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Russia’s Economy Minister Is Detained on Bribery Charges In a Late-Night Move, Russia Arrests a Top Economic Official in a Bribery Case
(about 11 hours later)
MOSCOW — Russia’s economy minister was detained overnight on charges of soliciting a $2 million bribe in connection with a huge oil deal, the country’s Investigative Committee announced on Tuesday. MOSCOW — Russians awoke to an extraordinary scandal on Tuesday with the minister of economic development detained on charges of soliciting a $2 million bribe — a drop in the bucket in a country where brazen corruption is almost a sport.
The minister, Alexei Ulyukayev, 60, was the highest-level official arrested in Russia since a failed coup in 1991. He was detained in the middle of the night, a tactic reminiscent of the Soviet era that has not been seen in recent years. The minister, Aleksei Ulyukayev, 60, a liberal stalwart with a trademark porcupine haircut, was detained in the middle of the night, a Soviet-like tactic against officials who have fallen into disfavor that many thought had been retired.
Svetlana Petrenko, a spokeswoman for the Investigative Committee, said Mr. Ulyukayev had accepted the $2 million in exchange for his ministry’s endorsement of the sale of part of one government-owned oil company to another, the state oil giant Rosneft. Mr. Ulyukayev was charged with extorting a $2 million bribe from Rosneft, the state oil giant, as a thank-you for endorsing a deal for it to buy a chunk of Bashneft, a smaller, government-owned oil company that the Kremlin recently confiscated from an oligarch.
“This is about the extortion of a bribe from Rosneft representatives accompanied by threats,” Ms. Petrenko told the RIA Novosti news agency. “Ulyukayev was caught red-handed as he received the bribe.” Late Tuesday, President Vladimir V. Putin dismissed Mr. Ulyukayev from the minister’s job he had held since 2013, citing a “lack of trust.”
Although details were still emerging, the accusation seemed to be the most revealing episode yet about a fight within the Kremlin over the direction and control of the ailing economy. Possible scenarios included a swipe at the liberal camp or an indirect assault on Igor I. Sechin, the chairman and chief executive of Rosneft and a confidant of President Vladimir V. Putin. It was the first bribery case to reach behind the high red walls of the Kremlin, and to an unusual degree parted the curtains on the extended, opaque battle within the ruling elite over the direction and control of the sickly Russian economy.
Mr. Ulyukayev, who is also the minister of economic development, has led the effort to sell off large blocks of key government assets, notably in commodities, in the face of a prolonged recession since 2014. Amid myriad questions about what actually happened, which may never emerge, one explanation emerged as the favorite.
A criminal case was opened against Mr. Ulyukayev on suspicion of soliciting a bribe to endorse the oil deal, according to the Investigative Committee, which reports to Mr. Putin. Investigators said the deal itself was not considered suspicious. The Kremlin and its allies, struggling to right an economy waterlogged by two years of recession, are seeking a life raft, analysts said. Mr. Ulyukayev’s mistake was to question their methods publicly.
Rosneft paid more than $5 billion for half of Bashneft, an oil company that the government had confiscated from an oligarch. Before the sale went forward in October, it prompted some criticism from members of the liberal faction, who said the stake should be sold to the private sector, not to another state firm. In this line of thinking, Mr. Ulyukayev, a well-known moderate, was being punished for trying to block Rosneft from expanding its reach by purchasing Bashneft and generally restraining its growth. On a larger scale, the arrest served as a warning from the increasingly dominant security services that no one should challenge them.
Mr. Putin also expressed surprise over the government’s recommendation that the sale go forward. “I think the purpose of the whole thing was to eliminate resistance,” said Vladimir S. Milov, an opposition politician and former deputy minister of energy who now leads a think tank. “The message is, ‘Don’t stand in my way.’ A clear message for all future deals.”
Investigators had been monitoring Mr. Ulyukayev’s telephone calls for months, the news agency Interfax reported, quoting an unidentified law enforcement official. The basic scenario goes something like this:
Dmitri S. Peskov, Mr. Putin’s spokesman, told Russian reporters that “this is a very serious accusation, which calls for very serious evidence.” He said a court would make the ultimate determination about Mr. Ulyukayev’s guilt or innocence. As the head of Rosneft, the state oil giant, Igor Sechin, a former K.G.B. agent and Putin confidant, is sitting on about $15 billion in cash. With the state’s two main reserve funds dwindling, the Russian government covets that cash.
At least three governors have been arrested on bribery charges in the past couple of years as economic problems have mounted, but this is the first time that corruption charges have reached into the Kremlin administration. Analysts have previously said that the campaign to arrest high-level politicians was rooted in fierce competition for illicit gains as the overall pie of the Russian economy shrinks. Mr. Sechin’s purchase of state assets transfers that money directly into the Russian treasury. It also increases his power, though there was a small wrinkle in the form of a law suggesting, except in extreme instances, that state assets should be sold into private hands. A private firm, Lukoil, also expressed interest at a lower price.
As minister of economic development, Mr. Ulyukayev had to sign off on the sale of any state assets. So Bashneft was a major test case.
Mr. Sechin wanted it for Rosneft, despite the law and the widespread, negative public perception that the elite was once again, as it did in the 1990s, abusing privatization laws to seize commodity resources at bargain prices.
