Corruption Arrest Sheds Rare Light on Illicit Big Business in Russia

A new shocking corruption case is beginning in Russia that might shed light on the riddle behind the largest recorded bribe in Russian history, 9 billion ($140 million) which was paid by an ordinary police colonel, Dmitry Zakharchenko, in 2016. This week, businessman Valery Markelov was arrested on bribery charges. Markelov and his partners earned billions of dollars from state contracts, in particular from contracts with state-owned monopoly Russian Railways.

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Colonel Zakharchenkos Billions has been the big mystery in the annals of Russian corruption for the last two years. In September 2016, Zakharchenko was arrested in Moscow. When his apartment was searched, investigators found 9 billion rubles in cash.

Its origins are completely unclear and Zakharchenko has said he saved billions while working for the police. It was obvious this was one of those rare moments when information about serious shadow businesses became public. Two years later we have our first answer to the riddle: on October 2, 2018, Valery Markelov was arrested on charges of attempting to bribe Zakharchenko.

Markelov is a major businessman, but not a public figure. Together with his partners, Alexey Krapivin and Boris Usherovich, he owned the 1520 Group of Companies. These firms are involved in railroad construction and engineering.

The number 1520 in the name refers to the width of Russian railway tracks (in most countries tracks are narrower 1425mm). Markelov, Krapivin and Usherovich became the main contractor for Russian Railways in the mid 2000s. The father of one of the partners, Krapivin, worked as an advisor to the president of Russian Railways, old friend and dacha neighbor of Putin, Vladimir Yakunin.

In 2015, Yakunin was fired, but this didnt interfere with business. In 2017, 1520 received Russian Railways contracts worth 218 billion rubles ($3. 75 billion) and was ranked first in the Forbes rating of Russian state contractors.

The money made from Russian Railways contracts was allegedly moved abroad by Markelov, Krapivin and Usherovich through offshore firms. Colonel Zakharchenko provided the protection for this transfer of funds to the West. Of course, the policeman and the railway businessmen couldnt have acted alone its likely Zakharchenkos bosses and managers of the railway monopoly also had a stake in the lucrative business.

But we will almost certainly hear nothing about them. According to The Bells sources, criminal charges could not have been brought against the owners of 1520 without Putins approval. This means that the case may continue, and arrests could lead to the highest levels of major state companies.

Why the world should careIn the West, everyone has heard of billionaires like Roman Abramovich or Putins friends who became super-rich, like Arkady Rotenberg. But Russias super-wealthy elite does not stop there: the owners of major shadow businesses may not even appear in Forbes famous list. Other important stories, brieflyPutins most unpopular reform is apparently complete: the president has now signed a law that will increase the pension age.

In reality, however, reform continues. For example, on October 1 we learned that Russians will be included in a new voluntary pension savings plan without their permission. But there will be no more dramatic and unpopular announcements.

Soon we will find out how this is impacting Putins approval rating. According to the last poll, Putins rating was at its lowest level since 2013.Lawyers have discovered a formality that may allow them to send Aleksei Navalny to prison following his latest arrest.

Under Russian law, three arrests for participating in unsanctioned protests within 180 days is grounds for a felony case. Moreover, the arrest gives the authorities a reason to change the suspended sentence which Navalny is currently serving to a prison sentence. The opposition politician could be handed a prison sentence of up to 5 years if the Kremlin were to deem it necessary.

Peter MironenkoThis newsletter is supported by the Investigative Reporting Program at UC Berkeley.// The major stories you need to understand Russia. An insider view, in 5 minutes.

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