Polar delinquency: Construction projects in Yamal become black holes in regional budget 

Polar delinquency: Construction projects in Yamal become black holes in regional budget
Construction industry became a hole in the Yamal budget Photo: The CrimeRussia

Construction is an official top priority for the Government of the Yamalo-Nenets Autonomous District. But based upon the number of never-ending construction projects funded from the budget, the main priority is the process, not result.

The CrimeRussia had already written how the Yamal Government purchases and then ‘leases’ luxury mansions in Moscow and St. Petersburg for ‘representation offices’ via state companies established by itself. By a conservative estimate, in the last five years, the officials have siphoned off over 300 million rubles ($4.9 million) using this scheme. Therefore, it was really weird to discover that many regional state agencies are, in fact, ‘homeless’. 

‘Cover’ for an official

Such governmental institutions include the Administrative Office of the Yamal Government, Regional State Archive, and Arctic Research Center. Comfortable Yamal Plaza Business Center hosts all these structures. Hundreds of millions of rubles are paid every year from the budget of the Yamalo-Nenets Autonomous District for the offices in the best business center of Salekhard. This situation exists since 2012; the owner of Yamal Plaza – Kontinent (Continent) Construction Company – has already earned some 1 billion rubles ($16.5 million) on the ‘governmental tenants’ -  group of contracts № 1; group of contracts № 2.

Yamal Plaza

Institutions not lucky enough to accommodate in Yamal Plaza are scattered in adjacent streets. In the same year of 2012, the construction of a building for executive governmental bodies of the Yamalo-Nenets Autonomous District has started; most regional institutions were supposed to be relocated there. VIS Production Company (a member of VIS Construction Group) had won the construction tender on a sole source basis. In fact, VIS Production Company wins all major governmental construction contracts in Salekhard. Such a loyalty of the authorities to this developer is surprising, especially taking that every other project of VIS turns into a never-ending venture.

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Yamal Plaza Business Center

According to the terms of the governmental contract, the building worth 4.1 billion rubles ($67.7 million) must be delivered turn-key ready. However, three months after signing the above contract, the Direction of Capital Construction and Investments of the Yamalo-Nenets Autonomous District (the client) has forgotten about it and conducted a new tender. The terms and winner were the same – but the price has increased to 4.38 billion rubles ($72.3 million). As a result, VIS Production Company is now building the same facility on a turn-key basis in accordance with two separate contracts. In other words, the cost of the project has doubled – now it exceeds 8 billion rubles ($132 million). 

The events are moving according to a familiar scenario: the grand project was supposed to be completed on December 25, 2013. Predictably, it was not finished on time. Since 2014, the completion dates had been repeatedly extended to 2016 and further. As of today, the facility is to be finished by the end of 2018. VIS Production Company has other outstanding ‘debts’ to Yamal as well, for example, the construction of the State Archive of the Yamalo-Nenets Autonomous District worth 700 million rubles ($11.6 million) launched in the same year of 2012. 

Nevertheless, the developer continues winning all the governmental tenders on a sole source basis. Final beneficiaries of VIS Construction Group and above-mentioned Kontinent Construction Company are well-known. Siemens Aktiengesellschaft (Germany) and RISE Capital AB (Sweden) are the co-owners of two companies – members of VIS Construction Group. Kontinent Construction Company belongs to Cyprus-based Harimelia Consulting Ltd. offshore company via Intera-Servis, Komproekt, and Rivfal. Apparently, the budget funds of the Yamalo-Nenets Autonomous District are siphoned off there – and the Yamal Government has no issues with this.

A collapsed fund 

The budget funds of Yamal disappear not only in offshore companies, but also in numerous development funds established at the initiative of Dmitry Kobylkin, Governor of the Yamalo-Nenets Autonomous District. These funds include inter alia the Fund for Development of Rural Areas of Yamal. Apparently, its purpose was to promote development in only two settlements – Seyakha and Yakh-Sale. The Yamal Government has invested a considerable amount of money – 6 billion rubles ($99 million) – into this noble cause.

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Dmitry Kobylkin, Governor of the Yamalo-Nenets Autonomous District

In fact, the construction of social infrastructure has actually started in these settlements – but it is unlikely that it brings joy to the local people. According to Vladimir Trofimchuk, Director and co-owner of Russky Masterovoy (Russian Artisan) company retained as a subcontractor for the boarding school construction in Seyakha, the general contractor, Spetsstroyinvest company, has violated all the existing state standards and construction rules and regulations. After the non-payment of 13 million rubles ($244.4 thousand) to Russky Masterovoy for the performed finishing works, Trofimchuk has addressed not only the Arbitration Court, but also the police and reported the rampant corruption in the Fund for Development of Rural Areas of Yamal. In his letter, Trofimchuk claims that the fund acts as the customer in all major construction projects in Seyakha and Yakh-Sale. He emphasizes the artificially high prices and low quality of works and notes that all the major governmental contracts had been awarded to only two contractors – Spetsstroyinvest and Partner Group. Leaping ahead, it is necessary to note that the law enforcement authorities did not find any corruption elements in the operations of the fund.

According to the governmental acquisitions web site, all the major construction contracts in Seyakha and Yakh-Sale have been won by Spetsstroyinvest and Partner Group. But even leaving aside the pricing issues, it is evident that the total cost of the above tenders does not exceed 1 billion rubles ($16.5 million). Spetsstroyinvest company has won eight construction tenders in Seyakha and nine tenders in Yakh-Sale for the total amount of some 500 million rubles ($8.2 million), while Partner Group has won only three tenders to improve the territory of Seyakha for the total amount of some 359 million rubles ($5.9 million).

Perhaps, the number and cost of these governmental acquisitions would not raise so many questions – but the Fund for Development of Rural Areas of Yamal has been suddenly shut down. According to the officials, the fund has accomplished its mission and is not needed anymore. Apparently, the region does not need the remaining 5 billion rubles ($82.5 million) as well. Partner Group, that had assisted in the ‘spending’ of the budget funds, is also undergoing urgent liquidation. In fact, the ‘accomplishment’ of the fund’s official mission raises doubts: based on the Master Plan of Seyakha, less than a tenth of the initial plan has been implemented. Perhaps, the true mission of the fund was quite different – and it has been completely accomplished indeed.

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