Russian Minister Arrested Amid Largest Putin-Era Corruption Scandal
Mr. Ulyukayev (center) was seen as a pro-reform economist in Putin's circle.
The Russian Minister of Economic Development, Alexey Ulyukayev, was arrested on November 15 in Moscow on corruption charges. He is accused of extorting a $2 million bribe from from the state-owned oil company, Rosneft. Russia’s main federal investigative authority, the Investigative Committee, announced that Ulyukayev had received the money in exchange for facilitating a deal between Rosneft and another state oil firm, Bashneft.
On October 12, TASS reported that Rosneft had acquired a 50.08 percent majority stake in Bashneft for $5.2 billion. Ulyukayev once opposed the deal, along with Prime Minister Medvedev. They argued that the transaction would do nothing to reduce the share of the economy controlled by the government, which is already at 75 percent. However, President Vladimir Putin said that this was not an issue and insisted that Bashneft would go to the highest bidder. He assured that the government would privatize 19.5 percent of Rosneft, the giant purchasing company, in the near future.
Russia is in the midst of its worst recession in 16 years and suffers from significant budget gaps due to low oil prices. As a result, the Kremlin is pursuing a policy of privatization for state-owned firms in an effort to raise additional cash for the government budget.
The alleged bribe was designed to secure Ulyukayev’s support for the crucial deal. According to Svetlana Petrenko, deputy head of the federal anti-corruption agency, he was “caught red-handed” while receiving the payment. After being detained in the middle of the night, a Moscow court placed him under house arrest for two months. President Putin signed a decree dismissing Ulyukayev from the government, citing a “loss of confidence,” and the Investigative Committee said it was opening a criminal case against the now former-Minister on the charge of “large scale-bribery.”
Moscow business and government elites were stunned by the news. The 60-year old is the highest-ranking official to be arrested while in office since the collapse of the Soviet Union.
Many point to infighting among senior officials as reason for the arrest. Igor Sechin, Rosneft’s chief executive, is a known friend and close ally of President Putin. Tatyana Stanovaya, a political analyst at the Institute of Modern Russia, holds the view that Ulyukayev’s initial opposition to the deal was enough to anger the powerful Putin confidant. She described Ulyukayev as a sacrificial lamb and said, “The choice of Ulyukayev as a victim was dictated by the fact that he was the weakest link and stood against the privatization of Bashneft by Rosneft.”
More broadly, conservative and nationalist factions in the ruling class have long disliked Ulyukayev’s economic liberalism and pro-Western stance. Some consider his arrest to be a reflection of the wider campaign against liberals in Kremlin top ranks. The parallel to Soviet purges is easily drawn, and many see the arrest as Putin’s newest warning to members of his government not to step out of line.