How Russian experts say Putin is hiding a fortune

By Curt Devine, Casey Tolan and Majlie de Puy Kamp, CNN

(CNN) – The sprawling billion-dollar palace that sits on a hill overlooking the Black Sea is seen by some Kremlin critics as the ultimate emblem of Russian President Vladimir Putin’s corrupt legacy.

Dubbed “Putin’s Palace,” the 190,000-square-foot mega-mansion was reportedly built for his personal use with funds from billionaire oligarchs, whom he allowed to thrive in Russia’s notoriously corrupt economy as long as they shared the wealth – with him.

The property has its own amphitheater, an underground hockey rink and a private seaport, according to a documentary produced by jailed Russian opposition leader Alexey Navalny’s anti-corruption group. There is a no-fly zone in the sky above and a no-sailing zone in the surrounding waters.

The magnificent fortress stands in stark contrast to the tiny 800 square foot apartment claimed by Putin in his official 2020 financial disclosure.

Yet despite the opulence of the hilltop retreat, “I would be very surprised if Putin set foot there again,” Nate Sibley, a Russian corruption expert who advises members of Congress, told CNN.

Sibley said the palace symbolized what he sees as a bygone era of Putin pursuing, thanks to the wealth of the oligarchs, a luxurious lifestyle he could never afford on his government salary. While Putin would have amassed a hidden fortune through such means earlier in his career, Sibley said, he has since become less dependent on his wealthy benefactors over the years and has instead surrounded himself with government and government loyalists. army who share his radical nationalist views. .

The change, some Russian experts told CNN, could make it harder for Putin to personally feel the sting of the economic sanctions the United States and its European allies imposed to punish him for invading Ukraine.

Putin positioned himself, as Sibley puts it, “above the fray”.

It has not always been so. Nearly two decades before Putin sparked international ire for his latest unprovoked invasion of Ukraine, the Kremlin snatched Russia’s richest man from his private jet and charged him with crimes against the State.

Mikhail Khodorkovsky, an oligarch worth an estimated $15 billion at the time, sat caged in the middle of the courtroom during his highly publicized trial. Khodorkovsky, who had criticized government corruption under Putin’s leadership, was found guilty of tax evasion and fraud, although he argued the charges were politically motivated. Putin forgave him in 2013 and he has lived in exile ever since.

Putin’s bold move against the billionaire oil tycoon was seen as a message to fellow oligarchs: you could be next.

The tactic demanded the unwavering loyalty of the oligarch class.

The ensuing influx of cash, gifts and goodwill is part of why Putin, who claims a salary of just $140,000 a year, is believed to be one of the wealthiest people in the world. planet. He is said to own or have access to not only the Black Sea Palace, but also a $100 million yacht, according to published reports. CNN was unable to verify Putin’s connection to the palace or the yacht. The Kremlin has dismissed reports of Putin’s alleged hidden wealth.

Whether the properties and other possessions are not in his name doesn’t matter, said Tom Burgis, author of a book on international money laundering called “Kleptopia”. Burgis compared Putin to the Godfather and said it’s understood that when he asks something from an oligarch, it’s not really a request.

“At the end of the day, they owe the boss everything they have. And with a snap of a finger, as he has shown in the past, Putin can take it all,” Burgis said. “As influential as they may seem, they ultimately depend on him.”

Several of Putin’s closest associates, including childhood friends, a woman who is believed to have been his former lover and a professional cellist who is godfather to one of his daughters, have secretly amassed huge fortunes outside of Russia. during his tenure in office, according to leaked financial documents.

A convoluted web of front companies, offshore banks and hidden transactions masks their wealth, with accounts tucked inside each other like Russian nesting dolls. But a series of leaks in recent years from companies that facilitate the offshore financial system, including the Panama Papers and the Pandora Papers, have lifted some of those layers of secrecy.

Assets tied to Putin’s inner circle include an apartment in a luxury Monaco building overlooking the principality’s glitzy harbour. The fourth-floor apartment was purchased in 2003 for $4.1 million by a shell company called Brockville Development Ltd., a company registered in the British Virgin Islands, according to documents published by The Washington Post.

