XX. Also members of the original ownership team of Bank Rossiya were Mikhayl Markov and Yuriy Nikolayev.141 Matthias Warnig became a member of the board of directors in 2012, and some have suggested that he too was an early shareholder.142
XXI. NPP Quark (18.27 percent; Vladimir Yakunin, Yuriy Koval’chuk, Mikhayl Markov, Viktor Myachin, Andrey Fursenko, Sergey Fursenko, Yuriy Nikolayev). In September 1992 NPP Quark changed its name to Stream Corporation. JSC Bikfin (15.87 percent; Mikhayl Markov, Vladimir Yakunin, Sergey Fursenko). JV JSC Agency for Technical Development (11.3 percent; Viktor Myachin). JSC TEMP (7 percent; Sergey Fursenko, Vladimir Yakunin, Mikhayl Markov). JV CJSC Bikar (5.61 percent; Vladimir Yakunin, Sergey Fursenko).
XXII. The main theme can be heard at http://www.youtube.com/watch?v=cY5QtEw_VTc.
XXIII. Krutikhin was followed as CEO by Vitaliy Savel’ev (1993–95), Viktor Myachin (1995–98, 1999–2004), Mikhayl Markov (1998–99), Mikhayl Klishin (2004–6), and Dmitriy Lebedev (2006–).
XXIV. Diana Gindin, the Russian American Swiss banker, at that time the president of the First Boston Bank in Russia and representative in Spain of Credit Suisse, according to El Pais.
XXV. For his part Il’ya Traber maintains that his success was due to his close and legitimate connections with political figures. He stated in an interview that when he established his antiquarian business in St. Petersburg, he decided, “Antiques—this is the kind of business that should be a merger of state power and the money of honest businessmen. The system is simple—we create a joint venture with the city—33% belongs to City Hall, the remaining 67% to me and my staff. But no one wants to play by these rules. Because then you cannot steal.” On the occasion of Sobchak’s inauguration as mayor, he presented him with a bust of Catherine the Great.185 Traber’s business interests expanded in the 1990s to include a significant role in developing the St. Petersburg port. Novaya gazeta also reported that he had been named as communicating with Petrov and Reznik while they were in Spain.186
XXVI. This sensational charge by Zykov, who had access to official documents, is not found elsewhere, and it has not been possible to substantiate it further.
XXVII. Aleksandr Sabadash became the owner not only of the distillery (producing both Smirnoff and Russian Standard vodkas in Russia) but also of Vyborg pulp and paper mill. In 2003 he was appointed a representative of the Nenetsk Autonomous Region in the Federation Council, a position from which he resigned in 2006.
XXVIII. The Regional Directorate for Combating Organized Crime (Regional’noye Upravleniye po Bor’be s Organizovannoy Prestupnost’yu, RUBOP) was a division of the Ministry of Internal Affairs created to suppress organized crime in 1988, reorganized in 2001, and finally disbanded in 2008. During its twenty years of existence it was tasked with fighting drug and arms trafficking and corruption. In the 2000s Putin used it increasingly to fight terrorism and “extremism.” Throughout the 1990s it was widely considered in the Russian press to be “acting on behalf of the highest bidder in political and business disputes.”188
XXIX. Western intelligence agencies were said to have even investigated the 1993 car accident in which Lyudmila Putina was seriously injured as a misplaced attempt on her husband’s life.
XXX. Co-owners were believed to be Zakhar Smushkin (21.25 percent) and the brothers Boris (21.25 percent) and Mikhayl (7.5 percent) Zingarevich.215 In April 1992 Fintsel founded and registered with Putin’s committee the Ilim Pulp Enterprises, a Russian-Swedish joint venture and the biggest producer of pulp and paper in the country. By September 1994 Fintsel owned 40 percent of Ilim, along with the Swiss company Intertsez (40 percent), the Ust Ilim works (10 percent), and the Kotlasskiy Cellulose and Paper Combine (10 percent). Because Medvedev owned a 50 percent stake in Fintsel, most observers believe he acquired a 20 percent stake in Ilim Pulp. Medvedev worked as Ilim’s legal director from 1994 to 1999.216 It is not known how he acquired these stocks, which were worth approximately $80 million in 1999, when he claims he sold them.217
XXXI. According to Hill and Gaddy, Sechin worked for the GRU as a military interpreter in Mozambique and Angola but never worked for intelligence, despite his fantasies of doing so. Presidential Administration insiders told them that Putin made Sechin an “honorary” colonel as an “inside joke.”219
XXXII. A reference to the Kremlin’s “invitation” to oligarchs to make charitable contributions to various worthy causes as a way of keeping in good stead with those authorities who are in a position to grant them state contracts.
XXXIII. The author of this article, Oleg Lur’ye, had a long career as an investigative journalist, working at the beginning of the Putin period at the opposition newspaper Novaya gazeta. This came to an abrupt end in 2008, when he was convicted in Moscow of extorting money from a politician in return for keeping a story about him from going to press.
