Chapter 6: ‘The Inner Circle Made Him’
1. Yeltsin’s speech at the 2000 presidential inauguration of Putin, www.youtube.com/watch?v=Q2AF_2gHHeQ
2. Inauguratsionnaya Rech Vladimira Putina 7 maya 2000 goda, Moskovskie Novosti, www.mn.ru/blogs/blog_reference/80928
3. He’d then been sent to serve briefly as security chief for the Karelian republic on Russia’s strategic border with Finland.
4. Author interview with person close to Patrushev, February 2015
5. Author interview with Putin ally, August 2018
6. Author interview with person close to Patrushev, February 2015
7. Such as the works of Halford Mackinder, an English academic who at the turn of the century had written some of the founding tracts of geopolitical theory that influenced foreign policy during the Cold War
8. A former member of the Red Army Faction, however, said Ivanov had often appeared in Dresden with Putin.
9. Author interview with former FSB colleague of Ivanov, June 2014
10. Report written by Yury Shvets with input from former FSB officer Alexander Litvinenko and aired during the London High Court inquiry into Litvinenko’s killing. It can be found at webarchive.nationalarchives.gov.uk/20160613091026/https://www.litvinenkoinquiry.org/files/2015/03/INQ006481.pdf
11. Author interview with person close to Ivanov, June 2018
13. Author interview with former St Petersburg businessman, Andrei Korchagin, January 2015
14. Author interview with former close Putin ally, January 2017
15. Author interviews with two people close to Sechin: one in February 2015, the other in August 2018
16. Author interview with person close to Sechin, February 2015
17. Ibid.
18. Ibid.
19. Ibid.
20. Author interview with associate of Kharchenko, the former head of the Baltic Sea Fleet, March 2014; and author interview with former Putin ally, August 2018
21. Author interview with person close to Cherkesov, November 2015
22. Author interview with former senior US official, June 2014
23. Author interview with Pugachev, September 2014
24. Catherine Belton, ‘A Russian Volley over the ABM Treaty’, BusinessWeek, November 9 2001
25. For a discussion of these assurances, see the analysis by Svetlana Savranskaya and Tom Blanton, of George Washington University, of recently released documents from the National Security Archive, ‘NATO Expansion: What Gorbachev Heard’, December 12 2017, https://nsarchive.gwu.edu/briefing-book/russia-programs/2017-12-12/nato-expansion-what-gorbachev-heard-Western-leaders-early
26. Ian Traynor, ‘Putin Urged to Apply the Pinochet Stick’, Guardian, March 31 2000
27. Hans Leyendecker and Frederik Obermaier, ‘Diskrete Geschafte am Affenfelsen’, Suddeutsche Zeitung, April 11 2013
28. Author interview with Pugachev, September 2013
29. Author interview with Kremlin insider, December 2014
30. Author interview with Pugachev, February 2015
31. According to estimates by the International Monetary Fund; see Prakash Loungani and Paolo Mauro, ‘Capital Flight from Russia’, International Monetary Fund Policy Discussion Paper, June 1 2000
32. Author interview with Bogdanchikov, August 2013
33. Alexander Voloshin, then Kremlin chief of staff, said: ‘The republics were not paying taxes. There was war in Chechnya. Some republics were refusing to send troops to the army. Debts for wages and pensions were mounting, and the popularity of the president was just 4 per cent. Against this background, the Communists were strong, and so were Primakov and Luzhkov. The enemies were strong and we were weak. There was a real risk the country could collapse.’
34. Author interview with Yakunin, June 2013
35. Author interview with Yakunin, November 2016
36. Alan A. Block and Constance A. Weaver, All is Clouded by Desire, p.125, International and Comparative Criminology, Westport, Connecticut, 2004
37. Author interview with Christian Michel, May 2005
38. Author interview with Putin associate, May 2013
39. Andrew Jack, ‘Putin Appears to Distance Himself from Oligarchs’, Financial Times, February 29 2000
40. ‘Oligarchs Will Become Extinct, Putin Vows’, Agence France-Presse, March 18 2000
41. Author interview with person close to Putin, August 2018
42. Author interview with Berezovsky associate, June 2018
43. Nikolai Vardul, ‘Kak Putin Budet Upravlyats Stranoi’, Kommersant, May 3 2000
44. Maura Reynolds, ‘Russia Raids Media Company Critical of Kremlin’, Los Angeles Times, May 12 2000
45. David Hoffman, ‘Putin Moves to Bolster Central Rule; Plan would Rein in Regional Governors’, Washington Post, May 18 2000
46. Gregory Feifer, ‘Berezovsky’s Letter Dominates News’, Moscow Times, June 1 2000
47. Author interview with Berezovsky associate, June 2018
48. Author interview with Yumashev, October 2017
49. Ibid.
50. Guy Chazan and Alan Cullison, ‘Russia’s Oligarchs Protest Arrest of Media Magnate’, Wall Street Journal, June 15 2000
51. Igor Semenenko, ‘Suit Filed to Undo Norilsk Auction’, Moscow Times, June 21 2000
52. Dmitry Zaks, ‘Tax Police Raid Russian Business Giants Following Putin Threat’, Agence France-Presse, July 11 2000
53. Andrew Kramer, ‘Tax Police Open Case against Auto Giant’, Associated Press, July 12 2000
54. Dmitry Zaks, ‘Putin Vows to Punish Russian Oligarchs as Tax Police Strike Again’, Agence France-Presse, July 12 2000
55. Sergei Shagorodsky, ‘Russian President Defends his Heavy-Handed Policies’, Associated Press, July 13 2000
56. Marielle Eudes, ‘Russian Business Barons Want Frank Talk with Putin’, Agence France-Presse, July 14 2000
57. Nick Wadhams, ‘Berezovsky’s Announcement he Will Resign from Russia’s Parliament Another Riddle’, Associated Press, July 17 2000
58. Maura Reynolds, ‘Putin Reaches Out to Oligarchs’, Los Angeles Times, July 29 2000
59. Author interview with Pugachev, December 2013
60. Andrei Savitsky, ‘Favorit’, Nezavisimaya Gazeta, November 6 2001; see also ‘Semya Kopilka’, Moskovsky Komsomolets, June 28 2000; ‘Sekretniye Druzya Putina’, Moskovsky Komsomolets, April 4 2001; Konstantin Remchukov, ‘Bodrym Shagom k BoNY-2’, Vedomosti, November 27 2001; Andrei Savitsky, ‘Syn Otvechayet za Otsa’, Nezavisimaya Gazeta, November 30 2001; Mikhail Kozyrev, ‘Tuvynets Pugachev’, Vedomosti, December 26 2001
61. Henry Meyer, ‘Russian Media Magnate Says Government Forced Sale in Prosecution Deal’, Agence France-Presse, September 18 2000
62. Ibid.
63. ‘Berezovsky Warns About More Possible Terrorist Acts in Russia’, Interfax, August 10 2000
64. Author interview with former close Putin ally, January 2015
65. Guy Chazan, ‘Putin Lambasts the Media Over Coverage of Sub Disaster’, Wall Street Journal, August 31 2000
66. Ibid.
67. Author interview with Berezovsky associate, June 2018
68. Goldfarb and Litvinenko, ‘Death of a Dissident’, p.210
69. Vladimir Isachenkov, ‘Oligarch Says Kremlin Moves to Take His Share in Television Station’, Associated Press, September 4 2000
70. ‘Pavlovsky Outlines Kremlin’s Information Security Plans’, IPR Strategic Information Database, September 26 2000
71. ‘Russian Tycoon Berezovsky Fears Return to Russia’, Agence France-Presse, November 14 2000
72. Author interview with Nevzlin, July 2018
73. Author interview with Pugachev, March 2015
74. Andrei Zolotov Jr, ‘Putin Backs Foreign Investor at NTV’, Moscow Times, January 30 2001
75. Ibid.
76. Author interview with Pugachev, March 2015
77. ‘Media Most Chief Compares NTV Seizure to August 1991 Coup’, BBC Monitoring Report of Ekho Moskvy interview, April 14 2001
78. ‘NTV Raid Shows “KGB in Power” in Russia: Ex-Dissident’, Agence France-Presse, April 14 2001
Chapter 7: ‘Operation Energy’
1. More than 70 per cent of oil extracted and 87 per cent of gas production went to the domestic market mostly to prop up the military industry: Sergei Yermolaev, ‘The Formation and Evolution of the Soviet Union’s Oil and Gas Dependence’, March 29 2017, Carnegie Endowment for International Peace
2. Yermolaev, ‘The Formation and Evolution of the Soviet Union’s Oil and Gas Dependence’
3. Thane Gustafson, Wheel of Fortune: The Battle for Oil and Power in Russia, p.76, The Belknap Press of Harvard University, Cambridge Massachusetts, 2012. The book describes how Yeltsin signed a decree November 1992 creating the first three vertically-integrated oil majors – Lukoil, Yukos and Surgutneftegaz, in which the state was to retain a 45 per cent stake for three years when a decision would be made about their privatisation. The rest of the industry went into a temporary state company Rosneft, which fast was cannabilised by corporate raiders who sought to take prime production units.
4. Gustafson, Wheel of Fortune, p.90
5. Oil revenues were 35.5 per cent of total federal revenues in 1996, and 27.4 per cent in 1997, according to Goohoon Kwon, ‘The Budgetary Impact of Oil Prices in Russia’, IMF Working Paper, August 1 2003, p.4 www.imf.org/external/country/rus/rr/2003/pdf/080103.pdf
6. Author interview with Pannikov, April 2008
7. Robert Cottrell, ‘Russia’s Richest Man Reveals Himself’, Financial Times, June 21 2002
8. The company was financially on its knees because in the first half of the nineties it was forced to sell most of its output to the state at fixed low internal prices under the rules that governed the oil trade then, while it bartered some oil to pay for services.
9. Miller was the sea port’s director for investment and development from 1996 to 1999, at the same time as the port was under the control of Ilya Traber, the Russian mobster who was a key intermediary between Putin’s security men and the broader Tambov organised-crime group. Miller brought with him another official from the sea port: Alexander Dyukov, who’d worked as its general director from 1998 to 1999, and then as the head of its oil terminal, who was appointed to first serve as the head of Sibur, the petrochemicals giant, and then later in Putin’s second term as head of Gazprom’s newly created oil arm, Gazpromneft. Another of Traber’s closest allies, a KGB man named Viktor Korytov, became deputy head of Gazprombank.
