Sanctions Revive Search for Secret Putin Fortune
WASHINGTON
— When the Obama 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 N. Timchenko, meant little to most Americans, but buried
in the Treasury Department announcement were a dozen words that
President Obama and his team knew would not escape the attention of Russia’s president, Vladimir V. Putin. “Putin,” the statement said, “has investments in Gunvor and may have access to Gunvor funds.”
For
years, the suspicion that Mr. Putin has a secret fortune has intrigued
scholars, industry analysts, opposition figures, journalists and
intelligence agencies but defied their efforts to uncover it. Numbers
are thrown around suggesting that Mr. Putin may control $40 billion or
even $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 has adamantly denied any financial ties to Mr.
Putin and repeated that denial on Friday.
But
Mr. Obama’s response to the Ukraine crisis, while derided by critics as
slow and weak, has reinvigorated a 15-year global hunt for Mr. Putin’s
hidden wealth.
Now,
as the Obama administration prepares to announce another round of
sanctions as early as Monday targeting Russians it considers part of Mr.
Putin’s financial circle, it 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 C.
Zarate, a White House counterterrorism adviser to President George W.
Bush who helped pioneer the government’s modern financial campaign
techniques to choke off terrorist money.
So
far, the American government has not imposed sanctions on Mr. 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.
But officials said they hoped to get Mr. Putin’s attention by targeting figures close to him like Mr. Timchenko, and other business magnates like Yuri V. Kovalchuk, Vladimir I. Yakunin and Arkady and Boris Rotenberg.
Among
those likely to be on Monday’s 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 Senator Robert Menendez, Democrat of New Jersey,
the chairman of the Foreign Relations Committee, describing at a recent
hearing the way the sanctions are getting closer to Mr. Putin.
Putin’s Denials
Mr.
Putin’s reported income for 2013 was just $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 Mr. 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
K.G.B., the Soviet intelligence agency, Mr. 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 K. Misamore, who was the chief financial officer of Yukos Oil
before the Russian government imprisoned its top shareholder, Mikhail B.
Khodorkovsky, seized its assets and gave many of them to Mr. 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.”
And
yet, 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 Mr. Putin. Some argue that Mr. 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 Mr. Putin. “Russians have to have the biggest and
the best. It’s part of the mystique, part of the image.”
The
Treasury Department has not provided evidence to back up its statement
about Mr. 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 $91 billion
in revenue last year, said it had subsequently provided documents to the
Treasury Department that it said disproved any connection to Mr. Putin.
Some
Obama administration officials have argued for releasing details of
what the United States knows about Mr. 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 Mr. Putin’s overall worth.
American
diplomatic cables obtained by the antisecrecy organization WikiLeaks
show sustained attention to the subject. The cables tied Mr. Putin not
only to Gunvor but also to Surgutneftegaz, a large oil company, and even
to Gazprom, 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 Mr. 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 $10 billion.”
The
C.I.A. in 2007 produced a secret assessment of Mr. 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 Mr. Putin
effectively controlled holdings in Gunvor, Gazprom and Surgutneftegaz
that added up to about $40 billion at the time.
Trailed by Suspicion
From
the start of his political career, Mr. 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 $92
million in oil, timber, metal and other products in exchange for an
equal amount of imported food. But the food never materialized.
Mr.
Putin was not accused of personally benefiting, but a City Council
committee led by Marina Salye recommended Mr. Putin’s dismissal for
“incompetence” and “unprecedented negligence and irresponsibility.” She
also pushed for prosecutors to investigate. Mr. Putin blamed the
companies involved and was spared by the mayor, Anatoly A. Sobchak, his
political patron.
Still,
it was not clear whether Mr. 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 A.
Berezovsky, the tycoon who helped install Mr. Putin in the Kremlin only
to fall out with him and become his most bitter opponent, told a story
of seeking and receiving Mr. 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 United States, seeking intelligence on Russia became a lower
priority after the attacks of Sept. 11, 2001. But Washington got a rare
look into the world of money and the Kremlin after the invasion of Iraq
in 2003. Charles A. Duelfer, the weapons inspector, 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, Mr. Duelfer wrote that Colin L. Powell, then the
secretary of state, objected to mentioning Mr. Putin for diplomatic
reasons. By listing a Russian state company under Mr. Putin’s control,
Mr. Powell said, “you are implicating Putin.” Mr. Duelfer said he
reluctantly took Mr. Putin’s name out of the report. Mr. Powell said
last week that he did not recall the episode.
In
2006, Mr. Bush kicked off 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 Ilham Aliyev of Azerbaijan and Aleksandr G. Lukashenko of Belarus.
The
2007 C.I.A. assessment grew out of that. But different officials came
away with different impressions of its reliability. Some said they
considered it a reasonable appraisal of Mr. 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 Mr. Khodorkovsky of
Yukos.
Mr.
Belkovsky told European newspapers in December 2007 that Mr. Putin had
amassed a fortune of “at least” $40 billion through sizable shares of
some of Russia’s largest energy companies. Mr. Putin secretly controlled
“at least 75 percent” of Gunvor, 4.5 percent of Gazprom and 37 percent
of Surgutneftegaz, Mr. 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,” said Mr. Zarate, the
former Bush adviser. “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 Mr. Putin’s finances. The
magazine The Economist linked Mr. Putin to Mr. Timchenko in 2008. Mr.
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.
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In
2010, Sergei Kolesnikov, a businessman, published an open letter saying
he had helped Mr. Putin secretly build a billion-dollar palace on the
Black Sea. The Kremlin dismissed his claims as “absurd.” In 2012, Boris
Y. Nemtsov, an opposition leader, released a report detailing the
presidential perks at Mr. Putin’s disposal, including 20 residences, 15
helicopters, four yachts and 43 aircraft.
But
some hunting for Mr. 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 Mr. 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, Ms. 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 Mr. Timchenko, one of the founders of
Gunvor, the department froze any American assets of Mr. Kovalchuk and
his Bank Rossiya. It described Rossiya as “the personal bank for senior
officials,” and described Mr. Kovalchuk as one of Mr. Putin’s
“cashiers.”
Mr.
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 Mr. 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 Mr. 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 State Department 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,” Mr.
Pietras said. He said the company’s banking partners had been satisfied
by its explanations.
The
Treasury Department, however, was not. “We remain confident that the
information on the relationship between Putin and Gunvor is accurate,”
said a 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 Mr.
Putin’s wealth must be so buried that it would be difficult to prove
within the standards typically required by American 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.
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