Putin’s People. Catherine Belton

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СКАЧАТЬ the lines between what was strategic and what could be spent on personal needs and bribes had become conveniently blurred. Mostly, it generated black cash used to make sure politics went the way of a faction of security men in the Kremlin supporting Yeltsin. ‘The authorities always needed money. It would seem there is the state budget. But if you need finances to ensure a vote in parliament goes a certain way, you’re not going to get the cash from the state budget,’ Skuratov later told me.[17] MES’s activities were closely tied to Mabetex and the Kremlin reconstruction project. When Pavel Borodin, the Kremlin property department chief, initially asked the government for funding for the Kremlin reconstruction project, he was told the budget had no cash.[18] So he asked for oil contracts to be sold through MES to finance it instead. But the decrees issuing the oil quotas for MES – first for two million tonnes, and then for another 4.5 million tonnes – were all classified.[19] No accounting of how the proceeds were spent was ever published. And then, as if the oil sales through MES had never been granted, the government made an official announcement that it was going to finance the Kremlin reconstruction by raising $312 million in international loans.[20] MES looked to have got away with as much as $1.3 billion in proceeds from the oil sales, and no one could explain where the money had gone.[21]

      In the middle of it all was Sergei Pugachev, the Kremlin banker who would later flee to London and then Paris. A tall, gregarious expert in the art of backroom deals, he’d teamed up with Borodin while the bank he co-founded, Mezhprombank, was the main creditor of the Kremlin property department.[22] In those days the property department was a sprawling fiefdom, controlling billions of dollars’ worth of property retained by the state following the Soviet collapse.[23] With Pugachev’s help it doled out apartments and dachas, medical services and even holidays to members of the Yeltsin government. It was a Soviet-style patronage network that to all appearances extended to the Yeltsin Family too: Pugachev said he’d bought an apartment through Mezhprombank for Yeltsin’s daughter Tatyana.[24]

      Officials’ wages were still paltry compared to what could be earned in business in the boom of Russia’s market transition, and Pugachev insisted that what the property department did was the only way to keep state officials honest, and stop them from taking bribes. But essentially the department was the ultimate Kremlin slush fund, and it gave Borodin a position of great power, including the ability to make or break careers. ‘People were queueing to see him,’ said Pugachev. ‘If you were a minister, you didn’t get anything if Borodin didn’t give you it. If you needed an apartment, a car, any resources you had to go to Borodin to get it all. It was a very influential position.’[25]

      Pugachev would not explain the extent of his involvement with MES. But his Mezhprombank had helped bankroll the operation,[26] and he’d developed a deep friendship with the head of the Russian Orthodox Church, Patriarch Alexei II, working closely with him ever since his appointment.[27] Pugachev had nursed the Kremlin reconstruction project, and guided its every step. He was an adept of the Byzantine financing schemes of Yeltsin’s Kremlin, and reaped a fortune for himself along the way. He’d somehow managed to set up a financial arm of Mezhprombank in San Francisco in the early nineties,[28] and spent large parts of the year in the United States. His direct access to the Western financial system further ingratiated him with the senior officials of Yeltsin’s government. ‘I could explain to them how the Western financial system worked,’ he said. He rented the most expensive house in San Francisco, and later bought a fresco-covered villa in the south of France, high on the hills overlooking the Bay of Nice. He’d become close to the Yeltsin Family, in particular to Yeltsin’s daughter Tatyana, when he’d worked as part of a team helping to secure Yeltsin’s re-election in 1996, bringing in a team of American spin doctors who ran a US-style campaign that helped boost Yeltsin’s flagging ratings and focused on the threat of a Communist return.[29]

