CORRUPTION Syndromes of Corruption

128 Syndromes of Corruption
simply lent the government’s own deposits back to it), and the ‘‘auctions’’
that followed were rigged. Foreign bidders were barred while oligarchs
colluded on their bids, dividing major assets among themselves at extremely
low prices. The loans were made before the 1996 presidential
election, in which Boris Yeltsin faced significant challenges, while the
resolution of the scheme took place after. The loans enabled Yeltsin to
make good on public obligations, pay some back salaries, and finance his
campaign at a level one hundred times higher than the legal limit. The
oligarchs, meanwhile, acquired an interest in Yeltsin’s re-election so that
the scheme could be seen through to conclusion (Freeland, 2000:
169–189, 194–195; Reddaway and Glinski, 2001; Shelley, 2001: 246;
Hudson, 2004).
Another more specific scheme involved Russia’s aluminum industry.
In the mid-1990s a syndicate led by Oleg Deripaska and ‘‘Yeltsin family’’
backers used corrupt influence, rigged bids, and the threat of violence to
take over the industry at knock-down prices. Entrepreneurs in other
industries, not all related to metals production, have complained more
recently of legal and illegal pressures, and outright threats of violence,
from those same forces seeking to expand the aluminum empire.
Aluminum production requires large amounts of electricity: one reason
why Deripaska’s clan acquired major influence in the energy sector as
well (Ivanidze, 2002; Tavernise, 2002a; Reut and Rubnikovich, 2003).
Evidence of corruption was a saleable commodity in the Soviet era, but
now the market is booming. Kompromat – a contraction of ‘‘compromising
materials’’ – involves the use of evidence of corruption to threaten
political and economic rivals as well as uncooperative officials.
Journalists, investigators, and politicians amass incriminating information
(easily obtainable, but forged if need be) and sell it back to the person
involved; if the target will not pay, the evidence can just as well be sold to a
newspaper. The effectiveness of kompromat reflects the abundance of
corruption itself, the ineffectiveness of state investigators and law enforcement,
and a climate of lawlessness that makes even fictitious allegations
widely believed (Karklins, 2002: 28–32; Szilágyi, 2002).
The Putin government has made tax reform a priority, in part for
revenue reasons but also as a way to demonstrate a measure of official
credibility. Tax evasion, in itself, is not necessarily corruption, but in
Russia it reflects oligarchs’ power and the state’s ineffectiveness.
Simplifications of the tax code enacted in 1999 have increased revenues
to some extent and, by limiting discretion in the calculation of taxes owed,
may have reduced some low-level corruption. But some oligarchs and
bankers continue to enjoy near-impunity regarding taxes, while the state
scrambles for revenue and many public servants are paid poorly or not at