As the KGB rezident at Leningrad State University and as an employee of the Leningrad Fifth Chief Directorate, where he worked as a member of the active reserves after returning from East Germany, Putin would certainly have had access to the lists of agents and informants who worked for the KGB during the Soviet period. He also would have been tasked to monitor political activity among faculty and students at the university. Lieutenant Colonel Andrey Zykov,XVII the lead Russian investigator in St. Petersburg for especially important cases, who was assigned to examine Putin’s activities for criminal behavior, even went so far as to allege that two of Putin’s later associates, Anatoliy Sobchak and Dmitriy Medvedev, both of whom were teaching law at Leningrad State University at the time, had provided Putin with information (“I Anatoliy Sobchak, i Dmitriy Medvedev byli ego stykachkami”).127 Thus Putin would not have been the only person interested in “cleansing” his own file of damaging materials. Eastern Europe at this time was awash with exposés as high-ranking politicians were unmasked as agents of either the KGB or local security services. No one in Russia wanted a repeat of this, and indeed there has never been such a period in post-Soviet Russia. Clearly the KGB got there first, and files, lots of files, were burned. As mentioned earlier, Putin himself admits that in Dresden, after the Berlin Wall came down in November 1989, he burned so many files that the furnace exploded. But also the entire mood in Russia, the heart of the Soviet Empire, was quite different compared to the rest of the Soviet Bloc—it was one thing to unmask someone in Poland who had worked for the Russians; it was quite another to reveal that a Russian son had been spying on his father, for example.128 Russians as a whole sensed that such a settling of accounts would be divisive, ruinous, and pointless. And those tens of thousands of people coming out of the collapsed CPSU and KGB had other tasks in mind—most notably making a living in new conditions. The elites from these two organizations knew where the money was and how to use it. They had more lucrative assignments in mind than revenge.
In the Beginning: Bank Rossiya
While spontaneous privatization was occurring throughout Russia, with the KGB and the mafia getting a head start, it also occurred in Leningrad, where, at the request of the local oblast’ (regional) Party committee, a new bank was established that would be closely associated with the circle around Putin. On June 27, 1990, the Aktsionernyy Kommercheskiy (Joint-Stock Commercial) Bank Rossiya, or OAO AB ‘Rossiya,’ known simply as Bank Rossiya ever since, was established in Leningrad.129 An initial 1.5 million rubles ($840,000) was received from Nikolay Kruchina, the CPSU Central Committee chief of the Administrative Department, in July 1990 to capitalize the new bank.130 The veteran Russian journalist Vladimir Pribylovskiy claims that in a letter to Kruchina (who died by defenestration following the attempted coup) dated September 27, 1990, Leningrad’s Party secretary Boris Gidaspov asked for a further transfer of 500 million rubles ($280 million) “to finance the activities of the Central Party structure” in Leningrad.131 It is not known whether any of this money was ever transferred, but a further 50 million rubles ($28 million) was deposited from the Central Committee’s insurance trust in April 1991.132 The Leningrad oblast’ Party committee held 48.4 percent of the shares in the new bank, but these shares were frozen after the attempted coup, when the CPSU was legally disbanded. The remaining shares, according to Pribylovskiy, were held by the insurance company Rus’ and the media company Russkoye Video. Rus’ was owned by Arkadiy Krutikhin, formerly head of the Property Management Department of the Leningrad oblast’ Party committee, Vladislav Reznik, and Aleksey Aleksandrov. Reznik and Aleksandrov would rise to become Duma members and founding members of United Russia, the ruling political party, under Putin. Russkoye Video was headed by Andrey Balyasnikov, who had worked in the city’s Ideology Department. Pribylovskiy claims that Russkoye Video’s founding capital of 13 million rubles ($7.3 million) also came from the Leningrad regional (oblast’) Party committee.133
Twenty-three years later, in March 2014, in response to Russia’s annexation of Crimea, the Obama administration introduced sanctions against officials close to Putin and against one lone entity, Bank Rossiya. This move was justified by a White House official’s description of Bank Rossiya as a “crony bank—this is a bank that provides services to senior Russian government officials.” One of the bank’s owners and founders, Yuriy Koval’chuk, was described as “essentially the personal banker for many senior government officials of the Russian Federation, including President Putin.”134 So how did Bank Rossiya emerge, and what is Putin’s relationship to it?