XXXIV. The size of the Presidential Property Management Department grew exponentially under Putin, although figures vary. An investigation by Sovershenno sekretno in 2010 reported that in October 2000 the department employed over 120,000 people in its hundreds of state properties, including twenty-seven resorts for top officials, with an annual budget in 2001 of 4.6 billion rubles, a figure that grew to 60 billion by 2009.242 The U.S. government, in its press release sanctioning Kozhin, stated that he had a staff of sixty thousand, over a hundred enterprises and institutions, including the Kremlin itself, and over four thousand vehicles.243
XXXV. There was an Investigative Committee of the Procurator General’s Office that became an independent agency reporting directly to the Kremlin as well as an Investigative Committee of the Ministry of Internal Affairs.
XXXVI. The settlement account, or raschetnyi schyot, was introduced in the late Soviet period by organizations and cooperatives practicing khozraschyot, or economic self-sufficiency. They became standard with privatization. Soviet and then Russian law allowed such accounts to be used without restrictions for payment for wages, repairs, and capital purchases as required by the account holders. In the 1990 law governing cooperatives, all members have equal rights, and the cooperative may receive loans from banks.272 The specific financial transactions of the Ozero Cooperative have never been explored, and details of transactions are unknown. However, by law, any of the members would be able to deposit and withdraw funds for his own use.
XXXVII. The 1988 Law on Cooperatives legalized private economic cooperatives and allowed shares to be issued, free from state supervision, and the formation of joint ventures with foreign companies. Cooperatives were indistinguishable from private enterprises in Western countries.273
XXXVIII. Abramovich, regarded as one of the oligarchs under Yel’tsin, does not owe his start to the relationship with Putin. However, he was certainly able to stay in the game as a result of throwing his lot in with Putin in the late 1990s. As a sign of his loyalty, he helped to fund the purchase for $50 million of Putin’s first new presidential yacht, the Olympia, fundraising for which preceded Putin’s being elected president.290 He also became the source of the first funds that were diverted to the construction of “Putin’s Palace” in Gelendzhik, according to Petromed’s owner, Sergey Kolesnikov, although Abramovich has consistently claimed that he provided this money for the building of medical facilities.291
Chapter Three
Putin in St. Petersburg, 1990–1996
Accusations of Illicit Activities
THE RUSSIAN and foreign press, as well as internal and external investigative services, have associated Putin with many incidences of corruption. The opposition press is replete with charges and innuendos. Roman Shleynov of Novaya gazeta’s investigative department led an analytical piece in 2005 on Putin’s connection to criminal cases with the following observation: “At a recent meeting . . . President Vladimir Putin laughed at an abstract question about corruption in the Kremlin. . . . No one asked him about specific cases. There are a lot of these. We made a list. You can call it ‘Antiforbes’: leading
figures of the Russian Federation and criminal cases in which they are mentioned. A simple comparison showed that the Russian president is the one most often mentioned in connection with criminal cases.”1 The point of the story was to underline that one can’t understand the logic behind Putin’s personnel policy—who is appointed and to what job—without understanding that key personnel are connected by this common corrupt activity from the St. Petersburg days.
Several cases have been the subject of serious investigation by Russian and international law enforcement. In the 1990s Western agencies in particular monitored Putin’s extensive travels to Germany, Finland, and Spain, where St. Petersburg investigators also alleged that he traveled numerous times on false papers. Certainly Putin went back and forth between Russia and Germany, and Russia and Finland dozens of times on official business after he started working in St. Petersburg, as would be expected of anyone who headed a city committee in charge of foreign trade. But after interviewing four senior Finnish diplomats, Anders Åslund reported that “Putin visited Finland 60 to 70 times during his five years as deputy mayor, and the Finns investigated his links with organized crime in Turku, Finland.”2 Officials in Turku conceded publicly that Putin was often there not only on government trips but also on “private visits to businessmen in the area,” which included the celebration of his fortieth birthday.3
Putin’s role in securing a monopoly position for select firms was a feature of his style while deputy mayor. While he professed an interest in economic liberalization and private property, he also acted to reduce competition, structure the market, and maximize profits for his friends. In St. Petersburg, Åslund reported, “both Swedish and Finnish businessmen complained about Putin squeezing out their companies, mainly through persecution by the lawless tax police, to the advantage of companies with which Putin was friendly”—as happened with the Grand Hotel Europa, where, using the tax police, Putin squeezed out the Swedish management that had already made a multimillion-dollar investment in favor of German and Russian investors closer to him.4 Putin also allegedly favored a takeover of the St. Petersburg port by the Tambov organized crime group.5
Other sources indicate that Putin chose to go abroad because, as he told friends, he couldn’t talk without fear of being bugged anywhere inside Russia. Lyudmila Putina’s friend from East Germany, Irene Pietsch, similarly reported that Putin regularly went abroad for business during this period. Putina told her that her husband “always goes to Finland when he has something important to say. He says that in all of Russia, there is no place where you can speak without being overheard.”6
A short list of the best-known legal investigations and cases related to his work in St. Petersburg city government includes the following:
1. Censure by the St. Petersburg legislature over illegal actions in the assigning of licenses and contracts by Putin as head of the Committee for Foreign Liaison.
