EXPERTS REMAIN SKEPTICAL OF GOR'S ABILITY TO

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 002823 SIPDIS STATE FOR EUR/RUS, EEB NSC FOR MCFAUL E.O. 12958: DECL: 11/18/2019 TAGS: ECON PGOV PINR RS SUBJECT: EXPERTS REMAIN SKEPTICAL OF GOR'S ABILITY TO REDUCE CORRUPTION REF: A. 08 MOSCOW 3775 ¶B. 08 MOSCOW 3363 ¶C. MOSCOW 1450 Classified By: Econ MC Matthias Mitman for reasons 1.4 (b. and d.) -------------- Summary -------------- ¶1. (C) In a nod to President Medvedev's 2008 anti-corruption legislation, Transparency International's Corruption Perceptions Index ranked Russia at 146, up one spot from its 2008 147th ranking. This general lack of progress confirms what analysts have told us. Corruption in Russia remains a serious problem, despite Medvedev's public denouncements and efforts to reduce it. This presents a quandary for the GOR as it decides how to proceed. Dramatic steps might threaten the status quo, yet gradual steps so far have been ineffective. End Summary. -------------- Russia's Corruption Rankings Stagnate -------------- ¶2. (SBU) Transparency International released its 2009 Corruption Perceptions Index on 17 November. Russia was ranked at 146 (it was ranked at 147 in 2008),which Transparency International said reflected a "mildly positive" response to Medvedev's 2008 anti-corruption legislation. Russia's 2009 rank, however, is still below its 2007 rank (143) and far below its 2006 rank (121). These results echo the World Bank's Worldwide Governance Indicators, with Russia's rankings on "control of corruption" showing a steady annual decline since 2005. ¶3. (SBU) President Medvedev has repeatedly stated that corruption is endemic to Russia and has made fighting it a signature issue for his presidency. He has highlighted consistently the damage corruption has done to Russia, most recently in both his high-profile "Forward Russia" article in September and his 12 November address to the Federal Assembly. Beyond the anti-corruption legislation promulgated last year, however, few practical steps have been implemented. -------------- Elite Losing Control -------------- ¶4. (C) Furthermore, there is growing consensus among analysts that even if the power elite wants to tackle corruption, the economic crisis has exacerbated tendencies towards unmanageability of corruption within the power vertical. XXXXXXXXXXXX XXXXXXXXXXXX, told us that the GOR may have waited too long. XXXXXXXXXXXX said that a few years ago, when only millions had been "stolen" from the Russian people (as opposed to today's billions),the GOR could have acted and not sparked public outrage. XXXXXXXXXXXX said that the crisis had made the GOR's task more difficult and the scope of corruption has become unmanageable. As the crisis reduced the size of the pot and the anti-corruption rhetoric increased, some Russians felt that they had best grab as much as they could while the going was good. XXXXXXXXXXXX XXXXXXXXXXXX, noted that the tendency of corruption to evade control by the GOR was not new. In 2006 -- at the height of Putin's control in a booming economy -- it was rumored within the Presidential Administration that as many as 60 percent of his orders were not being followed. -------------- --- Do Changes At Interior Ministry Signal Progress? -------------- --- ¶5. (C) XXXXXXXXXXXX noted that Minister of Interior Rashid Nurgaliev had recently fired or brought charges against a number of relatively low-ranking law enforcement officials for corruption. XXXXXXXXXXXX stated though, that it was too soon to judge whether this activity reflected real change. XXXXXXXXXXXX XXXXXXXXXXXX, argued that Nurgaliev's actions were not meaningful. He stated that action was required from higher up the power vertical and needed to affect the strata that average Russians would consider "untouchable". -------------- MOSCOW 00002823 002 OF 002 Can Russia's Trajectory Be Changed? -------------- ¶6. (C) XXXXXXXXXXXX XXXXXXXXXXXX, said that only a "revolution" could change Russia's current trajectory. He argued that the system had become too sclerotic and too beneficial for too many to allow for change. XXXXXXXXXXXX noted that corruption had even become a positive factor for a substantial portion of society. By taking merit out of the equation for success, it was simply easier to pay for entrance to a university, for a contract, etc. XXXXXXXXXXXX, who has made a fortune in Russia's casino business, told us forthrightly that the "levels of corruption in business were worse than we could imagine" and that, after working here for over 15 years and witnessing first-hand the behavior of GOR officials at all levels, he could not imagine the system changing. -------------- Comment -------------- ¶7. (C) Corruption in Russia remains pervasive and deep-rooted. While Medvedev's anti-corruption rhetoric is a step in the right direction, we have yet to see significant implementation of new measures. Russians appear to accept current levels of corruption and seem inclined to pay up or emigrate, rather than protest. Neither have Russians reacted to the sight of the connected few continuing to indulge in luxurious lifestyles as the economic recession continues to leave most Russians worse off than they were two to three years ago. Nonetheless, the commentary on the GOR's increasing inability to manage the scope of corruption bodes ill for its stated effort to enhance corporate governance and investor confidence. Beyrle