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20 November, 2014

Russia’s objective is to increase the split between Europe and the US

The Ukrainian Week speaks to the author of the newly published book Putin’s Kleptocracy: Who Owns Russia? about the loyalty of people around the Kremlin leader, the role of Ukraine in his staying in power, and about Russian money in Europe.

Interviewed by Anna Korbut

U.W.: In his grip on power, Vladimir Putin apparently relies on a close circle of people who have accompanied him on his path to power and wealth from the beginning. Russia’s current policy is probably threatening their assets and further prospects. Do you think that they will stay with Putin till the end and support him in whatever he does, or will they rather leave him as soon as they see that his power begins to crumble for some reason?

That’s the key question. I suppose that his agreeing to the continued detention of Vladimir Yevtushenkov (owner of Bashneft, an oil company, and a number of other profitable assets – Ed.) and the introduction of the Kremlin-sponsored new bill that would allow sanctioned people to be compensated by the seizure of Western assets, otherwise known as the “Rottenberg bill”*, are both signals from Vladimir Putin that he will take care of this close group around him first, and everyone else after that. He may be sending that signal because he feels that not all of them will be loyal under certain circumstances.

U.W.: Can the West actually reach Vladimir Putin’s money and thus affect his policies or weaken his grip on power?

Putin has power not because of his money but because he has access to anything he wants from the Russians. He can call up troops, build residences, and have a good life. In addition to that, he has money. But it was simply a part of his motivation for coming to power in the first place, not necessarily a tool that keeps him in power.

However, when the sanctions were first put into force, the US Treasury Department posted a list of all people who were going to be sanctioned on their website. Gennadiy Timchenko was one of them. In its description of the reasons, the US Treasury Department said that “Putin has investments in Gunvor and may have access to Gunvor funds”, Timchenko’s oil trading company. The day before Gunvor and Timchenko were sanctioned, he sold his shares to his Swedish partner. Did he sell Putin’s shares, too? We don’t know. But we know from the US Government that he has shares. So far, we don’t know what is happening to Putin’s own money. I will say, however, that in terms of the Russian money – money from the oligarchs and the cabal around Putin – given that so much of it is invested in overseas accounts, like the British Virgin Islands, Lichtenstein, Switzerland, Luxemburg, those particular places have not really been hit by the collapse of their banking sector. I therefore suppose that the money is very well hidden. Much of the money that is flowing out of those places is not going back to Russia, but is heading to Hong Kong or Singapore. That is less safe than Europe but more safe than Russia.

U.W.: This money is one of the convenient factors that help Russian influence politics in European countries. Is it just money, gas and investment of the wealthy Russians into luxury real estate, schools and goods in the West that make them welcome guests almost anywhere in Europe, or could there be any deeper networks that subtly promote Russia’s interests in European business, economy and politics?

We must assume that all states, especially the powerful ones, have intelligence services. They are all successful in increasing the influence of their countries through intelligence methods. Russia is not alone in this. This is a whole layer of activity and everybody knows that it exists. There are rules to govern this. The recent Russian abduction of Eston Kohver, an Estonian intelligence service officer, is shocking because it broke those rules.

In the Soviet era, the Soviets themselves were the major funders of the so-called “peace movement”. Their objective was then the same that it is now: to increase the split between Europe and the US. Russia has an objective interest in making sure that Europe does not follow the leadership of the US. You can see it in their editorials, read it in Putin’s speeches.

On the open side, we see people like Marine Le Pen, for example. Most of the right-wing parties in Europe have a pro-Putin stance. This is because they fundamentally agree with Russia on two things: anti-Americanism and anti-immigrant sentiments that have racism as their core.

Another concern is that the Russians are funding the anti-fracking movement in Europe. They certainly don’t want to see fracking developing in Ukraine.

So, I would be surprised if there weren’t any of their money flowing in support of these kinds of activities. There is so much going on publicly that it’s only just to think that a lot more is going on underneath the carpet.

U.W.: So, the objective has been to increase the split between the US and Europe, and probably within the EU itself. Still, European policymakers and business communities have all this time been trying to befriend Russia and make it more democratic that way, and rushing there with their investment and technology. With all the immediate benefits of the Russian market, they couldn’t but see what the country has gradually been turning into…if they did not care for the risks Russia posed to its neighbours politically, why didn’t they care about risks it would ultimately pose to them?

