Corruption: A new Russian Fukushima in the making?

Last summer’s arrest of a former high-ranking Rosatom official on embezzlement charges may have been a first widely publicised case of a corruption scandal in the Russian nuclear domain in the recent years, but it was likely just one – and, furthermore, dismissed by some as a see-through PR move by Rosatom – fragment in a sprawling corruption mosaic in the Russian nuclear sector, something that alarms environmentalists and civil activists enough to talk about grave safety risks and the need for the government to take urgent measures.

On September 12, Kirill Kabanov, who is a member of the presidential Council for Civil Society and Human Rights and heads the non-governmental organisation National Anti-Corruption Committee, addressed Prime Minister Putin and Prosecutor General Chaika with open letters urging the officials to take a closer look at abuses reported by a range of national media at new reactor construction sites. (The two statements, in Russian, are available as attachments to this report, on the right.)

‘Situation with corruption’ is adverse, NAC experts say

The National Anti-Corruption Committee has at its disposal information compelling one to assess the “state of the situation with corruption in the nuclear industry as adverse,” the letters say.

The NAC further refers to reports by the official national daily Rossiiskaya Gazeta as it says: “[…] in the past six months alone, removed from their posts on suspicion of corruption and other abuses were heads of twelve Rosatom enterprises. In 2010, 35 industry officials were dismissed for the same reasons. In a notorious development last summer, officials with the Main Department for Economic Security and Countering Corruption of the Ministry of Interior of the Russian Federation detained former Rosatom deputy director Yevgeny Yevstratov and charged him with embezzling budget funds allocated toward the construction of a number of the corporation’s sites.”

At the same time, the letters continue, “these measures have so far proved insufficient to ensure a drastic solution to the problem of embezzlement of budget funds and corruption at nuclear sites. The issue of abuses perpetrated with respect to the industry’s purchases in NPP construction and modernisation projects remains urgent.”

The statements proceed to describe some of the common corruption schemes reported in the nuclear industry and, while the address to Prime Minister Putin simply informs the head of the government of the situation, the letter to Prosecutor General Chaika ends with a request to look into “whether prosecutorial probes have been conducted into the alleged violations of the law” reported by the media and, if no such probes have been conducted, to “consider the possibility of arranging for such a probe to take place.”

“We are asking to get to the bottom of this. President [Dmitry Medvedev] recently instructed the Prosecutor General’s office to look into any public allegations of corruption,” the NAC’s head Kabanov told Bellona in a telephone conversation. “We simply drew the Prosecutor General’s office’s and the government’s attention to these facts.”

Corrupt cooling towers?

Some of the details concerning the urgent issue of “abuses perpetrated with respect to the industry’s purchases in NPP construction and modernisation projects,” as highlighted by the NAC, which cites media reports, are, in particular, purchases of technological equipment for the cooling towers of the fourth reactor of Kalinin NPP, in Udomlya (some 200 kilometres northwest of Moscow) and the second line of construction at Leningrad NPP, near St. Petersburg:

“Recently, equipment purchases for NPPs have been conducted outside the tender procedure, which is contrary to the law. […] a specially issued regulation […] adopted in 2007 by [Rosatom’s daughter company, national NPP operator] Concern Rosenergoatom allows for the selection of equipment to be bought without conducting a tender – or solely based upon the decision of the design organisation.” 

Furthermore, the letters say, citing media sources, “preferences are afforded to such suppliers that offer equipment without a due guarantee of reliable operation within the duration of the useful life term, as well as that produced from fire-hazardous materials, which, in its turn, could affect the safety of power-producing sites. In a number of cases – and again outside the tender procedure – the choice has been made in favour of a foreign-based company, even though analogous equipment produced domestically is both up to quality standard and significantly cheaper in price (by two or three times).”

Speaking with Bellona on the telephone, Kabanov said: “The special regime arranged for any process within the framework of internal industry regulations is, essentially, a corruption scheme in and of itself. One example is that story with [NPP] construction tenders in conditions of such a special regime. Clearly, it was possible, if one wanted, to set up all tender terms and conditions. Clearly, there are monopoly companies that produce nuclear equipment. But here, too, we must prevent corruption, rather than introduce it with the help of such intradepartmental regulations.”

