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Dmitry Medvedev speaks as the chair of the United Russia party during the plenary session of the 19th United Russia Party Congress in Moscow. November 23, 2019

‘Right on the edges of the law’ How Russia’s ruling party is using dark money in the run-up to the election that will decide Putin’s political future

Source: Meduza
Dmitry Medvedev speaks as the chair of the United Russia party during the plenary session of the 19th United Russia Party Congress in Moscow. November 23, 2019
Dmitry Medvedev speaks as the chair of the United Russia party during the plenary session of the 19th United Russia Party Congress in Moscow. November 23, 2019
Alexey Druzhinin / Press Service of the Russian President / TASS / Scanpix / LETA

The 2021 State Duma elections will be crucially important for the current regime. The next session of parliament will either facilitate the transfer of power to a new president in Russia, or it will change the country’s laws to preserve the powers of Vladimir Putin. The leaders of United Russia, Russia’s ruling party, discussed the start of their Duma election campaign as they gathered for their party congress on November 23. They plan to maintain their constitutional majority in the Russian parliament — in other words, to win more than 301 seats out of 450. As was disclosed on November 26, United Russia will also create a separate legal entity for the campaign: a special non-profit organization that will conduct opinion polls for the party and mobilize political strategists to work in different regions of the country. At the same time, there is a mechanism for financing political campaigns that has existed in Russia for many years — so-called election cash boxes, which finance candidates loyal to the Kremlin and its local leaders, as well as campaigns to discredit the opposition. Meduza special correspondent Andrey Pertsev examined how these funding mechanisms work.

In 2014 in Yuzhno-Sakhalinsk, elections were held for mayor and to choose deputies for the City Duma. The campaign took place without disruption or scandal, and as a result, most of the Duma seats, as well as the post of mayor, were won by United Russia, the ruling party nationwide. Three years later, it was discovered that several deputies had paid bribes for their victories — they had paid Governor Alexander Khoroshavin to obtain their Duma seats. In any event, that was the version put forward by investigators in a large-scale case that was launched against the head of the region and his entourage.

Among the officials involved in the case was Anatoly Makarov, the governor’s deputy chief of staff, who was then a political handler in Sakhalin. Now he is in Georgia, where he is attempting to prove to the authorities that he is not guilty of bribery and should not be extradited to Russia at the request of its law enforcement agencies. “Any group that is involved in elections in Russia can be imprisoned. Any governor or mayor who is responsible for the result of [candidates in elections] across the territory can be locked up as a bribe-taker,” Makarov said.

The former Sakhalin official appears to be telling the truth. The responsibilities of any regional leader in Russia include not only their immediate responsibilities related to managing the local administration, but also informal political tasks. The main one is ensuring the election victory of government representatives — first and foremost, candidates for United Russia.

Running an election campaign requires money — for campaigning, research, collecting signatures, and paying political strategists and so-called spoiler candidates who are placed on the ballot to draw votes away from opposition candidates. Regional officials collect this money themselves and place it in unofficial election accounts known as black cash boxes.

“Ugly in the eyes of the people”

A number of Meduza sources in the leadership of United Russia both in governors’ administrations and close to Putin’s administration called this method of election financing “a necessary part of the process.” The money goes to campaigns on all levels — municipal, regional and federal.

“If the funding was all done legitimately, there wouldn’t be enough money for anything,” said an official in charge of political affairs in one of the Russian regions.

Certainly, conducting a successful election campaign requires far more money than candidates are allowed to collect and spend under Russia’s election laws. For example, the law on presidential elections limits each candidate to only 400 million rubles ($6.4 million) in the first round. It is also forbidden to use money from any source other than an official campaign fund. In 2018, Vladimir Putin reported that his campaign spent 399.8 million rubles, just under the legally authorized amount.