Putin’s involvement in helping Bank Rossiya began in his first week of office, when, on July 4, 1991, his newly formed Committee for Foreign Liaison took a 5 percent interest in the new St. Petersburg World Trade Center, with Bank Rossiya also purchasing 5 percent of the initial shares, putting St. Petersburg city money into a joint venture with Bank Rossiya, along with ten other cofounders, including foreign firms. The coordination and registration of this new venture went through Putin’s office, and it was the first of several dozens of new firms that his committee would help found and, on behalf of the St. Petersburg municipal government, would co-own with private ventures. Pribylovskiy, who had access to all the registration documents for the period 1991–94, states that it was Putin’s legal advisor Dmitriy Medvedev who developed the legal case for city ownership.135, XVIII
When, in December 1991, Bank Rossiya was allowed to resume operations, the CPSU had been dissolved and the shares held by the Leningrad oblast’ Party committee were thus up for grabs. Records show, as confirmed by the subsequent director general of Bank Rossiya,136 that the Leningrad regional party executive committee (obkom) share was redeemed by a certain Leningrad Association of Joint Ventures,XIX which consisted of five of the founding members of the Ozero Cooperative: Andrey Fursenko, Yuriy Koval’chuk, Vladimir Yakunin, Nikolay Shamalov, and Sergey Fursenko.XX Of these, the first three ended up on the U.S. government’s March 2014 visa ban and asset seizure list. Koval’chuk was described in the U.S. Treasury Department’s list as a “personal banker for senior officials of the Russian Federation including Putin.”143 He became a member of the St. Petersburg municipal commission on enterprises with foreign investment, headed by Putin, in 1995. Bank Rossiya became the primary funding vehicle (into which city funds for new companies approved by Putin were channeled) for Putin’s Committee for Foreign Liaison when the city became a cofounder of enterprises.144
Koval’chuk remained a major shareholder throughout the history of the bank, owning about 30 percent.145 He would become a cofounder of the Ozero Cooperative, which established a common bank account for its members, one of whom was Putin. Also among those close to Putin who were involved in Bank Rossiya were Nikolay Shamalov and Dmitriy Gorelov, who consistently held about 10 percent each of Bank Rossiya shares, and Viktor Myachin, another original shareholder. At the beginning of 1992, in addition to individual shareholders, a number of other joint ventures also held shares, but given that these joint ventures were themselves owned, according to Pribylovskiy,146 by Ozero members connected to Putin, the ownership of Bank Rossiya stayed within a tight circle.XXI Subsequently another of Putin’s close circle, Gennadiy Timchenko, would invest in Bank Rossiya; by 2013 he was listed as owning 8 percent of the shares, and Gazprom 16 percent.147
Putin benefited directly from Bank Rossiya early on, when a film about him was funded by the bank in 1992. The documentary filmmaker Igor Shadkhan recounts that he was called in to Putin’s office in 1992 to make a series called Vlast’ (Power) on St. Petersburg’s new government, and which would include one whole episode on Putin. Shadkhan ended up making only one forty-five-minute show, the one about Putin, portraying him as smart, savvy, trustworthy, and having a KGB background. In his autobiography, First Person, Putin admitted that he used Shadkhan’s film to reveal his KGB past so that he wouldn’t be blackmailed for it.148 Shadkhan, whose previous well-regarded works were on the gulag, admits that Putin “recruited” him.
149 The piece opened with the haunting and popular theme from Putin’s favorite Soviet TV series, Seventeen Moments of Spring, a series that continues to have enormous resonance for Putin and for Russians nostalgic for the Soviet era.XXII In the film Putin says that totalitarianism isn’t something that can be imposed from above—it’s “embedded in our own people’s mentality.” The filmmaker subsequently said he would like to ask Putin who is to “blame for the resurrection of the authoritarian regime—the people?”150 Putin’s effort to shine a favorable PR light on his background, and to use Bank Rossiya money to do it, indicates his early ambition for a bright political future and his methods.
