By John Helmer, Moscow
Sergei Stepashin (right) was the prime minister of Russia for three months before Vladimir Putin (left) was appointed to the job in August 1999. Before that, Stepashin was the head of the Federal Security Service, Minister of Justice, and Minister of Interior. He also has a doctorate; a professor’s rank in civvies; and in the military the rank of Colonel-General. For a while in 2005 he was Boris Yeltsin’s preferred candidate to succeed him as president. He is now in his third term as the head of the Accounting Chamber, having been nominated by the Kremlin and accepted by the State Duma in 2000, 2005, and 2010.
The chamber’s job is to scrutinize the spending of public funds and where possible uncover and expose abuses and corruption. It’s the Russian equivalent, in constitutional duty at least, of the Government Accountability Office in Washington, or the National Audit Office in London. Unless he jumps or is pushed, Stepashin is in office until the end of 2017. By the standard of officials of the post-communist period, Stepashin has the right stuff.
So when Putin criticized Stepashin by name and by innuendo in front of the Federal Assembly on December 12, claiming the head of the chamber was already in office for longer than suits the president, Stepashin did what no Russian government official has dared to do to Putin – he struck back.
Putin said: “The Accounts Chamber has significant instruments. We expect much greater efficacy and professionalism from this institution. The ruling party, as well as the parliamentary opposition, should have the right to propose candidates for the post of chairperson, deputy chairperson, and auditors. At the same time, given the specifics of this type of work, it would be best to limit their tenure to two consecutive terms.”
Stepashin said: “Everything comes to an end, no problem, I agree. The only caveat — then it is necessary that it will apply to all federal officials in the Constitution. Everyone without exception. Then it will be fair.” An identical version of what Stepashin said appears here.
It may have been pure coincidence that on the same day as Putin claimed Stepashin wasn’t doing his job, the Accounting Chamber issued a brief public notice on its six-month investigation of United Company Rusal, the Russian aluminium monopoly, and its operation of offshore registered companies for transfer pricing, tolling and tax avoidance. Without mentioning the name Rusal in its announcement, the chamber reported “a number of negative factors affecting the most important economic and social interests of the Russian Federation”. Rusal’s tolling, the chamber said, “does not stimulate the development of Russian enterprises”, while offshorization “can shift the centre of taxation of profits to countries with low levels of taxation”.
Between the Chamber’s headquarters on Zubovskaya Street, and the Kremlin, there is scarcely 1,500 metres as the crow flies. On December 12 an intelligent crow might have supposed that as Stepashin wound up his audit of Rusal, and Putin was launching the brand-new term, offshorization, the two of them were seeing eye to eye. Didn’t the Chamber’s attack on Rusal for stripping cash from its Russian operations, despatching capital abroad, and avoiding tax mean the same thing as Putin meant , when he told the Federal Assembly: “We need a comprehensive system of measures to reverse the offshorization of our economy. I am instructing the Government to make corresponding integrated proposals on this matter. We are to strive for offshore transparency, disclosure of tax information, as is done by many nations…”
Dmitry Peskov, Putin’s spokesman, was asked three questions to clarify what Putin was referring to: To what is the President referring when he termed the chamber lacking in ‘efficacy and professionalism’? To what reports and recommendations of the chamber is the President objecting? Does the President oppose the Chamber’s 8-year campaign to put a stop to tolling in aluminium and the offshorization of United Company Rusal?” Peskov is refusing to answer.
Prime Minister Dmitry Medvedev was asked the same questions, along with this: has the prime minister lost confidence in Stepashin? Mikhail Buben, Medvedev’s spokesman, replied “we look forward to working with your Bureau and the legendary journalist John Helmer”, then said he was passing the question to Ksenia Kaminskaya. They aren’t replying.
For a high serving Russian official to attack Putin publicly, and imply he’s already served enough time in office, ought to be news. Even bigger news is the innuendo from Stepashin that he cannot put a stop to Rusal’s offshorization because someone unnamed, in office for more than two terms, is protecting the company’s chief executive, Oleg Deripaska. The mainstream Russian press has failed to report a thing, though the management at Kommersant and at the state news agency, RIA Novosti, realizing something serious was up, changed in print what Stepashin had actually said, so the Putin barb has been air-brushed away. Not even the Putinophobes at the Anglo-American press have detected what is happening.
