November 4, 2012: Russian efforts to curb corruption have, not unexpectedly, encountered problems at, or near, the top. Recently, the government corruption agency (SKR) indirectly accused defense minister Anatoly Serdyukov of corruption because of privatization effort Serdyukov, and his patrol Vladimir Putin, pushed. This effort took a lot of the non-military property (including valuable real-estate farms, factories, and other business) owned by the military, along with military support operations and put them in a separate commercial company (Oboronservis). In theory this was more efficient and cut off a major source of corruption in the military. Serdyukov got the Defense Ministry job because he had been successful at running the tax service for five years and was considered one of the few senior officials who was not corrupt and could be depended on to get things done.

Now the SKR has accused some of those running Oboronservis of corruption, to the tune of over $100 million stolen. But here’s where it gets interesting. Serdyukov has made a lot of enemies among the generals and admirals in the armed forces. Some of these officers were upset by the reforms (dumping old Soviet methods and adopting Western, often American ones). Many officers were corrupt and afraid that Serdyukovs efforts would result in prosecutions. The officers were also insulted that Serdyukov brought in a lot of trusted managers from the tax service, many of whom were smart, tough, and sometimes very attractive women. This offended the macho atmosphere in the military. There are also nasty rumors of Serdyukov having sexual relationships with some of his female executives. This is a popular accusation because Serdyukov’s father-in-law is also a senior government official said to be embarrassed by stories of Serdyukov having a “harem” at the defense ministry. Meanwhile, the corruption and reforms continue. Worse, the defense budget is getting much larger, going from $67 billion this year to $100 billion three years from now. All that money is supposed to revitalize the armed forces but resistance and corruption by so many officers and defense ministry officials is trying to wreck the reforms and steal much of the additional money.

Corruption investigators believe that about 20 percent of the military budget is lost to corruption and outright theft. So just spending more money on the military is not an easy fix either. Worse, many, if not most, Russian arms manufacturers are corrupt and incompetent. This has gotten so bad that many reform minded generals and admirals prefer to buy foreign weapons. This means paying more but the quality is much higher and you get stuff on schedule.

For most of last year Russian president Dmitry Medvedev publicly criticized the Defense Ministry for delays in spending money for new weapons and equipment. This set off all sorts of finger pointing and accusations. Ballistic missile firms claimed that missiles could not be built as fast as the government wanted because the Defense Ministry would not sign purchase orders on time. Defense Minister Anatoly Serdyukov responded that the purchase orders had not been signed because the prices had gone up sharply and the suppliers would not explain why. Serdyukov had been ordered to root out corruption in the Defense Ministry and was confronted with a perfect storm of incompetence, corruption, and pressure from above to "make things happen." This is not the first time Medvedev has had problems with the Defense Ministry leadership and the senior officers who came up during the Soviet days. The message does not appear to be getting through.

Trying to clean out the corrupt officers has been difficult. A year ago the president of Russia ordered an extensive financial audit of senior generals and admirals. The auditors found corruption and irregularities in every branch of the military. Not so much outright theft, but more using ones rank and connections to start businesses on the side. Some of these enterprises made the officers quite wealthy. It was found that they went to great lengths to hide this additional outcome by parking it overseas and putting them in the name of wives, children, or other kin. The auditors also found that when these senior officers were caught, the most severe punishment they received was to be retired from the armed forces. They kept their modest pensions and all the money they had embezzled. Some officers who stole money or equipment were caught and received harsher punishment. There were also other officers who seemed to have more unreported income than their secret businesses indicated. The extra cash was probably from bribes.

This audit did not dig deep and uncovered only a small portion of the offenders and their offenses. This makes it obvious that to cast the net wider and to dig deeper will surely uncover thousands of senior officials guilty of corruption. Is the government willing to go this far? There is growing pressure from below to take the investigations farther. But to do so would cause enormous disruption to the senior leadership of the government and the military. It might even induce a coup by the many corrupt officers and officials. What is to be done?

Many of the corrupt acts are pretty basic stuff. For example, earlier this year a Russian military prosecutor accused a military procurement official of stealing $100,000 by obtaining a cheap second-hand anchor instead of the new one needed for the aircraft carrier Admiral Kuznetsov. The corrupt official obtained forged documents for the defective anchor, although the substitute anchor was the wrong size and obviously not new. Sometimes this sort of thing, along with a few bribes, works. But this time it didn't. The Kuznetsov has been sent back to the shipyard several times during the last decade to fix problems and update equipment. Much was wrong with the ship, due to poor design, workmanship, or corruption and lackadaisical sailors are threatened with being sent to serve on the Kuznetsov as a way of motivating them.

Military prosecutors learned to pay attention to the Kuznetsov when it was being worked on because someone was usually trying to run a scam, and several of the corrupt officials or contractors have been prosecuted. Many have not, and the Kuznetsov continues to have problems with missing or malfunctioning equipment. This not only degrades the combat capabilities of the ship but also its habitability. At times there was no heat in the living quarters and many of the toilets didn't work.