The Auditing Chamber Chairman Sergei Stepashin suffered a crushing
defeat on June 22. The team of auditors he had sent to Kalmykia
(in part, with the goal of proving misuse of state funds by President
Kirsan Iliumzhinov) did find some infractions - but these were
so small that they can be handled within standard procedures.
This means that the expected major criminal charges in Kalmykia
are unlikely to materialize.
Allegedly Stepashin was devastated by the team's findings. Not
only because his first major project as head of the Auditing Chamber
has flopped - but because President Putin isn't accustomed to
such obvious failures by his subordinates.
Three months of work by a team of 50 people has been wasted;
even though a blind man could see lawlessness in Kalmykia, as
most of the politicians we asked about said.
Moreover, when Iliumzhinov was invited to attend an Auditing
Chamber meeting chaired by Stepashin, he didn't even deign to
grace it with his presence sending some of his ministers in his
stead, thus telling the senior Moscow official that the President
of Kalmykia had much more important things to do.
The meagre results of all these titanic efforts by the auditors
has been a big disappointment for the Yabloko faction in the Duma,
which has persistently opposed Iliumzhinov; this faction had requested
the audit of Kalmykia.
Nevertheless, Yabloko intends to keep working on Iliumzhinov.
Deputy faction leader Sergei Ivanenko says: "The investigation
by the Auditing Chamber isn't the last word. The fact that some
commission or other didn't find something there isn't enough to
support a definitive conclusion. Yabloko will continue taking
an interest in Iliumzhinov - we will send ten more requests. Water
can erode stone." That may well be true; however, regarding
Kalmykia's off-shore status and misuse of state funds - well,
in Russia it's always been the custom to deceive the Tsar or even
steal from him. The federal government's attempts to expose this
custom and call it by its true name - theft - requires certain
preconditions which simply aren't present in Kalmykia.
In Iliumzhinov's republic the criminal underworld is fairly quiet,
and there is no internal political feuding; therefore, says one
of our Kremlin sources, it's pointless to go digging there: "They
found nothing in Kalmykia - solely because all the loose ends
had been tidied up and hidden well away, long ago. Investigating
and digging things up can only be done where there is a conflict
within the elite and some people are prepared to inform on others.
There is no such conflict in Kalmykia; they're all united. Besides,
Iliumzhinov plays on the Kalmyk people's sense of ethnic identity,
constantly reminding them of the Stalinist deportation era. The
Kalmyks still haven't forgiven Moscow for that deportation."
The Kremlin wants its own person in charge of Kalmykia, as Kalmykia
is very significant strategically. There is a major battle underway
among various ethnic groups in the Caucasus (Kalmykia shares a
border with Dagestan, and Chechnya isn't too far away) and big
business: this republic lies on the shores of the oil-rich Caspian
Sea, and Sibneft has its eye on that (since LUKoil is now weaker
in that region). What's more, Kalmykia has access to the Volga;
and the strategic road from the Volga to the Caucasus runs across
However, replacing Iliumzhinov peacefully - by means of elections,
for example - doesn't seem possible: in the last Kalmykian presidential
election, he received 85% of the vote. This requires a search
for non-peaceful methods - like Stepashin's recent investigation.
But this appears to be water off a duck's back for Iliumzhinov
Iliumzhinov has sole control over all business in his republic
and wouldn't mind expanding onto the federal level. Allegedly
he is theš de facto co-owner of the TV-6 television network, although
this isn't set out in writing - it's just that at one time, he
loaned money to Eduard Sagalaev, former head of TV-6, and can
now demand repayment from TV-6. Rumour has it that the sum involved
is impressive: $8-10 million. Sources at TV-6 allege that Iliumzhinov
wanted to buy the company outright a year ago: however, the main
owner Boris Berezovsky thought it over and refused to sell.
But even without this television station, Iliumzhinov would be
unlikely to find favour with the present Kremlin regime. According
to a source in the Duma: "First of all, the Kremlin is undoubtedly
annoyed by the Kalmykia off-shore zone. Since 1995, Kalmykia has
had a system whereby all local taxes for non-residents are replaced
by a quarterly payment of $300 to the Development and Cooperation
Agency (ARIS). At present, five or six thousand such non-resident-banks
and other enterprises are registered in Kalmykia. Iliumzhinov
calculated that there was no point in collecting local taxes,
especially when there's no one to collect them from, if he can
get more money by registering these off-shore companies (up to
$10 million a year). The federal government can't do anything
about this at present, as this is not illegal. But the situation
is difficult to accept, as such arbitrary taxation practices strike
at the state's financial system and regional economic development.
Consequently tax reform plans place a priority on stamping out
regional off-shore zones. The second thing that irritates the
Kremlin is caviar: Kalmykia is considered the centre of illegal
caviar production and black-market exports. The third factor is
Kalmneft (Kalmykia Oil). With the help of a decree issued by Yeltsin,
Iliumzhinov managed to separate from Rosneft all its resources
in Kalmykia, and create his own Kalmykian oil company."
If all this is true, is Stepashin's Auditing Chamber strong enough
to take on such a powerful figure? Viktor Pokhmelkin of the Union
of Right-Wing Forces faction, a member of the Duma Legislation
Committee, has his own opinion: "Quite possibly, the Kremlin
initially issued the command to put the squeeze on Iliumzhinov
- but later on, during the audit, the Kremlin may have changed
its mind, or both parties reached some kind of agreement. Honour
among thieves is the law behind the nomenklatura's existence,
especially in the Russian state. The point is that a show of trying
to cleanse the ranks must be maintained for the Russian public
and the international community; but in reality, no one who enters
this nomenklatura game and abides by its laws (allowing theft
while saving face) will ever fall out of play - and that's what
is happening with Iliumzhinov."
Yabloko faction member Valerii Ostanin adds: "The prime
minister of Kalmykia was unable to answer when asked how the controlling
interest in Kalmneft was bought out for virtually nothing, and
how Kirsan Iliumzhinov's brother ended up owning the company.
In response to all my requests for information, I am told: well,
since the state doesn't hold an interest in this company, you
- even as a Duma deputy - don't have the right to request commercial
information about the participants or shares of participation.
Iliumzhinov's favourite football club, Uralan, has received 70.2
million roubles in state funding - which is two-and-a-half times
more than has been spent on education in Kalmykia, including child
welfare payments. Look what happened in one of the cases when
criminal proceedings were instigated over infringements by ARIS:
although the former prosecutor of Kalmykia undertook to deliver
the evidence personally to the General Prosecutor's Office, somehow
he had an accident along the way - and the criminal case burned
up along with the car. The former prosecutor got off with a scare,
only losing his job as prosecutor."
Whether the Kremlin will succeed in depriving Iliumzhinov of
power is highly debatable. In any case, the presidential administration's
grandiose plan - to replace Iliumzhinov with Alexandra Burataeva,
former TV star and now Duma deputy - is further evidence of the
over-active imagination of Kremlin strategists.
Murder of Larissa Yudina. Chronicle of Events
Road to Corruption