The Battle for Moscow's Billions
Power and Money in the Russian Capital
Under Mayor Sergey Sobyanin
Donald N. Jensen
Kennan Institute
February 4, 2011
The Many Faces of Moscow
“Moscow at night glitters as never before. The Russian
capital…is vibrantly alive, almost pulsating with energy….
Mayor Yuri Luzhkov has seen to it that virtually every building
façade, every urban surface, is well-scrubbed or freshly
painted – and brightly lit. Very brightly. Hundreds, perhaps
thousands, of spotlights and streetlights have been installed
by Luzhkov’s government to display the new Moscow to best
effect. And the sight is indeed impressive. In its central
districts, Moscow can be compared to the downtowns of the
great cities of Europe – something that could never be said
truthfully before, at least not since 1913.”
-Blair Ruble
Mid-1990s
The Many Faces of Moscow (cont’d)
• Westernized: Moscow-Siti
• Desacralized symbolic Soviet spaces: skating
rink near Lenin mausoleum;
• Russified: refurbished statues of Aleksandr II;
Peter the Great
• Diversified: new lifestyles, housing, ethnocultural diversity
Moscow: the Economic Powerhouse
• Gross regional product:
$340bln (24% of
Russia’s GDP)
• 40% of Russia’s foreign
investments
Moscow the Economic Powerhouse:
August 2010 budget draft calls for 1.3 trillion rubles ($43bln) of
spending in 2011
• Sample
figures:
• Social
Benefits: 592
blnR
• Road
construction:
38blnR
• Metro
construction:
26blnR
Moscow Is By Far the Richest Region in Russia
Downside: the Unheavenly City?
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Pervasive corruption
High crime rate
Pollution
Deteriorating roads
Traffic congestion
Deteriorating public transport
High cost of living (eg, utilities and housing)
Transportation bottlenecks:
3.6 Million Cars for 10.5 Million People
Macro-Issues (Colton)
• Service and
Responsiveness
• Scale
• Accessibility
• Coherence and
Accountability
• Regional cooperation
• Local-central diplomacy
• Strategic planning
• An expanded policy
reportoire
Outline
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Moscow, the Economic Powerhouse
Moscow, Inc.
Why Luzhkov Was Ousted?
How is Sobyanin doing?
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Deluzhkovization
Battling crime and corruption
Redistribution of property
Public satisfaction
Transport
Social payments
Tolerance of public protest
Challenges: Ethnic riots, Oppposition Demonstratios, Domodedovo
bombing
• Prospects: the Meaning of Moscow
Luzhkov’s Moscow:
Keys to prosperity
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Takeover of city’s Soviet-era assets
Supermayoral system of governing
Luzhkov’s charismatic leadership
City Hall’s extensive involvement in business
Massive inflow of resources from Russia’s regions
and foreign investment
• Highly criminalized political and business climate
• Federal subsidies
• Luzhkov’s alliance with Yeltsin, then Putin
Luzhkov’s Moscow: A semiautonomous
political-economic system embedded within the
Russian Federation
• Money-power nexus
• Relatively consolidated
• In Putin era, federal patrimonialism as in
important ways come to resemble that in
Moscow, rather than vice versa
Moscow, Inc.
The mayor and his proteges act as owners of the city as
well as its political leaders:
•Extensive participation of the city in business
•The involvement of Moscow businesses and financing
city programs and the commercial use of Moscow city
funds
•An opaque budget process marked by extensive use of
off budget funds as well as federal subsidies.
•Russian Finance Minister Kudrin recently claimed that
one quarter of Moscow’s government decrees were
secret, including decrees allocating land in central
Moscow.
City of Moscow Owns:
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356 State Unitary Enterprises
337 blocs of shares in ventures and
companies including:
– Agricultural holdings
– ZIL automotive metallurgy plants in
Smolensk
– Building projects in:
• Abkhazia and South Ossetia
• Crimea, Ukraine
• Other foreign countries, from
Mongolia to Venezuela
As of 2008 Moscow received 0.15% of
its budget revenue from these
enterprises.
During the economic crisis, this
revenue shrank by 90%.
