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. Last Updated: 07/27/2016

Customs to Be Its Own Agency

Prime Minister Mikhail Fradkov will directly oversee the corruption-plagued Federal Customs Service following President Vladimir Putin's decision Thursday to move the service from the Economic Development and Trade Ministry.

The presidential decree ordering the transfer followed an April 10 meeting with Cabinet members at which Putin accused the service of entrenched corruption. That meeting was followed by a series of high-profile arrests of senior customs officials.

The decree was made public on the presidential administrations web site.

The reorganization enables the service, which brings in more than 40 percent of state revenues annually, to craft its own regulations. It also gives the head of the service, currently Alexander Zherikhov, the power to appoint regional customs officials.

Putin's move was warmly greeted by business leaders, who said it suggested much-needed reform was on the way, while it raised eyebrows among political observers skeptical of the government's ability to reform itself.

The Economic Development and Trade Ministry declined to comment.

The notorious inefficiency of customs officials, known for bribery and abuse of power, has been the cause of frequent complaints in the business community.

Last month, the wave of discontent drew Putin's attention.

"When are we going to create order on the border?" Putin asked Economic Development and Trade Minister German Gref at the April 10 meeting. "When are we going to stop the practice when customs units and businessmen merge in economic ecstasy at most of the border crossing points?"

Following Putin's remarks, there were some prominent arrests.

The head of the Far East Customs Directorate, Ernest Bakhshetsyan, and his first deputy, Alexander Vorobyov, were arrested in Vladivostok earlier this month on charges of exceeding official powers.

Ten customs officials were charged with involvement in car smuggling in Yaroslavl in late April. Another senior customs official was detained Thursday in Moscow on charges of fraud involving goods imported from Georgia, Interfax reported. His name was not disclosed.

Talk of revamping the customs system has intensified in the past five years. In 2003, a new customs code was adopted. Since then, there have been trial attempts to digitize the customs system and to simplify the pricing mechanism used for assessing the value of goods transported across the border.

The new customs code, analysts say, has been a marked improvement.

But serious systemic reform had yet to be tackled.

According to Economic Development and Trade Ministry figures, it would take 89 billion rubles, or $3.3 billion, to revamp the customs service. As much as $300 million in customs and export duties flow into the service daily.

Putin's decision, which effectively raises the service's profile, suggests that real reform is on the horizon, said Andrew Somers, president of the American Chamber of Commerce in Russia.

Somers said the latest move did not mark a reverse of the administrative reform effort of 2004, when the customs service was moved under the aegis of the Economic Development and Trade Ministry. It simply shows the president is now focusing on a specific area in need of reform.

The move was also welcomed by customs officials. "It is good for us because the nature of our job dictates that we have to work cooperatively with other government agencies, and being a separate organization should make it possible to simplify this work," said Federal Customs Service spokesman Vladimir Zubkov.

Konstantin Antipov, general director of Agency AM Consulting, which helps businesses navigate the sometimes-rocky shoals of Russia's customs regime, was more tepid about Putin's move.

The reorganization, Antipov said, makes it easier for Putin to implement changes. Whether those changes happen, however, remains to be seen, he said. Needed reforms include bringing the customs system into line with international practices and providing the service's employees with better benefits in order to deter lawbreaking.

Political analysts, including Vladimir Nikonov of the Politika Fund and Yury Korgunyuk of the Indem anti-corruption think tank, were pessimistic about the new customs service.

"Fradkov is a bureaucrat," Korgunyuk said. "And a bureaucrat's only tool is corruption. So things will just go on as they have before."