The job of Russian law enforcers is to protect the interests of the state, personified by their particular boss, against the people. This psychology is particularly developed among former (and not so former) KGB members who have gained huge political and economic power in the country since Mr. Putin came to office. Indeed, the top ranks in the Federal Security Service (FSB) describe themselves as the country’s new nobility—a class of people personally loyal to the monarch and entitled to an estate with people to serve them. As Russia’s former Procurator General, who is now the Kremlin’s representative in the north Caucasus, said in front of Mr. Putin: “We are the people of the sovereign.” Thus they do not see a redistribution of property from private hands into their own as theft but as their right.288
By 2013 the Forbes Russia list of the wealthiest businessmen in Russia289 was replete with friends of Putin, many of whom have been discussed in this chapter: Roman Abramovich (estimated to have a net worth of $10.2 billion),XXXVIII Vladimir Kogan ($.95 billion), Yuriy Koval’chuk ($1.1 billion), Arkadiy Rotenberg ($3.3 billion), Boris Rotenberg ($1.4 billion), and Gennadiy Timchenko ($14.1 billion). Shamalov and Gorelov were both estimated to be worth $.5 billion. Among the Forbes Russia list of the total incomes of families of federal officials for 2012,292 there are also many Putin friends: Sergey Chemezov ($.5 billion), Igor Shuvalov ($.4 billion), Vladislav Reznik ($.3 billion), and Viktor Ivanov ($.1 billion).
A third list from Forbes Russia293 reveals the alleged annual compensation, including payments made abroad, for state corporation managers in 2012: Aleksey Miller ($25 million), Igor Sechin ($25 million), German Gref ($15 million), Vladimir Strzhelkovskiy ($10 million), Nikolay Tokarev ($5 million), and Vladimir Yakunin ($4 million). These figures do not include these officials’ unofficial access to other resources of their companies. Russia’s Finance magazine in 2011294 also listed Vladimir Smirnov’s worth at $.6 billion and Pyotr Aven at $3.8 billion.
Vladimir Litvinenko was the rector of the Mining Institute from which Putin received a degree in 1996 after writing a dissertation that proposed increased state control. In 2004 he received shares in PhosAgro, one of the companies captured from the breakup of Khodorkovskiy’s Yukos, in compensation for consulting work. The company’s 2011 annual report listed Litvinenko’s ownership stake as 10 percent, with a total capitalization of $5.23 billion. Litvinenko insisted that the arrangement “did not contradict any laws.”295 He served as the St. Petersburg chairman of Putin’s 2000, 2004, and 2012 presidential campaigns. It was revealed that large sections of Putin’s dissertation were plagiarized from other sources, though it has never been determined whether he was responsible for this plagiarism or whether the dissertation was written by others who included plagiarized portions. Either way, Putin still received the kandidat ekonomicheskikh nauk degree (an advanced degree somewhere between a Western MA and a PhD), and Litvinenko’s career certainly did not suffer.296
Putin’s cellist friend became a multimillionaire, and the sons of his nephews and myriad other relatives became fabulously rich as well. In the meantime, Putin’s own reported income remained meager while his lifestyle kept pace with the richest of the rich. The presidential security services were in charge of no fewer than five luxury yachts and speedboats, which an analytical study by opposition figures297 estimated were worth not less than $110 million, excluding their full-time crews. The head of the state enterprise that managed all Russian commercial vessels, Dmitriy Skarga, admitted in open court in London that he was responsible for managing a “yacht which had been presented to Mr. Putin and was being managed by Unicom,”298 the 100 percent state-owned subsidiary of the state-owned agency Sovcomflot, headed at that time by Presidential Aide Igor Shuvalov, who had amassed a fortune of $.4 billion by 2012.299
The study by opposition activists, three of whom, Vladimir Milov, Boris Nemtsov, and Vladimir Ryzhkov, had served in Yel’tsin’s government, additionally found that the Russian president and prime minister have access to twenty-six official residences—a number that expanded considerably after Putin came to power.300 In addition Putin’s Petersburg friends built palaces that had presidential offices available for his use. Shamalov’s formal ownership of the palace in Gelendzhik did not conceal that it was in fact “Putin’s Palace,” given that it had the Russian state seal on the office chairs and over the main gate, its construction was supervised according to signed documents by Kozhin’s Presidential Property Management Department, it was guarded by Zolotov’s Federal Protection Service, and federal budget funds were diverted for its construction.
