The conflict of interest was massive. Kolesnikov subsequently described the working relationships: Gorelov was the director of Petromed, ordering medical equipment; Shamalov was the representative of Siemens, delivering the equipment; and Shamalov in particular was a good friend of Putin, with whom he went on to found the Ozero Cooperative. Kolesnikov said, “When Shamalov came to us with a proposal for Vladimir Vladimirovich, we understood that this was in reality a proposal directly from Vladimir Vladimirovich.”246 Gorelov believed that the relationship with Putin’s KVS was beneficial because it provided the “roof” to protect against demands from organized crime. When Vladimir Yakovlev became governor of St. Petersburg (the mayor’s position was changed to governor), the relationship between Petromed and the city soured, and Gorelov and Kolesnikov bought out the city’s stake, making Petromed a closed company owned equally between the two of them. They became major shareholders in Bank Rossiya, purchased a stake in Vyborg Shipyards, and by the mid-2000s were included in the Forbes Russia list of the richest Russians. Kolesnikov continued to run Petromed but ultimately became a whistleblower against what he maintained was a massive diversion of funds by the Kremlin to build “Putin’s Palace.”247
Vladimir Churov claims to have worked for an experimental design bureau at Leningrad State University before joining Putin in the KVS, where he worked until 2003.248 Marina Sal’ye, a leading democrat and deputy in both the St. Petersburg and Russian parliaments, stated that an investigation by the city legislature in 1990 concluded that Churov had worked for the KGB.249 Clearly Putin and Sal’ye had diverging views of the value of a KGB background, and Putin continued to promote Churov. After working for the KVS, he became a member of the Duma for the Liberal Democratic Party of Russia, and led the Central Electoral Commission during the 2007–8 and 2011–12 successor operations that the Russian state insisted on calling elections.
Aleksandr Bastrykin had also been a classmate of Putin in the law faculty of Leningrad State University.250 After 2011 he led the increasingly powerful Investigative Committee of the Procurator General’s OfficeXXXV when it became independent of the Procuracy, began reporting directly to Putin, and became a vehicle for many politically based cases,251 including investigations that led to the arrests of Pussy Riot, Aleksey Navalnyy, and the leaders of the 2011–12 Bolotnaya demonstrations against electoral fraud. Bastrykin was accused of “unscrupulous borrowing” of large parts of a book on J. Edgar Hoover for his own 2004 book.252 Navalnyy published evidence on his website of Bastrykin’s ownership of property and a residence permit in the Czech Republic that led him to charge that “the man responsible for all investigations and the entire struggle against corruption is a swindler, a fraud and a foreign agent.”253 Novaya gazeta accused him of personally threatening the life of its deputy editor.254 He was invited to give a lecture at the Sorbonne in 2013, but when he started speaking to a nearly empty hall about his medals, noble origins, and French wines, he was interrupted by questions about Greenpeace detentions, torture, his plagiarism, and political arrests. In a video posted online, one attendee can be heard loudly shouting in Russian, “Vy prestupnik!” (You’re a criminal).255
Such is the quality of the group that Putin has gathered around him from his days in the St. Petersburg mayor’s office. From these sketches it is easy to see why Viktor Ivanov, Sechin, Kozak, Kozhin, and Naryshkin were singled out by U.S. sanctions, and it is easy to imagine that others of this group could be added if relations between Russia and the United States were to deteriorate further.
The Rotenberg Brothers
Boris and Arkadiy Rotenberg grew up with Putin and have known him longer than perhaps anyone else from his inner circle.256 Both were placed on the U.S. sanctions list, not because they are government officials but for “acting for or on behalf of or materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of a senior official of the Government of the Russian Federation”257—a clear reference to Putin. They admit to running around together on the rough streets of Leningrad in their teenage years and sparring together as judo partners. When Putin became president, their businesses seemed to flourish. Speculating on the impact of knowing Putin, Arkadiy, who studied at the Leningrad Institute of Physical Culture, told the Financial Times, “Friendship never hurt anyone. But I have great respect for this person and I consider that this is a person sent to our country from God. He does a great deal for Russia. Therefore, you can’t just go to him and ask for something. . . . Firstly, this is not my style and secondly, he wouldn’t even let me through the door. When we meet, we are training—now we play ice hockey—or we are speaking about sport and remembering the days when we did sport. . . . He is a great person and I really do value these relations more than anything else. For me, friendship with this person is most of all a responsibility.”258 Boris also sparred with Putin as a teen and remained close.