Meduza’s sources are certain that the sum Putin reported to the Central Election Commission was greatly understated. Spending several hundred million rubles would be enough for one of the less-important governor’s campaigns, but not for the presidential campaign. Even taking into account the fact that the state administration and state-owned media worked for Putin, and that he had no strong competition, he essentially spent several hundred million dollars — in other words, several tens of billions of rubles — in the recent elections.

A source who has worked in the presidential administration with all the Kremlin’s political handlers over the past two decades (that is, with Vladislav Surkov, Vyacheslav Volodin and Sergey Kiriyenko) told Meduza that the amount needed to run a successful campaign at any level traditionally has been “Four to 10 dollars for every vote. This was the established number. Now, adjusted for the current exchange rate, we can say two to five dollars per vote. If there are 1.5 million voters in a region, then for a campaign that covers all offices - president, the State Duma, governor, the legislative assembly - [in that region] you need to spend from 3 to 7.5 million dollars - that is, 210 to 500 million rubles,” the source estimated.

A former official from one of Russia’s non-Caucasian national republics cited similar figures. He said that during his tenure several years ago, a regional campaign required about 150 million rubles ($2.4 million). By 2019, in a number of regions, the legally established limits on parties’ election funds were an order of magnitude less than the amount actually needed. In elections to the legislative assembly of the Bryansk region, a party’s legal campaign financing could not exceed 30 million rubles ($477,300). This year, the limit was increased to 100 million rubles ($1.6 million) while the estimated cost of a large party campaign in the region reached 200 million rubles ($3.2 million). The legal limit on party spending on elections for the State Council of Tatarstan has also increased - from 30 million ($477,300) to 50 million rubles ($795,500) — but the actual need is at least 800 million rubles ($12.7 million).

Sergey Malgavko / TASS / Sipa / Vida Press

There are two reasons for these restrictions, which hinder all politicians, not just those affiliated with United Russia. First, limits on campaign financing are needed to reduce the influence of large (by regional or national standards) businesses. Second, the limits help pro-government candidates present themselves to voters in a more favorable light. “The acting governor spent several hundred million rubles on his campaign, while the other candidates spent only a few million each,” said a former official in one of the regions of the Central Federal District. “Even if it were possible to spend the entire amount officially allowed, this would not be done for public relations purposes! It’s somehow ugly in peoples’ eyes — such waste on a campaign.”

“If the money is fully disclosed in a campaign, then it is necessary to disclose the people who get it,” the same former official added. “These are political operatives and local journalists who work for them as copywriters on the side. Often, they don’t need that kind of publicity at all.”

“This [restriction on official campaign spending] is basically hypocrisy, to show that all candidates have equal opportunities, that [candidates from the ruling party] spend only what is required by law,” former Sakhalin political handler Anatoly Makarov said. “Generally, they don’t like to show large expenses.”

According to the political strategist working with the presidential administration, there is another reason why the campaigns of pro-government candidates resort to black cash. “If you work completely legitimately, then you and your headquarters will drown in bureaucracy and documentation. [If everything is done according to the law], in the proper way, you need to assign a financial specialist to each activist and fill out a pile of papers on them,” he said. On the other hand, the strategist said, if the pro-government candidate faces a strong competitor who is supported by an influential local group, “then you have to do everything you can legitimately so you don’t get kicked off the ballot.”

“Even if it’s only 500,000, give it”

Campaign money comes from local entrepreneurs and large federal companies. Under Vladislav Surkov, according to several Meduza sources, money was often collected from entrepreneurs. In those years, they were encouraged to finance United Russia (in some cases, they were given seats on elected government bodies in return), and they were punished for supporting the opposition. “At that time, the party [United Russia] nominated mainly high-status and wealthy people. Businesspeople were spending, in effect, on themselves or on their representatives. The governors were responsible for collecting [the money],” recalled a Meduza source in regional government.

This system changed because Kremlin officials — while they could count on the loyalty of local authorities — were unhappy with local businesspeople who were independent and sometimes rebelled from party-line voting. In exchange for financing not only their own campaigns but also regional party lists and pro-government candidates such as mayors, businesspeople also demanded services in return, including government contracts and parcels of land. Therefore, the authorities began to abandon the practice of raising campaign funds only from local entrepreneurs.