Putin’s relationship with his friends was one of reciprocity: he gave them access to the state’s largesse in the form of supporting their raids on private businesses, providing their companies with no-bid state contracts, and allowing the courts to legalize their activities and criminalize those of their opponents. In return they supported his continuation in power; they became the bulwark of his base; they helped finance and secure his electoral victories; they didn’t criticize him in public; they removed his enemies from the scene; and they paid him tribute. All this began in St. Petersburg in the early 1990s, when he started to promote his comrades from the Leningrad and Dresden KGB offices. “The basic point is that these guys have benefited and made their fortunes through deals which involved state-controlled companies, which were operating under the direct control of government and the president,” said Vladimir S. Milov, a former deputy energy minister and now political opposition leader who has written several reports alleging corruption. “Certain personal close friends of Putin who were people of relatively moderate means before Putin came to power all of a sudden turned out to be billionaires.”301 And this occurred at the same time that studies showed income disparity in Russia had never been worse, with the superrich doubling their wealth and the bottom fifth of the population in 2011 making only 55 percent of their 1991 earnings in real terms.302 All this despite Putin’s electoral claims that his rule had brought prosperity to Russians in comparison to the stagnant 1980s and the turbulent 1990s.
Returning to Petersburg in the early 1990s, Putin had become deputy mayor alongside Vladimir Yakovlev. Putin ultimately became the first deputy mayor and had control over all private and foreign economic activity. Yakovlev held the portfolio for housing, transportation, and infrastructure. They would quickly become bitter rivals. Putin attached his loyalties firmly to Sobchak, whom Yakovlev defeated in the 1996 mayoral race. From 1996 to 2003 Yakovlev controlled everything in St. Petersburg and was well poised to make life difficult for Putin by proceeding with criminal investigations of his activities and allying himself with other governors, such as Moscow’s mayor Yuriy Luzhkov, to try to defeat the Kremlin “party of power” and then Putin in the 1999–2000 elections. But even leaving aside Yakovlev’s political motivation to undermine Putin, Putin’s behavior while he was in Petersburg left a lot to be desired.
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I. Ministry for State Security (Ministerium für Staatssicherheit, Stasi). Historians estimate that almost one in fifty East Germans collaborated with the Stasi, surpassing both the KGB’s infiltration of Soviet society at any time except the late 1930s and Nazi penetration of German society.22 Putin’s coworker Usol’tsev described the relationship between the Stasi and the KGB as “an expedition in which recent graduates of the secret service met with dogged old Chekists.”23
II. Putin himself gives a very interesting and specific answer to the question of whether he traveled into West Germany at this time: “No, not once while I was working in the GDR.”28 The answer does not exclude several possibilities: that he traveled to West Germany as an illegal before being formally stationed in the GDR; that he traveled to West Berlin, which in international law was still under formal Allied military occupation until German reunification on October 3, 1990. While the West treated West Berlin as part of the Federal Republic, the Soviet Bloc countries certainly did not, treating it as the “third” German jurisdiction, or a selbstständige politische Ei
nheit (independent political entity). Thus saying that he did not travel to West Germany certainly does not mean he did not travel to West Berlin. Nor is it excluded that he was infiltrated into West Germany before receiving an open assignment in Dresden. And of course, he could simply not be telling the truth.
III. The Mitrokhin Archive is a vast collection of documents and handwritten notes collected and brought to the West by the KGB First Chief Directorate archivist, Vasiliy Mitrokhin, in 1992. It detailed the most important KGB spies working in the West, the KGB’s role in a wide range of events, and the extent of KGB penetration of Western intelligence services.
IV. The document lists him as head of the Fifth Chief Directorate, but he was deputy head, in charge of monitoring and suppressing domestic dissent. Filipp Bobkov was the head of the Fifth Chief Directorate at this time.
V. The Ozero Cooperative, which is dealt with extensively below, was a gated compound of businessmen, including Putin, who shared lakefront properties and a common bank account. Their mutual connections and loyalties form the base of the political system built by Putin beginning in the 2000s, but their connections go back to the early 1990s.
