Karachay-Cherkessia – ‘pocket republic’ of Senator Arashukov. Part I 

Karachay-Cherkessia – ‘pocket republic’ of Senator Arashukov. Part I
Arashukov created a ‘shadow government’ in the republic Photo: The CrimeRussia

Rumors have been circulating recently that the Karachay-Cherkess Republic may become the next region to undergo a change of power a la Dagestan. Too many problems have accumulated there. According to our sources, the Dagestani authorities have been ‘purged’ because the amount of complaints against them had exceeded all limits. But in the case of the Karachay-Cherkess Republic, the federal center must act more delicately and selectively.


In late June, the media wrote about searches in the Government of the Karachay-Cherkess Republic. Initially, searches in the office of Rashid Temrezov, Head of the Republic, were reported. Then this information was refuted. Later it became known that the Republican Ministry of Finance was searched – although the Ministry of Internal Affairs (MIA) for the Karachay-Cherkess Republic hasn’t confirmed this.

Apparently, the stand of Temrezov is weakening. The Agency of Political and Economic Communications affiliated with the Presidential Executive Office put him on the lowest position in its gubernatorial effectiveness rating at month-end June 2018.

 Rashid Temrezov

Rashid Temrezov 

It is also known that the Kremlin is displeased with the regional head due to the under-performance of the republic during the recent Presidential elections. Although the percentage of votes for Vladimir Putin was pretty high in Karachay-Cherkessia (87.64%), it was still lower than in 2012 (91.36%), and the entire procedure was marred by numerous violations and subsequent scandals.

Temrezov has problems within the republic as well. Even potential allies have claims against him. For instance, the Congress of Karachay People (Temrezov is Karachay by nationality) has recently addressed the Russian President asking to remove Temrezov from office because his staffing changes in the republican government violate the national balance. One of the most recent examples provided by the public activists is the replacement of Karachay Eldar Salpagarov, Head of the Administration of the Head of the Karachay-Cherkess Republic (in fact, the second highest position in the region), with Abazin Murat Ozov. According to the petition submitted by the congress, since the appointment of Temrezov in March 2011, “our nation” (i.e., the Karachay people – The CrimeRussia) has lost more than 10 supreme posts.

Eldar Salpagarov

Eldar Salpagarov

The national issue is very sensitive in the republic. In 1999, it even caused a severe political crisis because the supreme post in Karachay-Cherkessia was contested by Cherkessk Mayor Stanislav Derev (a Circassian by nationality) and general Vladimir Semenov, ex-Commander-in-Chief of the Ground Forces of the Russian Federation (a Karachay). Supporters of both candidates had claimed that should their opponent win, either Karachay or Circassian people would become a rightless minority. The confrontation has resulted in mass protest rallies and squabbles, blocking of federal motorways, arsons of election headquarters, and shooting attacks against activists. The federal authorities had to deploy in the region additional internal military forces and special police detachments, sit down both candidates at the negotiating table, and, in fact, annul the voting results. Ultimately, Semenov became the Head of the Karachay-Cherkess Republic.

Our
notes

Another problem of Temrezov is his confrontation with the republican elite groups, including powerful clan Arashukov claiming the leadership of the Circassian community and eager to increase its influence throughout the republic.

An escalation of the conflict occurred in August 2017, after the appointment of Eduard Derev, son of businessman Vyacheslav Derev, the Head of the Adyge-Khablsky District, the second largest area of compact settlement of Circassian people, instead of Soltan Kardanov by order of Temrezov. Clan Derev and clan Arashukov are old rivals; therefore, the dismissal of Kardanov, a protege of Arashukov, was given a hostile reception.

Eduard Derev

Eduard Derev

Not only do the unbounded ambitions of clan Arashukov cause material damages to the republic – but also threaten to disrupt its national and political stability. The CrimeRussia obtained materials indicating that members of clan Arashukov have been affecting the criminal and socio-political situation in the region using their corruption ties with the Prosecutor’s Office of the Karachay-Cherkess Republic and Investigations Directorate in the Karachay-Cherkess Republic of the Investigative Committee of the Russian Federation (ICR).