But is Stepashin convinced there is a connexion between the no-confidence remark by the President and the $2.5 billion in fresh Norilsk Nickel dividends that will be paid to Rusal’s Jersey Island beneficiaries, following the Kremlin’s order last month? Stepashin’s spokesmen are refusing to respond. Asked to confirm exactly what he had said in response to Putin’s rremark, the chamber press office is now refusing to confirm or deny.
Before Putin spoke on December 12, there was an effort in the State Duma to add teeth to the chamber’s capacity to investigate, uncover evidence of state budget abuses, and improve parliament’s supervision of the executive. The original law on the Accounting Chamber, FZ-4, was enacted in 1995. Here it is. The draft, as it was introduced in mid-November for the first reading, can be read here.
Stepashin has publicly endorsed the new bill, claiming it will be an effective tool to counter corruption, and give the chamber more independent investigative power than its counterparts have in Europe. As for appointment of the chamber chairman, the new bill adds to the powers of the Duma and the opposition factions represented there to promote a candidate of their own. They want to limit the Kremlin’s choice to one of three pre-selected by the Duma parties. A parallel process will be required for the election of the deputy chairman of the chamber.
There is nothing in this draft bill which puts a two-term cap on the chamber’s chairman. On December 12, the same day Putin attacked Stepashin and Stepashin attacked Deripaska, the Duma deputies voted to adopt the bill at the first reading. The Communist Party (KPFR) and the Liberal Democratic Party of Russia (LDPR) said they wanted a tougher bill, to include provisions to allow chamber auditors access to information held in the files of the General Prosecutor.
According to LDPR Deputy Maxim Rokhmistrov, the two-term limit has been included in a list of amendments to the bill which will be considered in the second reading debate. This list isn’t yet available from the Duma website. Other sources claim the initiative for this particular measure is coming from Putin.
The Duma deputies also make clear that if the chamber is ineffective or unprofessional in its performance, it’s because Putin has arranged that way.
“From my point of view,” says KPFR deputy Vadim Soloviev, “everything that was done to the Accounting Chamber of the State Duma transforms it from a control body into a body that works, is subject to, and is guided by the presidential administration. It’s very sad.”
According to Rokhmistrov, the new bill is needed because it “must be made clear that the audit institution can check all the others without their consent, including others engaged in financial supervision. Currently, the bill includes some [the power of agencies of government to require an] invitation or agreement to undertake joint inspections.”
As for Putin’s criticism, Rokhmistrov said: “Here, I would, of course, not agree. It all depends on what to keep in mind. In identifying different things within the existing powers [of the Accounting Chamber], it works more than effectively. Because it is necessary to ask, first of all, the opposition, which is engaged in criticism. And the basis of [this] criticism is always taken from the reports which the Accounting Chamber prepares.”
“Under the current law, it is severely limited in its rights. Because the law was enacted a long time ago, during the ensuing interval there have been a number of changes in the state. New forms have developed, such as public corporations. There has been wider development of joint-stock companies. In fact, they are private enterprises. But they are consumers of the budget.”
“And perhaps the biggest problem is the lack of leverage of the Accounting Chamber. That is, in the form in which the [Chamber’s] instructions or views are sent. What happens next in the relevant government agencies the Accounting Chamber cannot control. Here is where one can talk about effectiveness.Yes, of course, [Chamber reports] get stuck in the bureaucracy; there is a long process of implementation in organizations. Here is where we can say this process is delayed. At the same time, the Chamber is probably the first in our country to have adopted a concept of evaluation of its own effectiveness. So I would not say it is not effective. But the thing is that under the [current] law, it is severely limited in its capabilities.”
Deputy Andrei Krutov (Spravedlivaya Rossiya, Fair Russia), whose attack on Rusal’s offshorization in March, launched the latest Chamber audit, said he has yet to receive the confidential report of the Chamber. He added that for the chamber’s recommendations to end tolling and tax avoidance by Rusal, “the political will is needed, and also the understanding of how the system and redistribution [of wealth] should be arranged in Russia. In my opinion, it is not fair at all, and in fact not correct. This includes the lack of luxury tax, the lack of a progressive income tax, the lack of control over the withdrawal [offshorization] of money from large corporations. That system of redistribution works, in my view, ineffectively… and the Accounting Chamber largely upholds our position.”