The Criminal Economics of Kremlin Propaganda

Anti-corruption blogger Alexey Navalny is causing more waves at Aeroflot Airlines, where he has called for an internal investigation into a publicity contract worth 64 million rubles (2 million USD) awarded without competition to Apostol Media Group [ru]. In a letter dated February 18, 2013, addressed to Aeroflot's General Director Vitaly Savelev (published [ru] by Vedomosti newspaper yesterday on March 22, 2013), Navalny worried that the process by which Apostol won its contract appears to have violated federal law 223 [ru], as well as Aeroflot's own operating procedures (statute 5.16 of its procurement policy [ru]).

After Vedomosti broke the story, Navalny published a response [ru] in his LiveJournal blog, reiterating for the layman the claims of his letter to Savelev. Navalny also revealed something absent in his internal memo: political suspicions that Aeroflot contracted Apostol, in order to fuel the work of celebrity Tina Kandelaki, a co-owner of the media company and a staunch supporter of the Kremlin. (Global Voices interviewed [ru] Ms. Kandelaki in May 2012.) Navalny writes:

Моё личное мнение заключается в том, что Аэрофлот был принужден к его заключению. Мы имеем классическую ситуацию когда госпропагандистов сажают на секретный, но прибыльный контракт. Вся “кремлёвская интернет-медийка” так и работает – присосавшись к госкомпаниям.

My personal opinion is that Aeroflot was forced into this decision. We have a classic situation, when state-propagandists are handed a secret, but profitable, contract. All the “Kremlin Internet-media” works this way, leeching from state-companies.

Tina Kandelaki interviews Vasily Savelev, 6 September 2012, YouTube screen capture.

Tina Kandelaki interviews Vasily Savelev, 6 September 2012, YouTube screen capture.

Kandelaki, who is no stranger to accusations that she is a Kremlin stooge, published [ru] to her own LiveJournal a response copied from [ru] her Apostol colleague, Vasily Brovko, who attempted to refute Navalny's secondary claims that Apostol has failed to attract the online audience stipulated in its Aeroflot contract. (Brovko also devotes much of his text to refuting Navalny's offhand comment that Apostol's rebranding campaign for Rostec has been a waste.) Navalny retweeted Kandelaki's repost, writing [ru] skeptically:

эээээ… кто-нибудь понял из этого ответа почему они получили контракт без конкурса?

ummm… did anyone understand from this response why they [Apostol Media Group] got a contract without a competition?

In his February 18 letter, Navalny requested four actions [ru] from Aeroflot's management: (1) an internal review of how the Apostol contract was awarded and whether or not it violated laws or company policy, (2) the refinement of Aeroflot tender policies, (3) notification to the board of directors regarding any contracts worth more than 20 million rubles (648 thousand USD), and (4) a review of whether or not Apostol has met its contractual obligations.

Roughly a month after the memo, on March 11, 2013, Aeroflot's board voted six-to-one to approve a policy that is precisely the opposite of what Navalny wanted in point three of his letter. (See Navalny's dissenting opinion here [ru].) Aeroflot's management now has the right to deny any documents to board members, unless they specifically request particular paperwork. In other words, the board effectively neutered itself, surrendering what would seem to be a vital tool in maintaining corporate oversight.

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