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* Medvedev vows punishment for transport violations
* Observers say reaction inadequate, blame corruption
By Thomas Grove and Alissa de Carbonnel
MOSCOW, July 13 (Reuters) - A sunken riverboat at the bottom of the Volga River is a deadly illustration of Russia's failure to shake off its Soviet legacy of corruption and systematic neglect.
The circumstances that led to the disaster that likely killed 129 people last Sunday -- decrepit infrastructure, regulatory corner-cutting and an obsession with turning a quick profit at the expense of human life -- are all too familiar as the former superpower struggles to modernise.
"Our institutions basically don't work," said Mikhail Blinkin of the Moscow-based Institute of Transport and Road Engineering. "It is a question of the absolute ineffectiveness of the basic state institutions ensuring safety."
Listing to one side and experiencing engine trouble when it set out from a Volga River port on Sunday overcrowded with passengers it had no licence to carry, the 56-year-old Bulgaria was a tragedy waiting to happen.
Corruption and negligence have killed nursing home residents clawing at locked fire doors, coal miners in pits where owners flouted safety rules to maximise profits, and passengers on airlanes brought down by bombers who bribed their way through the gate.
It is also a problem the Kremlin has been unable to fix since the 1991 Soviet collapse, despite an oil-fuelled boom that has transformed Russia's cities, restored its pride and could make it the world's fifth-largest economy by 2016.
Early in his 2000-2008 presidency, current Prime Minister Vladimir Putin said Russia would be a "dictatorship of law" -- a country that runs smoothly and safely because officials and ordinary citizens obey the rules.
Following the riverboat tragedy, President Dmitry Medvedev vowed "harsh measures" against violators of safety rules, saying it was "completely obvious that we cannot tolerate this any more."
The words of the leader who has based his legacy on promises to modernise society and the economy rang hollow to many Russians.
Business daily Vedomosti criticised Medvedev's suggestion to ban certain types of Soviet-era passenger jets and watercraft, calling his call "inadequate."
"Such a response is completely inadequate when we are faced with ... the catastrophic scale of the deterioration of infrastructure and transport," the paper wrote.
One-quarter of the cruise ships plying Russia's waterways are over 40 years old and 9 percent over 50, Vedomosti said, citing official statistics. The Bulgaria was built in 1955 in the former Czechoslovakia, then a Soviet satellite.
Anti-corruption campaigner Yelena Panfilova, who runs the Russian branch of Transparency International, said licences for decrepit vessels were obtained through bribes or nepotism.
The country's foremost religious leader, Russian Orthodox Patriarch Kirill, lamented the frequency of disasters he suggested were caused by mechanical problems and human greed.
"If only it was an exceptional event. But it isn't," Kirill said on Tuesday. "If machinery has grown old, how can we use it, risking human lives only to get money?"
On Monday, a vintage passenger jet caught fire and crashed in Siberia, killing five people, weeks after a similar crash that killed 45 in northwestern Russia.
The riverboat sinking brought back memories of a disaster that struck months into Putin's presidency when the nuclear submarine Kursk sank in the Barents Sea in August 2000, killing all 118 aboard and prompting criticism of the sluggish response.
Lax enforcement of safety regulations contributes to 15,000 fire deaths a year in Russia, almost five times more than in the United States, which has a far larger population.
Owners of a nightclub in the Urals city of Perm were accused of paying off safety inspectors for an operating permit before a blaze set off by fireworks killed 156 people in December 2009, the highest fire death toll worldwide since 2004. A fire exit was sealed shut.
Officials in Russia's North Caucasus region have repeatedly accused corrupt police of taking bribes from Islamist militants to let them through checkpoints in order to stage attacks. (Additional reporting by Maria Tsvetkova and Denis Dyomkin; Editing by Steve Gutterman and Peter Cooney)