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. Last Updated: 07/27/2016

Siloviki Clash in Storchak Affair

Itar-TassEconomic Development and Trade Minister Nabiullina and Finance Minister Kudrin at a Cabinet meeting on Thursday.
A turf war between rival siloviki factions over the corruption charges against Deputy Finance Minister Sergei Storchak widened Thursday as the Investigative Committee threatened the Prosecutor General's Office with legal action.

Storchak already stands accused of attempting to embezzle $43.4 million in a foreign-debt deal with Algeria, and investigators this week unveiled a new case against him over debt negotiations with Kuwait.

The committee complained in a letter to Prosecutor General Yury Chaika that a decision Wednesday to a drop the second case against Storchak was illegal, spokesman Vladimir Markin said Thursday, Interfax reported.

The dispute over the Storchak affair represents just part of a broader power struggle between rival Kremlin clans ahead of the presidential election in March, analysts said.

Finance Minister Alexei Kudrin on Thursday welcomed the dropping of the second case, which was widened out to involve other Finance Ministry officials.

"I did not understand the motives behind this case," Kudrin said in televised comments at a government briefing. "I want to note that this case does not only involve Storchak but also colleagues in the Finance Ministry, who took part in the discussions."

Officials from the Economic Development and Trade Ministry, the Foreign Ministry, the Industry and Energy Ministry and the Federal Service for Military and Technical Cooperation also participated in the debt talks, Kudrin said.

Kudrin, who has been vociferous in his support for Storchak, said he intended to visit him in Lefortovo prison in the next few days.

Storchak, a leading authority on international finance who is the government's top foreign-debt negotiator, also oversees the government's $144 billion oil stabilization fund.

A spokesman for the Finance Ministry refused to comment further.

The Storchak case has pitted the head of the recently formed Investigative Committee, Alexander Bastrykin, whom analysts have described as an ally of Kremlin deputy chief of staff Igor Sechin, against Chaika, whom they say belongs to a rival siloviki clan led by Viktor Cherkesov, the head of the Federal Drug Control Service.

The committee, a semiautonomous agency that is handling the Storchak case under the auspices of the prosecutor's office, is now determined to contest the decision in court, Markin said Thursday, Interfax reported.

By law, the Prosecutor General's Office only has 24 hours to halt a case, Markin said. In this instance, that period had already expired, he said in televised comments.

At an appeal hearing Monday, prosecutors announced that they had opened a previously unknown second case against Storchak, centering on debt negotiations with Kuwait in January 2005.

By Wednesday, however, the Prosecutor General's Office announced that it had ordered the Investigative Committee to drop the second case due to lack of evidence. In a statement, the office said the case involved "other individuals at the Finance Ministry."

In a lightning response, a senior official at the Investigative Committee lashed out at the decision in a wide-ranging interview with official government newspaper Rossiiskaya Gazeta. The article, which added the assertion that a cash hoard had been found in Storchak's apartment, was published online Wednesday evening.

"I totally disagree with both the decision itself and the way it was made," Dmitry Dovgy, head of the Investigative Committee's main investigations directorate, said in the interview. "We will continue acting according to current legislation."

Going into greater detail about the investigation, which is being assisted by the Federal Security Service, Dovgy said the equivalent of $1 million had been found in cash at Storchak's apartment and insisted that his arrest had been absolutely necessary.

"We have information that he was planning to hide abroad," Dovgy said. Storchak would have attempted to pressure witnesses and destroy incriminating documents if he had not been arrested, Dovgy said.

A spokeswoman for the Investigative Committee refused to comment further Thursday.

Storchak was detained near the Finance Ministry on Nov. 15, on the eve of an official trip to South Africa, where he would have accompanied Kudrin.

Storchak is currently being held in a two-man cell in Lefortovo, a Soviet-era prison that is now run by the FSB. The cell has a refrigerator and television, and Storchak has not complained about his conditions, Dovgy said in his interview with Rossiiskaya Gazeta.

Storchak's lawyer, Igor Pastukhov, could not be reached for comments Thursday.

The public nature of the dispute shows that a struggle within the Prosecutor General's Office is intensifying as the Investigative Committee tries to carve out its own power base, said Andrei Soldatov, an analyst at the investigative web portal

Set up three months ago to handle many of the country's most high-profile cases, the Investigative Committee is emerging as a rival authority to the Prosecutor General's Office.

Bastrykin, a former university classmate of Putin's, is thought to have close ties to the FSB, Soldatov said.

"Bastrykin is really playing a good game," Soldatov said.

A spokeswoman for the Investigative Committee denied that there was a power struggle going on.

Another analyst said the tussle over Storchak's fate was the latest proof of an increasingly bitter fight for power -- including control of the $144 billion stabilization fund, which Storchak oversaw before his arrest.

"Control of the stabilization fund is part of the broader competition for power ahead of the presidential elections," said Sergei Makarkin, an analyst at the Center for Political Technologies.

The stabilization fund has been at the center of a debate within the government about how to spend the state's windfall taxes from oil revenues.

As of Feb. 1, the fund is to be split into a Reserve Fund, which will act as a hedge against a fall in oil prices, and the National Welfare Fund, which will be used to fund infrastructure development and other domestic investment projects.

In a sign that the public dispute could be worrying investors, investment bank UBS described the recent twists in the complex saga as "discomforting" in a note to investors Thursday.

The fallout over the Storchak case represents only the latest in a series of public disputes between rival law enforcement agencies.

In October, Cherkesov, the Federal Drug Control Service chief, published an open letter in Kommersant, warning that rival security factions were heading for a "war."

The letter came several days after the FSB arrested one of Cherkesov's deputies, General Alexander Bulbov, on charges of illegal wiretapping. Its publication was widely seen as an attack against the clan led by Sechin and FSB chief Nikolai Patrushev.

The Investigative Committee is leading the case against Bulbov.

In his interview Thursday, Dovgy accused Bulbov of illegally tapping the phones of "famous businessmen, politicians and high-ranking officials."