When US President Barack Obama’s administration imposed sanctions on individual Russians last month in response to Moscow’s armed intervention in Ukraine, one of the targets was a longtime part-owner of a commodities trading company called the Gunvor Group.
His name, Gennady Timchenko, meant little to most Americans, but buried in the US Treasury Department announcement were a dozen words that Obama and his team knew would not escape the attention of Russian President Vladimir Putin.
“Putin has investments in Gunvor and may have access to Gunvor funds,” the statement said.
Illustration: Mountain People
For years, the suspicion that Putin has a secret fortune has intrigued academics, industry analysts, opposition figures, journalists and intelligence agencies, but defied their efforts to uncover it. Numbers are thrown around suggesting that Putin may control US$40 billion or even US$70 billion, in theory making him the richest head of state in world history.
For all the rumors and speculation, though, there has been little if any hard evidence, and Gunvor, for its part, has adamantly denied any financial ties to Putin.
However, Obama’s response to the Ukraine crisis, while derided by critics as slow and weak, has reinvigorated a 15-year global hunt for Putin’s hidden wealth. Now, the Obama administration is sending a not-very-subtle message that it thinks it knows where the Russian leader has his money and that he could ultimately be targeted directly or indirectly.
“It’s something that could be done that would send a very clear signal of taking the gloves off and not just dance around it,” said Juan Zarate, a White House counterterrorism advisor to former US president George W. Bush who helped pioneer the government’s modern financial campaign techniques to choke off terrorist money.
So far, the US government has not imposed sanctions on Putin himself and officials said they would not in the short term, reasoning that personally targeting a head of state would amount to a “nuclear” escalation, as several put it.
However, officials said they hoped to get Putin’s attention by targeting figures close to him like Timchenko, and other business magnates like Yuri Kovalchuk, Vladimir Yakunin and Arkady and Boris Rotenberg.
Among those likely to be on the list, officials said, are Igor Sechin, president of the Rosneft state oil company, and Aleksei Miller, head of the Gazprom state energy giant.
“It’s like standing in a circle and all of a sudden everyone in the circle is getting a bomb thrown on them and you get the message that it’s getting close,” said US Senator Robert Menendez, chairman of the US Senate Foreign Relations Committee, describing at a recent hearing the way the sanctions are getting closer to Putin.
PUTIN’S DENIALS
Putin’s reported income for last year was just US$102,000, according to a Kremlin statement this month. Over the years, he has crudely dismissed suggestions of personal wealth.
“I have seen some papers about this,” he said at a news conference in 2008. “Just gossip that’s not worth discussing. It’s simply rubbish. They picked everything out of someone’s nose and smeared it on their little papers.”
How much Putin cares about money has long been a subject of debate both in Russia and in the West. On government payrolls since his days in the KGB, the Soviet intelligence agency, Putin to many seemed driven more by power and nationalism than by material gain. With access to government perks like palaces, planes and luxury cars, he seemingly has little need for personal wealth.
“If he really does have all that money salted away somewhere, why?” asked Bruce Misamore, who was the chief financial officer of Yukos Oil before the Russian government imprisoned its top shareholder, Mikhail Khodorkovsky, seized its assets and gave many of them to Sechin’s Rosneft. “What good does it do him? Is it just ego? Presumably, it’s not to pass it down to heirs. I doubt we’ll see Mr Putin becoming one of the leading philanthropists in the world.”
However, some have drawn attention to what appear to be expensive watches on his wrist and the construction of a seaside palace that the Kremlin denied was being built for Putin. Some argue that Putin may want money, or the appearance of it, because it is the measure of stature and power in a society whose transition to capitalism has produced instant billionaires out of the wreckage of communism.
“I came to the conclusion after time that some of these reports may be seeded by people around Putin himself,” said Fiona Hill, who was the chief Russia expert at the National Intelligence Council and last year co-wrote a book about Putin. “Russians have to have the biggest and the best. It’s part of the mystique, part of the image.”
The US Treasury Department has not provided evidence to back up its statement about Putin, but standard policy requires it to have enough verification to withstand a court challenge.
Gunvor, a Swiss-based firm that is the world’s fourth-largest oil trader and generated US$91 billion in revenue last year, said it had subsequently provided documents to the Treasury Department that it said disproved any connection to Putin.
Some Obama administration officials have argued for releasing details of what the US knows about Putin’s wealth to expose him to the Russian public, a suggestion so far resisted by the White House. Some lawmakers in Congress are discussing legislation to require the administration to publish an estimate of Putin’s overall worth.
US diplomatic cables obtained by the anti-secrecy organization WikiLeaks show sustained attention to the subject.
The cables tied Putin not only to Gunvor, but also to Surgutneftegaz, a large oil company and even to Gazprom, the state-owned energy giant, but they used words like “rumored.”
In one cable, for instance, diplomats cited a General Electric executive working in the region who privately said that Yakunin, the president of the state-owned Russian Railways, “has made sizable cash payments to Putin” and estimated that the Russian leader was worth “well over US$10 billion.”
The CIA in 2007 produced a secret assessment of Putin’s wealth that has never been released, according to officials who have read it. The assessment, the officials said, largely tracked with assertions later made publicly by a Russian political analyst who said Putin effectively controlled holdings in Gunvor, Gazprom and Surgutneftegaz that added up to about US$40 billion at the time.
TRAILED BY SUSPICION
From the start of his political career, Putin has been dogged by suspicion. While he was deputy mayor of St Petersburg in the 1990s, his office signed deals giving favored companies licenses to export US$92 million in oil, timber, metal and other products in exchange for an equal amount of imported food. However, the food never materialized.
Putin was not accused of personally benefiting, but a St Petersburg City Council committee led by Marina Salye recommended Putin’s dismissal for “incompetence” and “unprecedented negligence and irresponsibility.”