The city poured 100 times that much
money into supporting the
enterprises
Mosmedynagroprom holding in
Kaluga Oblast (experimental corn,
purebred cattle)
Moscow, Inc. (cont’d)
• The AFK Sistema conglomerate, headed by
Luzhkov crony Vladimir Yevtushenkov,
embodied the fomer mayor’s blend of politics
and business. Sistema operates consumer
service businesses in telecommunications,
microelectronics, insurance, home
construction, oil, the media and banking.
Sistema’s firms draw loans and business from
the city government and generated funds for
Luzhkov’s projects.
Moscow, Inc. (cont’d)
• Inteko, the firm owned by Luzhkov’s wife,
Yelena Baturina – named by Fortune in 2010
as the world’s third richest woman – is one of
the most power business empires in Moscow
• Baturina’s brother, Viktor Baturin, sued Inteko
for $120 million in 2007 alleging wrongful
dismissal
Supermayoralism
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Powerful elected mayor and apparatus
Weak city Duma
Tight Luzhkov team
Neighborhood institutions (prefect,
subprefect), largely act as transmission belts
for City Hall orders
• Fawning local media
Luzhkov’s Friends, Enemies , Inventions,Medals
Luzhkov’s “Team” of closest advisors
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Yuriy Roslyak
Valeriy Shantsev
Vladimir Resin
City Duma Speaker Vladimir Platonov
Relations with Federal Authorities
• Kremlin has allowed Moscow significant autonomy,
(exemption from federal privatization in exchange for
Luzhkov’s loyalty and and mainenance of political
stability
• Bolstered by Luzhkov’s alliance with Yeltsin, then Putin;
Luzhkov was a key Yeltsin ally in ‘91, ‘93, ’96 crises;
relations with Putin were correct, but not close
(Luzhkov made a presidential run in 1999)
• Moscow receives lucrative subsidies and privileges
• Moscow depends on revenue sharing from federal
center
• Moscow is largest contributor to national budget
Luzhkov’s Foreign Policy
• To ensure Moscow has sufficient fuel, food,
and other supplies, Luzhkov has placed a high
priority on cultivating good relations with
other Russian regions and other countries
• Economic cooperation agreements with most
of Russia’s 88 units
• City loans to other regions
• Direct ties with Ukraine, Lithuania, other CIS
countries, Latvia, and the separatist regions of
Transdnestria, and Abkhazia
Law Enforcement in Moscow
• The courts, the Procuracy, the FSB, the MVD, are
formally subordinated to the federal authorites
• In practice, the city has say over their budget,
personnel and operations
• Moscow subsidizes police officers salaries
• More than 100,000 federal armed troops are also
are based near Moscow
• The city has provided material support to many
of these troops,
Corruption
• Central to governing city. It has “…has stopped
being a problem and become a system.”
(Nemtsov)
• Interlocking network of politicians, businesses,
media holdings, law enforcement personnel,
answerable to City Hall. Bribery, protection,
graft is widespread
High Costs of Road-Building in Moscow: A Sign
of Corruption?
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Figures from
August 2010.
An officer of
Mostotrest
contracting
company cites
high costs
from the
“Kafkaesque
paperwork
associated with
transfers of
ownership to
City Hall” and
the need to
move the
underground
“tangle of
pipes, power
lines and
telephone
lines, most of
which have
different
owners …”
Moscow real
estate
•Favored construction
companies—especially
Baturina’s Inteko, Su-155
and others– received
preferential treatment:
permissions, municipal
orders.
•Kickbacks in the
permissions process can
reach 50-70 percent of
housing costs
•Municipal orders accounted
for almost half of the living
space under construction in
2007 (yellow windows in the
diagram).
