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A nation must think before it acts.
The last months of 2018 were not easy for state security company “Okhrana.” In October, Roman Egorov, the former head of a special department inside the company, was arrested for corruption. According to the investigation, Egorov had been providing off-the-books protection for several Russian businessmen and, more specifically, had been illegally paid 250,000 rubles (about $3,700) a month to provide security for the co-founder of M.Video, a consumer electronics retail chain listed at the Moscow exchange.
Then, in December, outlet Kommersant revealed that several major oil companies (Lukoi, Gazprom Neft, Tatneft and Sibur) complained in a letter to Nikolay Patrushev, secretary of the National Security Council, that Rosgvardiya (National Guard), the state agency which controls Okhrana, was increasingly trying to monopolize the market for security services.
The complaints have all the marks of a backlash to a process that started in 2016 with Rosgvardiya’s creation. The state security agency took over most of the country’s interior troops, riot units and special forces of the Interior Ministry (MVD) and became practically overnight one of the country’s biggest security agency. An additional blow to the Interior Ministry’s influence was the transfer of “Okhrana” to Rosgvardiya, who was also tasked with overseeing private security companies in the country.
FGUP (short for “Federal State Unitary Enterprise”) “Okhrana” is a significant player in the Russian private security business, itself a huge market estimated at 420 billion rubles (about $6b) in 2015. With more than 50,000 employees in 80 branches across Russia, it was, according to specialist Mark Galeotti, “a source of revenue that was useful in filling all kinds of gaps,” from spending money for strategic needs to embezzlement. And, as the Egorov case showed, it is an excellent vehicle for backhand deals.
After taking control of Okhrana, Rosgvardiya immediately started working to increase its influence in the security market. Okhrana expanded, adding 18,000 people to its workforce in 2017 when it took charge of all security matters for the Industry Ministry. Rosgvardiya started the same year a series of inspections of security firms in the fuel and energy complex. According to Kommersant, it inspected 2,500 sites in 2017, and 2,800 in 2018, a zealousness that lead to the complaint letter in December: Rosgvardiya, the oil companies wrote, is pressuring them to change security companies by claiming that their current services are not up to par.
Rosgvardiya’s appetite is not limited to oil companies, however. At the same time as it swallowed the Industry Ministry’s security company in 2017, Rosgvardiya started battling to do the same with the Communications Ministry by taking control of FGUP “Svyaz-Bezopasnost” (“Communications-Security”) and its 15,000 employees. The company tried to fight back and took Rosgvardiya to court following a February 2017 inspection (after which Rosgvardiya demanded “Svyaz-Bezopasnost” stop providing security for nearly 200 buildings as well as for “Rostelecom,” a major Russian company). They lost however and, in October 2018, a decree signed by Vladimir Putin officialized the company’s absorption into Okhrana.
As a result of these aggressive moves, Okhrana’s revenue jumped from 15 billion rubles in 2015 to 21 billion rubles two years later.
The company likely owes a good part of its success to strong political backing: in March 2018, a decree signed by Dmitry Medvedev included Okhrana in a list of strategic companies deemed “essential for the security of the state.” This makes sense on the surface, as Okhrana is involved in the protection of significant assets (e.g., companies in Russia’s industrial-military complex).
But the list, which allows the companies to bypass most tender regulations, included only 64 state firms when it was revealed in January 2017: a good part of those linked to the FSB, FSO and the Defense Minister. Other companies have been added since, but it remains an elite club.
Three months later, changes to a law regulating security companies also gave more power for Rosgvardiya to cancel licenses of security companies guarding oil and energy companies.
Okhrana’s growth is trailing the rise of Rosgvardiya as a major player among Russian security institutions. The company is a rent (albeit far from the biggest one) that can be distributed to secure loyalties at the highest levels of the bureaucracy. It is also a welcomed additional income for policemen with a low base salary, as many of Okhrana’s employees still come from law enforcement. For businesses, hiring the services of a firm linked to a powerful security institution raise hopes that any problems, such as a competitor trying to get a hold of your business, will be solved swiftly. But the complaint from major oil companies shows that the relationship can also be turned on its head, with the security company adopting a predatory attitude and forcing companies into unfavorable deals.