The real owner of the company: Svetlana Krivonogikh, a former St. Petersburg cleaner who allegedly had a romantic relationship with Putin two decades ago, according to documents obtained by the International Consortium of Investigative Journalists and reported by the Post and The Guardian. The company was registered just weeks after Krivonogikh, who was 28 at the time, gave birth to a daughter.

Proekt, an independent Russian media outlet that was banned in the country last year, reported that Putin began a relationship with Krivonogikh in the 1990s before he became president, and that his daughter has a patronymic middle name meaning “girl of Vladimir”.

Krivonogikh declined to comment on Putin to reporters, but his daughter – who had tens of thousands of Instagram followers before recently deleting her account – admitted to interviewers that she shares a resemblance to the president.

In addition to the Monaco apartment, Krivonogikh owns a majority stake in a ski resort where Putin was seen on the slopes, several other luxury apartments in St. Petersburg and a yacht, the Post and Guardian reported.

The leaked documents do not specify the source of the fortunes amassed by Putin’s inner circle. But in several cases, companies and financial institutions linked to them have won lucrative government contracts.

Russia holds the largest amount of wealth hidden in offshore tax havens, both in absolute volume – conservative estimates put it at around $800 billion in 2017 – and as a percentage of national GDP, report says of 2020 from the Atlantic Council.

On average, 10% of the world’s GDP is held abroad. However, in Russia, offshore wealth accounted for up to 60% of GDP in 2015, according to a 2018 Journal of Public Economics research paper, the most recent estimate available.

Experts say about a quarter of this black money is indirectly controlled by Putin and his close-knit circle of oligarchs and poses a “serious national security threat” to the United States. The Mueller report illustrated how Russian offshore accounts were used to interfere in the 2016 election.

Earlier this month, the Justice Department announced the formation of a task force dedicated to enforcing sanctions and other economic restrictions aimed at isolating Russia from global markets. The KleptoCapture task force will not only target Russian officials and oligarchs, but “those who aid or conceal their unlawful conduct.”

Gary Kalman, director of the US office of Transparency International, an anti-corruption advocacy group, said enforcing the sanctions would not be easy.

“It’s extremely difficult for law enforcement to try to ‘follow the money’ because at some point you’re literally going to hit a brick wall,” Kalman said. “There is literally no paper trail.”

The United States and the United Kingdom are ideal places to store large sums of money, they have some of the deepest financial markets in the world and both accept anonymous front companies, according to the Atlantic Council.

A group of international researchers has found that shell companies in the United States can be set up in less than an hour for as little as $200, without having to legally disclose who owns or controls them. For decades, Western corporations – banks and law firms – have profited from helping Russian oligarchs hide their money, setting up complex corporate structures that make it nearly impossible to link assets or accounts. banking to individuals.

In the eyes of some longtime Putin watchers, the enigmatic Russian leader has shifted his focus from the pursuit of wealth to the consolidation of power.

“It’s hard to understand precisely what’s going on inside the Kremlin and inside Vladimir Putin’s mind. But he’s increasingly in a close relationship with a very small group of people, and they tend to to be more on the military and intelligence side rather than the business people,” said Jill Dougherty, former Moscow bureau chief for CNN, “because obviously if Putin cared about business, he wouldn’t be pursuing this war. in Ukraine”.

“At the moment, it’s not up to the oligarchs to decide,” said Stanislav Markus, associate professor of international business at the University of South Carolina. “Weapons, not money, speak loudest in the Kremlin today.”

Regardless of whether priorities have shifted inside the Kremlin, Maria Pevchikh, head of investigations at Navalny’s Anti-Corruption Foundation, says the palace near the Black Sea and Russia’s invasion of Ukraine show that Putin sees himself as much more than a government official.

“He considers himself a tsar, like a king in a way,” Pevchikh told CNN. “He has huge plans. He has the vision for him as a historical figure, so powerful, so powerful, so important, and they’re putting a lot of money into this narrative.”

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