She also pushed for prosecutors to investigate.
Putin blamed the companies involved and was spared by then-St Petersburg mayor Anatoly Sobchak, his political patron.
Still, it was not clear whether Putin in that era coveted money for himself or was more interested in deciding how it would be distributed, as state assets were gobbled up by newly minted capitalists. Boris Berezovsky, the tycoon who helped install Putin in the Kremlin only to fall out with him and become his most bitter opponent, told a story of seeking and receiving Putin’s help with a business venture in St Petersburg and then offering him a bribe in thanks, only to be turned down.
For the US, seeking intelligence on Russia became a lower priority after the attacks of Sept. 11, 2001.
However, Washington got a rare look into the world of money and the Kremlin after the invasion of Iraq in 2003. Weapons inspector Charles Duelfer uncovered a web of lucrative Iraqi oil vouchers given to close Putin associates, including his chief of staff and the presidential office itself, in hope of eroding support for international sanctions.
In a later book, Duelfer wrote that then-US secretary of state Colin Powell objected to mentioning Putin for diplomatic reasons.
By listing a Russian state company under Putin’s control, Powell said, “you are implicating Putin.” Duelfer said he reluctantly took Putin’s name out of the report. Powell said last week that he did not recall the episode.
In 2006, Bush launched an initiative targeting corrupt foreign leaders. Over the next year, his administration focused attention on learning more about the finances of leaders in the former Soviet Union, like Azerbaijani President Ilham Heydar oglu Aliyev and Belarusian President Alexander Lukashenko. The 2007 CIA assessment grew out of that. However, different officials came away with different impressions of its reliability.
Some said they considered it a reasonable appraisal of Putin’s worth based on solid reporting.
Others said they considered it to be built largely on speculation and unsubstantiated talk.
Either way, the assessment roughly mirrored estimates made publicly at the end of that year by Stanislav Belkovsky, a Russian political analyst with ties to the Kremlin whose public attack on oligarchs several years earlier had presaged the arrest and prosecution of Khodorkovsky of Yukos.
Belkovsky told European newspapers in December 2007 that Putin had amassed a fortune of “at least” US$40 billion through sizable shares of some of Russia’s largest energy companies.
Putin secretly controlled “at least 75 percent” of Gunvor, 4.5 percent of Gazprom and 37 percent of Surgutneftegaz, Belkovsky said, citing only unnamed Kremlin insiders.
“The reality is that Putin has others and entities to move money that he controls or that he might control ultimately,” Zarate said. “The challenge with him is you don’t have an easy way of drawing the line to the assets he actually owns and controls currently. There’s a dimension of layering and relationships with people with whom he’s close and entities that serve as conduits that make it tricky to determine what is Putin’s and what is not.”
EFFORTS TO OPEN CURTAIN
In the years since, others have taken a look at Putin’s finances.
The Economist magazine linked Putin to Timchenko in 2008. Timchenko sued, but later dropped the case and The Economist issued a statement.
“We accept Gunvor’s assurances that neither Vladimir Putin nor any other senior Russian political figures have any ownership in Gunvor,” the magazine said.
In 2010, Sergei Kolesnikov, a businessman, published an open letter saying he had helped Putin secretly build a billion-dollar palace on the Black Sea.
The Kremlin dismissed his claims as “absurd.”
In 2012, Boris Nemtsov, an opposition leader, released a report detailing the presidential perks at Putin’s disposal, including 20 residences, 15 helicopters, four yachts and 43 aircraft.
However, some hunting for Putin’s private wealth have found obstacles.
Last month, Cambridge University Press declined to publish a book by its longtime author Karen Dawisha, a Miami University professor, exploring how Putin built “a kleptocratic and authoritarian regime in Russia.”
The publisher wrote her saying it had “no reason to doubt the veracity” of her book, but deemed the risk of a lawsuit too high, according to letters published by The Economist.
In a return letter, Dawisha called the decision “pre-emptive book burning.”
All of which makes the Treasury Department’s assertions last month so striking.
In addition to targeting Timchenko, one of the founders of Gunvor, the department froze any US assets of Kovalchuk and his Bank Rossiya.
It described Rossiya as “the personal bank for senior officials,” and described Kovalchuk as one of Putin’s “cashiers.”
Timchenko denied the assertions and sold his 43 percent share in Gunvor to his partner, Torbjorn Tornqvist, the day before the sanctions were issued to avoid repercussions to the firm. The sale contract has no conditions or provisions for buying the shares back and Tornqvist now holds 87 percent of the company, while senior employees own the rest, the company said.
Seth Thomas Pietras, Gunvor’s corporate affairs director, said Putin “does not and never has had any ownership, direct, indirect or otherwise, in Gunvor,” nor is he “a beneficiary of Gunvor,” and “he has no access to Gunvor’s funds.”
After the sanctions statement, Gunvor executives flew to Washington to meet with US Department of State officials and congressional aides.
“We’re providing evidence, but have not seen any sort of evidence from them yet and don’t know if we ever will,” Pietras said.
He said the company’s banking partners had been satisfied by its explanations.
However, the US Treasury Department was not.
“We remain confident that the information on the relationship between Putin and Gunvor is accurate,” said one Treasury official, who asked not to be identified in a public dispute with the company.
Garry Kasparov, the Russian chess master turned opposition leader, said Putin’s wealth must be so buried that it would be difficult to prove within the standards typically required by US lawyers.
“I’m sure it’s reachable, but you might have to break some of the rules to reach it,” he said.
The sanctions issued so far, he said, have not made enough of an impression.
“They have to convince Putin that it will be serious,” he said.
Additional reporting by Steven Lee Myers and David Herszenhorn
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