      All the while, Pugachev worked closely with Behdjet Pacolli, the owner of Mabetex. He personally oversaw the entire Kremlin reconstruction project, from the signing of the contract to the renovations themselves, he said. From the beginning, it was a lavish operation. Though he insisted that he tried to make sure the Kremlin got the best price possible, it seems that no expense was spared. Wood from twenty-three different types of tree was used to recreate the ornate patterns of the Kremlin Palace floor. More than fifty kilograms of pure gold was purchased to decorate the halls, and 662 square metres of the finest silk to cover the walls.[30] The Kremlin was to be transformed to its tsarist-era glory after decades of Communist rule in which all the treasures of pre-Revolutionary times – the mosaic floors, the precious ornamentation, the golden mirrors and chandeliers – had been ripped out and replaced with the plainest of decorations. Two thousand five hundred workers toiled day and night to create a palace fit for Russia’s new tsar.[31] Every last detail had to pass under Pugachev’s gaze. When Yeltsin asked why an urn had been placed outside his office, snapping ‘We don’t smoke here,’ Pugachev had it swiftly removed. And when Yeltsin asked why the new floors creaked and squeaked, he gently explained that there were now caverns of cables beneath them to carry the Kremlin’s top-secret communications.[32]

      When it was all completed, visiting foreign leaders were awed by the grandeur they saw. US president Bill Clinton and German chancellor Helmut Kohl could not help but gasp when they were shown the vaulted gold-leafed ceilings of the Ekaterinsky Hall, dripping with golden chandeliers. ‘And these people are asking for money from us?’ Kohl remarked.[33]

      The reconstruction had cost around $700 million,[34] at a time when Russia was receiving billions of dollars in foreign aid, supposedly to help it survive. But the financing that had been disbursed by the state for it was many times higher. The oil quotas MES had received alone were worth as much as $1.5 billion, while Yeltsin had signed off on an official decree for $300 million in foreign loans. Pugachev had also leaned on the first deputy finance minister, Andrei Vavilov, to approve an additional $492 million in guarantees for a treasury bill programme for the Kremlin property department – apparently another scheme to fund the reconstruction programme.[35] None of it was accounted for.

      Pugachev had been aware of the credit cards for the Yeltsin Family soon after Pacolli issued them. ‘I said to him, “Why did you do it?” He thought if he gave them the cards he would have them on a leash. He understood it was criminal, that this would mean the president was essentially taking bribes.’[36] He said he was also aware of bigger sums that had apparently gone to the Yeltsin Family. Later it emerged that $2.7 million had been transferred to two accounts in the Bank of New York in the Cayman Islands held in the name of Yeltsin’s daughter Tatyana’s then husband, Leonid Dyachenko.[37] A lawyer for the oil firm Dyachenko ran later said the funds were for work he’d done.

      So when, on a cold grey morning in late January 1999, Swiss prosecutors sent in helicopters and several dozen armed vans to raid Pacolli’s Mabetex offices in Lugano and left with a truckload of documents, it was, to put it mildly, a bit of a shock.[38] Pugachev and Borodin were immediately informed by Pacolli, and the news travelled like a poisoned dart to Yeltsin’s daughter Tatyana, who in her father’s absence was acting as unofficial head of state, and to the man who was later to become her husband, Valentin Yumashev, or ‘Valya’, as he was affectionately known, who until recently had been the Kremlin chief of staff.[39] For Pugachev it was a threat because of all the sums that had washed through MES. For Tatyana and Yumashev, it could potentially lead to the credit cards and other, larger, sums that appeared to have been transferred to private offshore accounts.

      Quietly, without anyone being informed, the prosecutor general Skuratov had opened a criminal investigation into the possible siphoning of funds for the Kremlin reconstruction through Mabetex.[40] For the past few months he’d been working in the shadows with the Swiss prosecutors’ office, but until the raid, no one had been aware that he’d launched an investigation. He’d received he first batch of documents on the case in the weeks immediately following the August 1998 default. To avoid interception, the Swiss prosecutor general Carla del Ponte had sent them to him via diplomatic pouch to the Swiss embassy in Moscow.[41] A few weeks later, towards the end of September, Skuratov held a secret meeting with del Ponte, skipping town from an official visit to Paris to meet her in Geneva. It was there that СКАЧАТЬ