VZCZCXRO2819
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHMO #2823/01 3231507
ZNY CCCCC ZZH
O 191507Z NOV 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5426
INFO RUCNCIS/CIS COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHEHNSC/NSC WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 002823

SIPDIS

STATE FOR EUR/RUS, EEB
NSC FOR MCFAUL

E.O. 12958: DECL: 11/18/2019
TAGS: ECON PGOV PINR RS
SUBJECT: EXPERTS REMAIN SKEPTICAL OF GOR'S ABILITY TO
REDUCE CORRUPTION

REF: A. 08 MOSCOW 3775
¶B. 08 MOSCOW 3363
¶C. MOSCOW 1450

Classified By: Econ MC Matthias Mitman for reasons 1.4 (b. and d.)

-------
Summary
-------

¶1. (C) In a nod to President Medvedev's 2008 anti-corruption
legislation, Transparency International's Corruption
Perceptions Index ranked Russia at 146, up one spot from its
2008 147th ranking.  This general lack of progress confirms
what analysts have told us.  Corruption in Russia remains a
serious problem, despite Medvedev's public denouncements and
efforts to reduce it.  This presents a quandary for the GOR
as it decides how to proceed.  Dramatic steps might threaten
the status quo, yet gradual steps so far have been
ineffective.  End Summary.

-------------------------------------
Russia's Corruption Rankings Stagnate
-------------------------------------

¶2. (SBU) Transparency International released its 2009
Corruption Perceptions Index on 17 November.  Russia was
ranked at 146 (it was ranked at 147 in 2008), which
Transparency International said reflected a "mildly positive"
response to Medvedev's 2008 anti-corruption legislation.
Russia's 2009 rank, however, is still below its 2007 rank
(143) and far below its 2006 rank (121).  These results echo
the World Bank's Worldwide Governance Indicators, with
Russia's rankings on "control of corruption" showing a steady
annual decline since 2005.

¶3. (SBU) President Medvedev has repeatedly stated that
corruption is endemic to Russia and has made fighting it a
signature issue for his presidency.  He has highlighted
consistently the damage corruption has done to Russia, most
recently in both his high-profile "Forward Russia" article in
September and his 12 November address to the Federal
Assembly.  Beyond the anti-corruption legislation promulgated
last year, however, few practical steps have been implemented.

--------------------
Elite Losing Control
--------------------

¶4. (C)  Furthermore, there is growing consensus among
analysts that even if the power elite wants to tackle
corruption, the economic crisis has exacerbated tendencies
towards unmanageability of corruption within the power
vertical.  XXXXXXXXXXXX
XXXXXXXXXXXX, told us that the GOR may have waited
too long.  XXXXXXXXXXXX said that a few years ago, when only
millions had been "stolen" from the Russian people (as
opposed to today's billions), the GOR could have acted and
not sparked public outrage.  XXXXXXXXXXXX said that the crisis had
made the GOR's task more difficult and the scope of
corruption has become unmanageable.  As the crisis reduced
the size of the pot and the anti-corruption rhetoric
increased, some Russians felt that they had best grab as much
as they could while the going was good.  XXXXXXXXXXXX
XXXXXXXXXXXX, noted that the tendency of
corruption to evade control by the GOR was not new.  In 2006
-- at the height of Putin's control in a booming economy --
it was rumored within the Presidential Administration that as
many as 60 percent of his orders were not being followed.

--------------------------------------------- ---
Do Changes At Interior Ministry Signal Progress?
--------------------------------------------- ---

¶5. (C)  XXXXXXXXXXXX noted that Minister of Interior Rashid
Nurgaliev had recently fired or brought charges against a
number of relatively low-ranking law enforcement officials
for corruption.  XXXXXXXXXXXX stated though, that it was too soon to
judge whether this activity reflected real change.  XXXXXXXXXXXX
XXXXXXXXXXXX, argued that Nurgaliev's actions were not
meaningful.  He stated that action was required from higher
up the power vertical and needed to affect the strata that
average Russians would consider "untouchable".

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MOSCOW 00002823  002 OF 002

Can Russia's Trajectory Be Changed?
-----------------------------------

¶6. (C) XXXXXXXXXXXX
XXXXXXXXXXXX, said that only a "revolution" could change Russia's
current trajectory.  He argued that the system had become too
sclerotic and too beneficial for too many to allow for
change. XXXXXXXXXXXX noted that corruption had even become a
positive factor for a substantial portion of society.  By
taking merit out of the equation for success, it was simply
easier to pay for entrance to a university, for a contract,
etc.  XXXXXXXXXXXX, who has made a fortune in Russia's
casino business, told us forthrightly that the "levels of
corruption in business were worse than we could imagine" and
that, after working here for over 15 years and witnessing
first-hand the behavior of GOR officials at all levels, he
could not imagine the system changing.

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Comment
-------

¶7. (C) Corruption in Russia remains pervasive and
deep-rooted.  While Medvedev's anti-corruption rhetoric is a
step in the right direction, we have yet to see significant
implementation of new measures.  Russians appear to accept
current levels of corruption and seem inclined to pay up or
emigrate, rather than protest.  Neither have Russians reacted
to the sight of the connected few continuing to indulge in
luxurious lifestyles as the economic recession continues to
leave most Russians worse off than they were two to three
years ago.  Nonetheless, the commentary on the GOR's
increasing inability to manage the scope of corruption bodes
ill for its stated effort to enhance corporate governance and
investor confidence.
Beyrle