When Vyacheslav Volodin was the first deputy head of the federal presidential administration, United Russia began to nominate not businessmen, but high-ranking state employees — chief medical officers, rectors, school directors, and other officials — as election candidates. In order to finance these campaigns, the party had to change its approach to filling black cash boxes. More and more often, political managers took money from large corporations controlled by the state, such as Lukoil, Gazprom, Rosneft, Rostec, Rosatom, and others.

“For someone like [Gazprom chief] Alexey Miller, it’s easier to give a significant sum for elections to the State Duma, or for the presidential campaign in a region, than, for example, to spend a much greater sum to provide natural gas services to all the villages in the territory,” a Meduza source in the presidential administration explained. “The election will require far less money, and the governor will not bother complaining to the Kremlin [about the gas supply].” This source added that corporations had previously been a source of black cash, but only in areas of the country where they “had a serious presence in the production or extraction of raw materials.”

An official working in the government of one of Russia’s oil regions recalled that Lukoil financed many of the local elections there, and that Gazprom allocated funding for the 2008 presidential election. “We made agreements with them at the very top; it was not the governor who did it. The most that he could approve was the timing of the cash flow,” the source said.

During Volodin’s tenure, election financing became more centralized. This affected both the official budgets that United Russia distributed through internal mechanisms and the black cash. Regional party leaders often received this money in cash within the presidential administration building itself. “In the elections to the State Duma [in 2016], all single-mandate members of [United Russia] received this kind of money, some more, some less, but they all got it. Even major businessmen, whom you’d expect to finance their own campaigns, were included,” Meduza’s source said.

Under the Kremlin’s current domestic policy handler Sergei Kiriyenko, the financing scheme has changed again, to a more flexible arrangement. “Approximately 20 percent to 25 percent of the money for legislative assembly elections comes from the Kremlin and the federal headquarters of United Russia; the rest has to be added locally,” said one official from the Far East. Because of this, the share of high-ranking state employees among elected officials has decreased, and the share of local businesspeople has grown again.

A legislative assembly deputy in a region in the Central Federal District confirmed that trend. He said that during recent regional elections, contributions to the general fund were collected from every candidate. “Even state employees [were told], ‘Even if it’s only 500,000, give it.’ For that reason, in the [current] composition [of the legislative assembly], there are relatively few state employees. They’ve gone back to the days of Surkov,” the deputy says.

At the same time, Moscow finances the election of technocratic governors, envoys of the Kremlin who often have no ties to the regions where they are sent. “If it’s a candidate from a special interest group or state corporation, they finance them. If a person is not attached to a certain group, then they will find a sponsor — that primarily applies to bodyguards of Putin’s who run for governor,” said a Meduza source close to the presidential administration.

Vladimir Putin speaks with Yaroslavl Governor Dmitry Mironov, one of his former bodyguards. September 2017
Alexey Druzhinin / Press Service of the Russian President / TASS / Vida Press

A source in the government of the Yaroslavl region, which is led by former FSO officer Dmitry Mironov, said that his campaign was funded by the state corporation Rostech.

Moscow is also taking control of financing elections in regions that are problematic for the central authorities. In the 2019 elections for the Khabarovsk legislative assembly, the Kremlin funneled money to loyal candidates through Rosneft and Rostech. A year earlier, a candidate from the Liberal Democratic Party had won the gubernatorial election there, and voters’ skepticism toward the government has not diminished since then. “[In 2019], they even had to pay people to run as United Russia candidates,” said a source close to the party’s Moscow leadership. “The campaign for the Khabarovsk City Duma [which took place at the same time as the legislative assembly election] was financed by people close to the mayor of Khabarovsk [Sergey Kravchuk of United Russia] — and he was clobbered.”

