Putin’s People. Catherine Belton

the brother of one of Putin’s university classmates who shared Putin’s love for martial arts.[23] Another recipient of diesel oil quotas was a firm called Interkommerts, run by Gennady Miroshnik, a convicted criminal who’d participated in a scheme that siphoned 20 million Deutschmarks from funds earmarked for the relocation of the Soviet Union’s armed forces from East Germany.[24] Later, Putin’s wife Lyudmilla told a friend that Interkommerts was linked to East Germans her husband met in Dresden.[25]

      The barter deals ‘were handed out to his friends,’ said Alexander Belyayev, the then head of the St Petersburg city council who oversaw Salye’s investigation.[26] ‘They had to be given to people Putin trusted. There was no legal tender process then, so it was clear they would be given to people he knew personally, to people he could control. For the oil-product sales, this was mostly connected to Kirishi. They were near monopolists. This was Timchenko, Katkov, Malov.’[27]

      The men Putin was apparently handing the deals to appeared to represent far more than a network of friends. One of them, Gennady Timchenko, was a spry man with a charming smile who was fluent in German and English, with a smattering of French. He and his partners, Andrei Katkov and Yevgeny Malov, had set up the Kirishineftekhimexport oil trader when Gorbachev first loosened trade in 1987, granting seventy organisations, including the Kirishi oil refinery near Leningrad, the right to trade outside the Soviet monopoly.[28] All Katkov and Malov had done at their previous posts in the Soviet foreign trade ministry was stamp and file papers for export deals, and they leapt at the chance to enter into their own business. Timchenko appeared to be a different matter. His official biography said he’d worked as a senior engineer at the foreign trade ministry. But according to three people familiar with the matter, he’d taken a very different route. He’d studied German together with Putin at the KGB’s Red Banner Academy before Putin was sent to Dresden and Timchenko to Vienna and Zürich,[29] where, two former senior officers for the Russian foreign-intelligence service said, he had worked as an undercover agent in Soviet trade organisations.[30] It’s possible, according to a third former officer speaking to Russian newspaper Vedomosti, that he was sent there to handle bank accounts funding the KGB’s networks of illegals.[31] ‘I don’t rule out that Timchenko knew Putin then,’ one of the former officers archly told me.[32] Timchenko has repeatedly denied any connection to the KGB, saying any such connection is untrue. A senior Russian banker with ties to the security services also indicated he had links to Putin during his Dresden days.[33]

      While Timchenko has also previously denied that his Kirishineftekhimexport had ever been involved in the scandal-racked oil-for-food deals, adding later that all his firm’s activities were ‘transparent and legitimate’, one of Timchenko’s former partners told me his firm had participated, as did two other associates. They insisted that all the food they’d been tasked with importing had been delivered to St Petersburg.[34] But overall, the scheme ended disastrously: only a tiny fraction of the food due to be imported had ever turned up. Instead, Salye suspected, KGB networks were being preserved. Salye told a friend she felt her inquiry had uncovered ‘the tip of an iceberg’.[35] What lay beneath, she believed, was a huge structure that had its origins in the foreign slush funds of the KGB, the networks of which the scheme was designed to maintain.

      Salye, it turns out, was probably right.

      *

      ‘Salye was a fool! This all happened. But this is absolutely normal trading operations. How can you explain this to a menopausal woman like that!’[36] It was May 2013, more than twenty years since the scheme was set up, and Felipe Turover, a former senior officer for the foreign-intelligence directorate of the KGB, was telling for the first time the story of how he helped Putin set up the St Petersburg oil-for-food scheme.