VI. In 2008 Siemens AG paid $1.6 billion in penalties to the U.S. and German governments after admitting to 4,200 illegal payments totaling $1.4 billion over six years to various countries, including specifically for the supply of medical devices to Russia.53
VII. During this period East Germany had become what its non-Communist interior minister, Peter-Michael Diestel, called “an Eldorado for terrorists.”59 Terrorist groups, including the Red Army Faction (RAF), Libyan-sponsored Arab terrorists, and Carlos the Jackal, operated from East Germany under Stasi and KGB control. During the time that Putin was in Dresden, the RAF was implicated in bombings at the USAF Rhein-Main Air Base and the assassinations of the chief of technology at Siemens and the chairman of Deutsche Bank.60
VIII. Putin’s interest in acquiring personal consumer goods, which Gessen describes as “pleonexia,” has continued into his presidency.61 Robert Kraft, the owner of the New England Patriots, recounted at an after-dinner speech at a public ceremony in the Waldorf-Astoria in 2013 that in 2005, while on a business trip to Russia with a group of top executives, Kraft had shown Putin his Super Bowl ring, encrusted with over four carats of diamonds, a fact confirmed by many pictures taken at the time: “I took out the ring and showed it to [Putin], and he put it on and he goes, ‘I can kill someone with this ring.’ I put my hand out and he put it in his pocket, and three KGB guys got around him and walked out.” Kraft made it known he wanted the ring back, but he claims that he got a call from the George W. Bush White House saying, “It would really be in the best interests of U.S.-Soviet [sic] relations if you meant to give the ring as a present.”62 So Kraft released a statement saying he decided to gift the ring to Putin. But by 2013 he had changed his mind, and in response to this new story, Putin’s spokesman Dmitry Peskov said Putin would not return the ring but would be happy to buy Mr. Kraft another one and advised that anyone who believes the story should “talk with psychoanalysts.”63
IX. Zuchold’s file in the Stasi archive confirms his employment by the Stasi in Dresden from 1982 to 1989, coinciding with the years Putin worked there.67
X. A leading unofficial informer (Führungs-Inoffizieller Mitarbeiter) knows the identity of other informers and leads them.
XI. Sobchak was head of the Leningrad City Council from May 1990 until June 1991, when the new position of mayor was established and he was chosen to become St. Petersburg’s first mayor. Putin was his advisor until June 1991 and then became deputy mayor in June 1991 and first deputy mayor in March 1994. Throughout the period, irrespective of his title, Putin was responsible for supervising St. Petersburg’s foreign economic relations.
XII. Dresdner was involved in the Kremlin’s attack on Yukos when the Ministry of Justice commissioned the bank’s investment arm, Dresdner Kleinwort Wasserstein, which Warnig oversaw in Russia after the local DrKW office was merged into Dresdner Bank ZAO in Russia, to value Yukos’s core asset, Yuganskneftegaz, before it was sold by the court. The tender was awarded without competitive bidding. DrKW stated that Yugansk was worth between $15 billion and $17 billion, a figure generally supported by Western investors. The company was sold to a shell company, Baikal Finance Group, for $9.3 billion, and then several days later was resold to state-owned Rosneft, whose chairman of the board was Igor Sechin.87
XIII. Chemezov did not say that Luch was a KGB operation. Rather he described his work as “heading the Experimental Industrial Association Luch in the GDR” (“Ya vozglavlyal predstavitel’stvo ob’edineniya ‘Luch’ v Drezdene”).97
XIV. Sovintersport was the agency responsible for handling commercial ventures involving Soviet sports and was reputed to be controlled by the KGB. But it was also clearly filled with people who the athletes felt were interested in padding their own wallets. In 1989, for example, U.S. boxing promoters provided Sovintersport $200,000 per boxer for six fighters who would be managed by U.S. promoters. But Uri Vaulin, the Russian heavyweight champion, claimed that Sovintersport was paying him only $900 per month.100 In other sports, like ice hockey and cycling, Sovintersport acted as the intermediary for Soviet athletes. Star ice hockey players bristled against continuing to give Sovintersport a reported 97 percent of their contracts. After negotiations, the amount was reduced to 90 percent, then 80 percent. In the end the top players received contracts in the West that paid $300,000 each a year, with slightly less going back to Sovintersport.101 Chemezov claims to have been part of the creation at Sovintersport in 1989 of the first professional cycling team to feature Russian cyclists, Alfa Lum, and has remained active as the chairman of the supervisory boards of the Russian Cycling Federation and Team Katyusha, Russia’s premier cycling team.102 Working with him as head of the Russian Cycling Federation is Igor Makarov, who, according to Harvard economist Marshall Goldman, founded ITERA, a trading company that at one point became the second-largest producer of natural gas in Russia, with headquarters in Jacksonville, Florida.103 Chemezov’s extensive links to Ukraine are also explored in http://www.foreignpolicy.com/articles/2014/03/19/dmytro_firtash_ukraine_billionaire_corruption_arrest.
