The Quest To Freeze "Putin's Billions"

Tyler Durden's picture

Just over a month ago, in the latest round of sanctions against Russia, and specifically Putin's inner circle of advisors and lieutenants, one person was singled out - Gennady Timchenko, part-owner of the Gunvor Group commodities trading company, the fourth largest oil trader in the world with over $90 billion in 2013 revenues.

This name was particularly notable because as part of the justification for adding Timchenko to the list of sanctioned oligarchs, the US Treasury said that "Putin has investments in Gunvor and may have access to Gunvor funds." This is curious because in 2008 The Economist also linked Putin to Timchenko. Timchenko promptly sued but later dropped the case, and The Economist issued a statement. “We accept Gunvor’s assurances that neither Vladimir Putin nor any other senior Russian political figures have any ownership in Gunvor."

Yet somehow, despite the repeated denials that Putin has a direct or indirect interest in the massive oil trading company, the Treasury department apparently knows better. As the NYT reports, "Seth Thomas Pietras, Gunvor’s corporate affairs director, said Mr. Putin “does not and never has had any ownership, direct, indirect or otherwise, in Gunvor,” nor is he “a beneficiary of Gunvor,” and “he has no access to Gunvor’s funds.” After the sanctions statement, Gunvor executives flew to Washington to meet with State Department officials and congressional aides. “We’re providing evidence but have not seen any sort of evidence from them yet and don’t know if we ever will,” Mr. Pietras said. He said the company’s banking partners had been satisfied by its explanations.

The Treasury Department, however, was not. “We remain confident that the information on the relationship between Putin and Gunvor is accurate,” said a Treasury official, who asked not to be identified in a public dispute with the company."

Still, whether or not Putin has a stake in Gunvor is of secondary importance - what matters is that tomorrow, as part of yet another round of sanctions by the US Treasury, among those likely to be on Monday’s list, are Igor Sechin, president of the Rosneft state oil company, and Aleksei Miller, head of the Gazprom state energy giant.

Which brings us to the topic of this post, namely the quest for Putin's billions.

Because if there was anything the Gunvor sanction escalation showed, is that the US is not afraid of going those who are in the Putin circle of not only trust but, certainly, money. To be sure, so far the American government has not imposed sanctions on Putin himself, and according to the NYT, officials said they would not in the short term, reasoning that personally targeting a head of state would amount to a “nuclear” escalation, as several put it. But that doesn't mean the Treasury can't go after those who are nearest to Putin, both in terms of power, and certainly money.

The problem, as the US is starting to realize, is that those alleged billions that Russia's leader may (or may not) have access to are quite difficult to track down. There is much speculation and conjecture, but the facts are still rather slim. Here is what is known:

For years, the suspicion that Mr. Putin has a secret fortune has intrigued scholars, industry analysts, opposition figures, journalists and intelligence agencies but defied their efforts to uncover it. Numbers are thrown around suggesting that Mr. Putin may control $40 billion or even $70 billion, in theory making him the richest head of state in world history.

 

For all the rumors and speculation, though, there has been little if any hard evidence, and Gunvor has adamantly denied any financial ties to Mr. Putin and repeated that denial on Friday.

The US may not be sure just where Putin's billions are buried preventing a laser-guided strategy, but that just means it will engage in a shotgun approach and slam all those financiers and oligarchs who are closest to Putin - even those whose goodwill is so critical to keep Russian gas flowing to Germany and the UK.

“It’s like standing in a circle and all of a sudden everyone in the circle is getting a bomb thrown on them, and you get the message that it’s getting close,” said Senator Robert Menendez, Democrat of New Jersey, the chairman of the Foreign Relations Committee, describing at a recent hearing the way the sanctions are getting closer to Mr. Putin.

Still, this does beg the question - is Putin really a billionaire? Officially, of course not.

Mr. Putin’s reported income for 2013 was just $102,000, according to a Kremlin statement this month. Over the years, he has crudely dismissed suggestions of personal wealth. “I have seen some papers about this,” he said at a news conference in 2008. “Just gossip that’s not worth discussing. It’s simply rubbish. They picked everything out of someone’s nose and smeared it on their little papers.”