Current clan leader, Rauf Arashukov, stops at nothing to achieve his primary goals – money and power – including neutralization of competitors (see below).

Rauf and Raul Arashukov

Rauf and Raul Arashukov

Raul Arashukov, a member of Edinaya Rossia (United Russia) Party and Deputy of the People’s Council of the Karachay-Cherkess Republic, became the founder of the clan consisting of natives of Khabez village of the Khabez district of Karachay-Cherkessia. His biography is pretty interesting: Arashukov was prosecuted twice in the Soviet period – for embezzlement of 4 tons of grain and 5 tons of sunflower – but became a high-ranked functionary in the gas industry in new Russia.

His ‘godfather’ was now-deceased relative Khizir Khapsirokov, ex-Aide to the Head of the Presidential Executive Office of the Russian Federation and Chief of Administration of the Prosecutor General’s Office. Novaya Gazeta newspaper wrote in 2001 that prior to his relocation to Moscow in 1993, Khapsirokov has left all his businesses to Arashukov, introduced him to top managers of Gazprom, and started actively promoting him in the region.

Khizir Khapsirokov

Khizir Khapsirokov

Since then, the career of Arashukov has skyrocketed and never attracted the attention of the law enforcement authorities again. Raul Turkbievich has made his first capital using a simple scheme designed by himself. His company had signed contracts with major gas suppliers to collect fees from the customers, including debtors. The gas arrears issue was critical in the Karachay-Cherkess Republic in that period – and nobody had rejected such intermediary services. However, the collected funds were transferred not to utility providers – but to dummy companies. Instead of hard cash, Arashukov had provided to gas companies non-interest bearing notes that often were non-liquidable.

Later he has taken charge of this process ‘from within’ by becoming the Head of Gazprom Mezhregiongaz Stavropol, a subsidiary company of Gazprom, in 1999. In 2007, he was appointed the Head of Stavropolkraigaz Open Joint Stock Company and successfully used the above scheme again. Monies for the consumed gas were going to Arashukov, while the state companies managed by him had received pieces of paper supposedly confirming the payment of outstanding utility fees.

Our
notes

This is how Arashukov has inflicted multibillion damages not only to Gazprom, but to budgets of several regions as well.

Viktor Kazantsev, then-Presidential Plenipotentiary Envoy to the Southern Federal District, and Valery Gaevsky, Governor of the Stavropol Krai, had tried to oppose his machinations – but in vain. After the election of Aleksander Chernogorov the Governor of the Stavropol Krai, Arashukov became, in fact, his ‘Grey Eminence.’ His fellow countrymen – natives of the Khabez district of the Karachay-Cherkess Republic – have taken up a number of superior positions in the regional administration.

Aleksander Chernogorov

Aleksander Chernogorov

In 2004, Deputy of the State Duma Anatoly Greshnevikov has submitted to the Deputy Prosecutor General of the Southern Federal District an official request to check the operations of Stavropolregiongaz Limited Liability Company and personally its head Raul Arashukov – but did not receive any meaningful response.

In 2008, the Audit Chamber of the Russian Federation launched a number of probes into operations of structures chaired by Arashukov. The clan leader was even searched in the framework of one of such inquests – but without any adverse consequences. According to some information, that incident was a result of a conflict between Arashukov and Khapsirokov. But after the reconciliation between the relatives, the probes have stopped.

In December 2011, Arashukov was finally removed from his posts in gas pipeline companies of the Stavropol krai – allegedly, as per order of Vice Prime Minister Igor Sechin. However, being an Advisor to Kirill Seleznev, General Director of Gazprom Mezhregiongaz, he, in fact, continued supervising the regional gas industry.

Our
notes

According to well-informed sources, a large volume of operative materials against Raul Arashukov has been gathered during the years of his work – but these materials were never used.

His extensive connections in the Prosecutor General’s Office propelling Arashukov, thanks to Khapsirokov, to the federal level, ties with the Regional Investigations Directorate of the ICR and governments of adjacent regions, and influence of his clan on the residents of the republic had enabled Arashukov to create a ‘shadow government’ of the Karachay-Cherkessia and made him invulnerable to any attacks.

