#13 - JRL 7271
Washington Post
July 30, 2003
Russian Port Grapples With Legacy of Graft
Vladivostok Leader Credited With Modest Steps Against Embedded
By Peter Baker
Washington Post Foreign Service
VLADIVOSTOK, Russia -- It came as little surprise when the tax office here refused to return tens of thousands of dollars in value-added tax owed to Gregory Sundstrom's leasing business. In Russia, that's often the prelude to a demand for a kickback.
But something different happened this time. Sundstrom appealed to a higher authority and got his money back. "No bribes were paid," he said proudly.
This is what passes for progress these days in what for years has been considered the most crooked city in Russia. Officials in this fog-draped port on the coast of the Sea of Japan still try to strong-arm businesses, but now sometimes can be resisted. Sundstrom, an American and 11-year survivor of Russia's often-shady market economy, finds this heartening. "Although there's still a lot of graft built into the system," he said, "there's less of it than there was before."
Vladivostok has become the most prominent test case in President Vladimir Putin's drive to rein in local officials who rule provinces like private fiefdoms. The goal is to instead foster a stable, predictable order in a country still struggling a dozen years after the collapse of communism.
Two years ago, Putin removed the local governor, Yevgeny Nazdratenko, who had become known for bullying foreign investors, journalists, legislators and judges while flouting federal laws he did not like. Wintertime power outages that left his constituents freezing were common during his tenure. Although Vladivostok today remains plagued by organized crime, contract murders and official fraud, they have become less flagrant. The outages have faded after a couple of relatively warm winters. And the new governor talks about welcoming international investment.
The slow pace of change has left many people here debating whether life has really improved since Putin intervened or whether they simply face a new generation of self-serving leaders who took office after a marred election.
Valentina Molochnaya, 55, a businesswoman strolling through downtown one recent chilly summer evening, pointed to a new cobblestone pedestrian area with fancy cafes and fountains and credited Sergei Darkin, the young business leader who succeeded Nazdratenko as governor.
"Slowly it's changing for the better," she said. "It's getting cleaner, a little bit more civilized." Darkin, she said, is "younger and has a more contemporary view. He's a rich man. He didn't have to start picking up his wealth [in office]; he came into power as a rich man. And as a younger man, he's more interested in the city becoming more civilized."
To others, though, the changes have been superficial, a veneer of modernization over the decay. "Even around a grave you can build some beautiful fences," said a former Vladivostok mayor, Viktor Cherepkov. "But the main thing is that economic potential went down, unemployment increased, crime went up, drug addiction rose, standards of living fell. . . . What started as a dramatic future has been destroyed."
Vladivostok sits on the far edge of Russia only about 400 miles across the water from Japan. It is a largely gray, industrial port city framed by breathtaking vistas. Ancient, rusting ships remain moored at the docks, a reminder of its faded glory as the home of the once-proud Soviet Pacific Fleet. Russia's only cable car sits atop a hill in the city, but these days it is broken.
With 700,000 residents, the city anchors the Primorye region, a province of 2.2 million people, rich in timber and fishing but years behind the development of Moscow, 5,500 miles to the west. Throughout the 1990s, organized crime groups dominated life here and frightened off investors.
Darkin, 39, who made his fortune in the fishing industry, was elected to succeed Nazdratenko in 2001 after his chief rival was thrown off the ballot at the last minute for alleged irregularities. The vote's outcome rankled the Kremlin, which had hoped to install its own candidate. Darkin has since focused on repaving dilapidated roads, restoring old buildings, stabilizing the budget and, most importantly, fixing the power supply.
"In Primorye, they don't switch off the lights any more; homes have heat and hot water, which for years they didn't have. Primorye was famous in the whole country for these problems," Darkin said in an interview in his unusually modern office, equipped with state-of-the-art laptop computers and a flat-screen television. "My main goal, and what I achieved, was to improve the standard of living. . . . It wasn't easy."
Often wearing polo-style shirts and casual pants, Darkin displays constant restless energy, shifting in his chair and stretching his neck. "His eyes move 100 ways at once," noted one businessman supporter. With his artist wife, Darkin is sponsoring a film festival this fall and campaigns to stem population flight by plastering the slogan, "Here Is Where We Live," around the region.
But he grows testy in answering some questions. Does he have ties to private businesses profiting from the government? He says no. And he irritably dismisses the notion that Putin's government in Moscow exercises any influence here.
"I am running the region here," he said. "I am. Not anybody else."
Darkin likewise declares that he has conquered the criminal elements, to the point that businesses no longer need to pay a krysha, or roof, a Russian term that refers to protection rackets. "The krysha system doesn't exist now," he said. "Nobody needs a krysha anymore. Why would you need a krysha? . . . We'll handle our criminals, don't worry."
Putin's team, however, continues to keep its hand in local affairs; last year, it took over the police department, and Interior Minister Boris Gryzlov visited this spring and condemned what he depicted as lack of progress.
Officials reported 353 murders and attempted murders in Primorye during the first half of 2003, almost the same rate as in 2002 and 2001. Crime remains such a problem that authorities this month took down a statue commemorating the Jewish poet Osip Mandelstam, who died in a prison camp near Vladivostok in 1938, because they said they could not prevent recurring anti-Semitic graffiti.
A recent political brawl over lucrative fishing quotas likewise highlighted the continued problems at the intersection of government and business. Local business leaders complain that Darkin has used the quotas to reward his own backers.
"People who have connections and are closer to the feeding box are not forgotten and get what they like," said Gennady Kadatsky, director of the Far East Fishing Co., who complained that his company had been deprived of its usual allotments. "The governor is the one who gives out the quotas and he decides who to share them with. . . . Naturally he has preferences for his own people."
Some said that episode and others showed that the men now running the region have simply papered over a corrupt system. "If before they were wearing black jackets, now they're wearing bow ties," said Valery Muravyov, a former journalist who was beaten during Nazdratenko's tenure and now works for Putin's political party. "A lot of them learned how to talk beautifully. . . . A lot of people say this or that has changed, but really nothing has."
To some foreign investors who are tentatively returning, that assessment sounds too harsh. Sunil Gandhi is one of the optimists. Part of a diamond trading family from India, he is building a diamond polishing factory here and brims with enthusiasm for the future. "Everything has changed," he said with a huge smile as he inspected his cutting and polishing machines in a run-down building overlooking majestic Golden Horn Bay that is being renovated. "There are good opportunities out here, really good opportunities."
Yet Gandhi's words are belied to an extent by his actions. He says he tries not to drive his Mitsubishi Pajero sport-utility vehicle around town alone, even in the middle of the day. And for security he hired the chief for economic crimes from the local police department.
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