Russia corruption: Putin's pet space project Vostochny tainted by massive theft

A Soyuz rocket launch at Vostochny cosmodrome (5 Jul 19)

Russia's new Vostochny space centre has lost at least 11bn roubles (£133m; $172m) through theft and top officials have been jailed.

So what went wrong with President Vladimir Putin's pet project?

Russia's Federal Investigative Committee (SK) says it is handling 12 more criminal cases linked to theft in this mega-project, which Mr Putin sees as a strategic priority for Russia, because of its huge commercial potential.

The longest jail term handed down so far was 11-and-a-half years for Yuri Khrizman, former head of state construction firm Dalspetsstroy.

Prof Mark Galeotti, a Russia expert at the Royal United Services Institute (Rusi), told the BBC the Vostochny scandal highlighted the scale of corruption in Mr Putin's huge state bureaucracy.

"How can you deal with it without declaring war on your own elite? He's not prepared to do that. This dependency on mega-projects almost invariably creates massive opportunities for embezzlement," Mr Galeotti said.

Why is Vostochny so important for Russia?

Vostochny was Russia's first purpose-built civilian site for commercial space launches. The first launch took place in April 2016 and there have been four more since.

The vast new site is in Russia's far east, well away from big cities, which reduces the risk of rocket debris hitting any large urban centre. The site used to be a Soviet missile base called Svobodny.

Space missions are a matter of national pride for Russia: it was the Soviet Union, after all, which sent the first human into space - Yuri Gagarin - in 1961.

Visiting Vostochny in September, Mr Putin told space officials: "This is the country's most important construction project of national significance."

Vostochny's total cost is currently put at 300bn roubles (£3.6bn; $4.7bn), Russia's RIA Novosti news agency reports. But the project has been dogged by cost overruns and delays.

Developing Vostochny is also a highly political move, as Russia has until now relied on the Soviet-era Baikonur cosmodrome in Kazakhstan for international space launches. Kazakhstan is a close neighbour, but having the main launch facility on Russian territory is safer for Moscow in the long term.

The space centre is still being built: a second launchpad under construction will host the Angara, a new heavy-payload rocket, with the inaugural launch set for 2021.

Vostochny also lies in an under-developed region with high levels of poverty, so the centre could help the local economy.

How did things turn sour at Vostochny?

In early 2015 a group of building workers at the site went on hunger strike, saying they were owed wages after a subcontractor's bankruptcy.

When the planned first rocket launch was delayed in 2015 - it took place the following year - Mr Putin ordered the SK to examine how Vostochny was being managed. Far-reaching corruption was discovered.

On Sunday the SK reported that 58 officials involved in the project had been sentenced for fraud and abuse of office.

Khrizman's theft alone cost the state 5.2bn roubles in losses. He and several other construction managers were jailed in February 2018.

His son Mikhail was jailed for five-and-a-half years.

The former chief accountant of Dalspetsstroy, Vladimir Ashikhmin, got seven years. The former president of the Khabarovsk regional assembly, Viktor Chudov, got six years.

Budget funds were embezzled by artificially inflating labour and material costs and through fake deals with subcontractors, Russian business daily Kommersant reported.

Sub-standard concrete was also used for the launchpad, which then had to be repaired, Tass news agency said.

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Despite the scandal, Vostochny is still being overseen by Dmitry Rogozin, head of the state space agency Roscosmos.

Mr Rogozin is close to Mr Putin, but not in the president's inner circle of top aides, Prof Galeotti told the BBC.

'Stealing hundreds of millions'

At a government meeting on 11 November Mr Putin spoke angrily about the continuing corruption at Vostochny.

"A hundred times people were told: 'Work transparently.' But no! They're stealing hundreds of millions," Mr Putin said.

His spokesman Dmitry Peskov later explained that the outburst was directed at the previous - not current - managers of the project. He said 11bn roubles had been stolen, of which 3.5bn had been later recovered.

Lack of financial transparency is the basic problem with this and other big state projects in Russia, Prof Galeotti said.

"President Putin would love Vostochny to be demonstrably a world-beater, he's looking for success stories now, but even this isn't enough to tackle the problems in the system. He's unwilling to really modernise the fundamentals of the system."

He said the problems were reminiscent of Soviet-era white elephant projects, notorious for wasted resources.

Other countries, including the US and China, remain keen to do business with Roscosmos, valuing its space expertise and technical prowess.

But new players in space, like Elon Musk's SpaceX, are already challenging Russia's competitive advantage.