Criminalized Law Enforcement
Position
Cost
Police general in Moscow
Approx. $1 million
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Position
Police
chief of an administrative district in
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Cost
Moscow
$100,000-$1 million or powerful business
connections
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Police general in Moscow
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Approx. $1 million
Chief
of prosperous
precinct in
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Police
Major-GeneralTsaritsyno
in Moscow Oblast
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$500,000
Moscow
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Police chief of an administrative district in Moscow
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$100,000-$1
Precinct
captainmillion or powerful business
connections
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Chief of prosperous Tsaritsyno precinct in Moscow
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$500,000
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Precinct captain
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$50,000-$100,000 to be put at the head of the
Criminal
police
waiting
list forchief,
the postprecinct level, central
Criminal police
chief, precinct level, central or
or• southern
Moscow
southern Moscow
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$25,000-$30,000
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Precinct criminal investigation chief in prosperous
part criminal
of city
Precinct
investigation chief in
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$10,000-$15,000
prosperous
part order
of city
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Chief of public
section, precinct level
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$15,000-$30,000
$500,000
$50,000-$100,000 to be put at the head of
the waiting list for the post
$25,000-$30,000
$10,000-$15,000
Chief of public order section, precinct level $15,000-$30,000
Moscow Police On the Take: Who paid whom for
protection in 2007
Payer or Purpose of Bribe
Who receives it
Average amount, 30
R/dollar
Trading stall (palatka)
Patrol officers and precinct
duty officers
$17/day
Old lady selling dill
Patrol officers and precinct
duty officers
$3-$7/day
Guarding a prostitutes’
hangout
Patrol officers and precinct
duty officers
$50/night
Providing krysha
(protection) for prostitutes
Moscow police official at
the administrative district
(UVD) level
$5000-$10000/month per
hangout
Stores, companies, cafes,
small restaurants
Local detective (field
investigator)
[not specified]
Sellers of counterfeit CDs,
vodka, Chinese counterfeit
Economic Crimes
Department officers
[not specified]
Large trading houses,
farmers’ markets, large
enterprises
Precinct (OVD) or
administrative district
(UVD)-level police officials
[not specified]
Prices of Favors in the Law Enforcement System
Payer or Purpose of Bribe
Who Receives It
Amount (30 Rubles/$)
Police officer-- to receive credit for
meeting quotas of crimes solved
Superior
$67
Credit for traffic inspector for return
of stolen vehicles
Station Duty Officer
$100-200
Person stopped without registration
Patrol officer
$10-$17
Big businessman seeking to have
criminal accusation dropped
Law enforcement officials
$1.5 million
To avoid arrest (minor case)
Local detective (field investigator)
$1000-$10,000
To get a case dropped once arrested
Local detective (field investigator)
$25,000-$30,000
To get a case dropped once
underway
Law enforcement officials
$100,000-$150,000
To get a case dropped if someone has
ordered it
Law enforcement officials
Much more, if at all possible
Patrol officer, to get assigned to a
lucrative route (market, train station)
Superior
$17
Organized Crime
Organized crime is pervasive:
• It plays a political role as lobbyist
and partner in governing the city.
• City hall manages oc rather than
fights it
• In recent years evolved from
burglary, robbery and protection
racket to acquisition of real estate,
manufacturng firms and business
Criminal
Map of
Moscow
(Komsomolskaya pravda
September 2009)
• Solntsevo Group
• Slavyanskiy Group
(Usoyan)
• Tbilisi Crime Clan
(Oniani)
• Izmaylovo Group
• Shushanashvili’s
Georgian Gang
• Azerbaijani Gang
• Taganka-Chinese Gang
• Golyanov Group
Glossary of Criminal Organizations
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Solntsevo Group
Territory of Mozhayskiy and Khoroshevskiy highways, Perovo,
Shchukino, Ramenki, Dinamo, Cheremushki, area surrounding
Southern and Prague subway stations, Balashikha, Odintsovo, and
several large firms in downtown Moscow -- Solntsevo gang's sphere
of influence.
Approximate size: More than 1,000 soldiers, not counting brigade
leaders and underlings.
Specialization: real estate, protection of firms on "its own territory,"
and money laundering, including proceeds from drug trafficking.
Sphere of interests -- hotel business and all waste disposal firms in
the capital.
Area surrounding Belarus subway station -- Tbilisi crime clan.
Approximate size -- about 3,000 members.
Leader -- "Thief-in-Law" Ded Khasan (Aslan Usoyan)
Base -- in Sochi.
Specialization: Interest in oil, hotel, trade, gambling business;
banking, metal sales, travel industry, motor vehicle sales, and
money laundering.