Ramzan Kadyrov and Rauf Arashukov

Ramzan Kadyrov and Rauf Arashukov

The adverse legacy of Arashukov is still in place. The arrears problem affecting the power sector and gas industry, the North Caucasus republic remains unresolved. Prime Minister Dmitry Medvedev recently ordered to intensify the struggle against losses of power resources in the region. According to him, republics of the North Caucasus Federal District have paid for less than 85% of the consumed gas in 2017; as a result, the total gas indebtedness has increased by 13 billion rubles ($204.8 million). According to Gazprom, as of the beginning of 2018, the overdue arrears of the regions constituting the North Caucasus Federal District had amounted to 27 billion rubles ($425.4 million) taking into account the assignment of debts between Gazprom Mezhregiongaz Pyatigorsk and new subsidiary companies of Gazprom launched in North Ossetia-Alania, Dagestan, Ingushetia, Adygea, and Karachay-Cherkessia; without this assignment of debts, the total indebtedness had reached 85 billion rubles ($1.3 billion).

The Prime Minister has emphasized that all gas thefts committed through unauthorized connections, illegal pipeline tie-ins, and various fraud schemes, including deliberate bankruptcy of housing and utility enterprises and energy service companies, are currently written off as transmission losses.

Our
notes

Medvedev called for ‘turning the tide’ through coordinated efforts of the regional governments of the North Caucasus Federal District, utility companies, and law enforcement authorities. This includes both staffing decisions and criminal prosecution of perpetrators.

Rauf, son of Arashukov senior and current Senator from the Karachay-Cherkess Republic in the Council of the Federation, is a worthy successor to his father. According to his official biography, at the age of 17, he became a Deputy Head of the Department of Investments and Property Relations of the Stavropol Regional Company for Gas Realization – chaired at that time by his father. A year later, he was elected a Deputy of the Stavropol Municipal Duma.

Rauf Arashukov and Valentina Matvienko

Rauf Arashukov and Valentina Matvienko

In April 2008, at the age of 21, he was been appointed the Minister of Labor and Social Development of the Karachay-Cherkess Republic. In November 2008, Rauf Arashukov became the Acting Head of the Khabez Municipal District and then was officially approved for that post. In March 2011, he was appointed a Deputy Prime Minister of the Karachay-Cherkess Republic. Since October 2011 and until July 2014, Arashukov junior was in charge of the Administration of Federal Motorways in the Karachay-Cherkess Republic of the Federal Road Agency Federal Budgetary Institution. In July 2014, he returned to the post of the Head of the Khabez Municipal District. In 2016, Rauf Arashukov became a Senator from the Karachay-Cherkess Republic in the Council of the Federation.

Our
notes

According to our sources, while being the Minister of Labor and Social Development, Arashukov has created, under the patronage and with consultative support of his father, a number of fraud schemes to embezzle budget funds.

After making the embezzlements a smoothly-running business, Arashukov junior has taken every effort to appoint to this post Murat Tkhakokhov – his relative and also a member of clan Arashukov. Tkhakokhov has involved into the criminal operations heads and officials of the Ministry’s regional administrations as well. In accordance with the clan structure, a portion of the embezzled funds was transferred to Rauf Arashukov.

Murat Tkhakokhov

Murat Tkhakokhov

In October 2013, operatives of the Administration for Economic Security and Combating the Corruption of the MIA for the Karachay-Cherkess Republic clamped down on the operations of this criminal group suspected of embezzlement of 86 million rubles ($1.4 million) from the budget. In August 2016, it was reported that the criminal case instituted under part 4 of Article 159 of the Criminal Code of the Russian Federation (swindling) was submitted to the Prikubansky District Court of the Karachay-Cherkess Republic. The following people have been charged: Murat Khachirov, ex-Head of the Department of Labor and Social Security of the Prikubansky Municipal District; Zinaida Stovburenko, Senior Specialist of the Department for Veterans’ and Elderly People’s Affairs of the Prikubansky Municipal District; Murat Uraskulov and Ibragim Asanov, ex-Directors of the Payments Department of the Prikubansky Municipal District Municipal Unitary Enterprise; and Zulfa Baikamkulova and Svetlana Tsygankova, Senior Accountant and Cashier Accountant of this municipal unitary enterprise. Tkhakokhov died in 2014 – prior to the trial commencement. No verdict was delivered yet with regards to the other suspects – the court sessions are continuously adjourned due to the absence of witnesses or defendants.

