Corruption

It is an open secret that the Russian defense industry is an important trough at which senior officials feed, and weapons sales continue to enrich many. Defense analysts attribute Russia's decision to sell weapons that the Venezuelan military objectively did not need due to the interest of both Venezuelan and Russian government officials in skimming money off the top. The sale of Su-30MK2 fighter-bombers was cited as a specific example where corruption on both ends facilitated the off-loading of moth-balled planes that were inadequate for the Venezuelan Air Force's needs.

In the post-perestroika period, following the collapse of the Soviet Union, a myriad of jokes emerged about a new class of corrupt businessmen and gangsters called “New Russians.” When Russia transitioned to a free-market economy, these men became overnight millionaires because they employed criminal tactics to get rich quick. They are stereotypically depicted as overweight men dressed in gaudy, crimson suits and gold chains, driving around in luxury cars and bragging about their newfound wealth.

The size of Russia's shadow economy was equal to 20 percent of the GDP last year, media reported 22 Febreuary 2019, citing the Rosfinmonitoring state financial watchdog. The watchdog recorded 20.7 trillion rubles ($315.9 billion) in undeclared imports and income taxes, as well as under-the-table salaries and other suspicious transactions, in 2018, the RBC news website reported. That amounts to a little under 20 percent of Russia's 103.6 trillion ruble GDP, the news outlet said. The value of the shadow economy rose slightly from 2017, when it was estimated at 18.9 trillion rubles. Meanwhile, in 2016, the shadow economy was estimated as having a value of 24.3 trillion rubles, or 28 percent of GDP. The 20.7 trillion ruble shadow economy last year was bigger than the 18 trillion rubles allocated to total federal budget spending in 2019.

Kremlin critic Alexei Navalny's team released a report 19 Janaury 2021 about a sprawling, opulent Black Sea palace allegedly owned by Russian President Vladimir Putin. The YouTube feature, accompanied by a blog post from the jailed dissident, claims Putin's property cost $1.35 billion (€1.1 billion) and was paid for "with the largest bribe in history." The video, released less than two days after Navalny was arrested at Moscow's Sheremetyevo Airport and subsequently jailed. It alleges that the private estate is 39 times the size of Monaco. Among the facilities it is said to boast are an ice rink and vineyards, with the sprawling mansion containing a theater and casino. Described as the "most expensive palace in the world," the palace complex spans some 7,800 hectares (about 19,300 acres), and also includes a church, an amphitheater, a teahouse and a helipad. The palace was allegedly funded through an elaborate corruption scheme involving Putin's inner circle in return for favors.

Kremlin spokesman Dmitry Peskov said the allegations were old but that the property, near the resort town of Gelendzhik, did not belong to Putin. The allegations were first made in 2010 by Sergei Kolesnikov, a businessman with connections to Putin before his time in politics. On paper, the property appears to be owned by businessman and billionaire Alexander Ponomarenko. The enterprising Russia journalist Maksim Iksanov actually went to the 'palace' and talked with the people working there. His video shows that the 'palace' is still an empty concrete shell with dozens of workers busy with drilling into concrete walls and setting up basic installations. All the pictures showing luxury interiors, as it turns out, are the work of computer graphic specialists from the German film studio Black Forest Studios.

According to Transparency International's 2009 survey, bribery cost Russia USD 300 billion a year, or about 18 percent of its gross domestic product. Corruption in Russia is systemic -- it is the rule rather than the exception, unlike in the West or even the Orient, where incidents of corruption are commonplace but are usually fairly quickly exposed by an independent press or uncompromised law enforcement organs. While it is true that corruption stories appear constantly in the Russian press, the authorities, as a rule, do not react to them. There have been no cases in the last decade when a prime minister or even a cabinet minister resigned under public pressure because of corruption scandals, as has happened in, for example, Israel, France, Spain, Germany, South Korea, India, and Pakistan.

The rising corruption in Russia is a most remarkable development. Corruption usually declines as a country grows wealthier, and in most other post-communist countries it has declined. But according to Transparency International, the only country in the world that is both richer and more corrupt than Russia is oil-rich Equatorial Guinea. Evidence indicates the scope and scale of official corruption in Russia have grown markedly in the past several years. The increased role of the state in the Russian economy has been accompanied with rising corruption.

There was a rapid increase in crime and corruption in Russia after the collapse of the Soviet Union. By one 1995 estimate, Russia faced more than 5,000 gangs, 3,000 hardened criminals, 300 organized crime bosses, and 150 illegal organizations with international connections. Approximately 40,000 Russian business and industrial enterprises were controlled by organized crime.

Corruption has been critically high in Russia and only worsened in 2003, according to a report by the Berlin-based corruption watchdog group Transparency International. Russia ranked 88th of the 133 countries included in the group's annual Corruption Perceptions Index, on par with Algeria and Pakistan. Finland held on to the previous year's top spot as the least corrupt country and Bangladesh ranked the last. In the past two surveys, Russia also found itself toward the bottom of the heap, ranking 79th out of 91 countries in 2001 and 82nd out of 99 in 2000.

Whistleblower Sergei Magnitsky died in jail in 2009. Magnitsky, a lawyer who worked for Russia’s largest Western investment firm, Hermitage Capital Management, claimed he'd uncovered a massive $230 tax fraud scheme involving Russian Interior Ministry officials. Magnitsky, 37, was later arrested on corruption charges by the same officials he accused of tax fraud. He was held in jail without trial until he died of pancreatitis. In 2012 jail doctor Dmitry Kratov was found not guilty of negligence in the death. An investigation by Russia’s Human Right’s Council found Magnitsky was denied treatment and severely beaten before he died. Russian authorities have held no one responsible for Magnitsky's death.

Magnitsky’s case prompted US lawmakers to pass the so-called Magnitsky Act, which bars Russian entry into the United States if they have been accused of human rights violations. In retaliation, Russia passed legislation banning Americans from adopting Russian children.

The National Anti-Corruption Plan for 2012–2013 contains guidance and recommendations for the government on counteracting corruption, including the establishment of a legal framework for lobbying and increasing the transparency of state officials’ personal finances and acceptance of gifts. Specifically, the bill will require all civil servants to declare large expenditures or face termination. These officials must also present information on the expenditures of their spouses and children if the expenditures involve acquisitions of land, vehicles or securities. Expenditures that do not match the declared income will be investigated by law enforcement agencies. If an individual fails to prove that the property in question was acquired legally, the property will be confiscated and turned over to the state. Bribing a public official has been illegal in Russia since May 2011