Violations not avoiding the scrutiny of safety authorities

The consequences of corruption schemes that are allegedly employed by Rosatom companies – such as the use of counterfeit and non-certified equipment in the construction of new nuclear reactors – could not have escaped the scrutiny of the federal industrial and ecological safety oversight agency, Rostekhnadzor. As evidenced by facts published in Rostekhnadzor’s yearly report of 2009, new reactor construction is compromised by run-of-the-mill theft – perpetrators substitute cheaper, subquality materials for the ones approved for construction. The federal service reports, for instance, the following incidents at the construction sites of Rostov and Leningrad NPPs:

 “Supervisory measures undertaken led to the discovery of 959 units of counterfeit concrete reinforcement supplied to Reactor Unit No. 2 of Rostov NPP. The company […] responsible for the delivery of the mentioned concrete reinforcement had [its] license revoked.”

“As established in the course of supervisory activities, uncertified concrete reinforcement was supplied to Leningrad NPP. An administrative penalty was imposed on the [supplier company] in the amount of RUR 30,000.

From violations to real accidents…

Problems that apparently plague the construction of new reactors in Russia finally manifested themselves vividly on July 17, 2011, in the crumbling of steel structures and the carcass of a containment building under construction for a new reactor at the site of Leningrad NPP-2.

[picture1 {Scene of a July 17, 2011, accident at the construction site of Leningrad NPP-2, where steel structures crumbled following egregious violations of technological regulations.}]

According to preliminary information, the unprecedented accident was caused by violations of technological regulations during construction works. Reports say the accident will have far-reaching consequences since at least 1,200 tonnes of reinforcing steelwork will have to be dismantled to rebuild the destroyed wall of the future containment building.

Incidentally, this is the same site where mismanagement and incompetence during construction works was earlier deplored even by nuclear industry veterans (in Russian) and a local court had had to halt construction owing to outrageous safety and sanitary violations.

In a statement published late last July (in Russian), Bellona demanded that not only the causes of the incident at Leningrad NPP-2 be thoroughly looked into, but that authorities also “analyse and inspect the quality of what has been built to date.”

“We believe that until all these steps have been taken, all further construction works must be ceased. Corruption and unprofessionalism that we observe today in various Rosatom structures may cost too dearly both the state and the country’s population,” Bellona’s statement read.

Neighbouring Ukraine and Belarus none too happy about the revelations

Besides implementing a number of domestic projects, Rosatom is also building or preparing to build new reactors in other countries – such as the former USSR republics of Ukraine and Belarus, where environmentalists and NGOs are likewise concerned that corruption and below-par construction quality may eventually affect the safety of the future reactors.

“The numerous violations of construction norms and standards, and working conditions, which lead to even serious incidents at NPP construction sites in Russia, cast doubt on the capability of the State Corporation Rosatom and its subcontractor companies of carrying out quality and reliable construction projects as per [Rosatom’s] export contracts, in particular, in Ukraine,” said, for instance, a statement on the website of the National Ecological Centre of Ukraine.  

And the Belarusian Anti-Nuclear Campaign, which is one among many Russian and Belarusian organisations trying to prevent the construction, in Belarus’s town of Ostrovets, of a new nuclear power plant to an as-yet untested Rosatom design, wrote this in an address to Russia’s Putin and Belarus’s President Alexander Lukashenko: “The known incidents and deficiencies in the operation and construction of Russian-built NPPs in Russia, Iran, and China, as well as the recent collapse of reinforcing steelwork at the construction site of the containment building at [Leningrad] NPP-2, are evidence that Rosatom and its structures have serious problems of a systemic nature and cannot guarantee the quality of their sites. This propagation of dangerous nuclear technologies places a special responsibility on the Russian government.”

What the Belarusian Anti-Nuclear Campaign is referring to is the less than perfect performance record Rosatom has been showing in its international construction contracts, such as problems with completing and launching the reactor at Iran’s Bushehr or the 3,000 or so complaints brought by China to Rosatom’s notice with regard to the quality of the equipment supplied to a station Rosatom is building there.

Corruption risks report: Nearly half of Rosatom’s goods and services contracts concluded with violations

At the end of 2010, the Moscow-based ecological group Ecodefense! and Transparency International Russia presented a study that took a look at corruption risks in Rosatom’s purchasing practices – the results of an analysis of some 300 orders placed by the state corporation and posted on its website for open access.

At issue are contracts concluded by Rosatom with external organisations for goods or services needed for particular projects – orders paid with budget funding – and the study highlights prominent corruption risks present in Rosatom’s purchasing activities. Because of a special status the corporation enjoys in the country, Ecodefense! and Transparency International Russia conclude, Rosatom’s purchases are not subject to the jurisdiction of the federal law that establishes procedure for procuring goods or services for state or municipal needs. And even though Rosatom itself provides a set of guidelines for such activities in its Unified Industry Purchases Standard, the restrictions these impose on the purchaser or ordering party are less clearly defined than in that federal law.