The post of the Head of the Administration of Federal Motorways in the Karachay-Cherkess Republic of the Federal Road Agency was even more profitable for Arashukov. He has created a system of kickbacks forcing contractors to pay him more than 30% of the contract cost in exchange for the right to perform construction and installation works.

Arashukov

Arashukov has been with his people since the early days

One of the main contractors in that period was Gazmontazh Subsidiary Limited Liability Company established by Foton (Photon) Closed Joint Stock Company. According to its financial statement, this enterprise incorporated back in 1998 started winning governmental contracts only in 2012 – after the appointment of Murat Kumukov, a friend of Arashukov, its director.

The period of 2013–2014 became a ‘golden age’ for Gazmontazh – the total value of government contracts awarded to it has reached 50 million rubles ($787.8 thousand); half of these contracts were granted by Arashukov. Then the company’s activity started declining; no government contracts were given to it since 2016. Perhaps, this is because the Administration of Federal Motorways in the Karachay-Cherkess Republic of the Federal Road Agency has ceased its operations in 2015.

Gidrostroy – another subsidiary company of Foton – has won governmental contracts totaling 186 million rubles ($2.9 million), mostly pertaining to works on A-155 Cherkessk–Dombay Motorway.

12 Zvezd (12 Stars) Limited Liability Company (currently Novostroy Limited Liability Company) received 115.7 million rubles ($1.8 million) to build road lighting on Cherkessk–Lermontov Federal Motorway.

Our
notes

According to our sources, all these companies are affiliated with Arashukov, and their directors had overcharged the cost of works performed under governmental contracts on a regular basis.

In addition, the Administration of Federal Motorways in the Karachay-Cherkess Republic of the Federal Road Agency has awarded contracts totaling at least 3 billion rubles ($47.3 million) to Kubanskoe Investment and Construction Company Limited Liability Company belonging to Rasul and Askhat Salpagarov – nephews of Akhmat Salpagarov, another Senator from the Karachay-Cherkess Republic, also known as ‘king of governmental orders’. The PMK-15 company belonging to Saltan Salpagarov, also a relative of Senator Akhmat Salpagarov, received governmental contracts for the total amount of 104.5 million rubles ($1.6 million).

Akhmat Salpagarov

Akhmat Salpagarov 

The most profitable ‘spending’ of budget funds was the construction of a bridge across the Kuban River on a motorway going through the Ust-Dzheguta district. Based on its financial reports, the federal budgetary institution has spent on it more than 5.3 billion rubles ($83.5 million).

According to our estimations, in the course of his work at such a profitable post, Arashukov could personally ‘earn’ some 1 billion rubles ($15.7 million). Then he used the time-tested scenario again: in order to keep control over the scheme designed and implemented to embezzle budget funds allocated for road network construction and maintenance in the Karachay-Cherkess Republic, Arashukov has ‘swapped’ positions with Khamzet Dzhumaev, ex-Head of the Khabez District, who continued distributing the money among ‘right’ contractors up until the company closure.

Khamzet Dzhumaev (on the right) and Rauf Arashukov

 Khamzet Dzhumaev (on the right) and Rauf Arashukov

The return to the district head post was not a demotion for Rauf Arashukov – instead, this was an extended vacation for him. Arashukov had probably enjoyed ruling his native land where he was the lord and master.

Clan Arashukov created a true cult of their family in the district center – Khabez village. Its secondary school and boxing club have been named after son Rafael Arashukov tragically killed in a car accident. A street and the cathedral mosque have been named after the father – Turkbii Arashukov.

