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Ten years of construction Billionaire Arkady Rotenberg’s company tops list Moscow’s main outside contractors under Mayor Sobyanin

Source: Proekt
Sergey Karpukhin / Reuters / Scanpix / LETA

Russian billionaire Arkady Rotenberg, a friend of President Vladimir Putin, has been the main outside contractor for the Moscow authorities during the ten years that Mayor Sergey Sobyanin has been in charge of the city, reports a new joint investigation from the investigative site Proekt and business magazine Forbes. 

Under Sobyanin, Moscow’s budget increased nearly threefold — from 1.11 trillion rubles to 3.15 trillion rubles (from about $14.5 billion to $41.1 billion). The mayor’s office spent the excess profits mainly on construction and urban development, to the tune of 8.5 trillion rubles ($110.8 billion) over the last ten years. During the same period, the city allocated 9 trillion rubles ($117.4 billion) towards social spending. According to Proekt, this distribution is a rarity among regional budgets, which typically earmark more than 60 percent of funds for social spending.

In just ten years, Moscow has spent 4.3 trillion rubles ($56.1 billion) on urban development and construction, 2.3 trillion ($30 billion) on the urban economy, and 1.5 trillion ($19.6 billion) on transportation and transport infrastructure. As it turns out, the municipality’s biggest contractor is Mosinzhproekt, an engineering company directly owned by the city government. It has received 832 billion rubles (about $10.9 billion) worth of municipal contracts in the last ten years. The company became the capital’s biggest customer simultaneously, placing a total amount of orders exceeding 1.5 trillion rubles ($19.6 billion).

As the investigation points out, placing orders through government-controlled joint stock companies — rather then on behalf of government bodies directly — allows for procurement to be carried out more flexibly: the buyers set their own procurement policy themselves, can sign contracts more freely, and are not required to issue single-source contracts.

Overall, the journalists behind the investigation concluded that under Sobyanin, the major construction contracts that form the basis of Moscow’s government contracts were handed out to a select number of large companies, whose owners “are either closely linked to the mayor’s office, or are friends with the country’s president, or are hidden by nominee and offshore companies.”

Arkady Rotenberg’s Mostotrest construction company takes first place in the ranking of outside contractors; in the last ten years, it received a total of 441.5 billion rubles (about $5.8 billion) worth of contracts from the Moscow government. For the most part, these contracts were related to road construction: for example, Mostotrest was responsible for reconstructing the interchange between the Moscow Ring Road (MKAD) and Leningradsky Avenue, as well as building sections of the North-Eastern Chord and North-Western Chord highways. Rotenberg's company also got the construction contract for part of the Sokolnicheskaya subway line.

The engineering company Metrowagonmash came in second place with 402 billion rubles (about $5.25 billion) worth of municipal contracts for building subway and tram cars. Notably, Vice Mayor Maxim Liksutov, head of Moscow’s Transportation Department, was on the board of directors for Metrowagonmash’s parent company, Transmashholding, for a long time. Liksutov was also a minority shareholder in the company. 

In third place was MISK (short for Moscow Engineering and Construction Company), which is involved in road construction, and its subsidiary IFSK (short for Investment and Financial Construction Company), which received a total of 286 billion rubles (about $3.73 billion) worth of contracts from the city. IFSK secured a significant portion of these contracts from 2011–2015, before it was bought out by MISK. At the time, the company was controlled by Russian oligarch Gennady Timchenko, another friend of President Putin’s. 

Finishing off Moscow’s list of top ten municipal contractors is the EKS Group, which received 64 billion rubles worth of contracts from the mayor’s office. Nothing is known about this company’s beneficiaries. But despite the fact that its owners haven’t been made public, the company has successfully secured contracts in St. Petersburg, Nizhny Novgorod, Yaroslavl, and Tula, as well as in Moscow. In a separate joint investigation, Proekt and Forbes revealed that the company’s real owner could be 36-year-old businessman Maxim Krylov, who is linked to the Rotenberg family. 

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Summary by Grigory Levchenko

Translation by Eilish Hart