      We were sitting in the sun on the terrace of a café in Boadillo del Monte, a sleepy market town in the hills near Madrid. The scheme that had been publicly presented in the early nineties as a mechanism to bring in vitally needed imports of food, Turover claimed, actually had a different purpose. It was never really intended that the food would arrive. There were much bigger problems to deal with: ‘All this bullshit about the report of Marina Salye. This was absolutely beside the point. The situation was one of total collapse. There was an absolute lack of federal finance for projects, and Moscow only drank and stole. In order for everything not to collapse, we had to do something. It was like a ship without a captain, and when you try to turn the wheel it falls off. This was what it was like. If we had not started work, then St Petersburg would have drowned in shit.’

      Built like a bodybuilder, with a shaved head and dark glasses, Turover had a demonic laugh and a treasure trove of stories about the Soviet collapse. He was from the elite of the Soviet foreign-intelligence service. His father had taught languages at the KGB Red Banner Academy, and served as a translator to Leonid Brezhnev; Giulio Andreotti, the long-serving Italian prime minister, was among his friends. In Soviet times Turover had worked closely with Vladimir Osintsev, the legendary komitetchik who headed the so-called ‘Party Technology’ division of the Central Committee’s International Department, running black operations and illegals deep into countries where the Communist Party was banned. In the chaos that followed the Soviet collapse, Turover had been charged with finding ways to pay debts owed to the ‘friendly firms’ at the heart of the clandestine financing schemes of the KGB and Party influence operations abroad – many of which also supplied crucial equipment, including for energy infrastructure, to the Soviet Union at a marked-up price.

      The problem was that when the USSR collapsed, Russia had agreed to take on all the foreign debts of the former Soviet republics in exchange for their foreign property, and had then promptly pronounced itself bankrupt. An international moratorium had been announced on all Russia’s foreign debts. Turover, who needed to bypass this in order to pay the friendly firms without anyone finding out, claimed that the barter schemes were in fact set up as a way to do so. Eventually he’d set up a channel for payments through a small Swiss bank in Lugano, documents show. ‘We could not say we paid someone and did not pay Philip Morris,’ he said. ‘This was not a small matter. For some things we needed to pay right away. If we did not pay for equipment for nuclear power plants, then we would have a catastrophe. When the country stopped existing, everyone had stopped supplies.’

      Turover had been sent to St Petersburg, he said, to help Putin set up his own scheme to pay off debts to some of the friendly firms. One of them, he claimed, was an Italian outfit called Casa Grande del Favore, which he said was one of a handful of engineering firms capable of the delicate operations required for repairs of the sewerage system that criss-crossed St Petersburg’s myriad of canals: ‘We had to pay, because without completion of the work St Petersburg would be covered to the tops of its cupolas in crap.’ He’d advised Putin to set up the oil-for-food scheme, he said, because ‘We needed to have operative instruments to be able to pay someone off fast.’[37]

      Turover was essentially admitting that from the start the scheme had been intended not to bring in imports of food, but to create a hard-currency slush fund for the city. But without any oversight, there was no way of telling whether any of the funds were actually used to pay off the debts to the friendly firms, or whether they were in fact funnelled to networks of KGB agents still operating abroad. Turover claimed that there was no other way to operate, because the Russian state bank in charge of foreign operations, Vneshekonombank, was in a state of collapse. All of its accounts had been frozen January 1 1992, when the Russian government announced it had run out of funds. ‘It was a pure necessity,’ said Turover. ‘It was not possible to pay the expenditures of the city any other way.’[38] Any hard-currency accounts officially connected to City Hall would be frozen, along with the other accounts impounded under the Soviet bankruptcy: ‘If they’d kept it on the accounts of the city, it would mean the same thing as keeping the cash in VEB. But if you had funds somewhere in foreign accounts, in Liechtenstein, then you could pay immediately.’[39]

      Russia’s central bank had used the same reasoning when it tried to explain away a scandal that emerged later in the nineties, when it emerged that it had transferred tens of billions of the country’s hard-currency reserves through a small offshore firm in Jersey named Fimaco, which had been established in November 1990, shortly after Ivashko ordered the creation of the ‘invisible Party economy’. The secret transfers through Fimaco,