Furthermore, a monitoring study of a selected sample of 200 purchasing agreements made by Rosatom revealed numerous violations of the Industry Standard, such as with, for instance, the selection of a particular method for placing an order, failure to provide cost estimate documentation when ordering construction or renovation works, and more.

Altogether, violations of Rosatom’s own purchasing standard were found in 83 contracts – 27 percent of the total sample or 41 percent of the 200 contracts selected for in-depth analysis. Another conclusion was that the laws and regulations that govern Rosatom’s activities where buying goods and services for the corporation’s needs is concerned are fraught with serious deficiencies that leave ample room for corruption risks.

“We know of the report by Transparency International Russia. But this story [with the cooling towers] did not make it into their analysis. They are now preparing a new report on that subject,” Kabanov told Bellona on the telephone.

Transparency International Russia says on its website that “corruption is understood here as a complex of phenomena involving abuse by officials of their office for purposes of extracting personal profit (bribery, fraud, embezzlement, favouritism, and nepotism).”

But in the nuclear industry, the risks are not confined to state or corporate funding, such as that may be channelled into tenders rigged to cater to specific companies with close ties to particular officials, simply vanishing in the corrupt officials’ pockets.

“Corruption in the nuclear industry leads to an impaired safety culture, substandard construction quality, and, as a result, accidents at nuclear sites. With respect to Rosatom, there is no outside control, so there are truly gigantic opportunities there for corruption,” Ecodefense!’s co-chair Vladimir Slivyak told Bellona. “There was corruption [within Rosatom] before, too […] But it is just recently, brought along with a new wave of NPP construction, that corruption processes [within Rosatom] may have reached a record high in the [corporation’s] history.

Any chance of remedy – or whitewash as usual?

That corruption risks take on a much more serious dimension when it concerns the nuclear industry is noted by other experts as well.

“If someone somewhere steals a bag of something, it’s one thing. But if stealing and corruption are rampant at nuclear sites, that’s a completely different matter, it affects millions of lives, something that’s been proven by both Chernobyl and Fukushima,” Greenpeace Russia’s energy programme coordinator Vladimir Chuprov said during a show on the liberal Ekho Moskvy radio station.

Russian parliamentaries are all for fighting corruption, too. In that, their statements are in line with one of the cornerstones of President Dmitry Medvedev’s domestic policy – zero tolerance for corruption.

In light of the recent exposés, members of the lower chamber of the Russian parliament, the State Duma, have been quoted in the Russian media proposing that such incidents be dealt with by law enforcement authorities swiftly and without mercy:

“If there are such isolated ‘shady’ cases, then they must, without doubt, be looked into in detail by the relevant authorities, with all the consequences and unequivocal, straight conclusions this entails,” said Georgy Leontiyev, of the State Duma’s energy committee. Leontiyev is a member of the ruling United Russia party. 

“With regard to the specific problems connected with purchases for construction at Kalinin and Leningrad NPPs, these are for professionals to sort out, acting within the mandate of the law,” said a Just Russia legislator Ivan Grachev, also a member of the energy committee.

Given the recent wave of revelations, it looks as though corruption scandals involving the nuclear sector may yet make more headlines in the future. The risk, however, is that even if Russian prosecutors take the matter seriously and more investigations are launched, a new anti-corruption sweep may only brush up the surface dust – a dozen low-ranking officials Rosatom may be willing to sacrifice to improve its public image.

This – giving up easy investigation targets in order to protect the corporation from closer scrutiny – may also have been the motive behind the July arrest of Rosatom’s former functionary Yevstratov.

Yevstratov was charged with embezzling 50 million roubles ($1.8 million) in state funding earmarked for the development of spent fuel management technologies. The arrest was hailed as a success in an anti-corruption crusade undertaken jointly by Rosatom and the Ministry of Interior, but it did not look convincing to Bellona’s Alexander Nikitin.

Nikitin, who heads the St. Petersburg-based Environment and Right Center Bellona, said that the term “corruption” is tossed around in contemporary Russia as frequently as charges of espionage, and that a possible explanation for the arrest could be Rosatom’s ardent post-Fukushima efforts to polish its image – something that would make Yevstratov, the head of safety programmes, a sitting duck for an anti-corruption sweep.

Still, though Rosatom may avail itself of the special treatment it enjoys in Russia – a combination of the influence it has been able to exert since the Soviet era, a meagre to non-existent external control, and the government’s inability or unwillingness to bring the deeper layers of ubiquitous practices of corruption to public scrutiny – the situation may not be as easy with foreign contracts, where corner-cutting or embezzlement schemes face a higher risks of getting exposed.

Andrey Ozharovsky

idc.moscow@gmail.com

Maria Kaminskaya