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May 15, 2006
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Customs Policy
// Operation Customs
Dismissals Agenda
The anticorruption operation that took place last Friday was the most massive since Russian President Vladimir Putin came to power. If the anticorruption rhetoric becomes a widespread political campaign, security agencies will play an even greater role in the political and economic life of the country. They have already gotten their first trophy. The transfer of customs from the Ministry of Economic Development and Trade to the purview of the prime minister and the appointment of former Rosoboroneksport official Andrey Belyaminov there look like the latest reinforcement of the security wing of the Kremlin.
In his first years in office, the president and his administration avoided demonstrative firings, corruption scandals and similar demonstrations. It would have contradicted the image of stability that was the keynote of his first term.

One of the biggest scandals that did emerge was also connected with customs. In the autumn of 2001, customs agencies made public a large-scale investigation of the major retail traders Grand and Tri Kita for furniture smuggling. The suspects in turn accused the Federal Customs Committee of protecting smuggling and not having control over it. The suspects were unexpected supported by the Prosecutor General's Office, which initiated a criminal case for extortion against the investigators of Tri Kita. The Customs Committee was supported by the State Duma, which passed a resolution to have the furniture smuggling case closed immediately. Analysts unanimously saw in this a reflection of the struggle between The Family (to which customs committee chairman Mikhail Vanin belonged) and St. Petersburg security personnel. The scandal gradually wound down and Vanin remained in his post, and the furniture stores also avoided any serious losses.

Vanin, who is considered a close associate of Alexander Voloshin and Roman Abramovich, lost his job in 2004, which the customs committee was transferred to the control of the Economics Ministry as part of a reorganization of the cabinet. Alexander Zherikhov, although he served in the Soviet embassy in East Germany during the years when Putin worked there, was not considered a member of either the Voloshin or the security forces' camp. Its transfer to the control of the Economics Ministry was to symbolize the beginning of a new era in customs history. It had been transformed from a special agency run by a figure of special trust into one element in the economic regulation system. In many developed countries, the customs agency is part of the finance, economics or trade ministries. Russia had a different tradition, however, and the customs committee's presence within the Economics Ministry was subject to constant bureaucratic attack. It became clear that Economics Minister German Gref had practically lost the committee last month when Putin demanded on live television that the practice of customs agencies and business structures merging into economic ecstasy be stopped. Before that, agents from the Interior Ministry's K Division had confiscated a lot of cellular telephones worth 530 million rubles for being illegally imported, demonstratively ignoring the fact that the lot had cleared customs. Finally, the purge declared on Friday has been unofficially tied by the special services to the exposure of a criminal network that has been importing Chinese goods into the country under the protection of high-placed customs and security officials.

Smuggling really is a serious problem. Gref's statement at the February collegium of the Federal Customs Committee that between 60 and 85 percent of household appliances and electronics, 60 percent of footwear and 45-55 percent of furniture was illegally imported last year (including manipulation of customs duties) was widely quoted in the media. According the data of the Confederation of Consumers' Societies, 90 percent of all cellular phones sold in Russia are illegally imported. Fighting smuggling was never seen as a political problem, however, and Gref's frequent mention of the problem was not by chance. Import from importation is an insignificant part of the $70 billion annually that customs earns for the federal budget. Export duties account for 85 percent of that sum, and more than half of that sum comes from the export of oil. The role of customs in the collection of that money defines its political role in the structure of the state. Therefore, the exposure of a smuggling operation and the transfer of authority over customs have a double-edged effect. Predictably, three of Vanin's deputies on the State Customs Committee between 1999 and 2004 were on the black list released yesterday of those who were dismissed or deprived of their senate seats. They are Yury Azarov, who was named deputy chairman of the committee when Vanin became chairman; Leonid Lozbenko, who was first deputy director from 2002 to 2004; and Senator Boris Gutin, who was deputy chairman from 2000 to 2004. Three other deputy chairmen, who kept their posts, were appointed after the departure of Vanin.

Thus, the transfer of the customs committee to the control of Gref in 2004 and the appointment of Zherikhov should be seen as transitional phase intended to preserve the status quo. The transfer of customs to the control of the prime minister and the appointment of Andrey Belyaminov, another acquaintance of the president's from Germany who has worked in Rosoboroneksport in recent years, can be seen as the return of customs to the sphere of influence of the Kremlin security wing.

On the whole, the operation on Friday allows the president to respond to growing societal demands for decisive action against corruption. According to the Amnesty International index of corruption acceptance, Russia's corruption indicators underwent improvement between 2002 and 2004, but fell to the level of the 1990s in 2005. The customs operations seems to be just the beginning of a broad anticorruption show campaign, as the president said in a conversation with the managers of the All-Russia State Television and Radio Co. yesterday. Moreover, the operation increased the political weight of the FSB, which may become the hero of the new anticorruption campaign and, as a result, considerably increase its influence in economic matters. The operation should also be seen as the latest correction in the balance of influence between the two main wings of the Kremlin the moderates, who are oriented toward Dmitry Medvedev as presidential successor, and the security wing, whose leader is considered presidential aide Igor Sechin.

All the Article in Russian as of May 15, 2006

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