Bank Rossiya was not, however, just a vehicle for investment by members of what would become Putin’s Ozero circle. It was also one of the many places where this circle came in contact with, and collaborated with, Russian organized crime. Marina Litvinovich, a Kremlin spin doctor turned whistleblower, provided the following detailed account of this tangled web, from which she concluded that 18.6 percent of the original shares in Bank Rossiya were owned by Gennadiy Petrov:
In 1992, Quark NPP, Bikfin CHC and other companies owned by the Fursenko brothers, Yuriy Koval’chuk, Mikhayl Markov, Vladimir Yakunin and Viktor Myachin, became shareholders of Bank Rossiya. Their partner in the Bank was mob boss Gennadiy Petrov (arrested by Spanish police in 2008 as head of the Tambov-Malyshev crime group). Petrov is Vladimir Kumarin’s neighbor; earlier Petrov was one of the actual shareholders of Petersburg Fuel Company. Petrov used to be partners with Sergey Kuzmin, whom Petrov met in a Soviet prison where both were serving criminal sentences. The company was represented by Bank Rossiya’s board of directors member Andrey Shumkov. Shumkov, employed at Ergen company and Fuel Investment Company (where Kuzmin and Petrov held shares), controlled 14.2% of the Bank’s shares. Kuzmin and Petrov also personally held a 2.2% share each. Overall, companies affiliated with Gennady Petrov held 18.6% of the Bank.151
Novaya gazeta reported that investigations into Russian mafia corruption by Spanish police had concluded that 2.2 percent of the shares of Bank Rossiya were held by Gennadiy Petrov and Sergey Kuzmin directly, and 14.2 percent belonged to three St. Petersburg companies Ergen, Forward Limited, and Fuel Investment Co., associated with Andrey Shumkov, Kuzmin, and Petrov.152 All were involved in various activities in St. Petersburg associated with Russian organized crime in the 1990s and were part of the investigation and arrests made by Spanish police as part of Operation Troika in the 2000s.
Another connection between Putin and Bank Rossiya was through the trio who headed up St. Petersburg’s oil refinery in Kirishi in the late 1980s: Andrey Katkov, Yevgeniy Malov, and Gennadiy Timchenko. They were the original owners of Kinex, short for Kirishineftekhimexport (Kirishi Petroleum Chemical Export). Putin gave them preferential treatment during the so-called food crisis in 1991, when he signed contracts allowing them to export oil at depressed domestic prices from St. Petersburg’s Kirishi refinery in exchange for food that the Sal’ye Commission concluded never arrived. Katkov and Malov each owned 3.17 percent of Bank Rossiya’s shares.
Timchenko had a long-standing personal relationship with Putin. He not only became a shareholder of Bank Rossiya but established and was the co-owner of Gunvor, a global commodity trading company. The announcement of the U.S. government sanctions directly linked Putin and Timchenko: “Timchenko is one of the founders of Gunvor, one of the world’s largest independent commodity trading companies involved in the oil and energy markets. Timchenko’s activities in the energy sector have been directly linked to Putin. Putin has investments in Gunvor and may have access to Gunvor funds” (italics added).153
Timchenko’s stake in Bank Rossiya grew over time. In 2010 he was revealed to have a 7 percent share.154 Also disclosed at that time was the fact that the cellist Sergey Roldugin, who provided many adulatory quotes about Putin in First Person and who is the godfather of Putin’s elder daughter, owns 3.9 percent of the bank.155
Doing the day-to-day work at Bank Rossiya at its inception was its founding CEO, Arkadiy Krutikhin, and his deputy, Vladislav Reznik.XXIII Both were also associated with the insurance company Rus’, and Reznik had also been deputy director general of Russkoye Video. Krutikhin told the New York Times in October 1990 that the bank would start with a capital base of 3 million rubles ($1.83 million) and would finance restoration projects in Leningrad.156 Aleksandrov and Reznik would rise to become Duma representatives and founding members of United Russia, as previously mentioned. Reznik was the main sponsor of a 2006 bill on preventing money laundering. This activity occurred before he was investigated by Spanish authorities, according to a U.S. cable leaked by Wikileaks, for ties to the Tambov crime family and Gennadiy Petrov, described in the cable as the leader of “one of the four largest OC [organized crime] networks in the world.” Spanish government officials evidently raided Reznik’s and Petrov’s houses in Spain,157 having intercepted what the Spanish conservative daily ABC, as repeated in Wikileaks, called “hundreds” of phone calls that would “make your hair stand on end” for their revelations about Petrov’s “immense power and political connections, as well as the range of criminal activity in Russia that the Troika