10. Author interview with senior banker close to security services, May 2016
11. Author interview with Pugachev, December 2014
12. Author interview with Pugachev, June 2018
13. Author interview with senior banker close to security services, May 2016
14. Author interview with person close to Putin, January 2015
15. Author interview with senior banker close to security services, May 2016
16. Ibid.; author interview with oil executive close to security services, January 2014
17. Melissa Akin, ‘Tax Police Target Boss of Lukoil’, Moscow Times, July 12 2000; also see Elizabeth LeBras and Natalya Neimysheva, ‘Report – Oil Evades $9 Billion in Taxes’, Moscow Times, November 29 2000
18. Anna Raff, ‘Lukoil Financial Officer Abducted’, Moscow Times, September 13 2002
19. ‘Lukoil Case Closed’, Moscow Times, February 13 2003
20. Natalya Neimysheva, ‘Illuziya Lgot’, Vedomosti, February 6 2003
21. Author interview with senior oil industry executive, March 2014
22. Author interview with Milov, September 2013
23. Author interview with Khodorkovsky, September 2015
24. Jeanne Whalen, ‘Oil Tender Pricing Formula Proposed’, Moscow Times, August 16 1997; Boris Aliabayev, ‘Kremlin Pledges Fair Oil Auctions’, Moscow Times, November 12 1997
25. Author interview with senior Western banker participating in the sale, September 2013
26. Akimov’s association with Soviet foreign intelligence was noted by three sources: ‘He was serving as an officer in the active reserve,’ said one senior Russian banker who knows Akimov well. ‘His father was a colonel in the KGB.’; ‘It was not possible to have a high post in one of the foreign Soviet banks without such connections to the KGB,’ said Vladimir Milov, the former deputy energy minister; Akimov could only have gained such a position through close connections with the KGB, said an executive who worked with him closely. In those days, the Soviet foreign banking network was a key channel for the financing of Soviet strategic operations. When in 1979 eight trash bags of paperwork were stolen from the Soviet foreign bank in Paris, Eurobank, a book was published a few months later based on the missing documents which detailed how the bank had financed the Communist Party in France. A position in this system was prestigious and coveted work. Akimov’s first posting was in 1985 as deputy head of the Soviet external trade bank, Vneshtorgbank, in Zürich, and he rose fast through the system.
27. Vladimir Pribylovsky, Akimov biography, Anticompromat.org/akimov/akimbio.html; see also Irina Reznik and Anna Baraulina, ‘Cold War Banker to Putin Billionaires Walks Sanctions Wire’, Bloomberg, October 24 2014; Irina Mokrousova, ‘Bankir pod Prikrytiem’, Forbes Russia, April 2 2015; Alexander Birman, ‘Orden Natsionalnovo Dostoyaniya’, Zhurnal Kompaniya, May 16 2005; Akimov had created IMAG with the full sanction of the Politburo and the Supreme Soviet of the Russian Federation – and he’d used its funds to provide the first outside financing for Timchenko’s Kirishineftekhimexport oil trader in St Petersburg, according to Timchenko’s partner in the oil trader, Andrei Katkov. Akimov had also kept close company with a partner of Martin Schlaff, the Stasi agent who’d worked with the Dresden foreign-intelligence chief, Herbert Kohler, to siphon funds to preserve the networks of the Stasi through fake shipments of embargoed electronic goods as the Berlin Wall collapsed. The close ties between Akimov and Schlaff were to emerge much later in Putin’s presidency when they forged a central European trading hub for Gazprom gas in Austria. Serving as a deputy to him at Donau Bank and later at IMAG was a former colonel of the Austrian security services, Peter Haenseler. Haenseler took care of the housekeeping, Donau Bank’s fleet of cars, the upkeep of the offices and securing passports while working on other ‘special missions’, according to the person who worked with Akimov.
28. Two sources: one person who worked closely with Akimov (January 2014) and senior KGB operative who worked with Putin(March 2014) also indicated Donau Bank played a role in the transfer of Communist Party funds abroad before the Soviet collapse. The person who worked closely with Akimov also said Akimov continued to work in Donau Bank after the Soviet collapse, and after he’d created IMAG in 1990, after his official departure from the bank. See also ‘The History of Soviet and Russian Banks abroad’, in chapter penned by the former head of OstWestHandelsbank, Sergei Bochkarev. Bochkarev reveals that when the heads of the Soviet foreign banks travelled to Frankfurt in the autumn of 1991 to urgently discuss the survival of their institutions, Akimov travelled too. The person who worked closely with Akimov said Akimov knew well Grigory Luchansky, the head of the Vienna-based Nordex trading group, an alleged organised-crime leader at the intersection of work with the KGB moving money out of the Soviet Union on the eve of the collapse. Later Luchansky also formed a joint business with Schlaff. ‘The fact that Luchansky knew Akimov well is well known. They met in Vienna,’ said the person who worked closely with Akimov. The former deputy energy minister, Vladimir Milov, also alleged Akimov was close to another major organised-crime figure who worked closely with the KGB, Semyon Mogilevich (author interview, November 2013). Akimov’s Gazprombank was later to set up a Vienna-based gas trader, Rosukrenergo, with Dmitry Firtash, a close associate of Mogilevich.
29. Author interview with Rair Simonyan, Medvedev’s close colleague at the Institute for World Economy, September 2013; See also Birman, ‘Orden Natsionalnovo Dostoyaniya’, Zhurnal Kompaniya, May 16 2005; Reznik and Baraulina, ‘Cold War Banker to Putin Billionaires Walks Sanctions Wire’, Bloomberg, October 24 2014
30. Author interview with senior Western banker involved in Akimov’s bid; see also Medvedev’s official biography: https://www.gazprom-neft.ru/company/management/board-of-directors/medvedev/
31. Author interview with Charlie Ryan, November 2013
32. Ibid.; and ‘Eastern Oil Bidding Has Begun’, Moscow Times, October 11 1997
33. ‘Russia’s Yukos Pays $775 million for 45 per cent stake in Eastern Oil’, Dow Jones, December 8 1997; John Thornhill, ‘Russian Oil Group wins Control of Rival’, Financial Times, December 9 1997
34. Author interview with Ryan, November 2013
35. Author interview with person who worked closely with Akimov; see also Ilya Zhegulev, ‘Nevzlin Poprosil Zaschity u Genprokurora’, gazeta.ru, July 21 2004; ‘Delo o dvukh pokusheniyakh na ubiistvo direktora avstriiskoi kompanii East Petroleum, Yevgeniya Rybina’, Vremya Novostei, July 4 2003; and interview with Rybin, Oleg Lurye, Vslukh, September 10 2003
36. Author interview with person close to Rybin, January 2014
37. Ibid.
38. Ibid.
39. Author interview with senior banker close to the security services, May 2015
40. Author interview with Michel, May 2005
41. Author interview with Khodorkovsky, May 2014
42. Author interview with Khodorkovsky, September 2015
43. Catherine Belton, ‘Kremlin, Big Oil on Collision Course’, Moscow Times, January 28 2003; Jeanne Whalen, ‘In Russia, Politics vs Pipelines – Kremlin Hesitates to Give Oil Firms Power to Invest in Infrastructure’, Wall Street Journal, January 29 2003
44. Author interview with Khodorkovsky, February 2003
45. Dmitry Zhdannikov and Andrew Hurst, ‘Standing at a Crossroads’, Reuters, January 27 2003
46. Valeria Korchagina, ‘Cabinet Agrees to Slash Tax Burden’, Moscow Times, April 24 2003
47. Khodorkovsky’s exchange with Putin at RSPP meeting, https://www.youtube.com/watch?time_continue=20&v=u6NKb79VN8U
48. Torrey Clark, ‘Tycoons Talk Corruption in Kremlin’, Moscow Times, February 20 2003
49. https://www.youtube.com/watch?time_continue=20&v=u6NKb79VN8U
50. Author interview with Kondaurov, May 2014
51. Author interview with person formerly close to Putin, June 2018
52. Author interview with Vavilov, January 2013
53. Author interview with Kondaurov, May 2014
54. Catherine Belton, ‘$36 Billion YukosSibneft Joins the Global Elite’, Moscow Times, April 23 2003
55. Andrew Jack and Carola Hoyos, ‘Yukos Eyes Up Western Partnership’, Financial Times, September 24 2003
56. Author interview with former Yukos shareholder, September 2013
57. Arkady Ostrovsky, ‘Yukos to Expand Beyond Russia’, Financial Times, September 28 2003
58. Author interview with Khodorkovsky, September 2015
59. Author interview with former senior Kremlin official, November 2013
60. Gregory L. White and Jeanne Whalen, ‘Why Russian Oil is a Sticky Business – Energy Barons are Wielding More Clout in Parliament at a Critical Time for Putin’, Wall Street Journal, August 1 2003
61. Author interview with senior Western banker, November 2013
62. Moises Naim, ‘Russia’s Dilemna: It’s Sinking While it’s Swimming in Oil’, The Australian, December 15 2003
63. Goohoon Kwon, ‘The Budgetary Impact of Oil Prices in Russia’, Working Paper, August 1 2003, www.imf.org/external/country/rus/rr/2003/pdf/080103.pdf
64. Victoria Lavrentieva, ‘Gref Says it’s Time to Squeeze Big Oil’, Moscow Times, February 20 2003. Oil-sector net income was rising far faster than the tax take, giving a lot of room for the government to take more. See: ‘Russian Oil Companies Got Richer by $20 Billion’, Finansoviye Izvestia, January 24 2003
65. Author interview with senior Western banker, November 2013
66. ‘Doklad Soveta po Natsionalnoi Strategii: “Gosudarstvo I Oligarkhiya”’, https://web.archive.org/web/20150325094708/ http://www.utro.ru/articles/2003/05/26/201631.shtml; the report was published on the news website utro.ru, May 26 2003
67. Author interview with Belkovsky, May 2016
68. Author interview with one of the participants in the meeting, a former Yukos shareholder, May 2015
69. Stenogram of Putin’s press conference June 23 2003, www.kremlin.ru/events/president/transcripts/22028
70. Simon Saradzhyan and Valeria Korchagina, ‘Head of Yukos’s Parent Company Arrested’, Moscow Times, July 3 2003
71. Ibid.
72. ‘Yukos Value Falls $2 Billion on Arrests’, Combined Reports (Reuters, MT), Moscow Times, July 4 2003
73. Valeria Korchagina, ‘Four Yukos Murder Probes Opened’, Moscow Times, July 21 2003
74. Catherine Belton, ‘The Oil Town that Won’t Forget Yukos’, Moscow Times, April 25 2006
75. Chrystia Freeland, ‘A Falling Tsar’, Financial Times, November 1 2003
76. Belton, ‘The Oil Town that Won’t Forget Yukos’
77. Author interview with person close to Yukos shareholders, May 2014
78. Valeria Korchagina, ‘Prosecutors Summon Khodorkovsky’, Moscow Times, July 4 2003
79. Catherine Belton, ‘Stocks See Blackest Day Since 1998’, Moscow Times, July 17 2003
80. Catherine Belton, ‘Khodorkovsky Sees Totalitarian Threat’, Moscow Times, July 22 2003
81. ‘Putin Says Yukos Case All About Murder’, Moscow Times, September 22 2003
82. Author interview with former Yukos shareholder, September 2013
83. Ibid.
84. Andrew Jack and Carola Hoyos, ‘ExxonMobil May Offer $25 Billion for 40 Per Cent of Yukos’, Financial Times, October 2 2003
85. Catherine Belton, ‘Yukos Targeted in Three New Raids’, Moscow Times, October 6 2003
86. Ibid.
87. Caroline McGregor, ‘President Reassures Investors’, Moscow Times, October 6 2003
88. Catherine Belton, ‘Yukos Chief – “It’s Just Not Fair”’, Moscow Times, October 7 2003
89. Author interview with Pugachev, May 2014
90. Catherine Belton, ‘Khodorkovsky Arrested on Seven Charges’, Moscow Times, October 27 2003
91. Ibid.
92. Valeria Korchagina, ‘The Elite Demand Some Answers’, Moscow Times, October 27 2003
93. Author interview with Gololobov, August 2018
94. Author interview with former senior GRU officer, April 2005
95. Author interview with oil executive linked to the FSB, January 2014
96. Valeria Korchagina and Maria Danilova, ‘Putin Defends Attack on Yukos’, Moscow Times, October 28 2003
Chapter 8: Out of Terror, an Imperial Awakening
1. Author interview with Pugachev, February 2016
2. Putin would no longer have to share the running of the economy with the Yeltsin-era holdovers. According to one close former ally, this had been part of the agreement Putin had made with the Yeltsin Family when he came to power.