Putin and Arkadiy Rotenberg at funeral of their judo trainer, August 2013. Photo by Sasha Mordovets, Getty Images
The brothers worked together to gain access to Gazprom subsidiaries and emerged as major figures in pipeline construction and drilling, as well as road construction. They are the main owners of the Severnyy Morskoy Put’ (Northern Sea Route) Bank.259 In addition, they received from Gazprom many of the intermediate companies that purchase gas pipes and sell them to Gazprom. In other words, they acted as middlemen producing neither the pipes nor the gas but simply sold one to the other—a situation that led Bill Browder of Hermitage Capital Management (which had $3.5 billion in Western investments in Gazprom) to express concern as early as 2005 that these intermediary companies were driving up prices, diminishing profits to Gazprom (which is a publicly traded company in the West, with billions of dollars of Western investments from pension funds alone), and receiving unfair preferences.260 The U.S. Treasury Department announced that between the two of them, the brothers had received approximately $7 billion in contracts for the 2014 Sochi Olympics,261 or more than the total cost of the Vancouver Winter Olympics. According to Boris Nemtsov, a political opponent of Putin, the Rotenbergs’ twenty-one no-bid contracts accounted for 15 percent of the total budget for the Sochi Games.262 They were both in the 2013 annual Forbes Russia list of billionaires,263 their personal wealth increasing by $2.5 billion in the past two years alone. Both have remained in touch with Putin through their sponsorship of the premier judo club in Russia, the Yawara-Neva Judo Club in St. Petersburg, where Putin is the honorary president, and through work with the Russian Judo Federation. In defending his close personal relationship with the president and the cost of the Sochi Games, Arkadiy stated that those projects were “big, difficult, and responsible projects that had to be completed within tight schedules. . . . Unlike my friends, I am not entitled to make a mistake, because it is not only a question of my reputation. . . . Vladimir Vladimirovich does not protect me. If I were to involve myself not in business but in some other practices, he would not say: ‘He must not be touched, he is a good guy!’ ”264 Hill and Gaddy observe, “In other words, in Rotenberg’s and Putin’s views of how the crony oligarch system works, it is not ‘corruption’ when your friends get lucrative contracts if they get the job done. . . . From Vladimir Putin’s perspective, the reason you give the contracts to your friends, the crony oligarchs, is because you can make them understand that very crucial point.”265
The Pièce de Résistance: The Ozero Dacha Consumer Cooperative
Putin and his circle started to gain power and privilege from the moment Bank Rossiya was established and Putin became head of the Committee for Foreign Liaison. Five years later, when Anatoliy Sobchak lost his 1996 bid to be reelected St. Petersburg’s mayor, outsiders may have believed that the efforts of this group to dominate St. Petersburg politics had been wasted. Sobchak and Putin would once again be under investigation by federal and local authorities, and Sobchak would soon flee abroad. Surely it would be the end of the road for Putin and his
team too. But nothing could have been further from the truth. Putin almost immediately received a top job in Moscow, from where he continued to exert influence in Petersburg. Several of his group moved to Moscow with him, though many stayed to shape events in their home city. But without access to the Mayor’s Contingency Fund, how were investments going to be shared, and what would be the mechanism for bringing together the tribute system that had been established by political and economic elites around the future president? One of the answers was the Ozero Dacha Cooperative Society. Three of its founders (Vladimir Yakunin, Yuriy Koval’chuk, and Andrey Fursenko) found themselves on the 2014 U.S. sanctions list that specifically mentioned their roles as cofounders with Putin of the cooperative. How did the Ozero Cooperative come about, and what has been its influence?
