by Peter Kysel
“How much have the Western intermediaries earned?” asked Jonathan
“Given a typical fee of 5%, their profit would be $50 billion.”
“What do you propose to do?”
“We are going to release our evidence of money laundering into the public domain through social media.”
“How dangerous is that proposal?”
“Very dangerous, we’ll have to release the data anonymously,” George added.
“Publication in itself will be a partial deterrent and should also stimulate active prosecutions.”
The board agreed to go ahead, subject to strict precautions against exposing the foundation. Michael then made his request.
“My pledge to Nina has been accomplished. The foundation is well funded. However, its future work may create conflicts with my business. I’m going to resign as a trustee to avoid any impropriety.” Michael recognised his conflicts of interest and aligned himself with Russia. I followed Michael.
“I shall continue to endorse the aims of the foundation, but I am not comfortable with its clandestine operations. Covert social media techniques need skills which I don’t have. As I can’t see how to effectively contribute, I’m also resigning.”
On the way out of the meeting I thought, the foundation is controlled by the Romanovs. The family is heavily involved in Russia, and their goals clash with the aims of the foundation. This is the right time to leave, before their conflicts are exposed. Putin is a wealthy man but is surrounded by oligarchs. The foundation’s policies are very dangerous. Ultimately, this is not my battle to fight.
A few days later, the news came out that Boris Berezovsky had hung himself at his house in Berkshire. Watching him over the years, I was appalled by his crassness, but also fascinated by his ruthless cunning and immorality.
Borby was the ultimate red wolf, who had created the new Russian elite. He was a rascal, full of contradictions. Within fifteen years of making billions, he had run out of money. Borby created two Russian presidents, but ended up as a fugitive. Always surrounded by pretty girls, by the time he committed suicide he was a lonely figure. Someone should make a movie about him.
President Putin made a speech, criticising the Euroatlantic countries for decadence, immorality and for abandoning Christian values, and condemned their multiculturalism. Russia and the West were set on a collision course as predicted by Jack Straw. Michael’s resignation was well timed.
During our next round of golf in Highgate, Jonathan spoke of Berezovsky.
“He made a fortune, lost it under huge stress and never enjoyed a peaceful life. How did you avoid the same fate?” I was wondering how to respond, while Jonathan played his next shot.
“Boris made a fortune, I didn’t. He was ruthless, rapacious and bold. I was content, cautious and constrained by my principles.”
“Were oligarchs the crucial cohorts for the transformation from communism?”
“No, they were useless parasites.”
“Then what is their value?”
“They are the barometers of the country’s governance. The more oligarchs there are, the more corrupt the nation.”
PART 9
Return to Russia
Chapter 33
Johnsons’ Ethics
The young Johnsons moved to St Petersburg. In 2013 they bought a newly built house, with a swimming pool on Kamenny island, just north of the centre. Their children, George and Olga, were sent to the Cambridge International School at Lakhtinskiy Prospekt. Svetlana joined her father Viktor in launching their online retail business. She was concerned about the future of her children in Russia.
“I want our children to grow up in a safe and civilised society. As the largest country in the world, we should have enough confidence not to behave like the money laundering mafia.” She knew that the Russian response to foreigners was flawed, but she was also patriotic and therefore conflicted. International tension began to deteriorate with the proxy war in the Ukraine and culminated with the annexation of Crimea and western sanctions. The foundation’s quest for a civil society had been her guide, but now she was changing her views.
“I’m going to join Putin’s party and get involved in local politics,” she told Michael and Viktor over dinner. Svetlana had reverted to her Russian maiden name. Through her father’s contacts, she was cultivating local politicians and had been elected to the city’s council. She focused on women’s issues and advocated transparency by the city administration, when tendering for public contracts.
Both subjects generated media interest. Her public profile, as an attractive, smart, young mother of three children, dedicated to civic responsibilities, attracted much attention. Michael remained resolutely in the background but helped to develop Svetlana’s public image. Both were aware that more than three quarters of Russians had a negative perception of the West.
Within two years of being actively involved in politics, his wife was nominated as a candidate for the state duma (national parliament). She was elected in 2016.
#
New Reforms?
Svetlana returned from her duma sessions in Moscow disheartened.
“We are told that the economy doesn’t have the strength to grow. Can you tell me why?” Viktor and Michael nodded to each other. Svetlana was going to widen her political agenda. Michael took the initiative to explain
“The economy is a stagnant and decaying swamp. We are the largest country in size, but our economy is rated twelfth in the world. Without our huge natural resources, it would be even lower. The economy has been stagnant since privatisation two decades ago and needs radical reforms”
“What reforms?”
“Structural reforms to ownership and management. The oligarchs control almost half of the economy. They are holding us back and they are not fit to manage businesses.
“I know, they privatised companies in fraudulent auctions.”
