Jamestown Foundation
www.jamestown.org
Eurasia Daily Monitor
Volume 5, Number 135
July 16, 2008
DMITRY MEDVEDEV’S ECONOMIC POLICY: A STUDY IN CONTRADICTIONS
By Jonas Bernstein
President Dmitry Medvedev has stepped up the fight against corruption and for judicial reform, at least verbally, underscoring the need to clean up Russia’s justice system and announcing that a national anti-corruption plan will soon be signed into law. Yet recent decisions by Medvedev seemingly increase the state’s role in the economy and thus work at cross purposes with his anti-corruption drive and his stated goals of de-bureaucratizing and liberalizing the Russian economy.
In a meeting with top Russian justices on July 15, Medvedev called corruption a “social evil” that existing legislation had failed to eradicate. “Corruption as a social evil is always dangerous,” Medvedev said. “As applied to the justice system, it is exceptionally dangerous … It seems that current legislation should reliably protect it [judicial independence], but pressure [and] influence are exerted, administrative resources are employed and direct bribery is often used.” He called for various remedies, including a law that would compensate people whose right to a speedy trial had been violated or who suffered because a court decision was not enforced. Medvedev acknowledged that many Russians seeking justice turned to the European Court of Human Rights, given their lack of trust in the country’s legal system (AP, July 15; Moskovsky komsomolets, July 16). The Center for Political Technologies, a Moscow-based think tank, reported last month that Russians had filed about 46,000 complaints with the Strasbourg court since 1998, accounting for one-fifth of the court’s cases (AP, June 24).
During a meeting on July 13 with the leaders of the State Duma’s four political parties, Medvedev said a national plan to combat corruption was already prepared, with only details left to be finalized. “I will sign it in the near future,” he said. “I would like us to begin active work to implement the plan already at the beginning of the [Duma’s] autumn session. I hope we will be able to do everything by the end of this year, and then we could come into the new year with up-to-date, high-quality legislation for counteracting corruption.”
Meanwhile, a study by the Audit Chamber, Russia’s federal budgetary watchdog agency, gave a hint of just how formidable the challenge of corruption is and, perhaps more importantly, how anti-corruption legislation can have unintended consequences. The Audit Chamber conducted a detailed study of the existing system of state procurement and found it to be ineffective, in a crisis, and mired in corruption. Audit Chamber head Sergei Stepashin said that the law on state procurement, which went into effect in 2006, was one of the most corrupt laws in the country and that it created an over-bureaucratized system that should be changed as soon as possible (RIA-Novosti, July 15).
Ironically, the law on state procurement mandated open competition and auctions for state purchases and was seen by its authors in the Economic Development and Trade Ministry as a crucial anti-corruption measure. It turned out, however, to have the opposite effect, at least according to the Audit Chamber’s findings. Other agencies share the Audit Chamber’s view of the law. According to Mikhail Yevraev, the head of the Federal Antimonopoly Service’s Department for State Procurement Supervision, kickbacks from state purchases can amount to as much as 50 percent of the cost of the purchase (Gazeta, July 16).
Yet in the midst of Medvedev’s anti-corruption campaign and push to de-bureaucratize Russia’s economy--he has, for example, begun replacing state officials on the boards of major state-owned companies with independent directors--the new Russian president made a decision that would appear to move in the opposite direction. In a presidential decree signed on July 10 and announced on July 14, Medvedev approved the transfer of the state’s assets in 426 companies to Russian Technologies, the giant state corporation that was formed on the basis of the state arms trader Rosoboronexport and already controls titanium maker VSMPO-AVISMA and automobile manufacturer AvtoVAZ (Reuters, July 14; Moscow Times, July 15). Russian Technologies is headed by Sergei Chemezov, who served with Vladimir Putin, the former Russian president and current prime minister, in the KGB in Dresden, East Germany, in the 1980s.
Commenting on Medvedev’s decree handing over state assets to Russian Technologies, Mikhail Fishman and Konstantin Gaaze wrote in the Russian edition of Newsweek: “Now Medvedev finds himself in an embarrassing situation. He signs a controversial decree that violates, in the opinion of experts, his own statements about liberalizing the economy.” Fishman and Gaaze quoted experts as saying that while Medvedev’s campaign to replace officials with independent directors on the boards of directors of state companies has “symbolic meaning,” what is needed in practice is “to lower barriers to small businesses and limit the role of state corporations in competitive economic spheres.” Medvedev’s decree moves things in the opposite direction.
Fishman and Gaaze also noted that in signing the decree granting state assets to Russian Technologies, Medvedev has greatly strengthened the position of Chemezov, who, as they wrote, is a key member of the group of siloviki hardliners who continue to surround Vladimir Putin. It remains to be seen whether the continued influence of the siloviki is compatible with Medvedev’s stated goals of fighting corruption and liberalizing the Russian economy.