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Putin circle nervous as corruption probe widens

17:25, Thursday, 17 November, 2016
Putin circle nervous as corruption probe widens
     Russian government officials and investors fear that the arrest of economy minister Alexei Ulyukaev over alleged corruption could spark wider uncertainty amid signs that investigators are broadening their probe.

“They are talking about up to eight additional suspects,” said a former official of the Federal Security Service (FSB) who said he had been briefed on the probe. His comments came after Russian media reported that investigators were targeting more people.

Mr Ulyukaev was put under house arrest for two months on Tuesday after the Investigative Committee, the federal body probing serious crimes, said he had been caught red-handed on Monday receiving a US$2m bribe extorted from state oil company Rosneft for supporting its acquisition of a stake in smaller peer Bashneft.

Mr Ulyukaev denies the allegations but President Vladimir Putin fired him on Tuesday night citing loss of trust.

“This is an extraordinary event for the government and the authorities of the country in general,” Dmitry Medvedev, prime minister, said at an extraordinary cabinet meeting.

In private, some investors and government officials said the move against Mr Ulyukaev could undermine the authority of those in Mr Putin’s government who have helped to steer the economy through an oil price drop, rouble devaluation and western sanctions over the past two years.

Two officials in the economy ministry and one large Russian investor said they believed Rosneft chief executive Igor Sechin, a former spy who long served as Mr Putin’s personal secretary, was involved in the move against Mr Ulyukaev as a warning to other proponents of liberal economic policies not to oppose him.

Russian media reported that Oleg Feoktistov, head of security at Rosneft, had led the sting operation which led to Mr Ulyukaev’s detention on Monday night at the Rosneft offices. Mr Feoktistov joined Rosneft in September from the FSB.

Rosneft said neither the company nor Mr Sechin had any comment.

“Sechin was humiliated by the strong resistance from many people against Rosneft’s acquisition of Bashneft,” said the investor. “This definitely weakens the economic bloc.”

Alexei Kudrin, Mr Putin’s former finance minister who advises him on economic policy, said in a Russian television interview from New York that he had several open questions about the nature of the accusations against Mr Ulyukaev and the role of Rosneft. Damage to the investment climate could be avoided only if the investigation was conducted in a transparent manner, Mr Kudrin said.

Although many observers view Mr Ulyukaev’s fall as the result of a power struggle rather than a political move by Mr Putin, some evoked the history of how dictator Josef Stalin purged the Soviet elite in the 1930s. “Is it 1937 again?” asked a consultant in a pro-Kremlin agency that has been working with the economy ministry.

Alexei Navalny, an opposition politician, said his anti-corruption fund was investigating Mr Ulyukaev for different suspicions of corruption but ridiculed the notion that the minister had tried to take on Mr Sechin and taken a suitcase of cash in dollars.

“Putin is afraid to be betrayed by his own elite,” Mr Navalny said. “In order to avoid that you should do what every authoritarian regime in history has done — terrorise your own circle by sending signals for everyone to be scared,” he said.

Mr Ulyukaev was among a group of proponents of structural reforms and prudent macroeconomic management whose advice Mr Putin has largely followed despite shrill political rhetoric in recent years. Others include Elvira Nabiullina, the central bank governor, and Herman Gref, chief executive of state-owned Sberbank.

Analysts said Mr Ulyukaev’s fall was unlikely to signal a change in economic policy.

“The president is rational enough to cancel out the consequences of his geopolitical and political decisions with the help of his liberal economists,” said Andrei Kolesnikov, an analyst at the Carnegie Moscow Centre. But he added that it had apparently been deemed necessary that “the entire Putin team and inner circle be paralysed with fear”.

Nervousness after Mr Ulyukaev’s arrest deepened on Wednesday when investigators searched the offices of Rusnano, a state-owned technology company, and initiated a criminal case against managers at a pharmaceutical company in which Rusnano has invested.

Rusnano is headed by Anatoly Chubais, a former deputy prime minister who as architect of Russia’s scandal-tainted privatisations in the 1990s is seen as the symbol of a negative side of liberal economic policies. Mr Chubais had said he was shocked by the detention of Mr Ulyukaev.

The Investigative Committee said the case involving Rusnano was not connected to Mr Ulyukaev.

“It may be a separate investigation,” said the consultant. “But i am certain that they timed the search to send a message.”

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