Deputy Minister’s Allies Call for His Release

By Miriam Elder

Staff Writer

Published: November 23, 2007 (Issue # 1326)

Reuters Storchak, seen here in February, is the government’s top foreign debt official.

MOSCOW — Lawyers and colleagues of Deputy Finance Minister Sergei Storchak mounted a fierce defense of the imprisoned official Wednesday, calling for his immediate release as he faces charges of attempted embezzlement.

Storchak’s court-appointed lawyer appealed his arrest, and a date for the hearing is expected by the end of the week, Moscow City Court spokeswoman Anna Usachyova said.

Storchak’s own lawyer, Igor Pastukhov, said the court would hear the case Friday. “Until then, he’s sitting in Lefortovo prison,” he said. Storchak has been held in the Soviet-era jail since his detention last Thursday.

The Prosecutor General’s Investigative Committee has said it will bring charges against Storchak and two businessmen by next week on suspicion of attempting to embezzle $43.4 million from the state budget.

Storchak oversaw all debt negotiations between Russia and foreign states, as well as the $148 billion oil stabilization fund, in his role as deputy to Finance Minister Alexei Kudrin.

Federal Security Service officers detained Storchak as Kudrin was flying to an international conference in South Africa. Kudrin, who has called his deputy’s arrest “incomprehensible,” returned to Moscow as planned Tuesday, a ministry spokeswoman said.

State Duma Deputy Alexander Lebedev, a billionaire shareholder in Aeroflot, said Wednesday that he had offered the court his personal guarantee that Storchak would not flee the country or tamper with evidence if released while awaiting trial.

“He is a worthy enough man not to stay in detention during the investigation,” Lebedev said, Interfax reported.

Storchak’s arrest, the most high profile of a serving state official during President Vladimir Putin’s time in office, came two weeks ahead of the Dec. 2 State Duma elections. The presidential vote will follow in March.

“Above all, [the arrest] is linked to the need to fight corruption,” said Sergei Markov, a Kremlin-connected political analyst. “Everyone in government is nervous about what will happen to them after the elections,” he added.

Neither Putin nor Prime Minister Viktor Zubkov has commented publicly on the arrest. Some analysts have seen the move against Storchak as a sign of continuing power struggles within the Kremlin as the elections draw near.

The accusations are believed to stem from the repayment of Soviet-era debt from Algeria, which were organized through commercial contracts with little-known firm Sodexim.

Prosecutors believe that Storchak and the two other men, Sodexim general director Viktor Zakharov and Vadim Volkov, the head of Interregional Investment Bank, or MIB, attempted to embezzle budget funds under the pretext of covering expenses for the firm.

The Finance Ministry on Tuesday insisted that the Sodexim transactions were legitimate. “All liabilities [to Sodexim] are sufficiently clear and transparent,” an unidentified Finance Ministry spokesman told Russian media.

Sodexim was awarded a contract to pay off Algeria’s Soviet-era loans in the 1990s by managing commercial agreements equal to the sum of the debt, the spokesman said. “The company had to first transfer the money to the budget and then receive the goods,” he said.

But despite transferring $26 million to the federal budget in 1996, Sodexim never received the goods, the spokesman said. Under a debt agreement ratified by Russia and Algeria last year, both governments were freed from any obligations. Russia said it would settle any debts with Russian companies, and Sodexim is now seeking the $26 million plus interest.

Amendments to the 2007 budget foresaw a debt repayment to Sodexim, the spokesman said.

Neither prosecutors nor the Finance Ministry have explained the alleged involvement of MIB, but the bank was linked to the last scandal to rock the Finance Ministry’s debt department, when its deputy head, Denis Mikhailov, was arrested in December 2004.