Tarasov with his finger on the pulse of commodity markets realised a watershed had been reached, the golden days of oil and gas were over, at least for the present, and hard days were ahead for the Russian economy.
He was not alone. Like other oligarchs he had been discretely transferring his moveable assets, namely cash and shares, to the safety of various offshore vehicles. Then came his decision to move InterBank’s subsidiary property investment business to London, which did go down at all well with the Kremlin’s master.
The final straw came with his revolt against the forced purchase of non-tradeable government bonds.
In the wake of economic sanctions, the collapse of oil revenues and the vertiginous fall of the rouble, the Ministry of Finance, in order to avoid deep budget cuts, summoned Russian businesses to exchange their dollar reserves for rouble denominated government bonds, which of course the oligarchs had no choice but to accept, that is with the exception of Tarasov who openly criticised the move.
Retaliation was swift and Putin’s until recently close relationship with the oligarch turned as icy as the hard trodden snow on Red Square. The Kremlin in a classic move, ordered the Ministry of Finance to seize the bank and its assets, justifying its moves by accusations of massive fraud tax evasion.
Wisely Tarasov postponed his return to Moscow in the hope that the crisis would pass. Any thing else would have been an invitation he could not refuse - a long sojourn in a hard labour camp in Siberia. He had no desire to suffer the same fate as that which befell Mikhail Khodorkovsky, a high flyer who had fallen out of favour with the Kremlin’s master, a consequence of the oligarch’s inordinate political ambitions.
Whilst the UK government could not prevent Tarasov from be pursued in British courts by the Russian authorities, Tarasov was protected by the absence of a bilateral extradition treaty between Russia and the UK, which had not however prevented the FSB from pursuing the Kremlin’s other enemies in London, amongst them Alexander Litvinenko and Boris Berezovsky, both of whom ended up seriously dead.
Nobody but nobody was beyond the reach of the Kremlin as Yuri Felshtinsky, a Russian historian noted. London had gone from being a safe haven for Russian expatriates to being a most dangerous place for those in the Kremlin’s sights.
Tarasov feared Putin, a man he had seen rise from a modest functionary, an assistant to the mayor of Saint Petersburg, to become one of the most powerful men on the planet. He saw him as a pure product of the Soviet system, a creation of Leonid Brezhnev’s Russia. Putin, who had no education or experience in politics, based his rule on Soviet style dictates without any other vision than that unquestionable obedience, reinforced by agents of the state who shared his ideas.
Putin’s vision was the restoration of a Greater Russia, summed up by Alexander III’s not unreasonable conviction that ‘Russia should belong to the Russian people’. Vladimir Putin was in fact a modern Emperor and Autocrat of All Russia consecrated by the Holy Synod, and his court, comprised of Russia’s wealthiest and most powerful men, was part of the Sacred Guard - a state within a state.
1. Kremlin Rising: Vladimir Putin's Russia and the End of Revolution‒Peter Baker, Susan Glasser
CORRUPTION
As Kennedy watched the suburbs of Beijing roll by he was reminded of the high-speed train disaster that cost the lives of forty passengers. A humiliating loss of face for China’s technology and state railway. The minister responsible, who had cut corners in the race to build a world beating system, was tried for corruption and during his trial it was revealed he had received a four percent commission on contracts which he used to keep eighteen mistresses.
It was no secret that corruption was endemic in China, where officials, great and small, used their position for graft, enriching their family businesses and building networks that reached into every corner of the economy.
Financial institutions including the Wu’s own bank operated within a system that encouraged corruption. Every property and land development project was an opportunity for graft via state-owned banks which had been instrumentalised to promote growth at almost any cost regardless of the viability of the projects.
A very public example was Bo Xilai, the head of the Communist Party in Chongqing, a vast urban conglomeration of thirty million souls, where Bo’s family had amassed a fortune of nearly three billion dollars. The former Politburo member and commerce minister was involved in the most sensational murder scandal in China’s Communist Party’s post-Mao history. Bo was sentenced him to life in prison for corruption and abuse of power after a dramatic trial and his assets seized.