 

How much Mr. Putin cares about money has long been a subject of debate both in Russia and in the West. On government payrolls since his days in the K.G.B., the Soviet intelligence agency, Mr. Putin to many seemed driven more by power and nationalism than by material gain. With access to government perks like palaces, planes and luxury cars, he seemingly has little need for personal wealth.

 

“If he really does have all that money salted away somewhere, why?” asked Bruce K. Misamore, who was the chief financial officer of Yukos Oil before the Russian government imprisoned its top shareholder, Mikhail B. Khodorkovsky, seized its assets and gave many of them to Mr. Sechin’s Rosneft. “What good does it do him? Is it just ego? Presumably, it’s not to pass it down to heirs. I doubt we’ll see Mr. Putin becoming one of the leading philanthropists in the world.”

Philanthropist, no. But if indeed Putin has highly confidential access to up to $70 billion, that would probably make him the wealthiest person on earth. And thus most influential.

Still, with no hard numbers and org charts highlight Putin's equity stakes and bank accounts around there world, there is mostly speculation:

The C.I.A. in 2007 produced a secret assessment of Mr. Putin’s wealth that has never been released, according to officials who have read it. The assessment, the officials said, largely tracked with assertions later made publicly by a Russian political analyst who said Mr. Putin effectively controlled holdings in Gunvor, Gazprom and Surgutneftegaz that added up to about $40 billion at the time.

 

... the assessment roughly mirrored estimates made publicly at the end of that year by Stanislav Belkovsky, a Russian political analyst with ties to the Kremlin whose public attack on oligarchs several years earlier had presaged the arrest and prosecution of Mr. Khodorkovsky of Yukos.

 

Mr. Belkovsky told European newspapers in December 2007 that Mr. Putin had amassed a fortune of “at least” $40 billion through sizable shares of some of Russia’s largest energy companies. Mr. Putin secretly controlled “at least 75 percent” of Gunvor, 4.5 percent of Gazprom and 37 percent of Surgutneftegaz, Mr. Belkovsky said, citing only unnamed Kremlin insiders.

 

“The reality is that Putin has others and entities to move money that he controls or that he might control ultimately,” said Mr. Zarate, the former Bush adviser. “The challenge with him is you don’t have an easy way of drawing the line to the assets he actually owns and controls currently. There’s a dimension of layering and relationships with people with whom he’s close and entities that serve as conduits that make it tricky to determine what is Putin’s and what is not.”

Then, there is the indirect way of estimating Putin's wealth:

In 2010, Sergei Kolesnikov, a businessman, published an open letter saying he had helped Mr. Putin secretly build a billion-dollar palace on the Black Sea. The Kremlin dismissed his claims as “absurd.” In 2012, Boris Y. Nemtsov, an opposition leader, released a report detailing the presidential perks at Mr. Putin’s disposal, including 20 residences, 15 helicopters, four yachts and 43 aircraft.

Indirect estimates, however, always leave much to be desired:

some hunting for Mr. Putin’s private wealth have found obstacles. Last month, Cambridge University Press declined to publish a book by its longtime author Karen Dawisha, a Miami University professor, exploring how Mr. Putin built “a kleptocratic and authoritarian regime in Russia.” The publisher wrote her saying it had “no reason to doubt the veracity” of her book, but deemed the risk of a lawsuit too high, according to letters published by The Economist. In a return letter, Ms. Dawisha called the decision “pre-emptive book burning.”

Which brings us back to Gunvor, which is sternly denying any relationship with Putin, even as the US Treasury openly rejected this explanation, with its explicit language.

Did Putin have some or all of his billions at the Cyprus-based company? Perhaps, but the cross holdings are so well-hidden not even the NSA likely knows who owns what. Indicating the complexity of Russian-oligarch org charts, here is just a "simple" summary of what Gunvor's stakeholder Timchenko owned, via Bloomberg:

The majority of Timchenko's net worth was derived from his 44 percent stake in Cyprus-based oil trader Gunvor Group, which he sold to partner Torbjorn Tornqvist on March 19, 2014, ahead of U.S. economic sanctions. Through Volga Group, his Luxembourg-based investment vehicle, he also holds 23 percent stake in publicly traded Novatek, Russia's second-largest natural gas producer; a 31.5 percent stake in petrochemical company Sibur; and 80 percent of rail company Transoil. 

