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Medvedev acknowledges graft progress scant, seeks law

MOSCOW (Reuters) - Russian President Dmitry Medvedev acknowledged on Thursday he has made little headway in tackling corruption and called for a new law to make it more difficult to set up shell companies to pay bribes by sending funds abroad.

Russia's President Dmitry Medvedev chairs a meeting of the presidential Anti-Corruption Council at the Kremlin in Moscow January 13, 2011. REUTERS/Dmitry Astakhov/RIA Novosti/Kremlin

Corruption is seen as the biggest barrier to foreign investment in Russia’s oil-fueled $1.2 trillion economy. Medvedev, whose four-year term as president ends next year, made a fight against graft one of his priorities when he took office.

“You know the situation well. Let’s admit that there are very few successes in this direction,” Medvedev told a meeting of his Anti-Corruption Council, which includes ministers, senior aides and heads of law enforcement agencies.

Berlin-based NGO Transparency International rated Russia joint 154th out of 178 nations in its corruption perceptions index, along with Cambodia, Kenya and Laos last year. The previous year Russia was ranked 146th.

Failure to fight graft has hurt the stature of Medvedev, still seen as a junior partner in Russia’s ruling tandem with his predecessor Vladimir Putin, now prime minister. One of the two is expected to stand in a presidential election in 2012.

The head of Transparency’s Russian office Yelena Panfilova said the anti-corruption drive was unlikely to gain traction before the election since authorities believe “corruption does not hamper economic growth but instability does.”

“They are not ready to sacrifice stability for fighting corruption,” Panfilova told Reuters.

Medvedev gave no further details of his proposed new law, but said it would make it more difficult to set up shell companies such as those involved in “large scale fraud linked to illegal transfer of assets abroad by a number of commercial banks” that was uncovered last year by the central bank.

“In many cases (transactions) were a direct result of corruption-related crimes. The shell firms involved are being used as channels through which officials are receiving their kickbacks,” he said.

Medvedev said one success of his anti-corruption drive was that officials now have to declare their assets, although those declarations were often false.

“Take a look at who declared what,” he told Moscow’s new mayor, Sergei Sobyanin “Otherwise one hears they have palaces outside the city but their declarations are negligible.”

Russia has also announced plans to replace prison terms in bribery cases with large fines. Authorities say fines will be a better deterrent because corrupt officials sometimes accept jail knowing they can still enjoy their wealth when they go free.

Writing by Gleb Bryanski; Editing by Peter Graff