Others high profile Communist Party members tried for corruption included Zhou Yongkang, former chief of domestic security and member of the Politburo, who was convicted of abuse of power, accepting bribes and revealing state secrets. He was sentenced to life in prison.
Similarities existed with Putin’s system in Russia, where political opponents were tried for corruption in secret trials, avoiding the kind of scandal that occurred in China. Both countries had a long tradition of targeting enemies of the system, real and perceived, which dated back to the days of Mao and Stalin.
B
o Xilai in court
Xi Jinping, General Secretary of the Communist Party of China, whose crackdown on corruption hit the China National Petroleum Corp. and other top state owned companies, had vowed to hunt down tigers as well as flies in his drive to rid the Party of corruption, was himself accused of accumulating a vast fortune via his extended family through the property and industrial empire they controlled.
The existence of a web of princelings, descendants of prominent and influential senior communist officials, at the heart of the ruling clique ensured the continuation of the system, was a fact commonly known by the man in the street in China, who was anything but naive. More than ninety percent of the population believed that political corruption lay at the source of the richest Chinese families’ wealth, such was the case of Wen Jiabao, a former Prime Minister, exposed by investigative journalists, who disclosed his extended family had accumulated a fortune estimated at nearly three billion dollars.
SAIGON
As Beijing looked to its frontiers, Chinese businessmen, especially those in the south turned their eyes to new labour sources. Vietnam bordered China’s southern provinces of Yunnan and Guanxi, a one hour flight from Hong Kong or Canton to Hanoi. It offered a cheap educated labour force and access to ASEAN, an association of nine South-East Asean nations with a combined population of over six hundred million.
As INI’s Chinese investors set up manufacturing plants in and around Vietnam’s coastal cities Kennedy set out with John Francis to discover the attractions of the country as an investment centre.
Francis, who had visited Vietnam on many occasions, had chosen Ho Chi Minh Ville, or Saigon, the country’s economic capital to start their visit. There from the roof top of the Caravelle Hotel he pointed out the main landmarks of the vast conurbation, a modern city of eight million, to Kennedy.
He was astonished at the city’s speed of change. With each passing visit it seemed to grow before his eyes, an almost unbelievable transformation from the French colonial city he had once known and which before the war had been described as the Pearl of the Orient, and it was: a garden city and a port onto the South China Sea.
Francis could not help seeing the goods produced by its factories as another onrushing tsunami soon to flood Europe. The country’s population was going on one hundred million, with its workers aspirated by the new production lines being built across the country.
The casual tourist only saw workshops producing lacquer ware, silk scarves, conical hats and cultured pearls, but behind that charming façade were countless new manufacturing plants pouring out an endless stream of electronics and consumer goods, situated in new industrial zones, owned by Chinese, Japanese, Taiwanese and American firms.
From their vantage point at the roof top bar of the Caravelle, in the heart of down-town Saigon,
they could see the city extending along the banks of Mekong to the east and Cholon to the south. Francis felt his throat tighten as the force that emanated from the vast heaving city rose up before him.
His first visit to the Caravelle went back more than three decades and though it had not been so grand it had been one of the city’s landmarks. During the latter days of French Indochina and during the Vietnamese war it had been a favourite haunt of foreign journalists.
The iconic hotel was no longer recognisable, dwarfed by a new rose coloured tower. It was a mere appendage on the flank of a shiny thirty storey glass and marble edifice that resembled so many hotels across the world, and more especially those of Asia.
The first time Francis touched down in Saigon, newly re-baptised Ho Chin Minh Ville by the Communist government in Hanoi, it was under the control of the conquering People’s Army of Vietnam, until recently, at the time, known as the North Vietnamese Army. It was not long after the humiliating debacle of 1975, which saw the American backed South Vietnam, or Republic of Vietnam, government overrun by the Communist forces.