Tbilisi clan
Central District -- Tbilisi crime clan.
Size -- over 3,000 members.
Leader -- "Thief-in-Law" Tariel Oniani, aka Taro.
Base -- in Spain.
Specialization: gambling, banking, real estate, drugs, arms trade,
and money laundering.
Izmailovo
Northern District -- Izmaylovo gang.
Size -- over 1,000 members.
Leader -- "Thief-in-Law" Aksen (Aksenov).
Base -- in Moscow.
Specialization -- protection of local businesses and some banks,
trade, insurance, and extortion. Protection of jitney lines.
Loyal to Ded Khasan (Aslan Usoyan) and Yaponchik (Vyacheslav
Ivankov).
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Georgian gang of Lasha Shushanashvili, loyal to Tariel Oniani
Altufyevskiy Rayon, Lianozovo, areas surrounding Polezhayev and
Oktyabrskoye Pole subway stations, and Mnevnikov region -Georgian gang of Lasha Shushanashvili. Loyal to crime boss Taro.
Specialization: Medium business, trade, theft of items left in
vehicles.
Azerbaijani gang
Nagatino, Maryina Roshcha, Tekstilshchiki, Lyublino, Brateyevo -Azerbaijani gang, no acknowledged leader.
Specialization: control of Moscow's outdoor markets. Protection of
businessmen in "trust territory" and protection racket.
Lasha Shushanashvili
Altufyevskiy Rayon and areas surrounding Polezhayev and
Oktyabrskoye Pole subway stations -- Lasha Shushanashvili's gang.
Specializing in real estate. Owns trade firms.
Taganka--Chinese gang
Taganka -- controlled by Chinese gang. Leaders constantly changing.
Specialization: contraband consumer goods, equipment sales,
drugs.
Golyanov group
Izmaylovo, Tushino -- Golyanov gang.
Leader -- "Thief-in-Law" Pasha.
Specialization: Theft of items left in vehicles, burglary, and small
business in trade sector. Controls outdoor markets and local
businesses.
Georgian gang
Area surrounding Moscow Oil Refinery -- Georgian gang.
Specialization: banks, oil and hotel business, and protection of local
enterprises and businesses.
Slavyanskiy group
Part of Central District -- Slavyanskiy crime clan.
Based in United States.
Specializing in vehicle sales and contraband, interest in banking,
gambling, and information technology. Affiliated with Ded Khasan
(Aslan Usoyan).
Luzhkov’s friends with underworld ties
Iosif Kobzon, the Russian Frank Sinatra
Luzhkov’s last chance to boast:
Moscow Day, September 4, 2010
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Highway projects
Clinic
Sports complexes
“Worker and
Peasant” statue
museum
• Music school
• “Informational
Intellect Center
and Gimnazia”
Why was Luzhkov Fired?
• Long rumored, causing
widespread anxiety among
Moscow elite
• Medvedev: “lost trust”
• The Kremlin wanted to further
centralize political power,
• Part of a broader trend toward
replacing entrenched regional
heads (18 fired in 2010)
• Federal authorities wanted
unfettered access to Moscow’s
riches.
• Luzhkov’s independence; his act
had become tiresome
• Repeated disputes with federal
center over Moscow fires last
summer, road construction, and
corruption, and the Khimki forest
• Putin: “Maybe it was for
unsportsmanlike behavior.”
Anti-Luzhkov Campaign
• Dismissal preceded by ugly smear campaign on state
tv which “revealed” massive corruption, traffic
paralysis, and other problems obvious to anyone
who has ever visited Moscow
• Luzhkov hit back: he wrote an open letter to
Medvedevaccusing him of organizing a witch hunt
and being “undemocratic”
• Sensing the end was near, many Luzhkov cronies
embedded themselves in the Olympic construction
mess, and were blamed by some for construction cost
overruns and delays
Who Fired Luzhkov: Putin or Medvedev?
• Putin said it was Medvedev’s decision and he
made it because he and Luzhkov did not get along}
• Ultimately Putin’s decision, not Medvedev’s
Selecting a new mayor
Meeting Mr Sobyanin
• Disproves speculation about growing political clout
of Medvedev. He is a Putin man.
