that in recent years, the Federation Council has become something like a branch of the Russian Union of Industrialists and Entrepreneurs. Any self-respecting oligarch-owned holding company considers itself obliged to have a senator of its own.

Ten of the people on Forbes magazine’s list of Russia’s hundered richest citizens are senators. Another five can be found on a similar list compiled by Finans magazine. And that’s not an exhaustive collection.

The Kremlin has been caught in its own trap. When the Federation Council’s membership principles were changed in 2000, that move had only one goal: to weaken the regional elite. But in solving one problem, the Kremlin has ended up with another. Senate seats have become ordinary commodities. The going price these days is $3.5 million to $5 million. That’s peanuts, for the very rich. The administrative opportunities it opens up will easily recoup the costs. For one thing, a Sentate seat provides immunity from prosecution.

Some Federation Council members have criminal records or have been investigated in the past. Some are seeking to evade prosecution. Many are first-hand or second-hand accessories, whose business activities automatically put them on the same level as those liable to arrest.

Just as many complaints could be made about Duma members, of course. But at least Duma members are elected. In contrast, remote regions can designate anyone at all as their Federation Council members, or recall them at a moment’s notice with no explanation.

Who are our senators? Whose interests do they represent? To which branch of government do they belong? If it’s the legislative branch, why are they selected by the executive branch (regional leaders)?

No one wants to answer those questions – especially not Sergei Mironov. But now that regional leaders are being appointed by the president, there’s no longer any point in the given system of selecting Senate members. The system has become irrelevant – apart from its economic aspects, of course.

Some senators I’ve spoken to have expressed the opinion that those four senators are being recalled so that their seats can be sold to somebody else.

Rumor has it that claimants to the vacant seats have already come forward. Allegedly, Boris Gutin’s seat will go to Iosif Levinzon, former deputy governor of the Yamalo-Nenetsk district. If that happens, any talk of the Senate’s ranks being clean will become complete mockery, since Levinzon resigned amidst a huge scandal late last year. Media reports accused him of acting in the interests of Novatek, a major independent gas company worth over $5 billion. A series of searches took place recently at the company’s offices, and the Prosecutor General’s Office has filed protests against the sale of its shares, instigating a criminal case.

Yet this is hardly unusual for the upper house. A third of the senators, or perhaps even half, can boast of being involved in similar scandals.

Fighting corruption in the Federation Council is just as much a myth as building communism. The very principle of selecting Federation Council members is corrupt.

* * *

The four senators recommended for recall by Sergei Mironov haven’t spoken to the media at all since the scandal started. Here is the first one to break the silence: Boris Gutin, Federation Council member for the Yamalo-Nenetsk district, former deputy chairman of the State Customs Committee.

Question: Why are you being recalled?

Boris Gutin: I’m just as curious about that as you are. I learned of the recall while I was visiting my home region. No one has explained anything to me.

Question: Media reports are openly linking your recall with the series of customs-related dismissals.

Boris Gutin: I haven’t had anything to do with customs for over two years – it was impossible for me to do so. After the SCC was renamed and reassigned to the Economic Development Ministry, and the new management team took over, every effort was made to eliminate all traces of our team from the FCS. People were dismissed on the slightest suspicion of supporting Vanin.

Question: What was the reason for this treatment?

Boris Gutin: I have never raised this issue, since I considered it inappropriate to discuss my former colleagues. But now that attempts are being made to link me to them, I’ll speak my mind. In the time since our team left, most of what we achieved has been wiped out. We aimed to gradually direct customs streams into legal channels, and kept a close watch on the major players in the market – but our successors simply gave them free rein.

A free-for-all began. Revenue collection targets were not met, although import volumes did not decrease. I’ll give you just one example: last year, the number of “non-deliveries” – that’s when a truckload of cargo crosses the border, but never reaches a customs point – was close to 1,500. That kind of thing didn’t happen when our team was in charge.

Question: Is all this a consequence of your departure?

Boris Gutin: It’s a consequence of the policy pursued by the former FCS leadership team – or rather, its complete lack of a policy. And all the recent events – Zherikhov’s dismissal, the restoration of the FCS’s independent status – provide supporting evidence for what I’m saying. The state has simply been forced to revert to the previous management model.

Question: But it’s hard to dispute that customs was and is one of the most corrupt state agencies in Russia.

Boris Gutin: Undoubtedly. But the extent of corruption now is incomparably greater than it was before. The most important factor has been destroyed: coherent rules of the game.

The dismissals from both the FCS and the security and law enforcement agencies are right and proper. This should have been done long ago. But what does it have to do with me? Is it just because I used to work at the SCC? Then let’s fire everyone who had any link to that agency – Bordiuzha, Draganov. Right up to Vanin, my former boss. And let’s make a public announcement that a background in customs is equivalent to being on occupied territory during the war.

Shortly before I moved to the Federation Council, President Putin gave me an Order of Merit and promoted me to colonel-general. So I was doing a good job then, but two years later it turns out I was doing a bad job?

Question: Sergei Mironov has alleged that the senators in question failed to attend Federation Council meetings or visit their home regions.

Boris Gutin: Utter nonsense. I’ve never missed a single meeting. I’ve been actively working on Far North issues. I visit the Yamalo-Nenetsk district all the time. What’s more, the Yamalo-Nenetsk regional legislature didn’t just delegate me to the Federation Council; before that, I was elected to the legislature.

Question: So what’s the problem?

Boris Gutin: I don’t rule out the possibility that some major smugglers we pursued in the past might be trying to settle scores with me now. Think of the notorious Three Whales furniture case, for example.

Question: Has Mironov himself explained anything to you?

Boris Gutin: When he invited me to meet with him, the scandal had already broken out. That was Monday. He proposed that I should submit my resignation. No explanations were given. All Mironov said was that I am not suspected of committing any crimes.

Question: What will happen now?

Boris Gutin: I don’t want to participate in this circus. If Mironov doesn’t want to work with me, I won’t be stubborn about it. I wrote an undated resignation letter yesterday. The decisive factor for me was a request from Yuri Neelov, governor of the Yamalo-Nenetsk district.