Despite large cash injections (several Meduza sources mentioned a sum of 400 million rubles), United Russia received only 13% of the vote for the Khabarovsk legislative assembly and failed to win in any voting district. “Now, only federal money is used in problematic areas,” said a source close to the presidential administration. “Otherwise, the people from the Kremlin [political strategists] who work there would face suspicions about how they’ve raised funds locally: ‘Have the locals bought you or something? Have you been working in their interests??

“The most convenient charges”

A former political handler in a region with significant oil revenues described the expenses of a typical election campaign as follows: “70% of the budget is spent on the ‘network,’ 20% on legitimate media expenditures for the campaign, and 10% on dark money ones.”

One of those dark money services, according to the former official, is the hiring of spoiler candidates. “Spoilers are needed to criticize the main competitor, be it a party or a candidate. The main candidate from the government shouldn’t mess around with attacking them; they should appear to be above that,” the source explains. Most spoiler work (including some that is fully legal) is paid for with black cash.

Some opposition parties can also get black cash if the leadership of their local unit is loyal to the governor. They are given money not to develop themselves as political competitors, but to tarnish other opposition parties. “In one of the campaigns, we funded most of the Communist Party’s campaign,” said one former regional administration official.

Top leaders of opposition parties may not suspect that some of their members are cooperating with local authorities, according to the legislative assembly deputy from a region in the Central District. “The federal [leaders of the party] may not know that some department is loyal to the authorities. The regional [leaders] may not suspect that some individual candidates are loyal,” he explained.

In the Yuzhno-Sakhalinsk City Duma campaign, "the general fund of the election campaign was formed” from money collected from candidates, according to Anatoly Makarov. “An estimate was made for the cost of all the specialists, all the activities. Moreover, you have to understand that preparation for the elections began much earlier than they were announced, and the promotion of candidates also began much earlier. Money was also spent on promotion, including for the United Russia primaries and for polling,” he recalled.

Makarov’s experience and that of other officials and political strategists shows that while illegal election funds are a part of modern Russian politics, it can be risky to use them.

At the end of October 2019, the former vice governor of the Chelyabinsk region, Nikolai Sandakov, was released from a penal colony. In 2018, he had been convicted of bribe-taking and fraud, and had been sentenced to 5 ½ years’ imprisonment and a fine of 7 million rubles. A year after his conviction, a court granted his petition to substitute mandatory volunteer labor for the remainder of his prison term.

Andrei Kabanov, the former head of domestic politics in the Ivanovo region, is also in prison after being convicted of bribery.

Pavel Marushchak, who headed the information policy department of the Komi Republic, was released from prison in the summer of 2019. He was convicted of fraud and had been sentenced to 5 years and 8 months in prison, but the court credited him with more than 3 years he had spent in a pre-trial detention center.

All these cases involved money that the officials took from businessmen. “These [getting money for elections] are the most convenient charges if you need to get a governor convicted. They always have subordinates who are involved in the elections, and they always interact with black money,” Pavel Marushchak explained to Meduza.

Indeed, the cases against the vice-governors were opened simultaneously with the criminal prosecution of their bosses — Chelyabinsk Governor Mikhail Yurevich, Pavel Konkov of the Ivanovo region, and Vyacheslav Gaizer of the Komi Republic. Security officials keep an eye on the black cash boxes “just in case, if they can’t find something else” with which to target opponents, a source close to the presidential administration said. “However, if testimony during a legal case shows that officials are funneling money into elections, that is a blow against the regime,” the source admitted.

Vyacheslav Gaizer, the former governor of the Komi Republic, in court. Moscow; September 26, 2019
Anton Velikzhanin / TASS / Vida Press
The former governor of the Ivanovo region in Moscow’s Basmanny Court. June 2019
Vladimir Gerdo / TASS / Vida Press

“The scheme for raising funds for elections is right on the edges of the law,” Anatoly Makarov said. “Where money is transferred from one person to another, it can always be shown as a bribe.” According to a former Sakhalin official, in his case, the security forces gave deputies elected to the Yuzhno-Sakhalinsk City Duma a choice: either admit that they gave bribes for their election, or they themselves would be named in criminal cases. Makarov wondered in frustration, “How can one possibly give a bribe to be elected in a single-seat constituency? Elections are the free expression of the will of the voters, and no one has disputed their results!”