• Shows no indication he is anything but loyal to the
federal center. Tight lipped bureaucrat rather than
populist politician
• His career track is closely linked to oil and gas sector,
especially to Lukoil and TNK-BP
Sergey Semenovich Sobyanin
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Born 21 June 1958, Khanty-Mansi
Autonomous Okrug
1980s Komsomol work in Chelyabinsk,
local administration in Kogalym
1990s: Regional posts in Khanty-Mansi
Autonomous Okrug
1996-2000: Federation Council member
2001-2005: Tyumen Oblast governor
2001-2003: Board chair of TNK fuel
company
2004: The first governor to support Putin’s
plan to end gubernatorial elections
Dec. 2005: Head of Putin’s Presidential
Administration
2006: Board chair of TVEL nuclear fuel
company
May 2008: Head of Putin’s government
administration
2009-: Chair of Channel 1
Oct 22 2010: Inaugurated Moscow Mayor
•Considered an ally of Vladimir Bogdanov
(Surgutneftegaz) and Roman Abramovich
•Received support from Putin and siloviki in the
Tyumen governor’s race
•Not tied with “Petersburg group” or particular silovik
groups, though some see a tie with Prosecutor Chayka
•“Kogalym Group” unites him with ex-Transneft head
Semen Vaynshtok, ex-Energy Minister Aleksandr Gavrin
•His aide Anastasiya Rakova followed him from Tyumen
and is now Deputy Mayor, staff member, and mayor’s
representative to the City Duma
Sobyanin-Tyumen Group
• Semyon Vaynshtok (Former
head of Transneft
• Aleksandr Gavrin (Former
Fuel and Energy Minister)
• Irina Rubinchik (Sobyanin’s
wife; headed various
regional projects when
Sobyanin was governor;
reportedly related to
Vaynshtok or Gavrin)
• Oleg Chemezov (former
deputy to Sobyanin in
Tyumen, then vice president
of TNK/BP)
• Laura Sokratova (Gavrin’s
wife)
Sobyanin Agenda
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Development of transport system
Health care
Education
Social support
Housing
Development of communal-engineering infrastructure
Energy conservation
Environmental protection
Scientific development and innovation
First 100 Days
Sobyanin Soaring?
• Suspended several construction projects, including $49 billion
4th Ring Road
• Towed many cars
• Further centralized power by demoting many district prefects
to below cabinet rank; many have been replaced
• Sacked many City hall bureaucrats
• At Davos, promised to transform Moscow unto a businessfriendly financial center free of corruption and red tape
• A November poll (VTsIOM), found that 63% of Musovites
appproved his work
Sobyanin Stumbling?
• Late December Levada poll found that 46% of residents said
Sobyanin left a “neutral” impression on them; 23% positive
• Opposition to his crackdown on kiosks
• Neither poll captures raising of communal service charges by
10% on January 1
• Criticized for lack of planning and competency (kiosk
campaign)
• Many dismissals may be for show. Resin and Kuzmin,
construction barons, remain
• Many projects which threaten historical sites continue
Deluzhkovization: Symbolic
• Plans to remove a
Peter the Great
statue
commissioned by
Luzhkov and widely
despised by
Muscovites
Deluzhkovization: Symbolic
• Peter the Great to Sobyanin:
“What are we going to do
with the statue?” (Yelkin,
10/30/10)
Deluzhkovization: Cadres
• Sobyanin has been systematically replacing officials
in City Hall and neighborhoods
• Some holdovers remain, however, including Deputy
Mayors Vladimir Resin and Ludmila Shvetsova.
• These may be those deemed “irreplaceable” or part
of a deal between the Mayor’s office and the feds
• Unclear whether Resin and Shvetsova still retain real
power
Cadres decide
everything: Changes
in Moscow city
government as of
October 26, 2010
• The caps show
Luzhkov-era
holdouts; the eagles
show new cadres
Sobyanin and his team, February 2011
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More deputy mayors (11 versus 8).
Mayor’s office includes people from:
Business (Golodets, Sharonov)
Federal agencies (Lyamov, Rakova, Sergunina)
Regions (Khusnullin—was in Tatarstan)
Proportion of Luzhkov-era cadres has sunk to
40% (Shvetsova, Biryukov, Resin and
Shukshin).