“These auctions could be revoked by law. Companies could then be re-privatised in open bidding contests.”
“What would we gain?”
“Re-auctioning would generate huge proceeds for the state. Companies could then be restructured by new owners and made more efficient. The government and the state duma would also need to play their part.”
“Putin says that Russia shouldn’t be on the periphery of the global economy.”
“We should welcome foreign investment and create the right conditions for doing honest business. If these reforms were implemented, the Russian economy would become successful and the people would be better off.” Svetlana took time digesting the implications and then asked, “How can the auctions be reversed?” Michael smiled.
“We did it in the CAIC. We reported that the CAIC’s privatisation auction of the second-largest airline in Russia, Avio-kompanija Baikal, was illegal. The CAIC admitted its failings, for being the sole bidder. The Russian judge reversed the company’s privatisation project. The CAIC received its original payment and the government retrieved the shares in the airline.”
“I remember that story. So, there is a precedent.”
“Yes. The law stipulated the terms of reference for the auctions. They had to be open, widely advertised, accessible and transparent. Bidders could not be in anyway related. The auctioneers had to accept reasonable offers, but the actual privatisation auctions ignored the rules.
“Companies were sold off at 2% of their true value. people got wise to that and that’s why they automatically say oligarkhi vory (oligarchs are thieves).” Svetlana listened and brightened up.
“What’s good for the economy, will be good for the people and for the creation of a civil society in Russia. How much could the re-auctioning make?”
“Enough to give every person $4000 in cash.” There was a stunned silence, while Svetlana digested the figure and then asked,
“What improvements would the reforms achieve?”
Michael had his response ready.
“If reforms
improved the economy as much as they did in Central Europe, Russia today would be 50% better off and its people would earn $5000 more every year.” There was more silence, each thinking about the quarter of a century lost in military conflicts, economic stagnation, and poverty, until Viktor added,
“Since the fall of the Soviet Union, the oligarchs have stolen $125,000 from every Russian citizen. Without reforms, Putin will leave behind an authoritarian state with a stumbling economy.” Nobody spoke, most likely thinking about the rumours of how much wealth the president’s family and friends had amassed. Michael added hesitantly,
“The president sought proposals to lift the economy out of stagnation. He is a cautious man, but he should know that economic reforms need to be radical. This could be your opportunity.”
Viktor added,
“Putin comes from St Petersburg. I’ll make sure that you have the chance to present your proposals. Reforms have been successful in other countries, so they should work here too.” They all looked at Svetlana.
“We’ll prepare the case for reforms and help you with the presentation,” added Michael reassuringly.
“But will Vladimir Vladimirovich listen to me?” asked Svetlana, more encouraged. Viktor nodded.
“He will listen, but will he deliver? I don’t know. He could drain the swamp and move towards a civil society. But, if he doesn’t deliver, then there will be an opportunity for his successor to try.”
“We need to start working on our proposals,” said Svetlana. She was all fired up. It occurred to her, that these radical proposals, if carefully promoted within the ruling party, could raise her to national prominence.
#
Presentation Dinner
Svetlana was noticed at the duma, as she gradually developed her agenda. She was perceived as an attractive woman and a young idealist. The party apparatchiks patronised her but tolerated her for her charm. Two years later Viktor telephoned with a message.
“You have been invited to a dinner with the president at the Hotel Europa. He remembers meeting Michael with the angliynskiy bankir and Berezovsky in the Europa hotel years ago. I gave him a summary of your proposals. He is interested to hear more details. Michael is also invited.”
“This is a great omen. My great-uncle Gyorgy Mikhailovich was conceived in that hotel in October 1909,” laughed Michael.
The dinner with the president and his advisors was cordial, but noncommittal. Viktor reported afterwards,
“It was a good meeting. His team agreed that your proposals were practical. They found them radical, but that’s not a bad thing. If the politicians turn against the oligarchs, these proposals could be adopted. If not, the proposed reforms could shape your own election platform with the acquiescence of the president.”
Svetlana and Michael were encouraged enough to plan an ambitious strategy. Their target was to get Svetlana selected as the presidential candidate.
Coincidentally, Michael’s investment boutique received its first contract from Putin’s administration, for property purchases in London. Following the dinner at the Europa Hotel, he took it as a sign of official approval. Sergei’s predictions seemed to be validated. Despite worsening relations with the West, they were accepted as a potential bridge between the two cultures. As a white wolf, Michael sent out signals, that western policy in Libya, Syria and Iraq, and the attempted US containment of Russia, were all hostile actions.
#
Rosneft
When Roman Abramovich sold Rosneft for $13 billion to the semi-state company, Gazprom, Michael commented,
“Roman won the largest lottery in history. Borby used to claim that he structured Rosneft and privatised it through the loans-for-shares scheme, with Andrei Ivanov arranging the loan from Jersey, and Nina preparing the contracts. Borby thought of Roman as a ‘white horse.”
