How a Kremlin ‘curator’ launched a huge corruption feeding frenzy for Russian officials in the occupied Donbas

27 July, 11:45 PM
An ironic collage depicts Russian dictator Vladimir Putin and his main curator for Ukraine Serhii Kyriyenko putting their corrupt tentacles in Ukraine's Donetsk and Luhansk oblasts (Photo:NV collage)

An ironic collage depicts Russian dictator Vladimir Putin and his main curator for Ukraine Serhii Kyriyenko putting their corrupt tentacles in Ukraine's Donetsk and Luhansk oblasts (Photo:NV collage)

The Kremlin's "curator of Ukraine" Serhii Kyriyenko came up with the idea that Russian regions should take “patronage” over the temporarily occupied parts of Ukraine.

This has set off a corruption-feeding frenzy among officials of the Russian Federation.

Ukraine’s Russian-occupied Donbas is becoming a new – and very large – breeding ground for corruption among representatives of the authorities of the occupying country. According to Ilya Ponomarev, a former member of the Russian State Duma who is now a citizen of Ukraine, “the middle and lower level of Russian officials will be enriched” by the occupation.

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The grounds for this were laid by an initiative launched on May 19 by one of the key “curators of Ukrainian issues” in the Kremlin – Serhiy Kiriyenko, head of the internal political bloc of the regime of Russian dictator Vladimir Putin.

At that time, Kiriyenko declared that the Russian regions would take “leadership over the districts, municipalities of the Donetsk and Luhansk People's Republics” – the sham statelets created by Russia in the Donbas in 2014.

Russian opposition publications attributed the authorship of the idea to the dictator Putin himself, saying such a practice has been well known since Soviet times.

“Russia will help the LPR and the DPR, but it will take years to bring things into order,” the Kremlin master himself later said.

The cost of this system, according to the most conservative estimates, could reach trillions of rubles. However, the Kremlin has shifted this financial burden to the regions of the Russian Federation.

At first, the latter was unenthusiastic. Russian opposition journalist Andriy Pertsev, who follows this topic on the Meduza website, explains: At the end of June, only 20 of the 85 subjects of the Russian Federation had dared to take on patronage of certain occupied regions of Donbas.

The Kremlin did not like this passivity, Moscow insisted, and now, according to Russian propagandists, 10 more regions of the occupying country have joined the process. 

A woman walks by a destroyed building in Russian-occupied Mariupol (Фото: REUTERS/Alexander Ermochenko)
A woman walks by a destroyed building in Russian-occupied Mariupol / Фото: REUTERS/Alexander Ermochenko

For example, the Altai Territory allegedly took under its “control” the Slovyanoserbsiky District of the “LPR”, and Bashkiria – the city of Kryshtaleviy – in the south of Luhansk Oblast.

There are pros and cons in the patronage system: On the one hand, subjects of the Russian Federation do not want to take on new expenses. On the other hand, such large-scale programs give Russian officials the opportunity to make a lot of money from bribes and kickbacks.

Konstantin Skorkin, a Russian expert at the Carnegie Center, explains: “The patronage program is a test of the loyalty and initiative for the heads of the Russian regions. But they don’t have free monetary resources unless we are talking about the leaders of Moscow and the oil and gas-bearing regions.

And if you take money for patronage from local budgets, it will automatically lead to a serious curtailment of regional programs – in some subjects of Russia, for example, projects for the construction and repair of highways are already being canceled.”

For example, in Russia’s Kursk Oblast, money “for the Donbas" comes from the regional reserve fund, while the authorities of Bryansk Oblast and Bashkiria have stated that they are allocating the funds from “extra-budgetary sources,” Skorkin says.

Many other Russian regions are still counting on contributions from large local businessmen who are loyal to the governors and work under budget contracts, according to Pertsev. In the same way, “black” party coffers are filled at election times.

And this is where the second, corrupt side of this entire scheme comes into view: As Ponomarev explains, officials in Russian regions are interested in maximizing the number of funds that their regions allocate for “patronage.” This is because it will involve large-scale construction work, from which it has always been easy to take kickbacks and secure other corrupt earnings – especially so since the “underbosses” in the Donbas are unlikely to complain to Moscow.

“It will be a flow of money that cannot be counted," Luhansk businessman Yevhen, close to the occupation authorities of the region, told NV on condition of anonymity. 

“The Russian governors have money, but it is difficult to ‘release’ it so as not to arouse the suspicion of the inspection authorities,” the businessman said.