 

He owns Sibur through the holding company Sibur Ltd. with billionaire partner Leonid Mikhelson. The pair acquired the company from Gazprombank, the lending affiliate of state-controlled energy company Gazprom, in 2010 and 2011. The investment cost is calculated using the value stated by Gazprombank in December 2010, when it sold the first 25 percent for $1.3 billion. He also has an 80 percent stake in Russian construction company Stroytransgaz, which is valued using the average price-to-sales and price-to-book value multiples of three publicly traded peers: Mostotrest, Budimex and Polimex-Mostostal. 

 

Through Volga, Timchenko holds stakes in publicly traded Rorvik Timber and Russian Sea Group, a fish farm and seafood processing company, as well as 8 percent of Bank Rossia, 12.5 percent of insurance company Sogaz, 49.1 percent of insurance company Sovag and 30 percent of coal mining company Kolmar. Gunvor holds another 30 percent of Kolmar.

 

Through A-group, the billionaire controls 70 percent of Avia Group, which develops ground infrastructure for the business aviation center at Moscow's Sheremetyevo airport, Avia Group Nord, which provides business-aviation services for flights out of Saint Petersburg's Pulkovo international airport, and a 99 stake in private jet operator Airfix Aviation. He also controls Finland's Hartwall Areena along with billionaire partners Boris and Arkady Rotenberg.

Confused yet? Here is more on the ties between the commodity magnate and the Russian president from a 2008 FT profile:

...many wonder whether Gunvor’s rapid expansion over the past five years – just as the Kremlin has moved in on private oil production – is due to more than just vision. The company has “one very good friend,” a former partner says. “He is at the very top level,” says another.

 

Some have speculated whether there are ties that bind Gunvor’s other co-founder, Gennady Timchenko, and Vladimir Putin, Russia’s president from 2000 until last week. As the company emerges from obscurity, some details of the connections between the two are finally becoming clear. The company claims that it has not benefited from any political favours. 

 

The company’s rise provides a glimpse into a secretive clique of businessmen close to Mr Putin who have made immense fortunes under his presidency but have so far stayed far away from public scrutiny. Even as Mr Putin completes a stage-managed transfer to the role of prime minister, installing his hand-picked successor, Dmitry Medvedev, as president, they are finding it increasingly hard to escape the spotlight. This year, Mr Timchenko for the first time made it on to the Forbes rich list with an estimated fortune of $2.5bn.

 

In a scanty paper trail, corporate records from St Petersburg show Mr Timchenko and a committee headed by Mr Putin participated in one business in the early 1990s. Bankers say the company, Golden Gates, was established to build an oil terminal at St Petersburg’s port but foundered in a clash with organised crime.

 

Mr Timchenko’s trading company, meanwhile, was a beneficiary of a large export quota under a scandal-tainted oil-for-food scheme set up by Mr Putin when he worked as head of the city administration’s foreign economic relations committee in 1991, local parliament records show. The trader also built close ties with Surgutneftegaz, a Kremlin-loyal oil company, inviting speculation he may have built a significant stake there.

Keep in mind, this is just one billionaire in Putin's entourage: consider the spaghetti chart of cross-holdings, ownerships and stakes if one charts Putin with all his closest oligarchs. As for those who ended up "less than close" with Putin, just Google Khodorkovsky.

And somehow the Treasury is supposed to keep tabs on all such relationships and track stakeholder interests which in all likelihood were defined only by a verbal arrangement? Of course, it isn't.

Which is why in tomorrow's round of sanctions, the US Treasury will most likely push further and, as rumored, may go as far as the two most powerful men in Russia (behind Putin of course) - the heads of Rosneft and Gazprom.

Will Jack Lew's department finally sink a battleship in its shotgun approach to isolating the financial pawns, knights, bishops and rooks in Putin's chessgame? And if so, what happens if suddenly Putin realizes that the US financial trap may be getting warmer and warmer, and even the nuclear option is being contemplated. Will that be enough to force the former KGB spy to backtrack after over 2 months of opportunities to do just that? Somehow we doubt it, and in fact it will likely accelerate the Russian offensive both in the Ukraine and elsewhere around the world.

