A Show Trial in Moscow
As
the sensational trial of former Minister of Economic Development Alexei
Ulyukaev continued this week in Moscow’s Zamoskvoretsky District Court,
it seemed more and more like a replay of the infamous show trials of
the Stalin period—the charges bogus, the outcome predetermined. Ulyukaev
is the first Kremlin minister to be charged with a crime while in
office since Lavrenty Beria was arrested in 1953. He is accused of
taking a $2 million bribe from Igor Sechin, the CEO of the Rosneft oil
company, in exchange for facilitating Rosneft’s purchase of controlling
shares in the state oil company Bashneft. Ulyukaev was detained by the
Federal Security Service (FSB) on November 14 last year after he walked
out of Rosneft’s Moscow headquarters with the cash, and has been under
house arrest since.
Ulyukaev appears to be a pawn in a larger political game. In the words of
veteran Russian political analyst Anton Orekh: “He was nothing more
than a worm on a hook; he was not the real target.” Orekh says that
Sechin, widely viewed as the most powerful of Putin’s subordinates and
the de-facto leader of the hardline “siloviki” faction in the Kremlin,
was using Ulyukaev to attack the so-called “liberals” in the government,
represented by Prime Minister Dmitry Medvedev and his group of economic
reformers. But the case has another purpose as well. In true Stalinist
fashion, President Putin, who would have given his approval for
Ulyukaev’s arrest and trial, is sending a message to all members of his
entourage: Watch out, you could be next. While Ulyukaev’s case points to
a conflict over power and resources within Putin’s elite, it is also a
manifestation of a broader crackdown by Putin—a crackdown that includes
the recent shocking arrest of famed theater and film director Kirill
Serebrennikov on fraud charges and the arrest last summer of Kirov
governor Nikita Belykh, whose trial is now taking place in Moscow as
well. With presidential elections looming in the spring of 2018, and the
Russian economy still fragile, Putin may be feeling vulnerable and be
concerned both about popular discontent and the loyalty of his elite.
Now, more than ever, he needs to show that he is in charge.
Ulyukaev,
who faces up to fifteen years behind bars if convicted, looked visibly
wan and older than his sixty-one years when he appeared in court on the
first day of his trial, August 16; he told journalists that he lost more
than thirty pounds since his arrest. But he was defiant, claiming that
he was innocent and had been “set up” by Sechin and Oleg Feoktistov,
the FSB general in charge of Rosneft security at the time: “Sechin
called me [to Rosneft headquarters] on the pretext of discussing
important matters and proposed we meet. That’s when the bag [of cash]
was given to me.” Ulyukaev says he did not know the bag contained money,
but Russian prosecutors have a different story. In their version, when
Ulyukaev and Sechin were both at a BRICS summit in Goa, India in
mid-October 2016, Ulyukaev complained that, while everyone got payoffs
for doing deals on the Kremlin’s behalf, he was working around the clock
on the Bashneft transaction and getting nothing in return. Sechin,
taking Ulyukaev’s statement as a request for a bribe, reported it to the
FSB, which then laid a trap for him.
The
problem with the prosecution’s narrative is that the Bashneft purchase
was completed in early October, before the summit in Goa happened.
Furthermore, it strains credulity that Ulyukaev, with his long years of
experience in the government, would have allowed himself to be duped
into taking a bribe so blatantly—especially since, by all accounts, the
deal was not contingent on his approval in the first place. How could
Ulyukaev exhort a bribe from Sechin for something Sechin, who manages to
win out in all Kremlin internecine struggles, would get anyway? In the words of
one government official: “If Alexei Ulyukaev had been accused of
running over an old lady while driving a Gelandewagen at high speed
through Moscow late at night, even that would look more probable.”
In
addition to lack of motive, the prosecution’s case thus far seems
flimsy on evidence, although in the Russian system of justice evidence
often does not matter much. On
Tuesday, the third day of the trial, the prosecutor read from a
transcript of a taped conversation that took place between Sechin, who
was wearing a wire, and Ulyukaev just before the latter was arrested as
he and his driver were leaving Rosneft headquarters in a BMW.
There was no discussion of money or a bribe, and it was not at all clear
from the conversation that Ulyukaev knew that there was $2 million
stashed inside a briefcase Sechin gave him that also contained a bottle
of expensive wine. Sechin, who reportedly has a habit of giving gifts to
business associates, presented Ulyukaev with a basket containing
sausages as well. (Sechin is an avid hunter and often has the Rosneft
chef make sausage from the wild game he catches.) According to
Ulyukaev’s driver, who was questioned in court today, Sechin was with
Ulyukaev when he put the parcels in the trunk, thus making sure that his
plan came off.
Ulyukaev’s
fall from grace was preceded by a highly successful career as an
economist and central banker. (He also has published three volumes of
poetry.) As he pursued a doctorate in economics, Ulyukaev became
associated in the late 1980s with Yegor Gaidar and other prominent
economic reformers during the years of perestroika, and eventually
served as deputy head of the Gaidar Institute for Economic Policy.
From
2000 to 2004, he was first deputy minister of finance under Alexei
Kudrin, and then moved to the Central Bank of Russia, where he served as
first deputy chairman from 2004 to 2013, overseeing assets management
and making his name as a frequent speaker on financial and economic
affairs. Ulyukaev was the favored candidate to become governor of the
Central Bank when Sergei Ignatiev retired in 2013, but in the end Putin
gave the job to Ulyukaev’s colleague Elvira Nabiullina, and Ulyukaev
became minister of economic development in the cabinet of Prime Minister
Dmitry Medvedev.