3. Natalia Yefimova, Torrey Clark and Lyuba Pronina, ‘Armed Chechens Seize Moscow Theater’, Moscow Times, October 24 2002. See also description in Steven Lee Myers, The New Tsar: The Rise and Reign of Vladimir Putin, Simon & Schuster, London, 2015
4. Michael Wines, ‘Chechens Kill Hostage in Siege at Russian Hall’, New York Times, October 25 2002
5. ‘Russian NTV Shows Previously Filmed Footage with Hostage-Takers’ Leader, BBC Monitoring Former Soviet Union, October 26 2002
6. Eric Engleman, ‘Armed Chechens Hold Hundreds of People Hostage in Moscow Theater’, Associated Press, October 23 2002
7. ‘Events, Facts, Conclusions – Nord Ost Investigation Unfinished’, Regional Public Organisation for Support of Victims of Terrorist Attacks
8. Luc Perrot, ‘Russia Marks Anniversary of Moscow Theater Hostage Siege’, Agence France-Presse, October 23 2003
9. Michael Wines, ‘Hostage Toll in Russia Over 100; Nearly All Deaths Linked to Gas’, New York Times, October 28 2002
10. Sergei Topol, Aleksandr Zheglov, Olga Allenova, ‘Antrakt posle Terakta’, Kommersant, October 23 2003
11. Susan B. Glasser and Peter Baker, ‘Gas in Raid Killed 115 Hostages; Only 2 Slain by Rebels; More than 600 Remain Hospitalised in Moscow’, Washington Post, October 28 2002: It took at least two days before the authorities were ready to disclose the full extent of the death toll, another two before they named the gas. Doctors trying to treat the hostages had been left till then in the dark about what they were dealing with; stocks of a standard antidote were in short supply or absent.
12. Valeria Korchagina, Lyuba Pronina and Torrey Clark, ‘Man, a Bottle, a Shot, Then Gas’, Moscow Times, October 28 2002
13. Michael Wines, ‘Russia Names Drug in Raid, Defending Use’, New York Times, October 31 2002
14. Sergei Topol, Aleksandr Zheglov, Olga Allenova, ‘Antrakt posle Terakta’, Kommersant, October 23 2003
15. Author interview with former Kremlin official, March 2015
16. Ibid., March 2015 and June 2018
17. Topol, Zheglov and Allenova, ‘Antrakt posle Terakta’, Kommersant, October 23 2003
18. David McHugh, ‘Doctors Say Knockout Gas Killed All But Two of the Victims of Moscow Hostage Crisis’, Associated Press, October 27 2002
19. Topol, Zheglov and Allenova, ‘Antrakt posle Terakta’, Kommersant, October 23 2003
20. Irina Khakamada, then vice speaker of the Duma, ‘Obraschenie Iriny Khakamady’, January 14 2004, https://graniru.org/Politics/Russia/President/m.56704.html (Khakamada made the statement as part of her failed bid for the presidency in the 2004 presidential race.) This statement is also cited by the report by relatives of dead hostages: ‘Events, Facts, Conclusions – Nord Ost Investigation Unfinished’, Regional Public Organisation for Support of Victims of Terrorist Attacks
21. Anne Nivat, ‘Chechnya: Brutality and Indifference’, Crimes of War Project, January 6 2003. Nivat’s account is cited by John Dunlop, the senior fellow on Soviet and Russian politics at the Hoover Institution, in a report on the siege for ‘RFE/RL Organised Crime and Corruption Watch’, January 8 2004. Nivat says the GRU, the Russian military-intelligence service, had announced Movsar Barayev’s arrest two months before the siege.
22. Yury Schekochikin, ‘Nezamechenniye Novosti nedeli kotoriye menya udivili’, Novaya Gazeta, January 20 2003: Schekochikin reported that a mother of one of the terrorists had told him her daughter, recognised by her from television footage as one of the terrorists, had long been imprisoned in a Russian penal colony. ‘She cannot understand how her daughter reached Moscow as a terrorist from a prison cell.’ See Dunlop too for more on this, as well as Nivat, who reported two mothers from a Chechen village in the region where Barayev’s men came from as saying their daughters had been arrested at the end of September 2002 and had later resurfaced as suicide bombers.
23. Kommersant buried the finding that the bombs were dummies at the bottom of the story – the first half of which was devoted to the indictment of a group of Chechens accused of being involved in preparing a string of terrorist attacks in Moscow, including the Dubrovka siege – and no one else picked it up.
24. Politicians leapt to praise a successful operation. Using the gas had been the only choice. ‘We found ourselves in a situation between a horrible tragedy involving the deaths of all the hostages and an incredible disgrace had we met all the demands of the hostage-takers,’ the Moscow mayor, Yury Luzhkov, said.
25. Caroline Wyatt, ‘Moscow Siege Leaves Dark Memories’, BBC, December 16 2002. The report cites opinion polls as showing 83 per cent of Russians were satisfied with Putin’s rule.
26. Valeria Korchagina, ‘Duma Seeks Probe of Theater Attack’, Moscow Times, October 30 2002
27. Timur Aliyev, ‘Chechens Vanish in Veil of Darkness’, Moscow Times, December 23 2002
28. ‘Moscow Gunmen Threaten to Begin Killing Hostages Sat’, Dow Jones, October 25 2002. The report cites Russia’s deputy interior minister Vladimir Vasiliev as saying Maskhadov was behind the attack, while Russian TV networks aired a video of Maskhadov saying the rebels had shifted from guerrilla warfare to an ‘offensive’ strategy, adding: ‘I am certain that in the final stage there will be a still more unique action, similar to the jihad, that will liberate our land from the Russian aggressors.’ Russia’s state-controlled Channel One later claimed the tape had been made five days before the hostage-taking, but it emerged that it had actually been made months earlier, during the summer. See also John B. Dunlop, ‘RFE/RL Organised Crime and Corruption Watch’, January 8 2004, which cites Maskhadov’s spokesperson as saying Maskhadov was referring to a military operation against federal forces, not to any hostage-taking. Dunlop also cites Putin’s spokesman Sergei Yastrzhembsky as saying Maskhadov could no longer be considered ‘a legitimate representative of this resistance’. In NTV’s interview with Barayev, the apparent leader of the hostage-takers, Barayev said they were acting on the orders of ‘our supreme military emir’, named as rebel leader Shamil Basayev, and that Maskhadov was the president, and ‘we are very much under his command’.
29. Steven Lee Myers, ‘Russia Recasts Bog in Caucasus as War on Terror’, New York Times, October 5 2002
30. Andrew Jack, ‘Moscow Siege May be Linked to Al Qaeda’, Financial Times, October 24 2002. Russian security forces also said they’d intercepted calls made by the Chechen hostage-takers to the United Arab Emirates and Turkey.
31. Steven R. Weisman, ‘US Lists 3 Chechen Groups as Terrorist and Freezes Assets’, New York Times, March 1 2003
32. Nabi Abdullaev, ‘There are No Rebels Left for Peace Talks’, Moscow Times, November 1 2002
33. Author interview with Pugachev, February 2015
34. Author interview with Pugachev, March 2013
35. Ibid.
36. Author interview with Voloshin, November 2013
37. Catherine Belton, ‘Anointed Enigma: The Quiet Rise of a Dedicated Dmitry Medvedev’, Financial Times, February 28 2003
38. Catherine Belton, Valeria Korchagina and Alex Nicholson, ‘Yukos Shares Frozen, Voloshin is Out’, Moscow Times, October 31 2003
39. Pyotr Netreba, ‘Otstavka Voloshina Sovpala s Kontsom Epokha Yeltsina’, Kommersant, November 3 2003, interview with Kudrin
40. Belton, Korchagina and Nicholson, ‘Yukos Shares Frozen, Voloshin is Out’
41. Ibid.
42. Catherine Belton and Lyuba Pronina, ‘The Duma of a New Political Era’, Moscow Times, December 9 2003
43. Catherine Belton, ‘Homeland a Force to be Reckoned With?’, Moscow Times, December 5 2003
44. Belton and Pronina, ‘The Duma of a New Political Era’
45. Francesca Mereu and Oksana Yablokova, ‘United Russia Set to Get 300 Seats’, Moscow Times, December 22 2003. United Russia won 37.6 per cent of the vote, and a majority of seats after independent deputies joined its ranks.
46. Author interview with senior banker close to the security services, May 2016
47. Author interview with Kasyanov, January 2013
48. ‘Gazprom Off Reform Agenda’, Reuters, Moscow Times, September 29 2003
49. ‘President Putin Demands Stopping of Hysterics and Speculations about Arrest of Khodorkovsky’, ntv.ru, October 29 2003
50. Author interview with Kasyanov, January 2013
51. Alexander Bekker and Vladimir Fedorin, ‘Interview: Mikhail Kasyanov, predsedatel pravitelstva RF: Reformy vo vsekh sferakh budut prodolzheny’, Vedomosti, January 12 2004
52. Valeria Korchagina, ‘Gazprom Cuts Supplies to Europe’, Moscow Times, February 19 2004
53. Ibid.
54. Caroline McGregor, ‘Putin Fires Kasyanov 19 Days Before Vote’, Moscow Times, February 24 2004
55. Author interview with Kasyanov, January 2013
56. Caroline McGregor, ‘Putin Picks Fradkov for Prime Minister’, Moscow Times, March 2 2004
57. Author interview with Kasyanov, January 2014
58. Simon Saradzhyan, ‘Early Returns Give Putin 70 Per Cent’, Moscow Times, March 15 2004
59. Author interview with Pugachev, March 2015
60. Author interview with Pugachev, May 2013
61. Valeria Korchagina, ‘Duma Set to Revive the Soviet Anthem’, Moscow Times, December 6 2000
62. Natalia Gevorkyan, Natalia Timakova, Andrei Kolesnikov, In the First Person: Conversations with Vladimir Putin, pp.11–12, Vagrius, Moscow
63. Ana Uzelac, ‘Putin, Bush Reach Across the Divide’, Moscow Times, June 18 2001
64. Author interview with Russian tycoon, November 2013
65. Author interview with Pugachev, March 2016
66. The Russian parliament ratified a treaty calling for the creation of a single economic space between the four former Soviet republics in April 2004; earlier Putin’s government had called for the rouble to be the unified currency for the union. Askold Krushelnycky, ‘Parliaments Ratify Treaty on Single Economic Space’, RFE/RL, April 21 2004
67. Author interview with descendant of white Russian emigré close to Putin, May 2014
68. Earlier that year, the newly-installed pro-Kremlin leader, Akhmad Kadyrov, had been killed in a huge bomb blast at a football stadium, and the vote count was barely in on the man to replace him, the former Chechen interior minister, another Kremlin loyalist. The day before the Beslan attack, it was announced Alu Alkhanov had been elected with 74 per cent of the vote. The vote – as well as a Kremlin-organised referendum the previous year for Chechnya to remain as part of the Russian Federation – had been widely denounced by human rights groups as rigged. Most of the republic’s infrastructure was still in ruins following the years of carpet-bombing in Putin’s military campaign.
