Leadership: The Fatal Shame Of Russia


July 6, 2013: Russian prosecutors have finally completed their investigation and prosecution of those responsible for one of the most notorious cases of military corruption in Russian history: the use of obsolete and counterfeit parts in Russian warplanes built by Russian manufacturers. The last act of this prosecution was to give a suspended sentence to one of the corrupt officials who cooperated with the prosecutors and provided information on who was involved and how the scam worked. It all began in 2007, when Algeria told Russia that it was cancelling the recent $1.3 billion purchase of 28 MiG-29 fighters and returning the ones already delivered. Algeria insisted that there were quality issues and that some of the aircraft were assembled from old parts. At first Russian officials refused to believe the Algerians a year later, and after actually looking into the situation Russia agreed to reverse the sale. The government then bought the 28 MiG-29s from the manufacturer to prevent the MiG Aircraft Corporation from going bankrupt. At the same time the government began an investigation of the aircraft industry. Within two years several aviation company executives were tried and convicted for passing off defective, or used, aircraft parts as new. Many of these parts made their way into MiG-29 jet fighters that were sold to Algeria.

The MiG-29 has been in service for three decades and stocks of Cold War era spare parts are still around, and it was first thought that some were put to use to build the Algerian aircraft. The Algerian MiG-29s were supposed to be "new," but some of their components were definitely not. Some MiG employees were very unhappy with the corrupt practices involving aircraft parts. This sort of crime often extends to parts for airliners. The MiG employees felt personally responsible for any defective aircraft leaving their plant and didn't want to be flying in an airliner containing fraudulent parts either. Russian prosecutors, already involved in an anti-corruption program underway for several years, jumped on the allegations and quickly found senior executives presiding over widespread fraud in the aircraft components industry. Some of these officials managed to avoid jail but not because they agreed to cooperate. But several others did go to prison and lost their personal wealth to pay heavy fines.

The publicity this scandal received caused the government to look more intently into the counterfeit or defective aircraft parts situation. Russian aviation officials were alarmed when, upon inspecting 60,000 aircraft parts, they found that nearly a third of them were counterfeits. While most of the substandard fake parts came from neighboring countries, many were made in Russia. China wins first place when it comes to stealing technology and producing counterfeit goods, but Russia is solidly in second place, turning out about a third as many counterfeit goods as China. Russia's neighbors, many former parts of the Soviet Union, have the same bad habits. But Russia and China together produce about 80 percent of counterfeits. Using old and now substandard parts was just one variation on the crime of selling bad (cheap) parts as good (much more expensive) stuff.

Western nations would like to get both Russia and China to crack down on the counterfeiting. That has not been easy. In both countries the counterfeiting is a multi-billion dollar a year industry, run by guys who know how to bribe the right politicians. The counterfeiters have another incentive to keep the prosecutors at bay, counterfeiting kills. Phony medicines and aircraft engine parts have both been linked to deaths in Africa and Asia, where the imitation goods are often sold. If brought to justice, Chinese and Russian counterfeiters would likely be executed.





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