Ulyukaev’s
influence in the financial world grew after he became chairman of the
supervisory board of VTB Bank in mid-2015, and the next year was
appointed to the board of Gazprom. But his reputation started to be
tainted with scandal. The state-controlled VTB Bank, which was placed on
the Western sanctions list in 2014, had become notorious for its
illicit financial practices and its lack of transparency, problems that
Ulyukaev apparently made no effort to address. The anti-corruption
blogger and now presidential candidate Alexei Navalny once said:
“VTB is a group of money-laundering thieves endlessly devouring money
allocated as ‘financial assistance.’” (Coincidentally, it was VTB Bank
that President Trump’s lawyer Michael Cohen was supposedly lining up to
finance the planned Trump Tower in Moscow.)
In
2015, Ulyukaev was featured ignominiously in the Panama Papers, which
disclosed his secret offshore family company, operating in the British
Virgin Islands from 2004 to 2009. It is illegal for Russian government
officials to own companies abroad, so Ulyukaev got around the problem by
listing family members as directors: Ulyukaev’s twenty-one-year-old son
Dmitry was initially listed as director of the company, followed by
Ulyukaev’s second wife, Yulia. Navalny later revealed another offshore
company, listed in Cyprus in the name of Ulyukaev’s father, who is in
his eighties. All this was technically legal, but certainly looked bad.
As for Ulyukaev’s reported income, according to documents unearthed by
Navalny it was around a million dollars in 2015. At that time Ulyukaev owned twelve
parcels of land, a residential house, an apartment, and a dacha, while
his wife owned five parcels of land, two houses, and two apartments.
This was a substantial holding for a Russian civil servant and his
spouse.
It
should come as no surprise that Ulyukaev took advantage of his
privileged Kremlin position to enrich himself and his family. As the
Russian journalist Evgenia Albats said to me this week: “Of course
Ulyukaev is corrupt, who isn’t in the government? That is the rule of
the game in Russia, otherwise you are lacking weight on the bureaucratic
market.” Indeed, Ulyukaev’s accuser, Sechin, is a notorious crook. In
September 2016, Navalny’s Anti-Corruption Fund documented the
rewards Igor Sechin has earned as the chairman of Rosneft, including a
$150 million yacht and a mansion in the exclusive Rublevka suburb of
Moscow that, together with its land, is valued at close to $60 million.
According
to Navalny, Sechin is a “witless, mediocre manager” who got his
powerful position as Rosneft CEO because he was for several years
Putin’s secretary and “carried his briefcases.” Rosneft’s acquisition of
Bashneft, which led to Ulyukaev’s arrest, may in fact be an example of
Sechin’s poor management skills. Supposedly the private company Lukoil,
Russia’s second largest oil producer, had been engaging in joint
ventures with Bashneft for several years and wanted to acquire the
controlling shares in Bashneft.
Two senior ministers in Medvedev’s
cabinet, Igor Shuvalov and Arkady Dvorkovich, were reportedly lobbying
on behalf of Lukoil and had opposed the Rosneft purchase, as did
Ulyukaev before he was persuaded otherwise late in the summer of 2016.
They argued, with justification, that Rosneft is not a private company
because more than two thirds of its stock is owned by Rosneftgas, which
is state-owned, so the purchase would just be assets shifting from one
state corporation to another. In their view, the transaction undermined
Russia’s privatization efforts.
Sechin, who is not a fan of privatization, won out, but the deal has
not been beneficial for Rosneft, which was already in debt and had to sell 19.5 percent of its assets to cover the purchase of Bashneft stock for $5.3 billion—higher than the market price.
Although
at this point the case against Ulyukaev boils down to his word against
Sechin’s, it is not clear that either Sechin or FSB General Feoktistov,
who facilitated the covert operation against Ulyukaev, will appear at
the trial as witnesses. Feoktistov, who has gained notoriety as the
investigator in several high-profile corruption cases, including that of
Nikita Belykh, was seconded from the FSB to Rosneft by Sechin in August
2016, presumably to work on the Ulyukaev case. He reportedly fell out
of favor for going too far in investigating members of the elite after
he returned to the FSB, and was sent into retirement.
As for Sechin, who
just yesterday repeated to journalists his claim that
Ulyukaev took a bribe from him, he has good reason to avoid facing the
former minister in court. The transcript of his conversation with
Ulyukaev on the fateful evening of the arrest reveals treachery on his
part that rivals that of Shakespeare’s worst villains. Using the
familiar “you” (ty) with Ulyukaev and addressing him by his
diminutive, “Losha,” Sechin fusses over him and feigns concern that
Ulyukaev is not wearing a jacket and will get cold. (He knows, of
course, that Ulyukaev will be spending the night in a dank prison cell.)
He talks cryptically about “completing a task,” presumably to imply
that he is referring to a bribe, but without arousing Ulyukaev’s
suspicions.
The
basket of sausage was an added touch, and its irony has not been lost
on Ulyukaev. He blurted out to journalists in court yesterday: “Beware
of Danaans [Greeks] bringing gifts of sausages.” This might be amusing
if it were not for the chilling parallel between Sechin’s actions and
those of Stalin and his henchmen. Alexei Navalny, himself a victim of
false corruption charges, has said that the prosecution of Ulyukaev is
part of Putin’s plan to create a “nightmare” for the Kremlin elite: “The
elite hates Putin and is scared of him. He is afraid that the elite
will betray him, so he is doing what all authoritarian leaders—from
Stalin to the chief of an African tribe—do: periodically repress some
unsuspecting person, so that the others will grumble less and actively
fight each other.”
Perhaps
Ulyukaev will avoid prison and receive only probation or a suspended
sentence. Whatever happens, he can at least be thankful that he is still
alive. Eleven years ago this month, Ulyukaev’s colleague, Central Bank
First Deputy Chairman Andrei Kozlov, an advocate of reforms that were
resented by the banking community, was brutally gunned down on a Moscow
street.
September 8, 2017, 4:10 pm