• More women (4 versus 2)
Vladimir
Resin, First Marat Khusnullin,
Deputy Mayor Deputy Mayor for
City Planning and
Fills in for Construction
mayor in his
absence;
Responsible for
oversees
Moskomarkhitektura,
Moskva-Siti
administering
complex,
investment projects.
remodeling of Head of coordinating
Bolshoy
council to carry out
Theater and
the General
other sites, plus Development Plan for
housing
Moscow
construction in
Caracas
Petr Biryukov, Anastasiya
Deputy Mayor
Rakova,
for Housing Deputy Mayor,
and Utilities
Head of the
Mayor’s
Administration
Oversees
housing and
Oversees IT
utilities
Department,
departments, archives, State
capital repair of
Services
housing,
Committee,
heating, and
Mayor’s
housing
administration
inspection.
and city
government
Luzhkov-era holdouts
Vladimir Resin, chief of Metro construction commission
Robert Moses
Lyudmila Ivanovna Shvetsova
• 1970s-1993: Komsomol and
Supreme Soviet posts
• 1994-2000: Headed Moscow
government's committee of
public and interregional
relations
• 2001: Moscow deputy mayor
• Was considered a top
candidate to replace Luzhkov.
• Oversees departments of
housing policy and housing
stock, social protection,
family and youth policy,
culture, and public relations.
• Health and education
reforms will now be handled
by her new colleague Olga
Golodets.
Yuriy Vitalyevich Roslyak, former Deputy Mayor
for Economics
• Since 1970s: engineering and
construction work in Moscow.
• Since 1980s: Moscow
administration.
• First Deputy Premier of Moscow/
First Deputy Mayor since 1995.
• Was considered part of Luzhkov’s
inner circle.
• Represents Moscow in the
Federation Council (Senate) since
Dec 22, 2010.
• This post provides immunity.
• Member of Senate Committee on
Economic Policy,
Entrepreneurship and Property.
The Kremlin has taken the fist steps to break up
Luzhkov’s empire
• Criminal bribery prosecution reopened against Deputy Mayor Ryabinin
• Initial inquiries have been made into Luzhkov and Baturina business
activities
• Federal auditors, working with Mayor Sobyanin, have reportedly come
up with evidence of “systemic problems” in Moscow authorities actions
regarding financial contracts and violations concerning more than $7
billion in investment in city transport in past three years.
• Interdistrict tax inspectorate deputy chief Tatiana Demenok was
arrested for accepting a 90,000 R bribe
• Medvedev has directed Sobyanin to eradicate all administrative
decisions that encourage corruption along with secret Luzhkov-era
“personal decrees” that violate the law
Public transportation reform?
• Prosecutor Chayka calls for
criminal charges against Metro
head Dmitriy Gayev
• Says he has 100mlnR in illegal
income
• Accounting Chamber finds
230mln of the 500mlnR spent on
city transportation in 2008-2010
were misspent
• Gayev’s son directs a subsidiary of
Sitroniks IT company that makes
swipeable metro cards
• Gayev’s daughter sells souvenirs
with his face on them
• Fired Feb 3 2011
Selling off the Bank
of Moscow
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Moscow City owns 47%
City keeps $3.5bln in
accounts there.
Founder and Luzhkov friend
Andrey Borodin is
consolidating his assets—
said to control 44% of the
bank’s shares.
The Audit Chamber started,
then cut short, an
investigation of the bank.
Experts say it would be
complex to remove city
accounts from Bank Moskvy
Who might buy shares—
VTB? Alfa (Kremlin-friendly?)
Closing Casinos
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Most casinos were closed July 1,
2009 under a 2006 decree
January 15: Sobyanin visits a
warehouse with confiscated gambling
equipment, watches as it is sawed
apart.
Between 6 December 2010 and 13
January 2011, Moscow law
enforcement closed:
239 “lottery clubs,”
8 illegal casinos and poker clubs
33 computer clubs hosting online
gambling
• 7500 gambling apparatuses have
been confiscated.