“Why was that?”
“As a government official Borby could not be personally involved.”
“Lucky Roman. Borby made him mega-rich. You worked for Borby at the time. Why didn’t he select you instead? You could have been an oligarch.” We both fell silent, contemplating the implications. Michael ended the conversation.
“No. I couldn’t be his ‘white horse’. The privatisation schemes were restricted to Russian nationals.”
“It’s different now that you are married to a Russian.” Michael became more enthusiastic.
“The Rosneft sale is a path towards our goal of de-oligarching the economy. It’s the official endorsement of our reforms.” I doubted that but kept quiet.
Michael had grown confident in handling his business and was irritated by my moralising about business ethics. As our close relationship began to fizzle out, our consultations ceased, I became disengaged from his business.
#
Johnsons’ Ambitions
The Johnsons’ political aspirations grew with the success of their business. Their modest aim of helping the country of their ancestors through the foundation, became a Johnson–Romanov quest for business and political power. Michael and George, attempted to sidestep their conflicts, by dividing their roles.
Michael’s property redevelopments in Moscow depended on his collaboration with local power groups. His business ethics became diluted. It seemed just a question of time before the foundation and its sponsors were exposed by Michael’s rivals.
George took charge of the foundation to promote a civil society in Russia. The foundation raised awareness of dirty Russian money in Scandinavian banks. Corruption charges were filed, and the foundation’s aims were vindicated. Its aim of raising public awareness of wealth inequality and tax evasion by Western plutocrats, had a negligible impact. The foundation’s reports of global tax manipulation by western corporates, were also largely ignored.
Michael’s parents were coming to London and wanted us to meet. I sent them a file on developments in Russia, prepared by Jack Straw and suggested that Jack should join us.
#
Romanov Torch
Over lunch at Odette’s in Primrose Hill, I reflected
“Michael is a resolute man with great charisma, who has had to overcome many obstacles to become accepted in Russia. A lesser man would have given up. You have a very resourceful son.” They nodded and Fiona added,
“Svetlana has surprised me. I thought she was essentially a gentle and dedicated mother, but now she has revealed her business and political ambitions. I believe, she’ll go a long way.”
“All the way to the top?” asked Jack
“Why not?” laughed Fiona. We paused to absorb her comments and silently raised our glasses. George then developed the subject further.
“I am thrilled that our family is reintegrating into the country. Even if Svetlana does not make it to the top in 2024, little George will by then be just twenty-two, and will be able to carry the Romanov torch into the next generation,” said George.
Jack seemed startled by George’s easy enthusiasm and complemented him, slightly sarcastically,
“It would be astonishing if your son, the heir to the Russkiy tsar, were to be related to a future Russian president.” George and Fiona smiled and turned to me.
“Thank you, angliyskiy bankir. A quarter of a century of your guidance has helped Michael into this position.” I perceived their thanks as a gentle parting shot.
I should have been as excited by their prospects as Michael’s parents were, but instead I felt let down.
Chapter 34
Open Conflicts
“My role as Michael’s guardian seems to have come to an end. Nevertheless, I am anxious about recent changes.” I was useful for a couple of decades as his protector, but when the Romanovs began to feel secure in Russia, I was discarded.
“It’s a shame that we have drifted apart,” observed George
“It was inevitable, as your intentions evolved.”
“Yes, we feel the obligation to strive for the redemption of our former social status. Michael cannot succeed in Ru
ssia as an altruistic white knight.”
“He has turned into a white wolf, to achieve your family’s ambitions. The objectives of the Romanov family conflict with your hopes for a civil society.”
“Yes that bothers me too. My father set up the family trust to help the country, not to enhance our status,” Jack, who was listening to our conversation, stepped in.
“Your strategy of riding two horses in Russia is lethal. Your family is conflicted and won’t achieve either of these goals.” Fiona admitted,
“George and I have tried to focus on the foundation and on being good grandparents. In Cape Town we are unable to follow the twists and turns in Russian politics.” George seemed troubled.
“I think it’s probably time for me to step down from the foundation. We’ll have to discuss this with Michael and Svetlana in Petersburg.”
Jack increased the pressure.
“Doing business in Russia is rough. The regime, when it finds out about the foundation, will discredit it. Michael will be exposed as a hostile alien. He’s likely to be charged with tax evasion and end up in prison.” George and Fiona were visibly shocked.
“What advice should we give him?” Jack had a ready response
“Close down your foundation. Your philanthropic contributions need to be channelled through an independent entity.”
“Why don’t we meet again after our visit to St Petersburg” concluded George and they left. Jack and I looked at each other and shook our heads. Jack summed up the whole meeting,