I feel like we’ve been writing a bit too much about corruption recently. Perhaps there is a reason for it, since a new BBC poll has just found that corruption is the most talked about global problem. One thing you discover in highly corrupt countries is that there is unlikely to be an area or a sector of the economy that corruption doesn’t touch. Some of those you don’t frequently think about.
The new Strategic Arms Reduction Treaty (START) is currently capturing much of the attention devoted to the Russian nuclear complex. Yet, while the debate is raging on the reduction of nuclear weapons, inspections and compliance, limitations of the new treaty, and whether it should be signed or re-negotiated, one important feature of the Russian nuclear industry is not getting the attention it deserves.
In a new report, two Russian civil society organizations, Transparency International (TI)-Russia and Ecodefense, attempt to lift the veil off the Russian nuclear industry and see to what extent corruption, the problem that has plagued every sector of the Russian economy, has affected it.
The verdict is worrying, although perhaps not surprising for Russia experts – corruption pressures are real. But as one can imagine, the costs of corruption when the nuclear industry is involved can go far beyond the costs of misappropriating huge sums of public funds, important in their own right. If a school collapses because of corruption, its bad enough – but imagine what can happen if utilization of nuclear waste or something similar is involved.
One of the main problems identified in the report are weak standards for public procurement in the nuclear industry. The standards for transparency in procurement set and followed by the State Nuclear Energy Corporation Rosatom lag behind the standards set out in the federal procurement law. For example, procurement transactions are not overseen in any way by independent external party, which leads to favoritism in selecting companies through the bidding process as well as higher prices for the end product.
In fact, as the report points out, this is a larger problem of how some of the public projects are implemented. Several years ago, the Russian government established government corporations, essentially non-profit entities that spend public funds to address socio-economic development goals. The budgets of these government corporations go into billions of dollars. Yet, there is little oversight over what they do.
These corporations exist outside of ministry structures, but they don’t function as publicly listed corporations. For example, no one knows what is discussed during board meetings, financial reports are inconsistent, and even Russian parliamentarians have complained that government corporations are not required to respond to their requests for information on the use of public funds (in Russian).
So how do things look for the nuclear industry? The report is based on a detailed review of 200 public procurement projects conducted by the Rosatom state corporation. Fourty percent of those projects were implemented in violation of Rosatom’s own bidding standards. One of the paradoxes of the procurement system highlighted in the report – a body that should provide oversight over these procurement transactions doesn’t exist, while the federal body responsible for this does not have any authority over this government corporation. This seems like a true transparency vacuum. You’d hope that internal oversight would fill the void, but, the report suggests that it is also faltering.
Importantly, the report is not going after individuals – it has institutional goals in mind. As Ivan Ninenko, one of the co-authors, points out (in Russian), the purpose of the study is not to catch anyone re-handed, rather it is to highlight corruption risks in the nuclear industry. One of the solutions to the problem, according to Elena Panfilova, head of TI-Russia, is to increase transparency within these government corporations or even to rethink their existence in the first place.
Published Date: December 13, 2010