69. Simon Ostrovsky, ‘Over 300 Killed in School Carnage’, Moscow Times, September 6 2004
70. Ibid.
71. Simon Saradzhyan, ‘30 Women and Children Freed in Beslan’, Moscow Times, September 3 2004
72. ‘Hostage Takers Demands in N Ossetia Not Changed’, Interfax, September 1 2004; see also Peter Baker and Susan B. Glasser, ‘Hundreds Held Hostage at School in Russia; Many Children Seized in Town near Chechnya’, Washington Post, September 2 2004, and Kim Murphy, ‘Critics Detail Missteps in School Crisis’, Los Angeles Times, September 17 2004
73. Andrew Jack, ‘Siege Gunmen Release 26 Mothers and Babies’, Financial Times, September 2 2004
74. Murphy, ‘Critics Detail Missteps in School Crisis’
75. ‘Svidetel na Protsesse po Delu Kulaeva utverzhdaet, chto Maskhadov byl gotov priekhats v Beslan dlya peregovorov c terroristami ob osvobozhdenii zalozhnikov’, Interfax, December 22 2005
76. Ibid.; see also Simon Ostrovsky, ‘Over 300 Killed in School Carnage’, Moscow Times, September 6 2004
77. C.J. Chivers, ‘For Russians, Wounds Linger in School Siege’, New York Times, August 26 2005; Kim Murphy, ‘Aching to Know’, Los Angeles Times, August 27 2005. Russia initially denied it had launched the thermobaric Shmel flamethrowers at the school, but in 2005, a senior Russian prosecutor acknowledged that they had been used: see also Anatoly Medetsky and Yana Voitova, ‘A Reversal Over Beslan Only Fuels Speculation’, Moscow Times, July 21 2005. The prosecutor, Nikolai Shepel, denied that the flamethrowers could have sparked the fire that engulfed the school. He claimed the type deployed, RPO-A, did not have an incendiary effect. An independent investigation conducted by Stanislav Kesayev for the North Ossetian regional administration, however, found traces of phosphorus on bodies, a sign that the incendiary PRO-Z shells had been used.
78. Chivers, ‘For Russians, Wounds Linger in School Siege’; see also ‘Russia: Beslan Reports Compared’, RadioFreeEurope/RadioLiberty, January 3 2007, for comments by eyewitness Kesayev on the Russians’ use of tanks: ‘As the head of the republican commission and as a person who was at the site of the tragedy, I continue to say that tanks began to shoot long before hostages left the building’; also the testimony given by Kesayev’s aide, Izrail Totoonti, during the trial of one of the terrorists involved in the siege, in ‘Zarema, a kovo nam seichas ubyvats?’, Kommersant, December 23 2005. Totoonti said: ‘I heard the shots of tank fire for the first time at about 2 p.m. It was before we began dragging the hostages out of the school.’
79. Chivers, ‘For Russians, Wounds Linger in School Siege’
80. Ibid.: An independent investigation said the terrorists had forced them to wave their clothing as an indication to federal forces they should hold their fire. But the gunfire did not stop.
81. Chivers, ‘For Russians, Wounds Linger in School Siege’
82. Ibid.
83. Kim Murphy, ‘Critics Detail Missteps in School Crisis’, Los Angeles Times, September 17 2004
84. Ibid.
85. Nikolai Sergeyev and Zaur Farniev, ‘Kommisiya Zavershila Terakt’, Kommersant, December 23 2006
86. Ibid.
87. Chivers, ‘For Russians, Wounds Linger in School Siege’; see Kim Murphy, ‘Aching to Know’, Los Angeles Times, August 27 2005 for a detailed account of former hostages describing how the roof began shaking while they were still held in the school. The article cites one former hostage, an army explosives expert, as saying he believed it was tank fire ‘because the whole building was shaking, and these weren’t grenades, it was something more serious than that … By that time, I was more afraid of our own people than the terrorists’; see also ‘Russia: Beslan Reports Compared’, and ‘Zarema, a kovo nam seichas ubyvats?’
88. ‘Russia: Beslan Reports Compared’
89. Nikolai Sergeyev and Zaur Farniev, ‘Kommisiya Zavershila Terakt’, Kommersant, December 23 2006
90. Yury Savelyev, ‘Beslan: Pravda Zalozhnikov’, www.pravdabeslana.ru/doklad/oglavlenie.htm; Maria Danilova, ‘Russian Lawmaker Makes Beslan Claims’, Associated Press, August 30 2006
91. Andrew Osborne, ‘Kremlin to Blame for Beslan Deaths, Claims Russian MP’, Independent, August 30 2006
92. ‘Video Rekindles Russian Debate on Blame for Beslan Death Toll’, Associated Press, July 31 2007
93. Murphy, ‘Aching to Know’
94. Author interview with former Kremlin insider, August 2017
95. Catherine Belton, ‘Putin is Facing his Biggest Challenge’, Moscow Times, September 9 2004
96. Ibid.
97. ‘Poll: Putin’s Popularity at 4-Year Low’, Moscow Times, September 23 2004
98. Address by Vladimir Putin, September 4 2004, www.kremlin.ru/events/president/transcripts/22589
99. Belton, ‘Putin is Facing his Biggest Challenge’
100. Nabi Abdullaev, ‘Putin: Scrap Popular Vote for Governors’, Moscow Times, September 14 2004
101. Nikolai Petrov, ‘Putin’s Reforms are Dangerous for Russia’, Moscow Times, September 15 2004
102. Simon Saradzhyan, ‘Putin Lashes Out at the US’, Moscow Times, September 8 2004; Guy Faulconbridge, ‘Putin Targets Terrorist Financing’, Moscow Times, October 6 2004
103. Author interview with former Kremlin insider, August 2017
104. Jason Burke, ‘London Mosque link to Beslan’, Observer, October 3 2004. A Russian official, Ilya Shabalkin, federal forces spokesman for the North Caucasus, confirmed to the Moscow Times that the mosque attendee, Kamel Rabat Bouralha, had been arrested by Russian forces while trying to cross the Russian-Azeri border, but declined to comment on whether he had played a role in the Beslan attack. (See: Valery Dzutsev, ‘Report: 3 British Residents Assisted in Beslan Attack’, Moscow Times, October 5 2004)
105. Valeria Korchagina, ‘Putin Tells West not to Meddle in Ukraine’, Moscow Times, July 27 2004
106. Simon Saradzhyan, ‘Putin Goes on Stump in Ukraine’, Moscow Times, October 27 2004; Francesca Mereu, ‘Putin’s Campaign has Kiev on Edge’, Moscow Times, October 28 2004
107. Anatoly Medetsky, ‘Outrage as Yanukovych Takes the Lead’, Moscow Times, November 23 2004
108. Oksana Yablokova, ‘Youthful Pora Charges Up the People’, Moscow Times, December 3 2004
109. Author interviews with two people close to Putin: one in March 2014, the other November 2014
110. Simon Saradzhyan, ‘President Lashes Out at the West’, Moscow Times, December 24 2004
111. Vladimir Putin, Annual State of the Nation Address, April 25 2005, www.kremlin.ru/events/president/news/33219
112. Vladimir Putin, Annual State of the Nation Address, May 26 2004, www.kremlin.ru/events/president/news/31034
113. Vladimir Putin, Annual State of the Nation Address, April 25 2005, www.kremlin.ru/events/president/news/33219
Chapter 9: ‘Appetite Comes During Eating’
1. Catherine Belton, ‘Ex-Yukos Chiefs Face Trial Together’, Moscow Times, June 17 2004
2. Peter Baker, ‘Russian Oil Tycoons Lose Bid for Release’, Washington Post, June 17 2004
3. See Leonid Ragozin, ‘When Russian Officials Nightmare Your Business, You Can Lose Everything – Even Your Life’, Bloomberg, January 29 2018. The situation was to escalate to such an extent that by 2015, 200,000 business-related criminal cases had been opened, of which only 46,000 had gone to trial. Yet 83 per cent of the businessmen involved in the 200,000 cases had lost their businesses. See also Kathrin Hille, ‘Business Behind Bars’, Financial Times, August 10 2018, for further figures on pre-trial detention of businesspeople, which reached a peak in 2016 at 6,856.
4. According to EBRD statistics and Vladimir Milov, former deputy energy minister and independent economist; Author interview with former government official, 2012; see also ‘Russian Anti-Monopoly Watchdog Says State Grip on Economy Rises’, Vedomosti, May 6 2019. The report cites the Federal AntiMonopoly Service as saying the state’s share of Russia’s GDP was more than 50 per cent by 2013
5. Author interview with Michel, January 2013
6. Interview with Vladimir Putin, New York Times, October 5 2003, www.nytimes.com/2003/10/05/international/06PTEXT-CND.html
7. Catherine Belton, ‘NTV Speculates on Yukos, Terrorists’, Moscow Times, September 27 2004
8. Ilya Bulavinov, ‘Sergei Ivanov – Eto Ne Smena Epokh, a navedenie poryadka’, Kommersant, November 17 2003
9. Catherine Belton, ‘Kremlin Playing Oil Game for Keeps’, Moscow Times, December 29 2003
10. John McCain, Remarks to Senate, November 4 2003, https://www.aei.org/research-products/speech/senator-mccain-decries-new-authoritarianism-in-russia/
11. Author interview with Thomas E. Graham, September 2018
12. Graham, for one, had always been a hard-nosed sceptic who earlier than his colleagues in the nineties had pointed out the dangers of viewing Russian politics of the Yeltsin era as a black-and-white battle between Yeltsin’s young reformers and the Communists. Then a diplomat in Moscow, he’d pointed out the risks the clan-driven politics of the oligarchs posed to democracy. For more on this see Hoffman, The Oligarchs, pp.322–3
13. Author interview with Graham, September 2018
14. Belton, ‘Kremlin Playing Oil Game for Keeps’
15. Andrew Jack, ‘Facing Judgment: Turmoil at Yukos Drains Investors of Their Confidence in Putin’s Russia’, Financial Times, June 16 2004
16. Catherine Belton, ‘Nevzlin Offers Shares for Freedom’, Moscow Times, February 17 2004
17. For more on the sophisticated use of judicial orders in Russia and how they became entrenched, see paper by Thomas Firestone (former resident legal adviser, US Department of Justice, US Embassy Moscow), ‘Criminal Corporate Raiding in Russia’, The International Lawyer, Vol. 42, No. 4 (Winter 2008), pp.1207–29
18. Catherine Belton, ‘Banks Warn that Yukos May Default’, Moscow Times, April 27 2004
19. Jack, ‘Facing Judgment’. Despite insisting that all their actions were in line with the law, the day before the start of Khodorkovsky’s trial, Yukos’s management let it be known that they’d offered a deal to the government in which they could issue shares to pay off the tax bill.
20. Catherine Belton, ‘Putin Tip Powers Yukos Recovery’, Moscow Times, June 18 2004
21. Author interview with Kremlin insider, June 2017
22. Author interview with Temerko, June 2016
23. Ibid. Temerko said that when he worked with the defence ministry he was a civilian, but that three- and four-star generals worked under him.
