‘I knew about funds fraud’ says Vladimir Putin’s chief of staff

Sergei Ivanov, left, speaks to Vladimir Putin during a meeting yesterday. Picture: AP
Sergei Ivanov, left, speaks to Vladimir Putin during a meeting yesterday. Picture: AP
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President Vladimir Putin’s chief of staff has acknowledged he was aware of the alleged embezzlement of state funds earmarked for Russia’s satellite navigation system, in a sign of an intensifying battle among the Kremlin clans.

Sergei Ivanov said he discussed the case with police officials but didn’t speak publicly about it for several years, to prevent the culprits from covering up their deeds. Mr Ivanov, a KGB veteran like Mr Putin, said years in the spy service taught him to be sly with the enemy.

“I have spent a large part of my life in foreign intelligence,” he told Channel One television. “The most horrible thing there is betrayal, and here we had the same thing. I had to be patient and not let my feelings show, because I realised that if I did that it would tip them off and push them to cover up their trail.”

Mr Ivanov’s comments, broadcast late on Sunday, come after a Russian police official said on Friday that the Interior Ministry was investigating the allegations of embezzlement of 6.5 billion rubles (about £125 million) earmarked for Russia’s GLONASS satellite navigation system. As a former Cabinet member, Mr Ivanov previously oversaw the development of the system that competes with the GPS navigation system run by the US.

The allegations follow a military corruption scandal that led to last week’s sudden removal of defence minister Anatoly Serdyukov, and some observers alleged a link between them.

Russian commentators saw Mr Ivanov’s comments as a clumsy attempt to avoid blame for allowing corruption to flourish at the ambitious project that has seen a series of humiliating failures in recent years, including the loss of three satellites in a failed launch in December 2010.

“It’s a specifically Russian way of investigating corruption: after learning that someone intends to steal state funds through shell companies you just hide and wait for two or three years,” Anton Nosik, a prominent blogger, wrote in a sardonic post.

Valery Morozov, an anti-corruption activist, said in his blog that the claims of embezzlement appeared to reflect the infighting among the Kremlin clans.

Mr Ivanov was widely seen as a driving force behind Mr Serdyukov’s fall, and the other camp seemed to strike back with the claim of corruption in GLONASS, Mr Morozov said.

While Mr Putin linked Mr Serdyukov’s departure to a probe into military corruption, most experts believe he was sacked because of an intensifying behind-the-scenes battle for the distribution of 20 trillion rubles (about £400bn) that the Kremlin plans to spend on buying new weapons through to 2020. Mr Serdyukov was refusing to sign new weapons contracts, demanding higher quality and cheaper prices from domestic military manufacturers, which angered industry leaders with strong Kremlin connections.

Vladimir Milov, a former deputy energy minister turned opposition leader, said in a commentary on the online Gazeta.ru that Mr Putin seems unable to mediate the escalating conflicts between his lieutenants.

“Putin has failed to maintain a reasonable balance of forces in his entourage after his return to the presidency,” Mr Milov wrote. “Simply speaking, Putin has rarely shown up at work and has been reluctant to play the role of an efficient arbiter on domestic conflicts that he did so well at the peak of his popularity.”