5 new facts about Khimki Forest
11 years ago, when I was just beginning my activities to protect Khimki forest, which was threatened with destruction from the Moscow – Saint Petersburg highway and its infrastructure, I was amazed at the maniacal insistence with which officials of all levels and types tried to defend this project. This was extremely surprising to me, because the project directly contradicted then the legislation of the Russian Federation. Indeed, neither the federal law nor the land nor forest codes at the time allowed - in fact it was strictly prohibited - the construction of such objects as toll motorway in the protected forest belt of Moscow. But, for some reason, the authorities stubbornly insisted on this illegal project and in their stubbornness, were prepared to do a lot:
- to cruelly disperse peaceful environmental meetings;
- to initiative contrived criminal cases and attempt to take children away from those protesting;
- to break ribs and jaws, and to give concussions to the ecologists, who organized the camp of those defending Khimki forest. And to unabashedly use not only police and bandits to beat defenders of the Khimki forest, but also actual Nazis;
- and the most awful: they didn’t stop until they crippled the journalist Mikhail Beketov – he stubbornly, despite many threats from the authorities, continued to write about the corruption which is driving the highway project. As a result of severe beatings, Mikhail Beketov became disabled and died.
I remember standing in Mikhail’s room when he had just been discharged from intensive care, trying to recognize the person from whom the doctors were forced to amputate a third of his head, his leg up to the knee, and the fingers of his right hand, as my comrade, a former military journalist, a healthy, strong, two-meter-tall man. It was then that I realized that the force that so easily crumpled and mutilated a person simply for their newspaper articles would stop at nothing.
For many years I was unable to understand what drives the Russian authorities, who are ready to break the law and attack people in order to ensure the realization of the Moscow – Saint Petersburg highway in the form they had conceived. The answer turned out to be utterly simple – money.
The Activatica team conducted an investigation and as a result discovered some interesting facts:
Fact No. 1. The Moscow – Saint Petersburg highway project was conceived as an advanced public-private partnership. Such projects are being implemented around the world, and they presume that the business invests money in a project that is of public interest to the state, and the state actively supports it. As a result, the business profits, and the government receives a socially significant project plus taxes. Putin called the Khimki highway project “a bright example of public-private partnership in the country’s road infrastructure and mutually beneficial cooperation with our French colleagues.”
The concession company NWCC (North-West Concession Company, Северо-Западная конуессионная компания) was founded especially for this project. NWCC was established by the French company Vinci and a network of mysterious offshore companies, whose shares now belong to the consortium “Mostotrest.” The concession company should have become the business that would attract investments for the highway’s construction, as is done all over the world. But in fact it turned out that the Moscow – Saint Petersburg highway project (from here referred to as M-Spb – ed.) is, perhaps, the only project in the world where the business represented by the concessionaire NWCC put such a negligible investment into the project. Indeed, this is an unprecedented fact in the history of world business, when the concessionaire only invests 10% of the total sum of investment into the project. At the same time, no one dismissed such a negligent concessionaire – NWCC successfully remained on the project.
Contributions to the construction of the highway according to the accounts of NWCC LLC. Blue indicates the contribution of the project concessionaires.
Contributions to the construction of the Moscow – Saint Petersburg highway, 15-58 km
Contribution / billions of rubles
Government financing / 22.8
Loans from Russian banks / 30.5
Fines and VAT refunds from the budget / 8.5
Concessionaires’ contributions / 6.8
So who gave money to the project? You won’t guess. Russian pensioners! It was on money from the pension fund that NWCC's bonds were bought. Without being asked, Russian pensioners’ pensions were used for a new toll road, M-Spb.
The French company Vinci, which created NWCC, did not have money that showed up in any kind of sum for M-Spb, but Russian pensioners shared their pensions and financed the Moscow – Saint Petersburg toll road without even knowing it.
The director of Vnesheconombank, Alexander Popov, called this scheme of using the pension savings of Russians “an ideal option.”
Fact No. 2. The average salary (with bonuses and social insurance) of a top manager of the concession company NWCC - the very same that generous Russian pensioners helped to finance the Khimki highway - is… 1.643 million rubles a month (over $28,000 USD – trans.).
At the same time, according to 2017 data, the average pension of the Russian pensioners is 13.7 thousand rubles ($236 USD – trans.), which is 120 times less than the average pay of NWCC top managers, whom they de-facto sponsor.
According to Rosstat, the average salary in Russia is no more than 36 thousand rubles ($620 USD per month – trans.). Consequently, the monthly salary of the top managers of NWCC is more than 45 times higher than the average salary in Russia.
Fact No. 3. Perhaps the concessionaire NWCC is so effective that it systematically pays its taxes to the Russian government and NWCC top managers receive their millions not for nothing?
From the explanations to NWCC’s financial statements it follows that the company did not pay any dividends to the Russian budget under the concession agreement at all. Moreover, NWCC has not once paid an income tax or VAT.