Putin had already acquired property on the banks of Lake Komsomol’skoye before Ozero was established. Investigator Andrey Zykov asserted publicly, “We investigated and found out that the Twentieth Trust corporation built a house for Vladimir Vladimirovich Putin on the shores of Lake Komsomol’skoye as well as a villa in Spain.”266 This is a reference to Putin’s dacha on the site of the Ozero Cooperative. In 2012 Zykov reiterated his belief that based on the investigation of Twentieth Trust that he had participated in, Putin had used Trust money to pay for his Ozero dacha. Zykov also stated that “the person who bought the land, scared the local residents, burning down their little houses if they refused to sell them, was a St. Petersburg officer who turned out to be none other than Vladimir Vladimirovich Putin. . . . At the end of 1992, Putin bought two adjacent plots of land—3,302 by 3,484 square meters [.85 acre]. . . . A public official in 1992–3 could not afford to buy an apartment and a cottage unless there was ‘excess’ income. And Putin, of course, had that income. In the summer of 1996 on this site they completed a 2-storey villa, like a palace. This house was estimated at about $500,000.”267 When the house burned down in August 1996, Putin prevailed on the builders to rebuild it for free, as their installation of a faulty sauna had caused the fire in the first place: “When the firemen later analyzed the fire, they concluded that the sauna builders were to blame for everything—they hadn’t put the stove in the banya properly. And if they were to blame they had to compensate us for the damage. . . . Everything was as it had been before the fire, and even better.”268 Zykov also claimed that the building of the houses in the gated community violated a law guaranteeing free access to protected shoreline, which he claims they had illegally privatized.269
No action was more symbolic of the intention of the group around Putin to support, promote, and fund his political ambitions and be supported by him in turn than the registration on November 10, 1996, of the Ozero Dacha Consumer Cooperative (Ozero Dachnyy Potrebitel’skiy Kooperativ). The legal document establishing the cooperative lists Vladimir Smirnov as its leader. Its other members, listed in the order they appear on the document, are Nikolay Shamalov, Vladimir Putin, Vladimir Yakunin, Yuriy Koval’chuk, Viktor Myachin, and Sergey Fursenko and his brother Andrey Fursenko.270
Founding Registration document of the Ozero Dacha Consumer Cooperative, with its founding members and bank account number listed. http://www.anticompromat.org/putin/ozero.html
The group built a number of dachas, actually small mansions, next door to each other on the shores of Lake Komsomol’skoye in Priozersk District, northeast of St. Petersburg.271 Critically they also established a cooperative association, with a bank account (Settlement Account No. 180461008)XXXVI in Leningrad Oblast’ Bank, where money could be deposited and used by all account holders, cooperatively, in accordance with the Russian law on cooperatives.XXXVII This group has stayed by Putin throughout his entire period in office, and they have all made hundreds of millions and even billions of dollars.274 In Russia a cooperative arrangement is another way for Putin to avoid being given money directly, while enjoying the wealth shared among co-owners. Where Putin got the money to acquire the land and build the dacha within the settlement in the first place is disputed. Zykov claims that the Ministry of Internal Affairs had documentation proving Putin’s money for the dacha came from the Mayor’s Contingency Fund.275
The Ozero Consumer Dacha Cooperative
Address: 643, 188760, Russia, Leningrad Oblast’, Priozersk city, Lenin st. 34,68
Telephone 279 22058
Date of registration: November 10, 1996
Leader: Smirnov, Vladimir Alekseyevich
Members:
Smirnov, Vladimir Alekseyevich
Shamalov, Nikolay Terent’yevich
Putin, Vladimir Vladimirovich
Address: St. Petersburg, 2nd line, Vasil’yevskiy Oblast’, 17, 24
Yakunin, Vladimir Ivanovich
Koval’chuk, Yuriy Valentinovich
Myachin, Viktor Evgen’yevich
Fursenko, Sergey Aleksandrovich
Fursenko, Andrey Aleksandrovich
Account No. 180461008
Leningrad Oblast’ Bank
Type of Account: Settlement (Raschetnyy) Account
Date Opened: April 2, 1997