24. Ibid.
25. Ibid.
26. Catherine Belton, ‘Police Surround Yukos Headquarters’, Moscow Times, July 5 2004
27. Peter Baker, ‘Court Defeat Brings Yukos to Verge of Bankruptcy’, Washington Post, July 4 2004
28. Catherine Belton, ‘Khodorkovsky Offers Deal, Deadline Passes’, Moscow Times, July 8 2004
29. Erin E. Arvedlund, ‘Yukos Says it Offered to Pay $8 Billion in Back Taxes’, New York Times, July 12 2004
30. Valeria Korchagina, ‘Yukos Production Unit to be Sold’, Moscow Times, July 21 2004
31. Denis Maternovsky, ‘Putin Aide Named Head of Rosneft’, St Petersburg Times, July 30 2004
32. Author interview with Temerko, June 2016
33. Guy Faulconbridge, ‘Dresdner Will Set a Price for Yugansk’, Moscow Times, August 13 2004
34. Author interview with Graham, September 2018
35. Gregory L. White and Chip Cummins, ‘Russia to Form Energy Giant Open to West But Led by Kremlin’, Wall Street Journal, September 15 2004
36. Ibid.
37. Peter Baker, ‘Russia State Gas, Oil Firms Merge; Aim is to Create Dominant International Supplier’, Washington Post, September 15 2004
38. Catherine Belton, ‘Gazprom to Grab Rosneft, Alter Market’, Moscow Times, September 15 2004
39. Guy Faulconbridge, ‘Second Leak Puts Fair Price on Yugansk’, Moscow Times, October 4 2004
40. Guy Faulconbridge, ‘Yugansk Goes on the Block for $8.6 Billion’, Moscow Times, November 22 2004
41. Ibid.
42. Author interview with Temerko, June 2016
43. Faulconbridge, ‘Yugansk Goes on the Block for $8.6 Billion’
44. Martin Sixsmith, Putin’s Oil: The Yukos Affair and the Struggle for Russia, p.175 (the author also spoke with Misamore)
45. Author interview with Temerko, June 2016
46. Author interview with Charles Ryan, the US banker who then served as head of Deutsche-UFG, a Moscow brokerage in which Deutsche Bank held a 40 per cent stake, and who worked closely with Gazprom and Kudrin to bring the Western banks on board
47. Catherine Belton, ‘Foreign Banks to Lend Gazprom $13.4 Billion’, Moscow Times, December 8 2004
48. Author interviews with two people familiar with the matter: September 2018 and November 2013
49. Catherine Belton, ‘Yukos Files for Bankruptcy Protection in Houston’, Moscow Times, December 16 2004
50. Catherine Belton, ‘Report: Gazprom Loan Put on Hold’, Moscow Times, December 17 2004
51. Including a tanker of crude it sent to Houston in 2002
52. Alex Nicholson, ‘Putin Defends Yukos Unit Sale’, Associated Press, December 23 2004
53. Guy Faulconbridge, ‘Mystery Bidder Wins Yugansk for $9.4 Billion’, Moscow Times, December 20 2004; Catherine Belton, ‘Putin Says He Knows Mystery Buyer’, Moscow Times, December 22 2004
54. Belton, ‘Putin Says He Knows Mystery Buyer’
55. Andrew Osborn, ‘Rumours Abound as Mystery Buyer is Tracked Down to London Bar’, Independent, December 21 2004
56. Belton, ‘Putin Says He Knows Mystery Buyer’
57. Ekaterina Derbilova, Irina Reznik, Svetlana Petrova, ‘Pobeditel, pokhozhy na ‘Surgutneftegaz’, Vedomosti, December 21 2004. The executives were identified as Igor Minibayev and Valentina Komarova, both mid-level managers at Surgutneftegaz.
58. Author interviews with Milov, November 2013, with a former Timchenko business partner June 2014, and with senior Russian banker, May 2015; corporate records showed that Baikal Finance Group had been founded by another obscure company, OOO Makoil, which was owned by another Surgutneftegaz executive, Alexander Zhernovkov, who later served on Surgut’s board. ‘Baikal Finance Group was the structure of Gennady Timchenko,’ said one former Timchenko business partner.
59. Anna Raff, ‘State-Owned Rosneft Buys Mystery Buyer of Yukos Unit Auction’, Dow Jones Newswires, December 23 2004
60. Author interview with Western banker working with Gazprom on the Yugansk bid, November 2013
61. ‘Kto Oplatil “Yugansk”’, Vedomosti, June 3 2005; Catherine Belton, ‘The Money Trail Leading to Yugansk’, Moscow Times, June 6 2005. The central bank data showed that on December 30 2004, $5.3 billion was transferred from a federal treasury account with the central bank to state-owned Vneshekonombank. The same day, Vneshekonombank received the same sum in promissory notes from subsidiaries of Rosneft, and Rosneft in turn received the same sum in its account at Sberbank, another state bank. Then Baikal Finance Group, which also had an account at Sberbank, transferred the remaining $7.6 billion it owed for Yugansk to the justice ministry. Analysts said it looked as if Rosneft had transferred the funds to Baikal Finance Group.
62. Catherine Belton, ‘Chinese Lend Rosneft $6 Billion for Yugansk’, Moscow Times, February 2 2005
63. Catherine Belton, ‘Putin Demotes Advisor Illarionov’, Moscow Times, January 11 2005
64. Author interview with Illarionov, January 2005
65. Catherine Belton, ‘Houston Court Rejects Yukos Appeal’, Moscow Times, February 28 2005
66. Author interview with Temerko, June 2016
67. Author interview with Western intermediary involved in the process, January 2017
68. Ibid.
69. Isabel Gorst, ‘Exxon and Rosneft Sign Arctic Deal’, Financial Times, August 30 2011
70. These emails have been obtained by author, and are part of ongoing litigation in the Netherlands.
71. Catherine Belton, ‘Half of Rosneft IPO Goes to 4 Buyers’, Moscow Times, July 17 2006
72. Author interview with Temerko, June 2016
73. Catherine Belton, ‘Banks Want Yukos Ruled Bankrupt’, Moscow Times, March 13 2006
74. Ibid.
75. Catherine Belton, ‘Creditor Banks Sell Yukos Loan to Rosneft’, Moscow Times, March 16 2006
76. Catherine Belton, ‘Western Banks Fund Rosneft Move on Yukos’, Financial Times, March 21 2007
77. Catherine Belton, ‘Analysts Skeptical as BP Quits Yukos Auction at First Stage’, Financial Times, March 28 2007
78. Catherine Belton, ‘Russian Bargain That Comes at a Price’, Financial Times, April 5 2007
79. Ibid.
80. Catherine Belton, ‘The State’s Unsated Appetite’, Financial Times, April 20 2007
81. Catherine Belton, ‘Yukos Finally Expires, Victim of its Battle with the Kremlin’, Financial Times, May 11 2007
82. Khodorkovsky’s Closing Arguments, April 11 2005. Full transcript: www.freerepublic.com/focus/news/1382298/posts
83. Valeria Korchagina, ‘Yukos Trial Ends with Applause’, Moscow Times, April 12 2005
84. Eyewitness account based on documentary material. The Moscow City Court responded to a request for comment about the account by saying it was ‘invention which does not require any comment. The legality and the justification of the rulings made as a result of the criminal cases have been checked by all the courts of the country, and have also been studied by the European Court of Human Rights. The rulings have been confirmed as legal.’ (The ECHR ruled, however, in January 2020 that Khodorkovsky had been denied a fair trial in 2009 and 2010 when he was convicted for a second set of charges of embezzlement and money laundering. The Russian judge’s refusal to ‘allow the defence to examine prosecution and defence witnesses and to submit important expert or exculpatory evidence’ violated Khodorkovsky’s rights, the ECHR found.)
85. Ibid.
86. Ibid.
87. Valeria Korchagina, ‘So Far, Verdict Appears to be Guilty’, Moscow Times, May 17 2005
88. Catherine Belton, ‘Judges Drag Out Verdict for a Second Day’, Moscow Times, May 18 2005
89. Lyuba Pronina, ‘Nine Years for Khodorkovsky and Lebedev’, Moscow Times, June 1 2005
90. Catherine Belton, ‘Shock and Then Boredom in Court’, Moscow Times, June 1 2005
91. Ibid.
92. Eyewitness account
93. Ibid.
94. Ibid.
95. Ibid.
96. Valeria Korchagina, ‘Court Rejects Khodorkovsky Appeal’, Moscow Times, September 23 2005
97. Ibid.
98. Nabi Abdullaev, ‘Khodorkovsky Jailed in Polluted Chita’, Moscow Times, October 21 2005
99. Eyewitness account
100. Ibid.
101. Kathrin Hille, ‘Business Behind Bars’, Financial Times, August 10 2018
Chapter 10: Obschak
1. Pavel Miledin, Anna Scherbakova, Svetlana Petrova, ‘Sogaz prodali v Piter. Samy pribylny v Rossii strakhovschik dostalsya banku “Rossiya”’, Vedomosti, January 21 2005
2. Author interview with Vladimir Milov, October 2011
3. Catherine Belton, ‘A Realm Fit for a Tsar’, Financial Times, December 1 2011
4. See the excellent Neil Buckley and Arkady Ostrovsky, ‘Putin’s Allies are Turning Russia into a Corporate State’, Financial Times, June 18 2006
5. Author interview with senior banker, Geneva, December 2013
6. Buckley and Ostrovsky, ‘Putin’s Allies are Turning Russia into a Corporate State’
7. Author interview with Kolesnikov, September 2011; Oleg Roldugin, ‘Kak za Kammenym Ostrovom, Kuda Peresilsya znamenity Putinsky Dachny Kooperativ “Ozero”’, Sobesednik, February 26 2014
8. A performer at one of these events was later to describe it all: Natalia Vetlitskaya, ‘Netsenzurnaya Skazka’, LiveJournal, August 15 2011
9. Author interview with Sergei Kolesnikov, September 2011
10. Ibid.; see also Yevgenia Albats, ‘Chisto Konkretny Kandidat’, New Times, February 26 2012, for tapes on this
11. Author interview, September 2011
12. Author interview with Kolesnikov, September 2011
13. Ibid.
14. According to one former intermediary for the KGB and documents siphoned from the Soviet Union by a defecting KGB officer, Vladimir Mitrokhin
15. Author interview with Kolesnikov, September 2011
16. Author interview with former KGB officer, March 2014
17. Author interview with Kolesnikov, September 2011
18. According to documents provided by Kolesnikov to author
19. Author interview with Kolesnikov, September 2011; and documents provided to author
20. According to documents provided by Kolesnikov to author; Aktsept was owned by one of Putin’s relatives, the grandson of his uncle, Mikhail Shelomov, and it owned a 4.5 per cent stake in Bank Rossiya. Abros was owned 100 per cent by Bank Rossiya.