XV. Stasi files list Putin in a December 1988 list of birthdays of the Soviet officers in Dresden as “OSL Putin Wladimir Wladimirowitsch (Parteisekretär), 7.10.1952.” OSL is an abbreviation for Oberstleutnant, or lieutenant colonel.107
XVI. Drozdov (1925– ) is the modern version of the real live Stierlitz, the undercover agent in the Soviet drama Seventeen Moments of Spring, which had motivated Putin to join the KGB. As an illegal in Germany, Drozdov posed as the cousin of the condemned Soviet spy Rudolf Abel, who was imprisoned in the United States and swapped for Gary Powers across the fabled Glienicke Bridge in Potsdam between East and West Germany in 1962.110 He headed the KGB’s Directorate “S,”111 in charge of illegals. As such, he was involved in several other fabled operations: he headed an elite unit of special forces in charge of the Soviet attack on Afghan president Hafizullah Amin’s palace that killed Amin as a precursor to the Soviet invasion in 1979,112 and in 1981, when the KGB formed Vympel, an elite unit composed only of officers to carry out “deep penetration, sabotage and liquidations in times of war,”113 Drozdov was its first head. A photo of him taken in 2011 (at the age of eighty-five) shows him under a bust of the Napoleonic war hero Kutuzov.114 Vympel was a victim of all the reorganizations that took place after the collapse of the USSR, but on October 8, 1998, less than three months after Putin was named director of the FSB, Vympel was reintegrated into the FSB and became one of the elite units in the Special Operations Center (known by the umbrella term Spetsnaz units) under General Aleksandr Tikhonov. In 1999 it became part of the Service to Protect the Constitutional System and Combat Terrorism within the FSB, combining political investigations and antiterrorism work. It has been involved in all the most deadly, secret, and controversial operations of the Russian s
tate under Putin, including the Nord-Ost and Beslan hostage crises, assassinations of Chechen leaders at home and abroad, and, some say, Aleksandr Litvinenko’s murder.115 Sovershenno sekretno maintained that operatives of this unit who reported directly to Tikhonov were responsible for placing the explosives in the basement of the apartment in Ryazan in September 1999.116 This was confirmed by other in-depth investigations.117
XVII. Formally Zykov was the senior investigator for particularly important cases of the Criminal Investigation Department of the Investigative Committee of the Ministry of Internal Affairs of the Russian Federation’s Northwest Federal District based in St. Petersburg, according to his statement on his nine-part YouTube testimonial.126
XVIII. Throughout the years Pribylovskiy has been a major and reliable source of documentation on the Russian elite through his writing and his website, Anticompromat.org. He had access to the entire database for Putin’s Committee for Foreign Liaison, listing all the companies the committee registered.
XIX. The association was formed in 1990 from four joint ventures: two from Germany, one from Finland, and one from the United States. The Finnish joint venture, Filco, was formed from Finland’s largest construction company, Haka OY, and the city of St. Petersburg, to redevelop the site on the Moyka Canal that subsequently housed the South African and then the Netherlands Chancery.137 So from the very beginning, the city of St. Petersburg was a partner in joint ventures with foreign companies. The city provided the site as its contribution to this unusual joint venture, relocating the communal apartment residents who were in it at the time.138 Interviews I conducted suggest that during the construction, which was not completed until 1993, Sobchak and Putin used the building’s courtyard to garage their Mercedes, rumored to have been gifts from the Chechen security for the new Mercedes dealership established in St. Petersburg in 1994. When Western officials called the mayor’s office to inquire where they had purchased the cars, Putin is said to have immediately stopped driving his Mercedes, but not Sobchak. At this time Boris Berezovskiy and Badri Patarkatsishvili were working together in Logovaz, which involved the importing of used German cars and had proven to be extremely lucrative in St. Petersburg, where they stated that Putin provided them with krysha (a roof).139 Berezovskiy later reported that Putin had neither demanded nor accepted a bribe,140 which is at odds with the otherwise unsubstantiated story relayed by Western officials.
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