Friday, January 04, 2008

Pauper or Oligarch - The Strange Case of Putin's Wealth

As Putin seeks to move from the role of President to Prime Minister of the Russian Federation, we've witnessed a possible inside look into the financial windfall he may have amassed during his time as President.

According to the Central Election Committee, President Putin declares the following assets:

  • 77.7 square meter apartment in St. Petersburg
  • 150 square meter land parcel in the Moscow region
  • 2 Volgas registered in his name (1960 and 1965 vintage)
  • 230 Shares of St. Petersburg Bank Stock
  • R3,700,300 ($151,409) in total savings (3 bank accounts)
  • R2,011,611 2006 annual earnings of ($82,311)
    It was widely reported at the time of a European Union summit in October that this declared income and assets would make Vladimir Putin among the poorest of the developed world's leaders. There was also some casual debate among bloggers and commentators that this didn't include assets in his wife's name, which may be substantial.

    Since that time, we have been treated to the declarations of Stanislav Belkovsky, supposed Russian analyst, and his assessment that Vladimir Putin is worth over $40 billion and among the richest men in the world.

    Belkovsky lists as Putin assets, owned secretly through various other parties and nefarious private means:

    • 37% of Surgutneftegaz (estimated worth of $18 billion)
    • 4.5% of Gazprom (estimated worth of $13 billion)
    • over 50% of Gunvor (estimated worth of $10 billion)
    Small wonder that he can afford all those expensive tailored suits.

    Today via Forum.MSK and Johnson's Russia List, we are treated to the long-winded and rambling observations of Julia Latynina, who sees the scandal of these two disparate assessments of Putin's wealth growing.
      It is amazing that Belkovskiy already said this a couple of weeks or three weeks ago, and everything was somehow kept quiet in the beginning, but now the scandal keeps spreading and spreading and spreading."

      "I can tell you from my own experience, that a colossal number of correspondents from Western publications started calling me just in the last week to ask me what I think of this."

      Belkovskiy stated "that Putin controls 37 percent of the stock in Surgutneftegaz, 4.5 percent of the Gazprom stock, and 75 percent of the stock in the Gunvor company," the writer went on to say. "I should remind you that the Gunvor company, with capitalization estimated at $15-20 billion, now sells a huge amount of Russian oil, including the oil belonging to Yuganskneftegaz.

      "I should also remind you that Khodorkovskiy was once accused of minimizing his taxes by selling oil from a company he owned through offshore firms also owned by him. This was called a crime.

      "Obviously, if you calculate the price at which the Rosneft state company must have been selling oil to the non-state Gunvor offshore company for it to amass capitalization of $15-20 billion -- and I have never heard that any of Khodorkovskiy's offshore firms had capitalization approaching this figure -- you have to wonder: If what Khodorkovskiy was doing, moving money from one of his own pockets into another of his pockets, is a crime, then what would you call what people are doing when they move money from the state's pocket, namely the Rosneft company, to a private pocket, namely the Gunvor company?

      "Gennadiy Timchenko is believed to own 50 percent of the stock in the Gunvor company. This elderly man has been in the oil business for a long time and has been a close friend of President Putin for a long time. In view of how many points Putin lost in the international arena because of the YuKOS affair, we have to conclude either that Putin is an extremely bighearted man, giving presents of this type to his friends, or that these friends are just the front men for someone else.

      "Going back to Belkovskiy's statements, I certainly cannot imagine how he could prove them, and I seriously doubt that anyone ever will be able to prove that the figure of $40 billion is correct. In general, Vladimir Vladimirovich is a cautious man, and we saw, for example, that when the transfer of the controlling interest in AO (Joint-Stock Company) Rossiya to another president became inevitable, President Putin did not go against the Constitution and he did make General Director Dmitriy Anatolyevich Medvedev the titular owner of AO Rossiya.

      "I think it would also be impossible to prove that Putin is the actual beneficiary of the Gunvor company or any other company, just as it would be impossible to prove that Putin is the actual beneficiary of AO Rossiya, whose titular owner will be President Dmitriy Anatolyevich Medvedev. It is difficult to believe that after being so excessively scrupulous in the constitutional matter, Putin would be less scrupulous in matters connected with property rights.

      "And there is something else, or actually two things, that should be borne in mind. The first is that Putin, as I already said, apparently is an extremely generous man if he gives presents like these to his friends even though they create foreign policy problems for him. The second is that the issue of property ownership was not raised just before 2008 by accident, because it plays an extremely important role in politics, after all: When President Putin was deciding what he should do after 2008, whether he should go or stay, or when the Kremlin was deciding this, the following consideration must have been taken into account.

      "If he had stayed on after 2008, there was a chance that the regime would have been illegitimate because it would have violated the Constitution, and the West does not like this, so it might have taken an interest in the Gunvor company at the very least. If he had not stayed -- i.e., if he had left -- another problem would have come up, because the people who are the official owners of various companies and who amassed considerable wealth during the Putin years, might say: 'Yes, we are the real owners, no one helped us, and we are not serving as a front for anyone else,' and there would be no way of proving the opposite.
      Latynina goes on from there for a while, spinning sort of dark theories about how the US had to know about Putin's ill-gotten gains. Sure. Like we knew about WMDs.

      No matter how you slice it, something doesn't match up with Putin's lifestyle and is declared wealth. There was some speculation a couple of years ago that with so many lesser mortals accumulating vast sums in the private sector, that Putin may seek to leave office for a high-paying role in Gazprom or heading some other lucrative gas or oil project (such as Nord Stream AG).

      Putin once said, "Надо исполнять закон всегда, а не только тогда, когда схватили за одно место" ("You must obey the law, always, not only when they grab you by your special place"). Some Russians have taken a small measure of pride in judging their President as being a tough and, in their perception, honest man. He was bringing the oligarchs to heel, after all and making them pay for their thefts from the Russian people. Could it be that Putin is the biggest thief of all?

      We are left wondering what will happen when that inevitable day comes when Putin is no longer in power and the law potentially grabs him by his special place. It would certainly prove an incentive to retain political power in Russia at the highest level possible, for the greatest length of time available.

      We are also left wondering about how these clues and details have been planted in the news media, along with other small revealed scandals such as velvet re-privatization.

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      Interesting concept and site. You'll have to keep us up to date on how things progress over time.

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