21. Aleksei Rozhkov, Irina Reznik, Anna Baraulina and Yelena Myazina, ‘Pristroili 3% Gazproma. “Sogaz” kupil Kompaniyu upravlyayushchuyu rezervami “Gazfonda”’, Vedomosti, August 23 2006; Belton, ‘A Realm Fit for a Tsar’
22. From the start, Leader Asset Management and Gazfond had been hand in glove. The two companies shared the same offices, and the walls of Gazfond’s conference room bore Leader’s logo. Details of how Gazfond’s $6 billion pension funds were managed were scarce. (Details of what happened to the $7.7bn Gazprom stake held on the balance sheet of Gazfond were scarcer still – by 2008, in fact, these shares had disappeared without any explanation or report.) Gazfond, however, had immediately been pulled into Bank Rossiya’s orbit. Nikolai Shamalov, the business partner of Kolesnikov, the dentist turned Siemens representative turned Putin’s friend, had his son Yury appointed head of Gazfond in August 2003, before the process of transfers had even begun.
23. Gazfond had accumulated a 20 per cent stake in a Moscow power-generation company called Mosenergo – and at the end of 2006 Gazprom’s board of directors ruled that it would swap its controlling stake in Gazprombank (50 per cent plus one share) for Gazfond’s 20 per cent stake in Mosenergo, then worth $1.8 billion. When, shortly after the deal (early 2007), a new law came into force barring pension funds from owning more than 10 per cent of non-traded stocks, Gazfond transferred the stake to Lider Asset Management, thereby giving Bank Rossiya control.
24. Belton, ‘A Realm Fit for a Tsar’; see also Boris Nemtsov and Vladimir Milov, ‘Putin I Gazprom’, Nezavisimy Ekspertny Doklad, October 2 2008
25. Author interview with Milov, September 2011
26. Belton, ‘A Realm Fit for a Tsar’
27. Author interview with Milov, September 2011. The estimate included the 3 per cent stake in Gazprom held by Gazfond, worth $7.7 billion; see also Nemtsov and Milov, ‘Putin I Gazprom’, for this estimate.
28. Author interview with Milov, September 2011
29. Ibid.
30. Author interview with Kolesnikov, September 2011
31. Ibid.
32. Ibid.
33. After Kolesnikov’s allegations first appeared, Shamalov sold the stake he held in the palace to another businessman close to Putin’s Kremlin, Alexander Ponomarenko. See Rinat Sagdiev and Irina Reznik, ‘Troe iz Dvortsa’, Vedomosti, April 4 2011
34. Author interview with person familiar with Shamalov and Putin
35. Author interview with Peskov, November 2011
36. Author interview with Kolesnikov, September 2011
37. The film is called Brilliantovaya Ruka. Sergei Pugachev also confirmed that behind the scenes Putin was nicknamed Mikhail Ivanovich after the police chief in this film.
38. Author interview with Kolesnikov, September 2011
39. Bank Rossiya had become a nest for all of Putin’s closest cronies. His key business allies shifted in and out as shareholders: only Kovalchuk remained constant as its biggest shareholder, owning 37.6 per cent at the beginning of 2005 when the acquisition of the Sogaz shares was completed. Timchenko’s International Petroleum Products oil trader had held 20.7 per cent between 1998 and 2002, while his other trader Kinex continued to hold this stake until 2003. It was also, for a time, a point of intersection with some of the organised-crime interests Putin had consorted with. For two years between 1998 and 1999, Gennady Petrov, a leader of the Tambov organised-crime group, held a 2.2 per cent stake in the bank, while one of his business partners, Sergei Kuzmin, held another 2.2 per cent, part of a network of close overlapping businesses that appeared at the time to hold as much as 14 per cent. It was a telltale sign of the alliance with organised crime that Putin’s KGB men had forged to run the city – and then the country – in their own interests. This alliance was later to surface all too clearly when Spanish prosecutors arrested Gennady Petrov in Spain in 2009 as part of a far-reaching investigation into Russian money laundering through Spanish real estate. The case was based partly on wiretaps on which Petrov and his business partners were caught discussing connections at the highest level of Kremlin power. All the while, Petrov’s wife had remained a resident of the Kamenny Ostrov compound, where Kolesnikov, Kovalchuk and other Bank Rossiya shareholders had lived.
40. Yevgenia Albats, ‘Chisto Konkretny Kandidat’, New Times, February 26 2012
41. Author interview with former KGB officer, May 2013
42. Author interview, December 2012
43. Belton and Buckley, ‘On the Offensive: How Gunvor Rose to the Top of Oil Trading’, Financial Times, May 14 2008
44. Ibid.
45. Ibid.; author interview with former Petroval trader, May 2007. (Gunvor rarely disclosed its earnings. In 2008, Tornqvist would only say annual profits were expected to be ‘in the hundreds of millions’ on revenues of $70 billion. But other oil traders said that sum sounded distinctly low: one estimated that Glencore – which then also did not disclose its profits – made about $6 billion on revenues of $140 billion in 2007.) The first year Gunvor began publicly disclosing its profits in 2010, it said net profit after tax that year was $299 million on revenues of $96 billion.
46. Author interview, Geneva, February 2013
47. When I interviewed Tornqvist in 2008, he would only say the third shareholder was ‘a private businessman who has nothing to do with politics’. The third shareholder was exposed by Roman Shleynov in 2012 as Pyotr Kolbin, another St Petersburg businessman who Timchenko’s Geneva associates described as a ‘close friend’ of Putin’s. See: Roman Shleynov, ‘Tainstvennym tretim vladeltsem Gunvor byl Peterburgets Petr Kolbin’, Vedomosti, October 8 2012. One of Timchenko’s former closest business partners said he could only tell the story of who Kolbin was ‘in ten years time’.
48. Andrei Vandenko, ‘Gennady Timchenko: Za Vsyo v Zhizni Nado Platits. I za znakomstvo s rukovodstvom strany tozhe’ (interview with Timchenko), ITAR-TASS, August 4 2014
49. Ibid. In the interview, Timchenko says Edward Snowden taught him ‘to use this technology more carefully. We are watched.’
50. Andrew Higgins, Guy Chazan and Alan Cullison, ‘The Middleman: Secretive Associate of Putin Emerges as Czar of Russian Oil Trading – In First Interview, Gennady Timchenko Denies Ties’, Wall Street Journal, June 11 2008
51. Author interview with Pugachev, September 2014. Timchenko, through his lawyers, said any suggestion there has been some kind of ‘secrecy’ around his relationship with Putin is absurd.
52. Ibid.
53. Luke Harding, ‘Secretive Oil Firm Denies Putin has Any Stake in its Ownership: Company Rejects Claims it Benefits from Kremlin Ties’, Guardian, December 22 2007
54. ‘Russian President Says Claims That He Has Amassed a Personal Fortune Are Nonsense’, Associated Press, February 14 2008
55. Author interview with Pugachev, January 2015
56. Author interview with former KGB officer and close Timchenko associate, May 2014
57. Author interview with Russian tycoon close to Putin, September 2014
58. US Department of Treasury, ‘Treasury Sanctions Russian Officials, Members of the Russian Leadership’s Inner Circle, and an Entity for Involvement in the Situation in Ukraine’, March 20 2014, https://www.treasury.gov/press-center/press-releases/Pages/jl23331.aspx. The US Treasury did not provide any details. Some signs of a close financial relationship between Timchenko and Putin’s family emerged in a 2015 investigation by Reuters. In 2012, Timchenko transferred ownership of a $3.7 million mansion on the coast of southern France in Biarritz for an undisclosed price to the man who was soon to become husband to Putin’s youngest daughter, Kirill Shamalov. (Stephen Grey, Andrei Kuzmin and Elizabeth Piper, ‘Putin’s Daughter, a Young Billionaire and the President’s Friends’, Reuters, November 10 2015) A year after Shamalov’s 2013 wedding to Putin’s youngest daughter, he also acquired a 17 per cent stake in Russia’s biggest petrochemicals giant, Sibur, from Timchenko for an undisclosed price with the help of a $1 billion loan from the closely allied Gazprombank. (Jack Stubbs, Andrei Kuzmin, Stephen Grey and Roman Anin, ‘The Man Who Married Putin’s Daughter and then Made a Fortune’, Reuters, December 17 2015) (A Timchenko spokesman said the transfer took place at a market price.)
59. This section is based on dozens of hours of interviews the author conducted with Geneva-based associates of Timchenko between December 2012 and April 2015. Signs of Goutchkov’s banking connections with Timchenko appeared in a cache of leaked bank records from HSBC shared by the International Consortium for Investigative Journalists. According to these, Timchenko and his daughter Xeniia opened accounts at HSBC’s private bank in Geneva at the end of March 2007 – just six weeks after HSBC announced that Goutchkov and his team had joined it to run Russian private banking from Julius Baer, the 180-year-old private Swiss bank. Goutchkov declined to comment, saying Swiss banking secrecy law prevented him from doing so. HSBC also declined to respond to questions on Goutchkov’s clients, but it indicated that it was aware his Russia connections ran deep, saying it hired him because of its desire to grow its presence in the Russian market. Two years after he joined its private bank, HSBC launched a $200 million drive to expand its presence in Russia, and Goutchkov joined HSBC Russia’s board.
60. Two people who have had direct dealings with Goutchkov, December 2012 and September 2013.
61. Author interviews, Geneva, December 2012 to April 2015; see also interview Goutchkov gave to banki.ru: ‘Ivan Goutchkov: ‘Rossiya – odna iz takikh stran, kuda seichas vygodno investirovats’, December 30 2015
62. Author interview with former HSBC colleague in Moscow, July 2013.
63. Author interview, Geneva, May 2013
64. Author interviews with two of Goutchkov’s Geneva associates, April 2013, December 2013, January 2014, March 2014, January 2014, March 2015
65. Ibid. Petrotrade was the part of Rappaport’s empire that made most of the billionaire’s money. It owned a vast, belching oil refinery in Antwerp, Belgium, that had long been supplied with shipments of Soviet crude via the Soviet oil-trade monopoly.
66. Author interviews with one associate, September 2014, with the second in Geneva, December 2013, and a third in April 2014
67. Author interview with Geneva asssociate, Geneva, December 2013. Through his lawyers, Timchenko denied visiting the Valaam monastery with Goutchkov and Putin.
68. Author interviews with two Goutchkov associates, September 2014, and Geneva, December 2012, as well as May 2014
69. Author interview with Goutchkov associate, Geneva, December 2013
70. Author interview with former senior KGB officer and close associate of Geneva money men, June 2014
71. Author interview with Putin ally, January 2017
72. One senior US official said in an interview September 2015: ‘When you’ve got at your disposal billions of dollars, not all of it can be personal.’ It was understood that Timchenko was ‘a custodian of Putin’s private wealth and of strategic slush fund type accounts’. Another senior US official said in a separate interview then that in drawing up sanctions against Putin’s allies in business, the US government was precisely targeting this type of wealth. ‘We believe that some of the cronies’ wealth, particularly Timchenko’s but also … others, is being enmeshed in Putin’s money. One of the ways he can stash his private assets is that they can do it for him: he has to entrust this to the people he trusts, so there is no paper trail. Then the Russian oligarchs, and the cronies in particular, are ordered by Putin to spend the money on projects for the state.’ Timchenko’s lawyers said neither Timchenko nor any of his companies hold or manage, or have ever held or managed, any of Putin’s assets. ‘Our client and his companies do not have any relationship or have had any relationship with any of Mr Putin’s assets.’