If nothing else, though, in a few more months of escalating sanctions of those most near and dear to Putin, if not Putin himself, the world may finally have its first official glimpse of what and where are "Putin's billions."

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Stoploss's picture

Sorry, he lost it in a boating accident.

kaiserhoff's picture

OK, if this shit's going mano a mano, we really need to pitch Bath House,

   and go find a honey badger.

Beam Me Up Scotty's picture

So it the East's oligarchs vs the West's oligarchs??

Wolferl's picture

Putin sure has quite some wealth, he owns probably more than a billion dollar in assets, but this is not important for him. He is brought up in another world like these Wall Street. And that is what the ruling class in the West doesn´t get.

kliguy38's picture

you mean like "you can take our women...you can take our rubles...you can take our gold.....BUT YOU CANT TAKE OUR VODKA""

mvsjcl's picture

"...$70 billion, that would probably make him the wealthiest person on earth."

 

What's a measley $70B to a Rothschild? Or a Lazard or even a Rockefeller?

Wolferl's picture

I mean like "you can do all your banking tricks you want against us, in the end you have to fight one of the largest army in the world with nukes, you pussies".

Manthong's picture

I’d feel a lot better about them going after how Vlad got rich only after if they went about how “Dirty Floor” Harry Reid got rich.

ZerOhead's picture

Whoever owns the Fed is probably worth trillions...

Tabarnaque's picture

Well said. That's exactly what I thought!

J S Bach's picture

Numbers are thrown around suggesting that Putin may control $40 billion or even $70 billion, in theory making him not only the richest head of state in world history but possibly the richest man alive in the world today, period.

 

How can anyone print such nonsensical rubbish.  The Rothschilds alone are worth hidden trillions... not to mention the other International "private stock holder" families of the Federal Reserve.

Keyser's picture

Just more bullshit from the all-knowing, all-seeing administration that can do no wrong. A wild goose chase hunting for $$$ that Putin may or may not have. And just how does the US propose to seize these funds if found and on what premise? These guys think nothing through before they pull the trigger, which is the scary part. 

 

gmrpeabody's picture

Boats...,

You can't live with..., you can't live without them.

Unknown User's picture

Everyone knows that evil Putin owns the Fed.  The Treasury must immediately seize it.

Latina Lover's picture

Now I get it, the USSA must steal Putins 70 billion to fund Obamacare, LOL.

Unknown User's picture

Don't you recall Bush administration saying that al qaeda had budget bigger then US military?

Lore's picture

I was likewise thinking of the Bush Family as I read this article. And the Clintons.  And...  And... And...

The reality is that Putin has others and entities to move money that he controls or that he might control ultimately,” said Mr. Zarate, the former Bush adviser. “The challenge with him is you don’t have an easy way of drawing the line to the assets he actually owns and controls currently. There’s a dimension of layering and relationships with people with whom he’s close and entities that serve as conduits that make it tricky to determine what is Putin’s and what is not.” ...Keep in mind, this is just one billionaire in Putin's entourage: consider the spaghetti chart of cross-holdings, ownerships and stakes if one charts Putin with all his closest oligarchs.

laomei's picture

It's all part of the propaganda push, to try and demonize putin and make it easier for the general sheepish public to support any bullshit the us decides to dream up.  It's the reason why you see that hilarious "super bowl ring" story surface now and again and anything and everything that might be deemed negative press for putin is hyped like it's "top story" shit.  It's why you see things like "evil russians block us spying despite it being totally legal" and on the reverse you see "omg, evil russians spying on the US!!! WE MUST DO SOMETHING".  This bullshit has been going on for decades and the reason is simple.  A developed Russia is a SCARY Russia.  With all those untapped resources, Russia has ALWAYS been a target.

 

Claiming Putin has ultra top secret investments that make him ultra rich... please, that's just bullshit.  I might as well claim that Obama has secret shares in all the banks and insurance companies because of ultra top secret backroom deals that allows the insurance companies and banks to become untouchable.  I can claim all I want, the point is that it's bullshit.  

Stuck on Zero's picture

Indeed.  I am shocked and dismayed that the Russian oligarchs could be richer than ours.  Moar QE!

 

Newsboy's picture

Vlad left a $1.46 on the bathroom counter, last time he came over for sushi and beer.