The first images that flashed by as the Air France 747 touched down remained fixed in his mind forever: a vast and astonishing parking lot overflowing with countless numbers of abandoned American helicopters, fighter jets, reconnaissance and transport aircraft of every possible description, all packed tightly together, as far as the eye could see.
C
aravelle – Ho Chi Min (old Caravelle to the right of tower)
He had arrived on one of the first postwar flights from Paris and had checked into the then run down Caravelle, renamed Independence Hotel. It was a remarkable moment, he was the sole client in the desolate establishment. Late into his first night in Ho Chi Min Ville, no longer the capital of Vietnam, he was awoken by the cries of the conquering soldiers of the Vietnam People’s Army, the smashing of glass and overturning of table, as they quit the street level terrace, refusing to pay for their food and drinks, insulting the staff and treating them as capitalist lackeys.
Since that remarkable visit, Francis had witnessed the changes that had taken place over the intervening forty odd years, as the city was transformed into a pulsating capitalist metropolis, where millionaires were made overnight, where the homeless huddled in shop doorways after eking out their miserable existence scrummaging through the garbage piles heaped up outside the city’s bustling markets.
The Vietnamese Communist Party had portrayed the South’s liberation as a victory: reality was different, their victory was Pyrrhic, and the newly unified nation faced long years of hardship. A decade and a half later the proverbial dominoes started to fall, but not those of capitalism! First the DDR, then Moscow, Beijing, Hanoi, Havana and the rest of the Communist camp fell as capitalism and globalisation triumphed.
Hanoi, after more than two decades of trying to impose Marxist economic policies, slowly realized the path traced by Deng Xiaoping was the only possible route to prosperity, that is to say via a market economy, the only means of fulfilling the needs and aspirations of Vietnam’s burgeoning population.
They visited the Museum of Remembrance where Pat Kennedy was marked by the military aircraft parked in the museum’s forecourt: triste souvenirs of war. But the sparkling new Pepsi-Cola vending machine standing a few steps from a Chinook gunship told another story. On the one hand the United States had abandoned a war that had cost too many American lives, and on the other the Communism and its adherent nations had been bled dry in the long confrontation against what they described as Western imperialism.
Francis could not help thinking the arrival of one nearly hundred million Vietnamese to the consumer society would surely be at the expense of the West. Was there a solution? It was a philosophical question, a subject for future historians to study. In sort it was not his problem. His was to guide Pat Kennedy, and more precisely Michael Fitzwilliams, through the dangerous shoals of capitalism in order to ensure the continued success of the INI Banking Corporation.
RUSSIA’S FAR EAST
It was not only China’s southern neighbours who were worried by Beijing’s expansionist policies in the South China Sea. To the north, from its vast Far Eastern Federal District, the Kremlin cast a wary eye on each new territorial claim made by the Middle Kingdom, fearing it would one day turn its attention to north.
“Russia’s remote Far East is slowly and inexorably being colonised by Chinese immigrants,” Francis informed INI’s managers at one of the bank’s regular internal seminars, held to review changing economic perspectives and the effect of geopolitics on their business objectives. “One day, sooner than later, population, economic pressures and political ambitions will surely result in an overflow into those huge almost empty regions.”
The district, from Pavlovich in the Sakha Republic, to the Sea of Okhotsk and the Pacific in the east and the East Siberian Sea to the north, represented one third of all Russia’s territory, with a population, barely six million, a mere five percent of Russia’s total population.
“The Russian Far East was once known as Outer Manchuria. It was first reached by Russians explorers in the mid 17th century, whilst we, that is to say Western Europeans, colonised the world by sea,” Francis told his audience. “The czars expanded their empire eastwards, leading to a long series of conflicts between Russia and the wary Middle Kingdom. In the eighteenth century Russian explorers continued on to what is now Alaska, where they came face to face with the British in Canada.”