While the concessionaire NWCC is not paying taxes to the Russian budget, it was unable to attract proper investments and it had to reach into the pocket of Russian pensioners to build the highway – nevertheless, the company received 4,798 billion rubles (over $82 million USD) in compensation from the Russian budget because of the popular protests that delayed the construction of the highway.
It’s a wonderful concession agreement, when the concessionaire does not fulfill its obligations, and the kind Russian state rushes to help it by pumping there money of its own pensioners. And at the same time, the concessionaire has the audacity to exact billions from the Russian budget for so-called “damages.”
It’s important to note that the text of the concession agreement, under which Russians pay billions in fines, is classified from the Russians themselves.
Fact No. 4. It is necessary to give credit to the top managers of NWCC, as they are truly “effective managers” and are able to solve financial problems simply and effectively. It is well known that the newly built toll road, which hasn’t reached Saint Petersburg, is not very actively used by Russians because of the high cost of this pleasure: the trip from the Moscow Ring Road to Solnechnogorsk costs 450 rubles ($7.75 USD). For the generous Russian pensioners, whose pensions went to the construction of this route, the pleasure of using it is prohibitively expensive. But the “effective managers” from NWCC decided that the best thing to do in this situation is to… constantly increase the toll.
The last toll increase happened on April 28, 2017, and for certain types of transport, the toll increased by 1.5 times. And before that, tolls increased from December 4, 2016 for certain categories by a factor of 2.
At the moment, compared to in December 16, the toll for the Khimki highway has increased by a factor of 3!
A tripling of the toll allowed the managers to increase revenue in the first half of 2017 by 1.5: from 916 million rubles (over $15 million USD) to 1.453 billion rubles ($25 million USD).
However, the managers are not going to stop this. Mostotrest’s financial reporting for 2016 reveals that the planned revenue growth rate stemming from the collection of payments is 6.7% per year. We already see how this is achieved. Citizens practically have no choice: after all, the “alternative” is in the form of the free Leningrad highway, which for most of the day is a solid traffic jam, and the ongoing development doesn’t lend any chance of its disappearance.
Tweet: A toll had been implemented on M11. The result: the multi-kilometer traffic jams on Leningradka and in Khlebnikovo were forgotten.
By the way, I will remind you why the Leningrad highway is like this and why its expansion in the direction of the region wasn’t waited for. The free Leningrad highway was a competitor to the new toll road and the concessionaire NWCC demanded that it not be reconstructed, as this would have hindered their plans to levy tolls for the use of the new M-Spb highway.
This requirement by the concessionaire NWCC was leaked from the classified concession agreement in the securities issue prospectus, thanks to which we are able to find out about this.
Fact No. 5. How did it happen that the concession company receives billions from the Russian budget, shamelessly raises tolls, and does not pay taxes to the Russian budget? Why doesn’t the fearless Bastrykin (Head of the Investigative Committee – trans.) stop the brazen scoundrels? And here, let me remind you of an investigation, that since 2016 has been conducted by the French prosecutor’s office against the Vinci company, the creator of the concession company NWCC. The French non-profit legal association Sherpa, which specializes in combatting international corruption, has undertaken investigations of it. Sherpa became interested in this problem after defenders of Khimki forest and Bankwatch published their investigation data, according to which Russian money was transferred through the concessionaire directly to different offshore companies, including to the Cyprus offshore account of Arkady Rotenberg, a close friend of Vladimir Putin, and who is just really a connoisseur of proper concessions.
Referring to the case materials, the New Times states: it is impossible to verify, but there is suspicion that “there is a high probability that, with the help of intricate schemes, Vladimir Putin himself received remuneration for the services rendered by Arkady Rotenberg for the Vinci group” (quotation from Sherpa’s complaint).
The complex ownership structure of the concession is shown in the below chart (data from Bankwatch).
Part of the offshore scheme from the complex examination of the concession activity for the construction of the M-Spb highway. (page 21)
Putin was involved with the project from the very beginning. On September 22, 2006, he was in France for an official visit. At the same time, the Minister of Transport Igor Levitin and the management of the Vinci company signed a protocol regarding their intentions for the construction of the highway.
After activists from the movement to protect Khimki forest published the offshore scheme for the M-Spb highway project its ownership structure began to feverishly change. At one point, Alexander Plekhov, famous as the right-hand man of the cellist Sergei Roldugin thanks to the Panama papers scandal, was spotlighted. The cellist, in addition to his music, is known to journalists as “Putin’s purse.”
NWCC LLC’s shares are constantly changing, but invariably they move from one person who is close to Putin to another.
What an amazing man Vladimir Vladimirovich Putin is. Literally all - from the poor Russian pensioners to the large French company Vinci - he manages to use to his own profit. Perhaps the most famous “effective manager” in Russia is, undoubtedly, Putin, and any foreign business that decides to work in Russia will be involved in corrupt schemes that will ultimately bring considerable profit to this same “effective manager” of the country.
Translated by Lilya Lvovna Morevna
Russian original with video