2. Collaboration with criminal organizations in the regulation of the gambling industry in St. Petersburg.
3. German police raids on a money-laundering operation by the St. Petersburg Real Estate Holding Company, of which Putin was a member of the advisory board.
4. His role in providing a monopoly for the Petersburg Fuel Company, then controlled by the Tambov criminal organization.
5. His role in Dvadtsatyy Trest, or Twentieth Trust, which produced a criminal prosecution (Criminal Case No. 144128), dropped only when he became president.
6. His involvement in obtaining, along with Mayor Sobchak, an apartment in St. Petersburg, and charges of his unauthorized use of funds from the Mayor’s Contingency Fund (Criminal Case No. 18/238278–95), which was also closed down after his election.
The Food Scandal and Censure by the St. Petersburg Legislature
Putin’s interest in becoming the linchpin between government operations and private business began almost immediately in 1991 upon starting work at the mayor’s office. There had not been a more uncertain time in St. Petersburg since World War II. In the midst of the collapse of the Soviet system, there was dire need for food, and money was in short supply, with hyperinflation increasing the desirability of barter arrangements. The head of the Lensovet, the local city council, Aleksandr Belyayev, described the context of those days: “In November 1991, the Congress of People’s Deputies of Russia formed the Gaidar government. Reforms had already been declared—the forthcoming liberalization of prices. The situation was ambiguous. . . . When the Gaidar government allocated a license for the export of raw materials for food, business entities that managed these resources were not eager to bring in food. They were waiting for the liberalization of prices. This was the situation.”7 Belyayev does not state that Putin himself was more or less corrupt than any of the other politicians of that time, but that “this was the very beginning of the corrupt system.”8 Others were much less generous and targeted Putin as corrupt from the very beginning.9, I
Putin was in a very important position—in charge of licensing imports and exports in conditions where food was scarce, the political center was in disarray, and the value of money was collapsing. Under those circumstances, he acted first and received permission later. Legislators in the St. Petersburg Parliament were immediately concerned about him because they had negotiated a contract in summer 1991 through a German company called Kontinent to purchase 90 million Deutschmarks of meat from Germany; when Marina Sal’ye, as head of the legislature’s food committee, arrived in Germany to sign the contract, she was told that it had already been signed by Putin as head of a delegation, and the meat had been delivered. But it did not arrive in St. Petersburg. Masha Gessen cites Sal’ye’s view that the meat was paid for out of St. Petersburg’s budget but delivered to freezers in Moscow as part of the reserve being established by the KGB in preparation for the August coup.11 While the meat undoubtedly did not arrive in St. Petersburg, it is not definitively known what happened to it since an investigation never took place. But when Putin started to act in a similar way in the late autumn of 1991, legislators were already skeptical. When more shipments of food had not arrived by winter, a commission was formed by the Leningrad, and then St. Petersburg, parliament that was headed by Sal’ye and fellow parliamentarian Yuriy Gladkov.
Marina Sal’ye was a Russian geologist who worked for the Academy of Sciences Institute of Geology and a politician, a long-standing and highly respected leader of the democratic movement who, like Sobchak, had been elected both to the Leningrad City Assembly and the Russian Congress of People’s Deputies. She was a key member of the Interregional Group of Deputies who threw their support to Yel’tsin as the USSR collapsed, and she participated in the 1993 Constitutional Council to prepare a draft of the new Russian Constitution. Sal’ye was a founding member of the Free Democratic Party of Russia and the Democratic Party of Russia, and, after coming out of hiding in 2011, she joined the anti-Putin Party of National Freedom. When she died in 2012, newspapers called her the “grandmother of Russian democracy.”12 She was also an early and vehement opponent of Putin. The Sal’ye Commission established by the St. Petersburg legislature clearly documented that Putin signed licenses more than a month before he had permission from Moscow to do so. Before that, the legal authority from the prime minister went to the minister for foreign economic relations and from him to his representative in the northwest federal region, A. P. Pakhomov. So Putin himself had no legal authority to grant licenses and simply issued them over his own signature. This began, it appears, on December 4, 1991, and by the time Deputy Prime Minister Yegor Gaidar got wind of it, goods—mainly raw materials, as detailed below—had already left the country, theoretically to be exchanged for food.13 Meanwhile Sobchak was trying to get the authority transferred to his office to legalize the situation. But in the meantime Putin continued to issue licenses and contracts. Gaidar gave written permission only on January 28, 1992, authorizing Putin personally (no one else was named in the decree) to set quotas, issue licenses, and work with suppliers directly, without havi
ng to pay export duties, and in the name of the Ministry, for the sale or barter of natural resources in exchange for food.14 In terms of the scope of the operation that Putin was to launch, Gessen, after interviewing Sal’ye, asserts that “Moscow had actually given St. Petersburg permission to export a billion dollars’ worth of commodities.”15 Putin initially resisted handing over the documents to the Sal’ye Commission, claiming that doing so would compromise business secrets. Ultimately, under the duress of a subpoena, he handed over documents for twelve contracts and licenses amounting to about $122 million in exports. But the scope of the operation was thought to be ten times larger.
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