“I believe there’s a lot of Chinese in Vladivostok today,” said Liam Clancy, the junior of the group.
“A good point Liam. In 1860 Alexander II founded Vladivostok and as it expanded fifty thousand Chinese flocked into a small district of the city known as the Millionka. It was a labyrinth of alleys, about the size of a couple of city blocks, filled with opium dens, brothels and gambling halls, all under the control of Chinese triads.”
Francis explained how Stalin, in 1937, viewed the Asian population of Vladivostok as a menace, and the Chinese, along with many other non-Russian immigrants, were deported. For the next half a century only Soviet citizens of mainly ethnic Russian origin, that is Russian speaking Europeans, lived in Vladivostok. Then, in 1992, following the dissolution of the Soviet Union the Chinese returned and the city quickly became the home to Russia’s largest Chinese population, second only to that of Moscow.
V
ladivostok – Paris by Trans-Siberian
“Today we’re looking at a dramatic turning point in Moscow’s historic ambitions. Young ethnic Russian are heading west, their numbers in the Far East have fallen by twenty percent, and the vacuum is being filled by East Asians.
“Vladimir Putin’s ambitious resettlement programme has failed miserably. Moscow had planned to attract eighteen million Russians to the Primorye Region, of which Vladivostok was the capital, but since the programme was launched only a few thousand have migrated eastwards, in fact many more have moved in the opposite direction, to the lights of Moscow and Saint Petersburg. We only have to look at official Russian statistics to see the population of Primorye is shrinking by fifteen thousand a year.
V
ladivostok
“In contrast, over one hundred million people live in the three Northeast provinces of China, while the population of the Russian Far Eastern Federal District, over six million square kilometres, has fallen to a bare fraction of that.
“It’s the story of modern Russia, declining population and declining perspectives, which probably goes a long way to explain Putin’s interest in annexing the Ukraine with its forty million souls,” concluded Francis sadly. “A paradoxical situation given Vladimir Putin’s recent overture to China. Russians look west and Putin points to the east.
“It’s as inexplicable as Putin himself, a democratically elected autocratic. In contrast to most Western leaders he’s loved by most of his compatriots, he’s a proud patriot, who, despite its cost, puts his vision of Russia before all other considerations.”
FUND RAISING
Kennedy was revelling in it, surrounded by oligarchs and their bejewelled wives and mistresses. He was seated at Sergei Tarasov’s twenty thousand dollar table at the Conservative Party spring fund raising dinner, a special event situated somewhere between the black tie ball and summer party, held to raise campaign funds to fight the coming general election.
The guests at the Old Billingsgate Market, including the men from INI, were all together, worth many billions.
One of the evenings attractions was the auctioning of a bronze bust. At first Tom Barton was puzzled; the bust was a likeness of who? It was rumoured to have been sculpted by an eminent Harley Street plastic surgeon. Barton was not impressed by the effort and jokingly whispering to Kennedy, “I hope he does a better job on his patients.”
Then the penny finally dropped, Barton realised the hilarious effort was a likeness of the star of the evening himself: David Cameron, who finally appeared, loudly applauded, followed by other distinguished guests.
With the burst of exceptionally warm weather and positive opinion polls, the Conservative leader was looking relaxed: tieless, in a navy blue suit, with Samantha at his side wearing a dress designed by a modish Serbian fashion designer. Taking the cue from their leader, the male guests offed their ties. The ladies, discretely alerted by the Prime Minister’s communications staff, were mostly wearing stylish, but unostentatious dresses, which would not have gone down well on tabloid readers who would soon be going to the polls. That was of course with the exception of one or two Russian wives, or mistresses, present, who wouldn’t have felt dressed without a layer of роскошь: a bling dress, totteringly sky high heels, and adorned with a mine of diamonds, looking as though they had stepped out of a paparazzi Marbella nightclub shoot.
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