Mr. Ulyukayev tried to postpone the deal, then Mr. Putin backed the sale eventually after initially hesitating. In October, it was announced that Rosneft would acquire just over half of Bashneft for more than $5 billion.
Mr. Sechin is known for a “take no prisoners” attitude toward anyone who challenges him, so the bribery charges against Mr. Ulyukayev were interpreted as revenge.
For Mr. Putin, the nation’s special reserve funds have served as Russia’s main, tangible economic cushion.
“The reserve funds have been something sacred. Putin always refers to them when he talks about economic difficulties,” Mr. Milov said. “They have been used as a strong, public indicator that the state still has capabilities.”
But they are shrinking fast with no economic revival in sight. Two sovereign funds, the Reserve Fund and the National Wealth Fund, are now down to less than $104 billion, compared with a combined $160 billion at the beginning of 2015, according to the Finance Ministry’s website.
The financial reserves are expected to run out by the end of 2017, just as Mr. Putin faces a campaign for his fourth term in the spring of 2018.
The Rosneft stash would help tide over the country for a longer period while the Kremlin ties its hopes to a rebound in the price of oil and the possible lifting of Western sanctions imposed over Crimea and the Ukraine crisis. Prospects for the latter brightened with President-elect Donald J. Trump’s criticism of the American policy of isolating Russia.
For now, the Russian economy hovers around zero growth and consumers still struggle with inflation caused by a sharp the drop in the ruble plus food restrictions imposed in response to the Western sanctions.
With minimal outside investment, Russia’s economic fate is increasingly in the hands of the state. New statistics from the federal antimonopoly service show that the government controls about 70 percent of the economy, compared to 35 percent in 2005.
Olga V. Kryshtanovskaya, a leading sociologist who studies the Russian elite, said the Ulyukayev case casts a shadow over the entire government. “People resent the fact that they had to give up French cheese in order to support the president’s policies and such corruption cases still erupt,” she said in an interview.
On Tuesday, the Kremlin cranked its information machinery into high gear to paint the arrest as part of an continuing anticorruption crusade that has included the arrest of three governors in the last two years.
A report called “Fight Against Corruption” was the top one much of the day on the main state-run television news network. A caravan of politicians appeared on screen to praise the arrest as evidence that nobody was above the law.
Mr. Ulyukayev was charged with extorting a large-scale bribe, Svetlana Petrenko, a spokeswoman for Russia’s Investigative Committee, said on state television. Mr. Ulyukayev threatened to use his official standing to create future problems for Rosneft, she said, and was detained on Monday while accepting $2 million.
Russian security had monitored Mr. Ulyukayev’s telephone calls for a year and Rosneft had put the $2 million in a safe-deposit box, according to various news reports, but the accused had not touched it.
Timofei Gridnev, identified by Business FM radio as Mr. Ulyukayev’s attorney, said the minister denied all the charges, calling it a “provocation” by Rosneft against a government official.
Mr. Ulyukayev was put under house arrest for two months.
Another school of thought, though not as widespread as the revenge story, believed the bribery scandal was meant to hurt Rosneft, to show that it was a source of corruption and bribery, to weaken Mr. Sechin.
Evidence for that was harder to find, however, especially since various politicians demanded Mr. Ulyukayev’s head. Gennadi A. Zyuganov, the leader of the Communist Party, suggested that Mr. Ulyukayev was happy to enrich himself while denying the funds needed for a children’s cancer hospital in Moscow.
Dmitri S. Peskov, Mr. Putin’s spokesman, told Russian reporters, “This is a very serious accusation, which calls for very serious evidence.” He said a court would make the ultimate determination about Mr. Ulyukayev’s guilt or innocence.
There was some mocking criticism of the charges from business leaders and others.
Apparently in a reference to Mr. Sechin’s reputation, Alexander N. Shokhin, the president of the Russian Union of Industrialists and Entrepreneurs, told the website Gazeta.ru that anyone who tried to shake down Rosneft for money should be the subject of a psychiatric investigation rather than a police investigation.
“If Alexei Ulyukayev had been accused of running over an old lady while driving a Gelandewagen at high-speed through Moscow late at night, even that would look more probable,” Mr. Shokhin said.
Ilya Shumanov of Transparency International, which fights corruption, told RBC Daily, a financial newspaper, that a $2 million bribe was a paltry, unrealistic sum in Russia’s moneyed oil industry, suggesting that was the kind of sum a deputy mayor might solicit.
A recent shake-up among Mr. Putin’s advisers prompted some analysts to suggest that Mr. Ulyukayev’s arrest was part of a trend of replacing seasoned veterans with a younger generation less likely to question the president’s decisions.
Many analysts, however, considered the arrest part of a different trend: the increasing power of the siloviki, or members of the security services, over the whole government.
Oleg Feoktistov, the head of security at Rosneft and identified in news reports as the main executive behind the arrest of Mr. Ulyukayev, used to run internal security and corruption cases in the federal security service, or F.S.B.
“In the past six to eight months these repressions have become more widespread,” said Kirill Rogov, an independent political analyst. “This is directly linked to the new people occupying new posts in the F.S.B., who want to expand their turf.”