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‘Close your foreign accounts or be fired,’ Putin tells Russian officials

The Russian president ordered all state officials to declare assets and divest foreign-held funds, in an apparent effort to tighten the Kremlin’s controls and stem corruption.

President Vladimir Putin has ordered all Russian officials to get rid of any bank accounts and financial securities they may hold abroad and bring them home to Russia by July 1, or face being fired.

The two decrees, suddenly and unexpectedly issued by Mr. Putin on Tuesday, will oblige all state officials to declare assets and divest foreign-held funds, and are seen by many experts as a potentially significant new impetus in the Kremlin‘s declared struggle against corruption.        

The new rules will strike a blow at the practice of “offshorization,” in which cash earned in Russia is exported to overseas tax havens, as highlighted by the recent collapse of Cyprus as a key offshore zone for wealthy Russians. Analysts say that Russian officials, compelled to keep their money at home, will be more easily controlled by a Kremlin that has lately been cracking down on outside influences in a variety of ways, including forcing NGOs that obtain funding from abroad to self-declare as “foreign agents” to prohibiting US citizens from adopting Russian orphans.

“If someone has bank accounts abroad, we give them three months to get rid of them,” Kremlin Chief of Staff Sergei Ivanov told reporters.

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“To own real estate abroad is not prohibited, but an applicant must declare it and specify the means he used to purchase it. An obvious consequence will follow if he fails to do this, which is dismissal due to loss of trust,” Mr. Ivanov added.

Critics say that spiraling official corruption in Russia goes hand-in-hand with an attitude on the part of top bureaucrats that their time at the public trough is limited, and that they had better grab as much as possible and find ways to get it out of Russia.

“Putin’s decrees are a purely political measure to make officials change their mentality in a positive way,” says Kiril Kabanov, head of the National Anti-Corruption Committee, a public organization.

“They have to stop thinking about their well-being as connected with assets abroad, and start thinking about how to make things work here in Russia. Putin wants the bureaucracy to be manageable, so he’s trying to set things in order,” he adds.

Russia ranked 133rd out of 174 countries in the latest Corruption Perceptions Index compiled by the Berlin-based Transparency International, putting it in company with GuyanaHonduras, andIran.

The presidential decrees may also be Putin’s way of nudging the State Duma to stop dragging its heels on a law submitted by the Kremlin earlier this year, covering the same ground, which deputies passed on first reading in February but have since failed to move forward with.

But the issue of deputies who keep secret assets abroad has been thrust into the public limelight by anticorruption blogger Alexei Navalny, who caused the powerful head of the Duma’s ethics committee, Vladimir Pekhtin, to resign last month, after property deeds and other documents posted by Mr. Navalny online showed that Mr. Pekhtin owned property in the US worth over $2 million.

“Putin had to act. Thanks to Navalny, this issue is now in the focus of public attention,” says Dmitry Oreshkin, head of the Mercator Group, an independent Moscow-based media consultancy.

“Corruption is out of control, and it’s the Frankenstein that Putin himself created. To limit it now will be difficult, even impossible,” he says.

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According to a March poll conducted by the independent Levada Center in Moscow, only 12 percent of Russians believe a law forbidding officials from holding assets abroad will work “in full.” Another 41 percent think it will work “selectively,” affecting some officials but not others. And 37 percent say that, like many such laws in the past, “it will be forgotten after a few months.”

“Public opinion wants to see a struggle against corruption. People will like the sound of these measures,” says Alexei Markarkin, director of the independent Center for Political Technologies in Moscow.

“But I’m doubtful there will be much impact. Maybe a few officials will quit, and go into private business. A few may be scapegoated, and blamed for all the evils. But most will likely experience no problems. The Kremlin may want to put a scare into officialdom, but it really doesn’t want a full-blown conflict with the state bureaucracy. After all, that’s the foundation of its power. Don’t wait for the revolution to begin, because it’s not going to.”