I remember an interesting conference in the summer of 1981, during Solidarity Days, prior to the imposition of the martial law in Poland. Representatives of the Deutsche Bank were there. I was shocked – and that explains why I no longer am today – by the extent to which their only concern was to get their debts from Poland to be repaid. They did not care about labour suppression and they would have supported martial law just to get the profit.

When you see the response of the City of London or Luxemburg to what’s going on in Russia – they will support any sanctions against individuals, but not against institutions that are flooding their money into Western banks. They want the commission for the money in their banks. And they have benefitted from this ever since the 1990s, in all the years in which we pretend that Russia was a democracy. As a result, after over 20 years of these investments, there is no rule of law in Russia, so oligarchs and people in power can loot the economy. All this money is flowing to Europe where there is rule of law that protects it. Therefore, having more transparent banking procedures in Russia and being able to see that this money does not come from laundering illegal gains is not in our interests, because that will mean reducing profits.

U.W.: Could all these factors eventually lead to an EU that is fragmented while Russia is growing stronger?

One thing that is clear to me is that, if Ukraine succeeds in having a number of clean parliamentary and presidential elections, and implements robust anti-corruption laws, that will probably act as a great support for civil society in Russia. Right now, the Russians do not see themselves in a position where they are actually willing to become Europeans. If Ukraine can do these things that will show people in Russia what possibilities they could have. Which is precisely why the Russian government is doing everything it can to prevent this. For Ukraine, that is extremely promising, and extremely burdensome.

The EU and NATO, however, will stay united. They will be the last thing that crumbles, even if Ukraine has to be sacrificed for that. Sadly, but I think that is the reality.

U.W.: Which European countries would you list as the most vulnerable to Russian influence?

One is Serbia where Vladimir Putin is going to participate in a big military parade (Serbian authorities will hold the parade celebrating the liberation of Belgrade from German occupiers four days before the originally planned date to adjust to Putin’s schedule – Ed.) on his way to the Milan summit, and will probably try to have a free trade agreement with it so that the smuggling routes that Slobodan Milosevic had established can be reawakened, and all the European goods could go to Russia directly through Serbia. Bulgaria would be right behind, followed by Hungary. 40% of real estate in Montenegro is owned by the Russians. In fact, it is any country that is 100%-dependent on Russian fuels.

Of the prime members of the EU, Luxemburg’s banking sector is important for Russia, and Russia is important for them. Lichtenstein that depends upon soft banking regulation for the livelihood of its population. Britain and Germany resist Russia a little stronger. In France, you have Mistrals. Italy, with Berlusconi out, is standing up to Russia, and that is a good move that is very much tied to the desire of the post-Berlusconi politicians to show that they are not in the pockets of the Kremlin.

I think that David Cameron and Angela Merkel are in a tough bind: they have to bring the EU along with them. So, they clearly hear the desire of the Baltic States and Poland to be very tough on Russia. But they should go together in that, otherwise the EU will be undermined as an organization.

U.W.: Who is the US’s most reliable ally against Russia’s aggression in Europe?

It is clearly Britain. Now, that the US is leading the coalition in Syria and Iraq, it is very dependent on support in it. So, it is not going to push Europe too hard on Ukraine – which is not great for Ukraine – if it can get what it wants, i.e. jets sent to fight the ISIS, in Syria and Iraq, from its European allies.


*On October 8, the Russian Duma passed the bill to amend the Federal Law on the Compensation for violation of right to a trial within reasonable timeframe or right to enforcement of verdict within reasonable timeframe (the law on compensation for sanctions, or the ‘Rotenberg law’ as the opposition named it after Russian oligarch Arkadiy Rotenberg whose villas and apartments were arrested in Italy in late September as a result of European and American sanctions) in the first reading by 233 votes to 202 against, including Russia’s Minister of Economic Development. The predominant majority of those who supported the bill are members of Yedinaya Rossiya, United Russia, the ruling party headed by Dmitri Medvedev that sponsored the bill 

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