The battle for power and influence in Russia is intensifying. In November 2016, the Minister of Economic Development Alexey Ulyukaev was arrested on corruption charges and the acceptance of a nearly $2 million bribe. According to Russian state-controlled media outlets, the bribe was received by Ulyukaev to give the green light for the privatization and the purchasing of a majority stake in smaller state oil producer BashNeft by one of the oil and gas giants Rosneft.
The arrest of Ulyukaev was an extraordinary event to which this article puts forward a possible explanation. Why extraordinary? The last incident when a national-level minister was involved in a corruption scandal, which caused his dismissal, was Soviet Minister of Internal Affairs Nikolai Shchelokov, in 1982-1983. He was accused of involvement in mass corruption schemes, clientalism, bribery, and illegal private usage of state property. For many in Russia, the current situation is a re-play of the past. Considering that corruption in Russia, among public officials of all levels, is rampant, a question arises: if the arrest of Ulyukaev is truly the result of anti-corruption efforts by Russia’s government, why was Ulyukaev arrested as opposed to any other high-ranking official? Scandals about corrupt high-ranking officials, involving even larger sums, are a normal occurrence in Russia, but only Ulyukaev is investigated and arrested. This seems suspicious. One of the answers can be that in the current economic downturn and political turmoil, the battle for control over Russia’s strategic economic sectors and political influence is heating up. First, let us explore the details of the privatization deal involving BashNeft.
BashNeft, a previously state-owned corporation, is one of the major oil producers in Russia. Initially, Ulyukaev and President Vladimir Putin did not look favorably upon the privatization of BashNeft. Such a move would not only relinquish some of the Russian government’s power over the most important sector of the economy, oil and gas, due to privatization, but also give Rosneft, the largest Russian oil producer, even greater influence over the strategically-important energy sector and thus, politics. Putin was slow to agree with Rosneft’s CEO Igor Sechin that the privatization and majority stakeholder deal is a good idea. Putin feared that increasing Rosneft’s monopoly over the oil sector would mean a further concentration of power in the hands of Rosneft and would increase Sechin’s personal influence in Russian politics. The privatization of BashNeft, however, was a necessary transaction as the Russian government must sell assets to fill the substantial budgetary hole. Ultimately, Putin gave the green light for the deal between Rosneft and BashNeft while Ulyukaev, although reluctantly, followed in the President’s footsteps to demonstrate administration solidarity.
Everything was going according to Igor Sechin’s plans: Putin and Ulyukaev were both officially on board with the BashNeft deal. According to some news sources, however, it is likely, that Sechin wanted to exploit the deal as part of a bigger plan to gain more political influence. This was an opportunity for him to knock out the Minister of Economic Development, who created a barrier for the expansion of the Rosneft empire, once and for all. The $2 million bribe seems convenient. It is possible to publically frame this corruption scenario, as the state-run media logically has done, as Ulyukaev having received the bribe for the deal to which he was initially opposed. Thus, there is a motive for accepting the bribe.
Russia is in a period of substantial economic and political turbulence. High-ranking officials are fighting over political turf and control over strategically important resources, such as oil and natural gas. In a state like Russia, whoever controls natural resources, controls the political agenda. Igor Sechin has been able to eliminate the all-powerful Minister of Economic Development and expand his influence within Russia. Since the arrest of the Minister is a recent incident, it is difficult to assess the immediate impact of such an event on Russia’s foreign policy. It is interesting to ask, however, will such a major shift in economic and political influence domestically have a spillover effect on Russia’s foreign policy?
Dani Belo specializes in Russian foreign policy and NATO-Russian relations. He is a first year MA student at the Norman Paterson School of International Affairs specializing in Conflict Analysis, Management and Resolution. He holds a BA (Hons.) in Political Science and International Relations, and a Minor in Russian Studies, from the University of British Columbia in Vancouver, BC. Dani’s research focuses on Russia’s foreign policy and strategy vis-à-vis NATO in Europe and the Arctic region.
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