73. See Chapter 2
74. Author interview with Pannikov, April 2008; see also Belton and Buckley, ‘On the Offensive’
75. Author interview, August 2019
76. Author interviews with three people close to de Pahlen
77. Author interview, Geneva, December 2013
78. Author interviews, Geneva, May 2014, and with Malofeyev, April 2014
79. Author interview with former senior Russian foreign-intelligence officer, May 2018. See also Roman Shleynov, ‘Kak Knyazya Aleksandra Trubetskovo zaverbovali v Svyazinvest’, Vedomosti, August 15 2011
80. Ibid., also Shleynov article; Trubetskoy was working there at the time the Soviet KGB officer Vladimir Vetrov defected to the West with a list of Soviet officers working on technology smuggling. But Trubetskoy had continued to work at Thomson, supplying Shchegolev and TASS with computers.
81. Author interview, Geneva, May 2014
82. Ibid., and author interview with senior Western banker who then served the interests of the Politburo and was friends with de Pahlen, June 2014
83. Author interviews with former KGB associates, March 2014 and March 2013
84. Author interview, Geneva, December 2013
85. Author interviews, Geneva, May 2014, and with Malofeyev, April 2014
86. Author interview, Malofeyev, April 2014
87. Author interviews with two of the Geneva money men, Geneva, May 2014
88. Author interview, Geneva, May 2013
89. Author interview, Geneva, December 2013
90. Author interview, Geneva, May 2014
91. Author interview, Geneva, March 2014
92. Ibid.
93. Author interview with Rybachuk, October 2018
94. Simon Saradzhyan, ‘Russia Rethinks its CIS Policy’, Moscow Times, August 24 2005
95. Author interview with Rybachuk, October 2018
96. Ibid.
97. Catherine Belton, ‘The Mob, an Actress and a Pile of Cash’, Moscow Times, November 27 2003
98. Ibid.
99. Author interview with Rybachuk, October 2018
100. Andrew Kramer, ‘Russia Cuts Off Gas to Ukraine as Talks on Pricing and Transit Terms Break Down’, New York Times, January 2 2006
101. Andrew Kramer, ‘Russia Restores Most of Gas Cut to Ukraine Line’, New York Times, January 3 2006
102. Catherine Belton, ‘Rosukrenergo Emerges as Winner in Gas Deal’, Moscow Times, January 10 2006
103. Steven Lee Myers, ‘Ukraine’s Leader Dismisses Parliament’s Vote to Fire Premier’, New York Times, January 12 2006
104. Author interview with Rybachuk, October 2018
105. According to the contract, Rosukrenergo was to buy 41 billion cubic metres of cheaper gas from Turkmenistan, and up to 15 billion cubic metres from Kazakhstan and Uzbekistan. Only 17 billion cubic metres was to be bought from Russia at the $230 per 1,000 cubic metre price, and almost all of that could be sold to Europe at $280 per 1,000 cubic metres for an immediate profit, since Ukraine only required 60 billion cubic metres of gas annually.
106. Author interview with Rybachuk, October 2018
107. Ibid.; see also Isobel Koshiw, ‘Dmytro Firtash: The Oligarch who Can’t Come Home’, Kyiv Post, December 26 2016
108. Ibid.; Rybachuk suggested the deal had been done through Firtash’s close relations with Yushchenko’s brother Petro. (Firtash flew Petro and Yushchenko’s other relatives to the United States soon after his inauguration as president, a former Western official said.) Also part of Firtash’s network was a Syrian businessman with close links to Syrian and Russian security services, Hares Youssef, who Rybachuk claimed was a ‘cashier’ to the Yushchenko Family.
109. Catherine Belton, ‘Gas Trader Keeps Orange Team Apart’, Moscow Times, March 24 2006
110. Andrew Kramer, ‘Ukraine Leader Forced to Name Ex-Rival as Prime Minister’, New York Times, August 3 2006
111. Author interview with Rybachuk, October 2018
112. Author interview with Russian tycoon who knows Firtash and Putin, October 2018
113. Account based on author interviews with former associates of Mogilevich, and former Western officials, as well as US Department of Justice document on Mogilevich operations, of which author has a copy
114. Author interview with former Mogilevich associate, March 2018; author interview with former Western official, September 2018
115. Author interview with two former Mogilevich associates: one in March 2018, the other July 2018
116. Author interview with former Mogilevich associates, March and April 2018
117. Author interview with Gordon, May 2007
118. Author interview with former Mogilevich associate, March 2018. Mikhailov is widely regarded as the head of the Solntsevskaya. The FBI in the nineties named Mikhailov as a leader of the Solntsevskaya organisation, which it said was the most powerful Eurasian organised-crime organisation involved in weapons trading, narcotics and money laundering. Mikhailov was arrested in Switzerland in 1996 and jailed for two years, accused of being a member of a criminal organisation. A key witness was shot dead. He was later acquitted by a jury, awarded compensation and returned to Russia.
119. Ibid.
120. Ibid.; the second former Mogilevich associate also confirmed that Mogilevich was the go-to man for these groups for organising investments, because they didn’t know how to do it themselves.
121. Author interview with former Western official, September 2018
122. Author interview with former Mogilevich associate, July 2018
123. Author interview with former Western official, September 2018
124. FBI Archives: FBI Ten Most Wanted Fugitives, October 21 2009, https://archives.fbi.gov/archives/news/stories/2009/october/mogilevich_102109
125. Gregory L. White, David Crawford and Glenn R. Simpson, ‘Ukrainian Investor Hid Identity to Win Business’, Wall Street Journal, April 28 2006
126. Stefan Wagstyl and Tom Warner, ‘Gazprom’s Secretive Ukrainian Partner Tells of Lone Struggle to Build Business’, Financial Times, April 28 2006
127. For more information on this, see Tom Warner, ‘Disputed Links to an Alleged Crime Boss’, Financial Times, July 14 2006; and Global Witness report, ‘It’s a Gas: Funny Business in the Turkmen-Ukraine Gas Trade’, July 25 2006. In addition, the US Department of Justice launched an investigation into Firtash’s links with Mogilevich: see Glenn R. Simpson, ‘US Probes Possible Crime Links to Russian Natural Gas Deals’, Wall Street Journal, December 22 2006
128. WikiLeaks: cable from US ambassador to Ukraine: ‘Ukraine: Firtash Makes his Case to the USG’, December 10 2008, https://wikileaks.org/plusd/cables/08KYIV2414_a.html. Firtash has since sought to row back on some of these comments, telling Time magazine in 2017 he was never Mogilevich’s partner. ‘He’s Ukrainian … Half the country knows him. So what? … Knowing him doesn’t mean answering to him.’
129. Author interview with former Mogilevich associate, March 2018
130. Author interview with Rybachuk, October 2018. Yanukovych was the gruff, tough-talking former governor from the grit and steel mills of east Ukraine, which had always maintained close links to Russia. He’d spent his teenage years in and out of prison, and then became close to the region’s biggest steel tycoon, Rinat Akhmetov, whose own past was steeped in the region’s mobster wars. Akhmetov had been the biggest financial backer of Yanukovych’s Party of Regions. But when one of Yanukovych’s closest aides introduced him to Firtash sometime in 2006, Yanukovych welcomed having an alternative. ‘He was told, “You will have your own cashier. You won’t depend on Akhmetov now,”’ said Rybachuk, the former chief of staff to Yushchenko. ‘At some point Firtash successfully represented the influence of Putin over Yanukovych. The idea was to really corrupt him.’
131. According to a lawsuit filed in the US by Yulia Tymoshenko, the former Ukrainian prime minister, in 2012. ‘President Yanukovych’s US Advisor to be summoned as a respondent in Tymoshenko’s claim against Rosukrenergo’, interview with Tymoshenko lawyer in Zerkalo Nedeli, Gorshenin Weekly, February 13 2012
132. Hans-Martin Tillack, ‘A Tale of Gazoviki, Money and Greed’, Stern Magazine, September 13 2007
133. Author interview with senior banker, August 2013
134. See Chapter 1; this from Bundestag investigation
135. Forster, Auf der Spur, p.86
136. In one deal in 2005 he’d acquired a Bulgarian mobile-phone operator from the alleged Russian mobster who owned much of Russia’s aluminium industry in the nineties, Michael Cherney, reaping nearly a billion euros in profit when he flipped the mobile operator soon after to Telekom Austria.
137. Schlaff’s close associate Michael Hason took a seat on its board, while Schlaff’s close business partner, an oil trader named Robert Novikovsky (whose Jurimex company had sold oil to Belarus from the Russian oil major Surgutneftegaz, linked to close Putin ally Gennady Timchenko), held a 20 per cent stake in it. Another Akimov deputy from IMAG, Peter Haenseler, the former colonel from the Austrian secret services, also reportedly played a role in establishing it: Roman Kupchinsky, ‘The Shadowy Side of Gazprom’s Expanding Central European Gas Hub’, Eurasia Daily Monitor, Vol 5, Issue 217, Jamestown Foundation, November 12 2008
138. Ibid. The outfit also overlapped with Rosukrenergo: a board member from Rosukrenergo, a Swiss accountant named Dr Hans Baumgartner, was president of the Centrex Vienna arm and helped set up the broader group.
139. Tillack, ‘A Tale of Gazoviki, Money and Greed’; Kupchinsky, ‘The Shadowy Side of Gazprom’s Expanding Central European Gas Hub’
140. Roman Kupchinsky, ‘Gazprom’s European Web’, Jamestown Foundation, February 2009
141. Gidi Weitz, ‘The Schlaff Saga: Money Flows into the Sharon Family Accounts’, Haaretz, September 7 2010. A grain-trading company owned by his close associate Robert Novikovsky had transferred $3 million into the bank accounts of Sharon’s two sons in 2002, just as Schlaff was stepping up a lobbying campaign to establish a floating casino off the coast of Israel. The Israeli police investigation, however, stopped at the Austrian border. When they tried to question Schlaff and his Vienna associates, they found themselves blocked. ‘Schlaff is a man of influence and standing in Austria, which, although a European country – let’s say it isn’t always the most properly run,’ an Israeli police investigator told Israeli newspaper Haaretz.
142. Ibid.
143. Kupchinsky, ‘Gazprom’s European Web’
144. Cable from US ambassador to Italy Ronald P. Spogli, January 26 2009, disclosed as part of WikiLeaks cache: https://wikileaks.org/plusd/cables/09ROME97_a.html
145. Author interview with Michel Seppe, September 2013
146. Author interview with Rybachuk, October 2018
147. Author interview, Geneva, December 2013
Chapter 11: Londongrad
1. Andrew Higgins, ‘You Don’t Often Find this Kind of Mogul in the Arctic Snow – Russian Tycoon’s Whim Drags Baffled Friends, Bodyguards into Aiding Blighted Region’, Wall Street Journal, June 13 2001
2. Ibid.
3. The tycoon invested a total of $2.5bn into reconstructing the region, according to Abramovich’s spokesperson.
4. Author interview with tycoon close to Abramovich, October 2017
5. See Chapter 10
6. Author interview with tycoon close to Abramovich, October 2017
7. Catherine Belton, ‘Shvidler Questioned Over Taxes’, Moscow Times, October 14 2003; ‘Chelsea Boss made Millions from Tax Break; Insight’, Sunday Times, September 14 2003. In 2003, Troika Dialog, the Moscow investment bank, estimated the tax breaks granted by the region gave the oil firm a windfall of £400m ($640m) since 2000. The tax schemes were in force until 2005.