defendants directed from Spain. . . . Troika mafia leaders invoked the names of senior GOR [government of Russia] officials to assure partners that their illicit deals would proceed as planned.”158 Spanish investigators said the entire operation started in 1990 with the purchase for 15 million euros of the Palmira Beach Hotel in Peguera, Majorca, by Petrov with Leningrad Communist Party and KGB funds. According to the investigators, having bought the hotel, Petrov was able to host St. Petersburg notables, including the city’s new mayor, Anatoliy Sobchak, Putin’s boss.159 Reznik’s name would be found on numerous documents showing that he and his wifeXXIV were co-owners of various companies with both Petrov and Aleksandr Malyshev, also arrested on suspicion of money laundering, tax evasion, and the establishment of a criminal structure that traded in contraband, arms trafficking, and murder, and which, according to Spanish authorities, could be traced back to St. Petersburg and the monopoly position given by the St. Petersburg government to the Tambov criminal organization in the supply of gasoline in the 1990s.160
The bank not only united elites close to Putin; it became a vehicle for investment in the Russian economy. By 2005 it had gained 51 percent control over SOGAZ (Gas Industry Insurance Company), one of the largest insurance companies, which had belonged initially to Gazprom. A report on corruption by key members of the Russian opposition, including those with past ministerial positions in the energy industry, claimed that Bank Rossiya received these shares for $58 million, despite their estimated value of $2 billion.161 The company has provided insurance for all of Gazprom’s major schemes, including all its pipeline and exploration projects. SOGAZ is controlled through Abros, a subsidiary of Bank Rossiya. Kirill Koval’chuk, the nephew of Yuriy Koval’chuk, is on the board of directors of Abros. Abros was one of the companies sanctioned in the second round of U.S. Treasury sanctions in April 2014.162
By the time the White House sanctioned Bank Rossiya, it had become the seventeenth-largest bank in Russia, with over $10 billion in assets, including U.S. dollar accounts with U.S. and European institutions that would be frozen as a result of the sanctions. Putin responded by announcing that he would henceforth open a ruble-only account with them and would make them the primary bank in the newly annexed Crimea as well as giving them the right to service payments on Russia’s $36 billion wholesale electricity market—assuring the bank $112 million annually from commission charges alone.163 Clearly he would do what he could to make sure that the financial well-being of this inner core would not suffer. After all, their loyalty to each other began in the very early 1990s.
The Establishment of Putin’s Security Circle: The Siloviki
Putin’s experience put him in touch with a close group of security service personnel with whom he had studied, trained, or served in Leningrad and abroad. They would form the backbone of hi
s personal security team as he rose through the ranks.
Sergey Ivanov, Nikolay Patrushev, Aleksandr Grigor’yev, Vladimir Strzhelkovskiy, and Viktor Cherkesov were all contemporaries of Putin in the Leningrad KGB in the 1980s. Of this group, Patrushev and Ivanov have remained the closest to him. Patrushev has headed Russia’s Security Council since 2008, and Ivanov has been Putin’s chief of staff in the Presidential Administration, a position that singled him out for inclusion on the White House sanctions list.
Grigor’yev was close to Putin from an early age; they studied together at university,164 and the two are pictured together in First Person. Grigor’yev graduated from the KGB’s Higher School in 1975 and went on to serve with Viktor Ivanov in Afghanistan (1983–85) and then under Cherkesov in the St. Petersburg security services in the mid-1990s. He received awards for his “service to the Orthodox Church” and was named to the advisory board of the Center for the National Glory of Russia, a project that united Putin’s inner circle of siloviki, including Yakunin, Viktor Ivanov, Sergey Ivanov, Cherkesov, and Chemezov.165 Sergey Ivanov and Putin both graduated from Leningrad State University in 1975, but from different departments and, according to Ivanov, did not know each other then. However, they became acquainted in 1976 when they received specialized training in the Leningrad region’s counterintelligence department of the KGB from “experienced intelligence officers” who had worked as “sleeper agents” (i.e., illegals) abroad and were their Teachers “with a capital letter.”166 Patrushev had been slightly ahead of them at university; he was in the Leningrad counterintelligence section of the KGB in 1975 and had risen to become the region’s chief for combating contraband and corruption.
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