Corruption probe gets closer to Russian Defence chief

Russian defence chief: Anatoly Serdyukov (Getty Images)

Over the past decade, Anatoly Serdyukov has earned a reputation as a faithful and thorough executor of whatever orders President Vladimir Putin gives him.

He was head of Russia's tax office in 2003 when Putin went after the oil tycoon Mikhail Khodorkovsky on tax evasion charges, and he provided crucial support to the prosecution that put Khodorkovsky in prison. More recently, as defense minister, Serdyukov has been ruthlessly reshaping and reducing the officer corps, fulfilling Putin's directive to create a modern army.

But now Serdyukov is on the verge of being sucked into a criminal investigation of an extensive corruption scheme in the Defense Ministry — and the surprise isn't about the corruption, it's about his seemingly sudden vulnerability.

When police swooped in last week to seize documents from a Defense Ministry agency, it set off a rash of speculation about why Serdyukov has now become a target. His place in Putin's firmament is well established. But he has more than a few enemies, and some of them are highly influential. One might be his father-in-law.

Did Serdyukov overstep some implicit boundary?

The criminal case involves an agency, Oboronservis, that was set up to sell off some of the ministry's extensive unneeded property. According to investigators' allegations, ministry funds have been used to fix up properties that were then sold off at rock-bottom prices to well-connected buyers — who sometimes paid with money stolen from the ministry. The total loss to the state is reportedly about $100 million.

The allegations are, in themselves, less than shocking. The tax agency, when Serdyukov ran it, was frequently used by raiders wanting to take over others' businesses, according to several published reports, including an investigation by the newspaper Vedomosti. Through two notoriously corrupt tax offices in Moscow, it also engineered huge tax refunds to some of these companies.

Serdyukov has been able to stand up to the generals, who have been seething over his cuts and his tendency to call them "little green men." He's got Putin, who wants to keep the generals in their place, behind him on that. But he may have gone too far in antagonizing his onetime mentor, Viktor Zubkov, chairman of Gazprom, the state-owned energy giant that is a financial pillar of Putin's government.

Zubkov is one of Putin's closest associates. He is also Serdyukov's father-in-law, which goes a long way toward explaining the younger man's rise from his early career as a furniture salesman in St. Petersburg. But Serdyukov and his wife have split up, and when police raided the apartment of Yelena Vasilyeva, the central suspect in the corruption scheme, at 6 a.m. Oct. 25, they found Serdyukov there with her, according to a tabloidy Web site called Life News.

"Even if you're the defense minister, you shouldn't fight with your father-in-law, especially if your father-in-law is Zubkov," said Vladimir Pribylovsky, who runs a Web site that monitors corruption and the officials who enable it.

When he came to the Defense Ministry, Serdyukov found an officer corps that was profiting handsomely by selling off ministry property under the table. He put a stop to that, further earning the enmity of the uniformed staff. But the new charges suggest that he and his civilian associates took over the sales for themselves — at a more sophisticated level.

The newspaper Izvestia reported Thursday that investigators might open a criminal case into the use of Defense Ministry funds to build Serdyukov a grand country house in a nature preserve near the Black Sea.

Police on Thursday arrested two people they say are connected to the scheme, the Interfax news agency reported.

Zubkov and the generals aren't the only ones who might hold grudges against the defense minister. A former Russian ambassador to NATO wants Serdyukov's job. Putin's chief of staff, a former defense minister, is reported to have been insulted by Serdyukov's descriptions of the mess he inherited.

And one of Serdyukov's oldest friends from St. Petersburg, Mikhail Mokretsov, was bounced from his position as chief of staff at the ministry this year to make room for Vasilyeva, as reported by the Web site Russia Defense Policy. It could be, Pribylovsky suggested, that Mokretsov gave investigators the lead they were looking for when they decided to move.

"The theft is not a problem, the theft is just an excuse to settle scores between the clans," Pribylovsky said. "We are witnessing now the fight for control over the chains of corruption."

Putin plans a dramatic increase in defense spending over the next decade and will want actual results. Pribylovsky said the president is betting that Serdyukov will hang on to his job. From Putin's point of view, he said, a compromised minister is more useful than an untouchable one.

"Maybe Serdyukov will understand and steal less," Pribylovsky said. "And I'm sure he shares with someone at the top."