8. In 2001 Sibneft’s effective tax rate was just 9 per cent, at the same time as Yukos’s was 13 per cent.
9. Igor Semenenko, ‘Abramovich Questioned in Sibneft Fraud Case’, Moscow Times, May 31 2001
10. Catherine Belton, ‘Sibneft Hit with $1 Billion Tax Claim’, Moscow Times, March 3 2004
11. A spokesperson for Abramovich later said the tax breaks had been granted as a way of funding the Chukotka reconstruction project. He claimed the regional administration had passed a law stating that at least 50 per cent of tax breaks had to be reinvested into the region.
12. Recording of conversation between Yumashev and Pugachev. In an interview with the author in November 2017, a close Abramovich associate claimed that Abramovich really had wanted to do something good for Chukotka, and to change life there. He’d first seen the ‘entire horror’ of the region when he was elected to parliament as a deputy for the region in December 1999, and ‘after he saw all this considered that he could do more to help as governor’. But he admitted that to some degree it became a trap, and that Putin had then asked him to go and work in Kamchatka, but he had refused. ‘He was exhausted from Chukotka. It was an absolutely thankless and difficult task, and he really was tired. It was physically very difficult, because to get there you need to sit in a plane for ten hours, and then there were periods when for three or four weeks you couldn’t fly out because of the weather – even though there could have been urgent business in Moscow. It was difficult work. And when his term was over, he was glad that he’d been able to do a lot with his team. They cardinally changed the social structure there. They built a lot of schools and houses and brought in cultural events and took children to the south on planes, and so on and so forth. And this took a lot of effort and money. And he worked there four or five years – I don’t remember – but when the end came he said, “That’s it. I have no strength left, and I am stepping down.” Vladimir Vladimirovich tried to persuade him to work further, but he said, “Vladimir Vladimirovich, I worked. Let me retire now.”’
13. Author interview with Yasin, May 2013
14. Author interviews with former Western government officials, September and October 2018
15. Neil Buckley, ‘Rich Rewards for Riding Rollercoaster – A New Model for Participation by Foreign Companies has Been Seen in Recent Months, Driven by Political Priorities’, Financial Times, October 11 2005
16. Ibid.
17. Arkady Ostrovsky, ‘Economy: New Found Wealth Starts to Spread’, Financial Times, October 10 2006
18. Neil Buckley, ‘Russia’s Middle Class Starts Spending’, Financial Times, October 30 2006
19. Ostrovsky, ‘Economy: New Found Wealth Starts to Spread’
20. Buckley, ‘Russia’s Middle Class Starts Spending’
21. Masha Lipman, ‘Russia’s Non-Participation Pact’, Project Syndicate, March 30 2011
22. Ibid.
23. Author interview, Geneva, March 2014
24. Author interviews with former Western officials, September and October 2018
25. Stefan Wagstyl, ‘Challenge of Change Faces Old and New: The Citizens of All EU Member States Must Adapt to the Fulfilment of a Dream’, Financial Times, April 27 2004
26. Arkady Ostrovsky, ‘Equity Offerings Signal Maturity’, Financial Times, October 11 2005
27. Astrid Wendlandt, ‘Russian Executives Become Hooked on Lure of London’, Financial Times, February 4 2004
28. Author interview with Nigel Gould-Davies, October 2018. See also: Nigel Gould-Davies, ‘Russia’s Sovereign Globalisation – Rise, Fall and Future’, Chatham House research paper, January 2016
29. Buckley, ‘Rich Rewards for Riding Rollercoaster’
30. Author interview with Gould-Davies, October 2018
31. Ostrovsky, ‘Equity Offerings Signal Maturity’
32. Wendlandt, ‘Russian Executives Become Hooked on Lure of London’
33. Author interview with Gololobov, August 2018
34. Joanna Chung and Sarah Spikes, ‘Rosneft Follows the Road to London’, Financial Times, June 24 2006
35. Kate Burgess, Joanna Chung, Arkady Ostrovsky and Helen Thomas, ‘Dicey Russian Flotations challenge London Investors’ Appetite for Risk’, Financial Times, December 6 2005
36. Author interview with former Abramovich associate, June 2017
37. Author interview with Pugachev, September 2017
38. Ibid.; Pugachev said Putin had first raised it with him a year before Abramovich bought Chelsea, suggesting that he, Pugachev, buy the club as a way of increasing Russia’s influence. ‘Before the deal happened, Putin told me this was the best way to infiltrate England,’ he said. ‘He said it’s the same as buying up all the pubs. “We’ll get such depth.”’
39. Author interview with former Abramovich associate, June 2017
40. Author interview with Russian tycoon, May 2018
41. The person close to Abramovich said the tycoon had first looked at clubs in Italy and Spain, but they were all ‘problematic’, as well as at four different clubs in the UK before settling on Chelsea because it was a ‘distressed asset’. However, the person did concede that Abramovich likely spoke with the president before agreeing the deal.
42. Author interview with Temerko, August 2018
43. Arkady Ostrovsky, ‘Moscow Offers Gazprom $7 Billion for Stake’, Financial Times, June 15 2005
44. Neil Buckley, ‘Watchdog Alarmed at Russia’s Market Growth’, Financial Times, February 16 2006
45. Catherine Belton, ‘Gazprom Scoops Up Sibneft for $13 Billion’, Moscow Times, September 29 2005
46. Catherine Belton, ‘Fortunes Go to Kremlin Favourites’, Moscow Times, September 23 2005. A spokesperson for Abramovich responded to claims that Abramovich may be a holder of funds for the Russian president and shared the proceeds from the sale of Sibneft with the Kremlin by saying that he’s ‘never seen any evidence of that’.
47. Author interview with Russian tycoon, May 2018
48. Author interview with former Abramovich associate, June 2017. The ownership of the Millhouse Capital holding company through which Abramovich purportedly owned his business empire had always been murky. It had never disclosed who its beneficiary owners were: the sole shareholder listed in company filings was Cyprus-registered Electus Investments, and the trail stopped there.
49. Author interview with Russian tycoon, April 2015
50. Neil Buckley and Arkady Ostrovsky, ‘Rosneft Looks to US Banker to head IPO’, Financial Times, March 15 2006
51. Joanna Chung, ‘Bankers to Reap $120 Million on Rosneft IPO’, Financial Times, June 27 2006
52. Catherine Belton, ‘Yukos Asks London to Halt IPO’, Moscow Times, June 26 2006
53. George Soros, ‘Rosneft Flotation Would Spur Putin on’, Financial Times, April 26 2006
54. Robert Amsterdam, ‘Rosneft IPO Represents Nothing But the Syndication of the Gulag’, Financial Times, May 1 2006
55. Gregory L. White, ‘Capital Gains: Flush with Oil, Kremlin Explores Biggest Ever IPO’, Wall Street Journal, April 18 2006
56. Catherine Belton, ‘Half of Rosneft IPO Goes to 4 Buyers’, Moscow Times, July 17 2006
57. Ibid.; and Joanna Chung, ‘Yukos Challenges Rosneft $10 Billion Flotation’, Financial Times, July 17 2006
58. Chung, ‘Yukos Challenges Rosneft $10 Billion Flotation’
59. Belton, ‘Half of Rosneft IPO Goes to 4 Buyers’
60. Ibid.
61. Catherine Belton, ‘An IPO Built on Greed and Ambition’, Moscow Times, July 7 2006
62. Ibid.
63. Stephen Fidler and Arkady Ostrovsky, ‘Yukos Case Highlights Role of Foreign Banks’, Financial Times, March 24 2006
64. Catherine Belton and Joanna Chung, ‘Sberbank Issue to Fall Short of Russian Record’, Financial Times, February 22 2007. Sberbank was Russia’s biggest savings bank. It held 60 per cent of the country’s retail deposits, and as Russia’s economy boomed with the surging oil price its shares had soared more than 1,020 per cent in the past three years. There was the small issue, however, of the insider dealing in which the state-controlled bank had handed out billions of dollars in loans to a Kremlin-connected tycoon who’d used the funds to amass a large stake in it.
65. Catherine Belton and Joanna Chung, ‘VTB Sets Price for $8.2 Billion Offering’, Financial Times, May 11 2007
66. Catherine Belton, ‘VTB Chief Hopes Offering will Seal Bank’s Independent Future’, Financial Times, May 2 2007. Alexander Khandruyev, the central bank’s former deputy chairman, told me, ‘It’s a bank for government special projects. It gives credit lines and guarantees where the risks are high.’
67. Catherine Belton, ‘Risks Brushed Aside in Race to Take Part’, Financial Times, April 20 2007
68. Ibid.
69. Catherine Belton, ‘The Secret Oligarch’, Financial Times, February 11 2012
70. Another example of this new generation was Alisher Usmanov, an Uzbek-born tycoon who became one of Russia’s richest men. In his case, Usmanov was able to parlay a top position at Gazprom into the transfer of metals assets from Gazprom to himself, building a metals empire and a 1.5 per cent stake in Gazprom itself. The state gas giant’s surging share price had helped double his fortune between 2005 and 2006. Usmanov too was seen as a proxy for the Kremlin’s interests.
71. Belton, ‘The Secret Oligarch’
72. Ibid.
73. Kerimov had initially co-owned Vnukovsky Airlines with Sergei Isakov, a Russian businessman who forged ties deep in Saddam Hussein’s Iraq, as did Kerimov. Towards the end of the nineties Kerimov had purchased the last remaining part of the former Soviet monopoly oil trader Nafta Moskva, by which he inherited a financial network that had once been closely connected with the KGB. The Studhalter family, who ran the Swiss holding company he took over, had been routing money for the KGB since the Soviet collapse. Then they’d managed funds for Boris Birshtein’s Seabeco and the KGB colonel Leonid Veselovsky, who’d written the Communist Party memos on ways to survive the transition to a market economy. Kerimov had graduated to trading oil in Saddam Hussein’s oil-for-food scheme, an operation that had been largely run out of the United Nations by Russia’s foreign-intelligence service.
74. Author interview with senior Western banker, autumn 2011; see also Belton, ‘The Secret Oligarch’
75. Ibid.
76. Ibid.
77. Catherine Belton, ‘I Don’t Need to Defend Myself: An Old Dispute Returns to Haunt Rusal’s Deripaska’, Financial Times, July 13 2007
78. Catherine Belton, ‘Close to the Wind’, Financial Times, October 25 2008
79. Ibid.; Catherine Belton, ‘Court Freezes Tycoon’s Stake in Vimpelcom’, Financial Times, October 27 2008
80. Catherine Belton, ‘Moscow to Lend $50 Billion to Indebted Businesses’, Financial Times, September 30 2008; Catherine Belton and Charles Clover, ‘Moscow Dictates Rescue of Oligarchs’, Financial Times, October 14 2008; Catherine Belton, ‘Too Big to Fail’, Financial Times, July 28 2009
81. Author interview with Russian tycoon, May 2015
82. Author interview with senior Western banker, December 2011
83. Author interview, Geneva, January 2015
84. Nicholas Shaxson, ‘A Tale of Two Londons’, Vanity Fair, March 13 2013
85. Author interview with Russian tycoon, July 2015
86. Author interview with former senior Western banker, August 2015
87. Author interview with Russian tycoon, May 2018