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. Last Updated: 07/27/2016

Cash for Children's Cancer Ward Diverted




Comfortably seated on the edge of her bed, Olga Ulasevich sounds like a typical teenager as she complains about the hospital. "It's very boring here," she says in fluent English, pausing from reading a popular teen magazine on her lap.


A straight-A student, Olga has been diagnosed with ovarian cancer. Her grandmother Tatyana Ulasevich - who has cared for Olga since her mother's death - brings her in for seven days of chemotherapy every other week at a 100-bed clinic on Kashirskoye Shosse attached to the imposing state-owned Oncology Institute, or NII.


Hundreds of other children with cancer are turned away from the clinic - and a big reason why is that the Russian government has diverted funds from the half-built children's cancer hospital next door to renovations for Kremlin-owned presidential sanatoriums, upgrades to state-owned RTR television and even to build a Moscow movie theater.


As a result, the sprawling shell of the 90,000-square-meter Children's Oncology Center - which was planned to be Russia's only children's cancer hospital - now stands deteriorating just a few dozen meters from the window of Olga's hospital room. Also deteriorating, in a nearby warehouse, is about $14 million in high-tech medical equipment that can only be used in the hospital.


The Children's Oncology Center was supposed to be built in two years, from May 1995 to May 1997. The $110 million project was to include 250 beds for child patients and a 100-bed hotel for their parents, and it has enjoyed the high-profile patronage of Naina Yeltsin - who in September 1997 took French First Lady Bernadette Chirac on a visit to the site and promised to have her back in a year for the grand opening.


Instead - after 4 1/2 years and $59 million - work has ground to a halt. And next door, doctors at the NII clinic do what they can, but simply don't have room or resources for the estimated 5,200 children who fall ill with cancer nationwide each year.


"A lot more children would have survived if the hospital was operating now," said Lev Durnov, the gentle-faced chief of the NII children's clinic and director of the unfinished hospital.


Valentin Pokrovsky, who as president of the Russian Academy of Medical Science is Russia's top doctor, agreed. "It is absolutely ridiculous to delay the construction for so long," Pokrovsky said.


The government drew up initial plans for the hospital in 1991 and held a tender for it in 1994. Turkish giant Alarko Holding won, and financing for the project was arranged through a complex swap: Russia agreed that 25 percent of the income from natural gas sales to Turkey - in 1997, a quarter of Turkish gas sales was worth about $125 million, according to natural gas industry analysts - would go to finance construction projects in the social sphere. The children's hospital's funding was to be handled by a state-owned financial agent, Vneshstroiimport.


However, hospital financing fell apart in 1997 after then-First Deputy Finance Minister Andrei Vavilov drew up an order diverting those Turkish gas sale revenues away from the cancer hospital to various other projects.


According to Finance Ministry orders shown to The Moscow Times by Vneshstroiimport, some $5 million of those funds were diverted to the refurbishment of sanatoriums owned by the presidential administration.


A hefty chunk of the cancer hospital's finances were diverted to the VGRTK television and radio company, which runs the Kremlin-friendly national television station RTR. Some of the finances also went to paving roads, purchasing new buses and building a Moscow cinema.


And finances were also steered away from the cancer hospital to benefit other public health projects, including the Bakulev Cardiological Institute, the Sports Trauma Center and the Burdenko Neurological Institute, where Yeltsin received treatment for an inflamed nerve last year.


All of the above projects were listed as new beneficiaries of the cancer hospital's dedicated financing in a Finance Ministry order signed by Vavilov on Feb. 18, 1997, and subsequently approved by then-Prime Minister Viktor Chernomyrdin on July 16, 1997.


Vavilov, once a top Gazprom official and now head of a think tank called the Institute of Financial Research, was first deputy finance minister from 1992 to 1997. His final years in office were stormy - from the February 1997 bomb that destroyed Vavilov's car as it was parked at the Finance Ministry, to allegations brought by the Central Bank and the Audit Chamber, parliament's budgetary watchdog, that he was involved in financial misappropriations.


On Wednesday, Vavilov had little comment on the funding of the children's cancer hospital. "That was three years ago, and I don't remember the document," he said. "At that time I signed hundreds of documents a day, and I cannot remember such a document."


Chernomyrdin, in approving Vavilov's Finance Ministry order, apparently did not want to cut off the cancer hospital entirely - he added a clause that it would get $36 million in 1998. However, Chernomyrdin was sacked soon after, and none of his four successors has authorized a restart of financing. Vneshstroiimport has not received any funds from the gas barter since early 1998.


"We have a very thick file of letters we sent to the president, different prime ministers, trade ministers, finance ministers," said Vadim Karpinsky, first vice president of Vneshstroiimport. "No one has refused to finance the project, but we still have not seen any money."


The most recent high-level appeal for the project was sent by Deputy Prime Minister Valentina Matviyenko to Yeltsin on Dec. 16. Yeltsin resigned two weeks later. A new appeal is now being drafted, and the Academy of Medical Science, Vneshstroiimport and NII all say their hopes rest with acting President Vladimir Putin.


Asked if Putin would see to the hospital's needs, a Kremlin spokesman asked that the query be faxed over, and warned that the acting president's busy schedule precluded a quick answer. "It's a difficult question," he said.


Alarko continued construction of the hospital at the request of the Russian Academy of Medical Science even after funding dried up. Then, with the government $12 million in debt, the ruble devalued, markets crashed and work was called off, said Alarko's regional director, Engin Colpan.


Meanwhile, some children with cancer get treatment and some don't; some get better, others die. Olga was admitted to NII's overtaxed clinic in August 1999 and had surgery in September. Although she is visibly weak as she undergoes a sixth course of chemical therapy, doctors think Olga has a good chance of beating the cancer.