Moscow Oblast
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Joera Mulders
April 3, 2011
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On Thursday March 31th the larger part of the first print run of Russian Forbes Journalist Anna Sokolova’s new book ‘Moscow Oblast Inc, How They Ruined Russia’s Richest Region’ was confiscated by the police. According to Forbes the police acted upon orders by Moscow Oblast Deputy Governor. Publisher Eksmo has protested the confiscation, arguing that it would have been sufficient for the police to take one copy in order to investigate the libel charges issued by the regional authorities. Russian Forbes went further and published an entire chapter from the book on its website. What is going on?

Boris Gromov, Moscow Oblast governor since the year 2000, has been on the nomination for replacement for several years. Non Russian members may have heard of the scandals surrounding the highway construction through the forest of Khimki or Ikea’s problems with the local authorities. Russian readers may add scandals involving illegal construction of cottages for the rich, illegal waste dumps, the transport deadlock surrounding Moscow City and very recently the interests the Moscow Oblast Procurator Office allegedly has in the illegal casino’s in the region.

Gromov however has proven to be more resilient than many of his once invincible colleagues. Eduard Rossel, Murtaza Rakhimov, Mintimer Shaimiev and of course Yuri Luzhkov were all replaced recently. Like them Gromov comes from a time in which governors were elected on the basis of their own political weight, rather than appointed because of their bureaucratic credentials.

Gromov’s patriotic credentials

As commander of the 40th Soviet army, Boris Gromov left Afghanistan on the last armored vehicle crossing the Amu Darya river back into what is now Tajikistan. A little less than two years earlier he had lead operation Magistral, the rescue of the famous 9th company (movie), heroically defending a mountain top near the strategically located city of Khost. For this Gromov received the highest military award, the golden star of the Hero of the Soviet Union.

The last Soviet tanks crossing the Amu Darya river

The last Soviet tanks crossing the Amu Darya river

What may have done even more for his standing among Soviet and Russian veterans was his decision of conscience to go against his direct boss, the Minister of Defense, Pavel Grachev, and speak out against the start of the first Chechen War. This decision cost him his job as deputy Defense Minister, but from a ‘bureaucratic exile’ at the Ministry of Foreign Affairs Gromov fought back and in 2000 he got him self elected as governor of the Moscow Oblast.

This connection with the veteran community has had a major influence of Gromov’s rule of the Moscow Oblast in the subsequent 11 years. In the chapter now available online, Forbes journalist Anna Sokolova documents how many crucial positions in Moscow Oblast bureaucracy (and corruption rackets) were given to members of one of Russia’s largest veteran associations, the All Russian Public Organization of Veterans, also called ‘the Fighting Brotherhood’, which Gromov has chaired since 1997. (Wikipedia)

The example of most interest to non-Russian readers could be the mayor of Khimki, Vladimir Strelchenko, whom is considered to be responsible for the intimidation and beatings of journalists and activists opposing the construction of a highway through the forest of Khimki. Strelchenko has fought in Afghanistan and worked for Gromov since 2002. The political resilience of both men can be explained by the ‘understanding’ that veterans don’t sell each other out. To add a bit of my personal thoughts: While Luzhkov could be cast a ‘thief from the nineties’, it is apparently much more difficult to get rid of someone with ‘patriotic’ credentials like Gromov.

Moscow Oblast and Moscow City

Another factor complicating the issue are the consistent rumors about a unification of Moscow City and the Moscow Oblast. Such a unification would make it easier to plan the transport and economic zoning in the areas surrounding the capital. Sokolova writes how under Gromov’s supervision Moscow Oblast bureaucrats have permitted the construction of malls along the MKAD, Moscow’s ring road, resulting in numerous illegal exits slowing down the traffic on the highway. One of the first things that Moscow’s new mayor Sobyanin did was to order an inspection of these private exits. Many of them however fall under the jurisdiction of the Moscow Oblast. Another example are Moscow’s airports. The airports Domodedovo and Sheremetovo fall under the jurisdiction of the Moscow Oblast, while Vnukovo is located inside Moscow City. Add to this the regional division of law enforcement structures and it is clear that under the conditions of an expanding Moscow, the division between the two federal regions has become a planning nightmare.