• There remain 111 “non-working
lottery clubs to which law
enforcement and district
authorities have no access.”
Whither Inteko ?
• Baturina’s brother reopened a lawsuit against Inteko
• Baturina discussed sale of assets to Vasily Anisimov
of Coalco.
• Suleiman Kerimov reportedly also Inteko purchase
• Baturina has agreed to sell her stake in Moskva-Citi
to Magnitogorsk Iron and Steel Works.
• Sold 98.12 % of Russky Zemelny Bank to six Cypressregistered companies (5.4 billion rubles)
Whither Moskva-Siti (Moscow International
Business Center), a $12bln construction project?
•The first zone in Russia to combine
business activity, living space and
entertainment in one single development
• First conceived by the Moscow
government in 1992
•Will include a central City Hall and City
Duma
• Sobyanin said it was a
“mistake”
• Putin visited, praised VTB
• Sobyanin changes the
committee overseeing
Moskva-siti
• Resin remains head of
commission
Sobyanin Budget: More spending
Projections
Luzhkov draft of August,
(approved by city Duma
Sept 29 2010)
Sobyanin-era budget approved Dec. 8
2010
Revenue
1.29trlnR
1.24 trlnR
Spending
1.19trlnR
1.38 trlnR
Deficit
100blnR
146blnR
Social Benefits
592 blnR
722blnR
Income from
sale of city
assets
900mlnR
13,9 blnR (may rise depending on Bank
Moskvy and Vnukovo sales)
Road/transport
construction
•Road construction:
38blnR
•Metro construction:
26blnR
Reserve for road and public transportation
construction: 123blnR
Other
Assumes 11% growth in
salaries
•City police: 29blnR (including 14bln for
Moscow salary supplements)
•“Un-allocated estimates for targeted
investment program” : 91blnR
Keeping the public happy
• Solving transportation
problems
• Reducing corruption
• Retaining social benefits
(pensions, Moscow
supplements)
• Keeping city services
running
• Managing public protest
Moscow Metro Development Plan:
79 km of new lines and 43 stations by 2015 (Luzhkov’s plan called
for 60 new stations)
• Resin commission gets a
60% increase in subway
construction funding, up to
$50bln
• Sobyanin also proposed
public-private partnerships
to fund construction
Sobyanin clarifies his kiosk cleanup campaign
• Jan 18 2011: Sobyanin
specifies that kiosks should
sell goods that are really
needed; that they should be
connected to legitimate
electric lines, not from
trolleybus lines; that they
be “esthetically attractive,”
that they not hinder
pedestrians, and that
prefects should prepare
maps of planned locations
of kiosks by February and
put them on the internet for
public discussion.
Tests for Sobyanin
• Moscow ethnic riots in December
• December 31 opposition demonstrations
• Domodedovo airport bombing
Manezh Square riot, December 11, 2010:
“Russia for the Russians!”
Moscow police
responded
carefully
•Moscow Police tried
and failed to protect a
cluster of young men
from the Caucasus
who were beaten by
the crowd.
•“Beat the Khach!”
yelled voices from the
crowd.
•“I didn’t think a
person could look like
that—like rubber.
Blows flew about his
body, his head, his
face…”
Sobyanin tolerates limited opposition protests
• “Legal demonstrations
will be facilitated, but
unsanctioned
demonstrations will be
strictly suppressed.”
•
(Sobyanin, announcing approval of 31
December protest led by humanrights activist Ludmila Alekseyeva for
1000 people at Triumfalnaya Square).
• “On the one hand, we
must not create artificial
barriers to mass
demonstrations, legal
protests, and citizen
activism. On the other
hand, you and I must
strictly suppress illegal
demonstrations and
attempts to provoke mass
disorder in the city.”
(Sobyanin to Moscow
police, Jan 19 2011)
• RIANovosti comparison of
October 31 demonstration by
human rights activists with the
December 11 “youth
demonstrations” by “leftistradical youth”
• Harsher measures toward
human rights activists:
– At the Oct 31 meeting, for which
permission was received, 28 of
800 people were detained.
– At the unsanctioned Dec 11
demonstration, 65 of 5500
participants were reportedly
detained at police stations, and
about ten criminal cases were
brought.