In a conversation with Meduza’s correspondent, a former regional official lamented that while most parties and candidates have access to black financing, the leaders of United Russia have a greater chance of going to jail than others do. “United Russia is the party in power, its officials are there, they’re the same ones (such as governors) who are responsible for campaigns. And if money falls into the hands of these officials, they are threatened with more serious charges. [In the eyes of investigators], this is not just illegal financing, this is bribery or abuse of authority,” he said angrily.

“There has been, is, and will always be fundraising”

When asked if the Kremlin knows about the system of black cash, all of Meduza’s sources answered unequivocally: Yes, the president’s administration is well aware of it. Moreover, Moscow officials themselves regulate the spending, in light of the strategy of each regional election campaign. And the controls on spending have increased under Sergey Kiriyenko.

One Meduza source, a former regional official, recalled participating in strategy discussions in which not only the exact amount of campaign spending but also the source of the financing was discussed. “Kremlin officials and federal party members have only a passing acquaintance with many regional officials. Why should they trust them? Therefore, the strategy should not only spell out the amount to be spent on the campaign, but also where this money will come from — the sources of financing point-by-point,” he said.

Campaign strategists defending their requests before political handlers in Moscow also should be prepared for other questions, both about their activities in the pre-election period and about the forecasted turnout and vote count for the pro-government candidate. “They could ask why some usual item or other is absent [from the strategy]. For example, money is allocated to campaigns to pay for spoilers who not only draw votes away from the opposition but also dig up dirt on opponents. If there was no ‘spoiler’ item in the strategy, the presidential administration and the party [United Russia] would be interested in why,” the former official said.

A United Russia regional functionary said that during campaigns in his region, election strategy had to pass muster with the Kremlin, but nothing was said in the documents about sources of financing. “There could have been an additional piece of paper with approximate expenses, but no one spoke publicly about it,” he said.

A former presidential administration official added that while Vladislav Surkov was in power, Kremlin officials rarely got involved in financing regional campaigns. It was understood that the governor and regional party members would find the money themselves. “There might be some kind of sounding things out to see if [local handlers] had money. Sometimes, the regional reps would try to get out of it, [saying] there’s nowhere we can get this money, help us. We checked, and sometimes, I had to say: ‘What the fuck are you lying for? This company operates [in the region], right there.’ And sometimes I had to help,” he recalled.

A source close to the Kremlin explained that nowadays, governors understand that ensuring election results for United Russia as established by the Kremlin is one of their highest-priority tasks in office. And regional leaders still rely on black cash to carry out that task. “If you go [to the governor] of a region where there is no major business, look around. There are pepole interested in state and municipal posts who, in exchange for an appointment [to those posts], will help in the election. There are typically some smaller-scale entrepreneurs around,” a Meduza source said.

Vote counts are displayed during Russia’s nationwide elections on September 9, 2019.
Alexander Shcherbak / TASS / Scanpix / LETA

Both he and most of the other sources who spoke with Meduza admitted that under the current Kremlin leadership, the role of black cash in elections is declining. At the same time, authorities are making increased use of administrative resources to adjust (essentially, to falsify) voting results in their favor, as well as screening out potentially strong competitors by preventing them from registering their candidacy in the first place. Under these conditions, campaign expenses are significantly reduced, which means that pro-government politicians from United Russia in the future may have sufficient financing from legal sources. “But mechanisms to bypass this system are not going away — there are still expenses that you cannot handle legally,” said a political strategist who works with the presidential administration. “For those, there has been, is, and will always be fundraising.”

Report by Andrey Pertsev

Editing by Vladislav Gorin

Translation by Carol Matlack

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