A unification, however, would create an monster region, both economically and politically. It seems therefore that the Kremlin and the White House currently prefer to wait and see if two governors from the new ‘generation’ of appointed bureaucrats could learn to get along and coordinate their shared interests. Yuri Luzhkov has recently been replaced by Sergey Sobyanin. Gromov’s third term ends in May 2011, just after the presidential elections. That’s soon enough …. unless someone wants to display force ahead of the presidential elections and fire Gromov ahead of his expiry date; someone who would need to show he is serious about his anti corruption campaign.

The privatization of farmland

The chapter from ‘Moscow Oblast Inc, How They Ruined Russia’s Richest Region’ published online by Forbes doesn’t offer new revelations. The lawyer of publishing house Eksmo confirmed that the book only consists of information which is already available in other publicly available sources.

The first part of the chapter documents the illegal structures through which one fifth of oblast’s farmland previously part of the kolchozes was privatized for the construction of cottages for the rich. After the default in 1998 financial structures became more interested in real estate. Sokolova documents how in 2003 a massive purchase started of the ‘pink papers’ which were given to the farmers as a share in the previous kolchozes. Big companies including Uralsib, Vimm-Bill-Dann, Promsvyazbank and Millhouse (Abramovich) participated in this new boon. 

In situations very similar to those of the voucher privatization in the early nineties farmers sold their shares for about an eight of the true value. The buyers of these ‘pink papers’ invested capital in the farmer’s associations, thereby taking control and subsequently stripping their assets. Local authorities and courts condoned these methods of expropriation and created their own corruption rackets when the new owners started to construct houses on plots of land designated for agriculture. 

Gromov has denied the widespread existence of illegal use of agricultural land. It is illegal. Therefore it didn’t happen. Nevertheless Sokolova asks how it would be possible then that so many cottages were build on agricultural land: ‘Isn’t it strange that in a region, where so many of the key positions are occupied by former military, it is not obligatory to follow the orders of the commander?’ The Absolut group, which according to Sokolova’s sources won control over 30% of the agricultural land in the Moscow Oblast is reported to have strong connections to ‘Fighting Brotherhood’.

New Yorkers may find it interesting to know that their socialite and Gugenheim board member Janna Bullock is married to the Moscow’s Oblast former finance minister and most likely has made her starting capital in the Moscow Oblast real estate deals described above.

The middle part of the chapter covers Gromov’s biography, part of which is summarized above. The third part covers the IKEA’s problems with the local authorities, which mostly draws upon ex-IKEA boss Lennart Dahlgren’s book ‘Despite Absurdity: How I Conquered Russia While It Conquered Me’. The gist of the matter. Gromov’s subordinates have squandered Russia’s investment image trying to get as much out of IKEA as they could.

How will the controversy play out?

It would be too far-fetched to think that the appearance of the book, which had a first print run of 5000 copies, is part of an orchestrated campaign to remove Gromov. The media campaign against Luzhkov on the other hand was characterized by quickly made television broadcasted on prime time. Anna Sokolova must have worked on this book for a considerate time. The book however does seem to present a serious indictment against the system that Gromov has presided over in the past eleven years. The title ‘Moscow Oblast Inc, How They Ruined Russia’s Richest Region’ reads like a bomb.

Initially ‘some’ company called Konsard tried to buy the remaining 3500 copies directly from the publisher, but then Deputy Governor Igor Parkhomenko intervened by ordering the police to investigate if the book had violated libel laws. Conveniently all the remaining copies were confiscated. Of course Parkhomenko may deny ordering the complete confiscation. It must have been a couple of policemen trying to do their job as best as they could. Plausible deniability and kickbacks is what the system rests upon.

The upside of the affair is the increase of media attention the book has received. The Russian Forbes is one of the most influential media outlets in the country, especially within the business elite. Eksmo is Russia’s second largest publishing house. They got the money to go to court. The Kremlin and the White House may want to wait until Gromov’s term expires, but private business and civil society could prove to be less patient.