This group of men around Putin promoted his interests, and in return he promoted theirs. The choice of Smirnov as the registered leader of the cooperative is most revealing; to quote from a paper by former Russian government officials who became Putin opposition members, Smirnov had long been “closely linked with the well-known ‘mafia’ businessman Vladimir Barsukov (Kumarin).”276 Smirnov met Putin in 1990 in Germany when the first decisions were made to invest in St. Petersburg. He then headed one of the companies involved in the food scandal of the early 1990s that resulted in millions being stolen; he and Putin sat together on the board of the St. Petersburg Real Estate Holding Co. (SPAG) beginning in 1994, which the German police accused of laundering money for Russian and Columbian organized crime; and he signed over a monopoly position to the Petersburg Fuel Company, which he co-owned with Barsukov-Kumarin. And after all this, Putin not only joined him in the Ozero Cooperative, but when he became president he appointed Smirnov head of Tekhsnabeksport, one of the world’s largest suppliers of nuclear goods and services to foreign governments, including Iran.277
Sergey Fursenko became head of Lentransgaz, which then became Gazprom Transgaz Sankt-Peterburg, one of Gazprom’s largest subsidiaries, with an annual turnover of 50 billion rubles.278 He also became chairman of the board of directors and president of St. Petersburg’s premier soccer club, Zenit,279 and president of the Russian Football Union, before being forced out after Russia’s poor showing in the European Cup. Andrey Fursenko was appointed deputy minister, then first deputy minister, then acting minister of industry, science, and technology; after 2004 he became minister of education and science, with a federal budget of 800 billion rubles in 2011.280 Of all the members of Putin’s inner circle, Andrey Fursenko is the only one to have risen through the ministerial ranks to become minister.
Vladimir Yakunin, who had been first secretary at the Soviet mission to the UN, a post normally reserved for KGB officers,281 returned to St. Petersburg and in early 1991 went into the export business with Yuriy Koval’chuk, Andrey Fursenko, and Viktor Myachin, all of whom he had known from the Ioffe Institute, where he had served as head of the International Relations Department when they worked there.282 Yakunin has said that he and the other members of the Ozero Cooperative visited Putin in his dacha before it burned down and put the idea of creating a cooperative to him.283 When Putin went to work for the Presidential Property Management Department in Moscow, Yakunin became the federal representative for that office in the Northwest Region.284 He moved on to become deputy minister of transportation in charge of the country’s seaports in 2000 and then in 2005 became head of Russian Railways. In June 2013 Putin announced that $43 billion of stimulus money—controversially to be borrowed from Russia’s pension fund—would be used to stimulate the economy, including $14 billion to build three infrastructure projects, two of them by Russian Railways.285 This occurred over the objections of economic authoriti
es such as Aleksey Kudrin, who questioned its financial basis as inflationary, unlikely to produce growth, and likely to undercut the country’s pension system.286 The Russian free media also forecast that such a move would only stimulate further corruption, particularly given the publication by the Russian press and the anticorruption crusader Aleksey Navalnyy of pictures and property maps of a massive marble-clad seventy-hectare compound they claimed was owned by Yakunin. Navalnyy bitterly criticized Yakunin’s entry to the ranks of Russia’s billionaires, given that, as the head of a state-owned firm, Yakunin is a salaried employee and nothing more. He lambasted the Kremlin for allowing this to happen: “In all other countries, the railways are used for movement, but we use them for stealing.”287
Summary
So what is the significance of all these inner circles? Putin formed them, chose them, could have excluded some, could have set down different rules. Of course, in some circles, he was not the leading figure from the beginning. But he created an interlocking web of personal connections in which he was the linchpin. He wasn’t the only strong person in these groups, but he was the only one who stood astride all of them. And they would be allowed to make money and come to power with him, and only because of him. This included members of organized crime circles, who roared out of the Soviet period fully prepared to benefit from and contribute to general lawlessness. Putin’s approach was never to shut them out completely but rather to allow those who were willing to cooperate with him to thrive, as long as they recognized his authority and the authority of the “new nobility.” In a 2008 article titled “Grease My Palm,” the Economist outlined the essential truths of the Putin era that he set out to establish in St. Petersburg:
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