Khabez

Khabez

Deluxe Adijuh Palace Resort & Spa has been erected in a scenic place located 700 m above sea level; it features a brilliant collection of retro cars. The resort belongs to Raul Arashukov’s son-in-law Ruslan Agoev; its director is daughter Aisha Kalmykova. Rauf’s wife Aida Arashukova used to hold this post in the past, but then she got bored with the director’s duties, switched to a more glamorous sphere, and created an exclusive designer clothing brand – Araida.

Sati Kazanova and Aida Arashukova

Sati Kazanova and Aida Arashukova

Adijuh Palace Limited Liability Company became the legal successor to Adijuh Open Joint Stock Company incorporated back in 2012; Arashukova was its Director, while Arteks-Yug and Angelina companies established by Raul Arashukov, daughter Zurida, and nephew Aslan were its founders.

 Adijuh Palace

Adijuh Palace

Overall, the family turned out to be very rich in financial talents. The following its members are involved with business (or were involved in the past): Raul Arashukov’s wife Nelli (Yuzhregionkomplekt Limited Liability Company), brother Mikhail (Khabez Gypsum Plant, animal husbandry farm, agriculture, and mining), brother Mukhamed (used to the Minister of Labor and Social Security of the Karachay-Cherkess Republic), sister Zarema (Cherkesskregion Private Security Organization), sister Ida (Avangard (Vanguard) Limited Liability Company), nephew Ruslan (Gazprom Mezhregiongaz Maikop), and nephew Azamat (agriculture).

While being out of duty, Rauf managed to make some extra money abroad. Apparently, he decided to create a ‘reserve airfield’ – just in case. His United Arab Emirates work permit issued in 2015 and open-term employment contract with Stroika Technical Works LLC incorporated in Dubai with a salary of 15 thousand United Arab Emirates dirhams ($4.1 thousand) confirm this.

This sensitive episode of his work biography became known in 2017 – at that time, Arashukov was already a Senator. Then the Congress of Circassian People held in the Karachay-Cherkess Republic has suddenly called for the early termination of his powers. The delegates have submitted the congress resolution to the Head of the Karachay-Cherkess Republic, Speaker of the Council of the Federation, Minister of Internal Affairs, and Prosecutor General of the Russian Federation. According to experts, this was a political game launched by Temrezov against Arashukov – however, there were really strong reasons to strip Arashukov from Senator’s powers.

According to paragraph “c” of part 2 of Article 6 of the Federal Law On the Status of a Member of the Council of the Federation and Status of a Deputy of the State Duma of the Federal Assembly of the Russian Federation, a member of the Council of the Federation may not run business or perform paid works except for teaching, research, and other creative activities. A breach of this law results in the termination of the Senator’s powers. In this particular case, the violation was even more severe because Arashukov had been working as a development manager abroad.

Based on the documents in our possession, immediately after the scandal, Arashukov has annulled his UAE work permit. But the prohibition on commercial activities applies to civil servants as well – i.e., he had violated the law for a year as the district head and another year as a Senator without any consequences. Arashukov still represents the Karachay-Cherkess Republic in the Council of the Federation.

In fact, this violation is nothing in comparison with other episodes of Arashukov’s controversial biography. Delegates of the Congress of Circassian People have noted his possible involvement in more severe crimes, including murders of Aslan Zhukov, leader of the Adyge Khase Circassian Youth Movement, and Fral Zhegzukov, Advisor to the President and candidate for the Prime Minister of the Karachay-Cherkess Republic, committed in 2010. In addition, Arashukov is believed to be the mastermind behind the assassination of Khasan Dzhanaev, Head of the Cherkessk Pretrial Detention Facility № 1.

 Aslan Zhukov

Aslan Zhukov is still remembered in the republic

The CrimeRussia obtained investigation records of these cases clearly indicating both the assassins’ paymaster and law enforcement functionaries covering him up. We are going to return to this subject shortly.

Caption Photo: Collection of cars belonging to clan Arashukov
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