Leaked U.S. diplomatic document portrays Moscow as haven of corruption

By Will Englund
Washington Post Foreign Service
Wednesday, December 1, 2010; 8:59 PM

MOSCOW - Control of the city is in the hands of a "kleptocracy," and it passes on a portion of the bribes and protection money it collects all the way to the Kremlin, the U.S. Embassy in Russia reported in a memo in February.

Both the police and the Federal Security Service run huge protection rackets that help account for the high cost of living in Moscow, it said. They collect money not only from legitimate businesses but from organized criminal groups as well. Each layer of the bureaucracy - what Prime Minister Vladimir Putin has termed the "vertical of authority" - takes its cut as the money moves up the ladder.

The memo, which was sent to Washington under the name of Ambassador John Beyrle, was posted by WikiLeaks on its Web site Wednesday. The memo is based on sources whose names have been redacted. It was written while Yuri Luzhkov was still Moscow's mayor, and it blames him for much of the corruption. He was fired in October by President Dmitry Medvedev, but there has been little evidence of a cleanup since then.

Luzhkov and his wife, Yelena Baturina, who owns a prominent construction firm, have consistently denied corruption accusations over the years, and he has won several libel suits over such accusations. In September he told a Russian television station, when asked about a documentary suggesting he was corrupt: "It is mad, it is filth, it is a mess."

Russians overwhelmingly believe that theirs is a corrupt society, polls have shown. But it is unusual to find the particulars spelled out as they were in the embassy's report, and it is unheard of that it should be diplomats from a foreign country doing so.

"The Moscow city government's direct links to criminality have led some to call it 'dysfunctional,' and to assert that the government operates more as a kleptocracy than a government," the memo says. "Criminal elements enjoy a 'krysha' (a term from the criminal/mafia world literally meaning 'roof' or protection) that runs through the police, the Federal Security Service (FSB), Ministry of Internal Affairs (MVD), and the prosecutor's office, as well as throughout the Moscow city government bureaucracy.

"Analysts identify a three-tiered structure in Moscow's criminal world. Luzhkov is at the top. The FSB, MVD and militia are at the second level. Finally, ordinary criminals and corrupt inspectors are at the lowest level. This is an inefficient system in which criminal groups fill a void in some areas because the city is not providing some services."

The report says that the FSB rakes in money from the biggest firms, and that the police target small businesses.

One source, it said, "explained that Moscow business owners understand that it is best to get protection from the MVD and FSB (rather than organized crime groups) since they not only have more guns, resources, and power than criminal groups, but they are also protected by the law. For this reason, protection from criminal gangs is no longer so high in demand."

The memo notes that, while the collection of money is comprehensive, the protection itself can be spotty; even those who pay are sometimes subject to arrest. Those who do not pay quickly find their businesses shut down on one pretext or another.

Medvedev has talked several times about fighting corruption but has admitted that he has made little headway. The embassy memo relays reports of men taking suitcases, presumably stuffed with cash, into the Kremlin itself.

"In his fight against corruption, Medvedev has to rely on bureaucrats," Georgy Satarov, director of the Moscow think tank Indem, said in a recent interview. "But he is a part of this bureaucracy. He is not part of a political class, because a political class doesn't exist in Russia anymore."

Without politics, without an opposition, without a separation of powers, he said, corruption is inevitable.

Nationwide, Indem estimates that corruption costs Russia more than $300 billion a year. The country was ranked 154th in a recent survey on global perceptions of corruption by the nongovernmental organization Transparency International (countries are ranked from least to most corrupt).

The disclosure of the U.S. Embassy memo, which didn't occur until late evening Moscow time, is sure to stir displeasure within the Russian government, although to the extent that Luzhkov can be blamed for Moscow's failings, it might be an opportunity for the Kremlin to argue that it is solving the problem.

Interviewed for CNN by Larry King, Putin suggested that the WikiLeaks documents may be fabrications and reacted angrily to a disclosure that U.S. diplomats had called him Batman to Medvedev's Robin.

"The truth of the matter is, this is about our interaction, which is an important factor of the domestic policies in this country," he said. "But to be honest with you, we didn't suspect that this would be done with such arrogance, with such a push and, you know, being so unethically done."

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