By Murad Rakhimov | 2025-07-22

Despite more than 2 trillion RUB ($25.6 billion) in annual funding, Russia's flagship national programs, meant to improve health care, education and infrastructure, are hemorrhaging money into corruption schemes.

Audits by the Prosecutor General's Office and the Federal Taxation Service in 2024–25 uncovered widespread financial violations in civilian programs launched under President Vladimir Putin.

State oversight agencies revealed that contractors misappropriated funds, dodged taxes and used complex schemes to shift money into the shadow economy, even as Russians face deepening poverty and shrinking social protection.

Phony debts, real bankruptcies

Companies participating in national projects profited at the state's expense rather than fulfilling their contractual obligations, investigators found.

"Companies would create false debts, drive themselves into bankruptcy and in so doing evade paying into the budget," the Prosecutor General's Office said in June.

The audits uncovered 1.3 billion RUB ($16.6 million) in fake debts, recovered 670 million RUB ($8.6 million) in property and brought in more than 4 billion RUB ($51.1 million) in unpaid taxes.

In one case, a contractor working on healthcare and demographic projects in Moscow, Tatarstan, illegally annexed Crimea and other regions failed to deliver on 3.7 billion RUB ($47.3 million) worth of contracts, while transferring money to linked firms. A court later ruled that 1 billion RUB ($12.8 million) of its debt was fictitious.

The schemes allowed insiders to move assets out of reach while avoiding legal and fiscal obligations. As a result, contracts went unfulfilled and the federal budget took heavy losses.

Systemic corruption

Recent anti-corruption efforts are more about internal power struggles than about serious reform, self-exiled Russian rights activist and blogger Alexander Kim told Kontur.

The authorities "jail those who, for one reason or another, didn't fit into the system. Though, to be fair, some of them may indeed be involved in corruption," he said, adding that the entire "anti-corruption campaign" resembles a farce. "For a corrupt official to fight corruption, he'd have to arrest himself."

Fiscal oversight in Russia's war mobilization economy is eroding from secrecy and the absence of independent media, Dmitry Dubrovsky, a lecturer in social sciences at Charles University in Prague, said.

"On top of that, the military spending controlled by the Defense Ministry affects other public programs, and control over them is concentrated in the hands of a small group -- a few companies and families. As a result, the distribution of government funds becomes a key source of income for Putin's elite," Dubrovsky told Kontur.

Corruption in Russia is so widespread and entrenched that linking public programs to citizens' well-being is meaningless, said Kim.

Corrupt officials "steal where they're allowed to," he said.

"Since the start of the war [in Ukraine], the situation has worsened: oversight by an already corrupt bureaucracy has intensified, while space for public criticism of the authorities has shrunk dramatically."

"Under these conditions, the power of officials has become virtually unchecked -- making it all the easier to commit acts of corruption," Kim added.

Russia introduced a formal anti-corruption law in 2008 under then-President Dmitry Medvedev, followed by a government contracting law in 2013, Alisher Ilkhamov, director of the London-based Central Asia Due Diligence, noted. But growing repression ahead of the war in Ukraine effectively dismantled civil society and independent media, he told Kontur.

"This eased the pressure on the government and gave a big boost to its sense of impunity. Under conditions of authoritarian usurpation, the state system in Russia is bound to deteriorate further and sink ever deeper into corruption," he said.

Lack of savings and record dividends

As government corruption rises, many Russians are focused on personal financial survival.

On average, Russians have enough savings to last just four months without a paycheck, a SuperJob survey conducted from June 30 to July 8 found.

Almost 38% of respondents reported having no savings at all. Among those with some financial cushion, 13% could manage for less than a month, 24% for one to two months, 12% for three to six months, 7% for six months to a year and only 6% said they could get by for more than a year.

Despite these concerns, 78% said they track their spending and 80% reported following a budget. Almost half said they plan their finances six months in advance.

Meanwhile, Russia's wealthiest business leaders withdrew record dividends from their companies last year, even as parts of the economy edged toward recession. According to Forbes, the 50 richest businesspeople took home 1.77 trillion RUB ($22.6 billion) in 2024, up from 1.4 trillion RUB ($17.9 billion) the year before.

Alexey Mordashov, chairman of Severstal, a Russian steel and mining company, topped the list with 201.8 billion RUB ($2.6 billion), followed by energy corporation Lukoil ex-president Vagit Alekperov (201 billion RUB or $2.6 billion), Vladimir Lisin (152 billion RUB or $1.9 billion), Leonid Mikhelson (104 billion RUB or $1.3 billion) and Alisher Usmanov (96.2 billion RUB or $1.2 billion).

Rising interest rates and soaring borrowing costs are pushing many firms toward bankruptcy, with civilian sectors still in recession, the Russian Union of Industrialists and Entrepreneurs has warned.

While some companies have suspended dividend payouts to stay afloat, major oligarchs continue to cash out.