“But to send away these sums because of the war, on all of all these aid (projects) and business trips, and then to withdraw them back again to Russia to controlled accounts is an excellent option for earning money.”

“It is important to fire the imagination of the big bosses,” Ponomaryov clarifies. “To say that in order to subjugate these large territories, it is necessary to spend on a large scale.”

“And, in addition, the national pride of the Great Russians will be in play: They will say that the Ukrainians destroyed everything, and now we will have to rebuild it. Therefore, these numbers will work very well for everyone in power."

But this “banquet during a famine,” as Ponomaryov says, will be paid for by ordinary Russians of those regions whose governors launch large-scale Donbas patronage programs – by a deterioration in their standards of living in Russia.

Corruption season opens

Work on the “restoration of the Donbas” has already begun. The juiciest pieces – infrastructure facilities – are handled by the headquarters of Vice Prime Minister of the Russian Federation Marat Husnullin, who is a major lobbyist for the construction industry. 

The so-called Unified State Customer for State Buildings, which is subordinate to the Ministry of Construction of the Russian Federation, is the general contractor for such work. The general contractor builds facilities in Russian regions, which are financed from the federal targeted investment program.

“Corruption is inevitable here, as in any large-scale infrastructure project,” explains Skorkin of the Carnegie Center. 

“That is why Kyriyenko's people are appointed to the ‘governments"’ of the ‘LPR/DPR’ to monitor the expenditure of funds, that is, they will make sure everything goes into the right pockets. Plus, they will ensure that the locals don't profit too much from this.”

He cites the example of one of the structures that will make money from construction in the occupied region – the St. Petersburg Renaissance company, which will be engaged in the “restoration” of Mariupol, as the former city of Leningrad has taken over the “patronage” of this city.

The company is already hiring workers in Russia, promising them salaries of RUB 70,000-100,000 per month (U.S. $1,200-1,700).

St. Petersburg Renaissance is owned by Ivan Orynchuk, a native of Ukraine, who is close to the government and has experience working with lucrative government contracts – the firm participated in the restoration of the Kremlin towers, Skorkin says. At the same time, the company has been involved in a string of criminal cases related to improper performance of work, fraud and non-payment of salaries to workers.

In Mariupol, Orynchuk says he will be engaged in the “restoration” of Zhovtnev District, rebuilding a philharmonic concert hall, a children's center, a theater, parks and other objects.

“It should be understood that the court Kremlin oligarchs are not interested in such small projects regarding the “restoration” of the Donbas,” says Ponomaryev. “They need billion-dollar constructions. People whose names you don't know steal these (other) recovery tasks. These are, for example, deputy ministers, individual governors, and vice-governors for construction work.”

Luring in workers

The Kremlin is now not only trying to “restore” the occupied Donbas regions at the expense of the Russian regions but also trying to provide the region, which has been emptied of people by the war, at least with some working hands.

As the Luhansk businessman Yevhen said, Russian workers have begun to be brought to the occupied territories. And these are not just builders: the cities of the region need to be serviced, and winter and a lot of resulting destruction from the weather are also ahead.

“The local men are at war, and how long (the war) will last – no one knows: The locals will not be released from the front until the very end,” says Yevhen. According to him, Russians go to the occupied Donbas to work, as a rule, on a temporary basis.

“For them, our life is just a paradise. They have never seen anything like this: There are roads, delicious food, low prices, and communal utilities that cost pennies. Well, they take their families with them. There is a lot of housing, a lot of people are buying now," says the Luhansk businessman.

People from all over the Russian Federation are being drawn to the occupied region. The U.S. newspaper The Washington Post wrote that teachers from Chuvashia, a region on the right bank of the Volga near Tatarstan, who receive a salary of about $550 a month at home, are promised $2,900 per month when they move to Donbas.

According to the publication, already about 250 teachers from 57 of the Russian republics, including from Dagestan, have signed up for temporary work in the occupied regions of eastern Ukraine. They are offered good conditions – in food and payments – of RUR 8,000 per day ($130).

The Russian Federation is also thinking about somehow redirecting the flow of labor migrants from Central Asia to the occupied territories in Ukraine, as the Russian market is stagnating.

Skorkin from the Carnegie Center says that workers from the Russian Federation will indeed be imported – primarily because the Donbas has experienced catastrophic population loss. 

According to his information, specialists are being actively recruited throughout Russia, including lower and middle managers, through offering them double salaries and social benefits.

“(But) so far, there is no question of the mass replacement of the population, as the Donbas is unattractive due to the war,” explains Skorkin.

“Rather, these are temporary workers.”

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