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Russia's Economic Development Minister detained for bribery

Meduza
12:01, 15 november 2016

Photo: Alexander Miridonov / Kommersant

On the night of November 15, Russia's Investigative Committee announced the detention of Economic Development Minister Alexei Ulyukayev. According to committee data, Ulyukayev received a bribe in the amount of two million dollars for allowing Rosneft to buy a controlling stake in Bashneft at the expense of the government. Meduza tells you what you need to know about this high-profile corruption case in Russia the day after the arrest.

Detaining a minister for bribery is a unique event for Russia. The widespread anti-corruption campaign of recent years has led to the arrests of several governors (for example, the former head of the Kirov region Nikita Belykh), senior investigative committee officers, federal officials, and deputy ministers. But the ministers in Dmitry Medvedev's government have up till now remained untouched.

This situation is unusual not only because of who precisely was detained by the police, but as a result of the fact that the Investigative Committee had issued as press release at 2:33 a.m. to inform the world about it. Later it was reported that Alexei Ulyukayev had received the bribe "during an investigative experiment" held on November 14 under the surveillance of "security forces."

News agency RIA Novosti reported, citing sources, that the operation occurred after the Minister and his entourage were wiretapped. News agency Interfax reported that a court had issued permission for the wiretapping as early as the end of summer. Publication Life reported that authorities had been monitoring the Minister's correspondence.

Alexei Ulyukayev's detention is connected with Rosneft's recent purchase of a 50 stake in Bashneft. The stake was previously owned by the state. The press release states that Ulyukayev received two million dollars in exchange for the Economic Development Ministry to allow Rosneft to make the deal. Later, the Investigative Committee made a mention of extortion and said that Ulyukayev had allegedly threatened Rosneft representatives.

The privatization of Bashneft occurred in October 2016. The development was strange, because it occurred without competition, though several companies had previously expressed interest in the asset. Furthermore, the buyer of state property became another company more than half of which itself belongs to the state. This privatization scheme has led to disagreements between officials.

In late July, Ulyukayev himself said that he considered Rosneft to be an "improper buyer" for Bashneft. Deputy Prime Minister Arkady Dvorkovich, as well as presidential adviser and former Minister of Economic Development Andrei Belousov also spoke out against the deal alongside him. However, the transaction took place and the decree on the sale of Bashneft was signed by Prime Minister Dmitry Medvedev.

President Vladimir Putin openly distanced himself from the privatization scheme. "You know, you may find it strange, but I myself was a little surprised by the government's position," he said.

The Investigative Committee has stated that the transaction itself is not the subject of the investigation; Rosneft acquired Bashneft legally, the committee said.

Ulyukayev's detention and possible arrest are expected to severely hit the government financially and economically. Over the course of most of his life, Ulyukayev worked in various positions in the government and the Central Bank. He is one of the few close associates of Yegor Gaidar remaining in power. The economists met in the 1980s and, in the early 1990s, Ulyukayev was an Gaidar's adviser when he latter worked in the government; in 1999, Ulyukayev ran for the State Duma as a right-wing candidate, but lost. It is important to note that bribery was reason for the arrest of yet another another former right-wing deputy Nikita Belykh, though the amount in question then was 400,000 euros in cash.

While serving as Economic Development Minister, Ulyukayev supported reforms that led to a reduction of state control of economy even under adverse financial conditions. One of the reforms he supports was privatization. His ministry was also not afraid to give negative forecasts. In October 2016, for instance, the Economic Development Ministry suggested that the country's economy would succumb to stagnation in the next 20 years and that its GDP growth would be below average. Ulyukayev attributed these development to the country's economy's need to adapt to new foreign policy conditions, including those of sanctions.

It is still unknown who will lead the ministry in the event of Ulyukayev's arrest. Dmitry Medvedev has not commented on the Minister's detention. Vladimir Putin's spokesperson Dmitry Peskov has said that "the accusation requires serious evidence."