Moscow’s Airports
Ownership
Passengers in 2009
Domodedovo
East Line
18.7mln
Sheremetyevo
State
14.8mln
Vnukovo
Moscow City owns 75% (may sell)
7.7mln
Domodedovo Attack of January 24 2011
• Airport not within city limits: Sobyanin not formally
responsible
• Nevertheless, he and Moscow Oblast governor
Gromov competed to appear responsive.
• No apparent connection of Luzhkov or Sobyanin to
East Line, the company that owned
Domodedovo.However, close to Moscow Oblast
authorities
Domodedovo Airport Bombing: Struggles Over
Money and Power
• Medvedev criticized the airport’s owners for lax
security.
• Who owns Domodedovo?
• Domodedovo’s ups and downs:
– High-level competition over airport traffic, China trade
(and contraband?) monopolies.
– Criminal investigations
– Battles with Russian Property Agency
– Powerful protectors
• Possible changes in ownership after bombing?
Domodedovo: choice property
• 2000: Rosimushchestvo (Russian state property ministry)
sued East Line, alleging improprieties in past rental
agreements.
• 2005: President Putin recommended that East Line be left
alone. Economics Minister Gref ordered Rosimushchestvo
head Valeriy Nazarov to drop the lawsuit
• Rosimushchestvo ignored them, continued the suit.
• Did it have a powerful protector?
• September 30 2008: On instructions from new President
Medvedev, the Supreme Arbitration Court quashes
Rosimushchestvo lawsuits against East Line.
Who Owns Domodedovo Airport?
• Hacienda Investments (Cyprus) >
• East Line Group (Ист-Лайн)>
• FML Ltd. (Isle of Man) >
• Nominal owners: Jane Peters and Sean Cairns
• Real majority owners thought to be Dmitriy
Kamenshchik and Valeriy Kogan
• Others: FSB-linked arms exporter
Rosoboroneksport was said to receive 25% in
2000.
Valeriy Mikhaylovich Kogan, chair of the
Supervisory Council, Domodedovo International
Airport since 2004
• Said to be the one who really controls
the company.
• Allegedly helped Kamenshchik settle
disputes with Russian Property
Agency in 2005.
• Said to have been seen skiing with
Putin.
• Owns mansions in Caesaria, Israel and
Greenwich, CT. His wife’s application
to “build a replica of Orly Airport” at
their Greenwich home was denied.
Dmitriy Vladimirovich Kamenshchik, Chairman
of the Board
• According to a 2002 Stringer
investigation he:
– Worked with the UralMash organized
crime group in the 1990s
– Hauled contraband (clothing and other
goods from China), evading import tariffs.
– Turned over 25% of East Line shares to an
FSB-linked company in 2000 in return for
the FSB’s tapes and other evidence of his
sexual and financial misconduct.
• Serves on Council on
Entrepreneurship under the
Russian Government, advisor to
the State Duma chair, advisor to
the Moscow Oblast
administration.
Don’t let a crisis go to waste. Who might take
advantage of the Domodedovo tragedy?
• East Line was planning an IPO. If Medvedev’s warning
indicates trouble with the government, its share value will
fall.
• Possible merger plan for the three Moscow-area airports has
been developed by Troika Dialogue for a Putin-led
government commission.
– Under one variant, Kamenshchik and Kogan would hold the largest
number of shares, but the state would own the golden share.
– Kamenshchik and Kogan reportedly resisted this idea.
– Criticism following the airport tragedy could pressure them to agree
to it, and could lower the value of their stake in the combined
airport.
The Meaning of Moscow
• Sobyanin is now the federal mayor rather than
Moscow’s mayor
• Moscow’s problems are now increasingly federal
programs
• Although destabilizing unrest in the city is unlikley, it
remains a possibility.
• If Sobyanin is judge successful, he could become a
national figure (replacing Medevedev?)
Whither Luzhkov?
•
•
•
•
Former mayor is exploring his options
Says he wants to stay in Russia
But has also explored his options in Latvia and the UK
A potentially destabilizing factor if he became
politically active
Meanwhile, Luzhkov tries to Move to Latvia