I can confiscate that.

Wahooo's picture

Yep. All this talk and guessing about whether Putin is worth $8 or $8 billion is silly. obama thinks he'll divide the hornest's nest and conquer it. More likely the hornets will come together and mass an attack. Perhaps Putin has his men on our billionaires already. Nailgunning.

Omen IV's picture

my understanding from confidential sources is  - he is worth  - $17 Trillion dollars - if the american people go along with whatever Obama and Kerry  say and  deem an objective worthy of their lives  - then  they will use his Trillions to eliminate all  US debt and taxes in the USA indefinitely

yours is not to reason why, yours is just to do or die !

USA USA USA !!!

Spitzer's picture

BS

Hes a true elite. He cares about Russia first and foremost. Unlike the Federalist scum in western democracies who answer to higher powers

Occident Mortal's picture

I just don't see any motivation for Putin to seek personal wealth.

The guys controls the KGB and enough nuclear weapons to end life on earth, he can have virtually anyone on the planet killed with total impunity.

He lives in a giant palace and is protected by one of the worlds largest standing armies.

He choose the laws of the land and has the ear of any world leader.

What the fuck would he want $70bn for? It wouldn't change a thing for him. He lives like an emperor. If he swapped being president of Russia for being the worlds richest man he would actually be materially worse off!

You simply cannot buy the kind of power Putin has. $70bn wouldn't even get you close.

macholatte's picture

 

"The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power. What pure power means you will understand presently. We are different from all the oligarchies of the past, in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites. The German Nazis and the Russian Communists came very close to us in their methods, but they never had the courage to recognize their own motives. They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just round the corner there lay a paradise where human beings would be free and equal. We are not like that. We know that no one ever seizes power with the intention of relinquishing it. Power is not a means; it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power."

-- Orwell  1984

adeptish's picture

That is what Putin is up against.

Anyone who thinks that Russia is not in the cross-hairs of the most powerful military and industrial conglomerate in the world is a wanker.

nmewn's picture

And he put himself in those crosshairs, why? Cuz he fancies himself a Russian Robin Hood? In his own words "Novorossiya" implies something "new"...that is to say, not currently owned or ever owned.

My my, from Putins own mouth ;-)

Harbanger's picture

It's not a fair comparison.  Putin is 100% old school KGB RUSSIAN.  Barry represents everything wrong with America.

nmewn's picture

O'Barry & Putin are exactly the same, ideologically.

They both come from the same party training regimen, O'Barry just came from the "New Party" school and at its core is a black socialist nationalist, still marxist but with a color biased eye, not someone (of any color) people want smaking decisions of national import for them. Putin just had original idiot teachers...lol.

O'Barry's ties to the New Party and communism are well documented (as are Putins to the KGB & communism) so no need to go into them here, two communists having a bitch slap fight is really an occaison for popcorn not concern, I'm just trying to get the Euro-Commies into the act ;-)

 

g'kar's picture

"O'Barry & Putin are exactly the same, ideologically."

+1000. I would have only added "and pathologically" after ideologically.

TheMeatTrapper's picture

Exactly! OM has it right. People desire money because it brings them power. When one has power, he no longer "needs" "money".

The Western bankers do not understand a man like Putin. They view the world through their own eyes - the eyes of vice, immorality, greed and fear. They cannot comprehend a man who has a vison of restoring his country to what he sees as it's natural role in the world and will not be bought off by gold trinkets or zero's on a ledger somewhere.

nmewn's picture

A guys gotta have a fallback plan, at some point he knows he will be the "old lion" in a pride of lions looking to take his perch.

He's not stupid and he's not a martyr, he's a survivor, no matter what it takes, he will do it.

(Audible gasp) self interest ;-)

//////////////

Wut?

Four (so far) think he's immortal!?!?...ROTFL!

Babes, mere babes.

///////////

Five now think he is immortal. Now this is getting interesting.

sushi's picture

You simply cannot buy the kind of power Putin has. $70bn wouldn't even get you close.

And he doesn't even bother picking up on Obummer's phone calls.


Doña K's picture

That's mega Cojones he has

lakecity55's picture

*Ring*Ring*

"Vlad, it's Bath House. Again."

"Who?"

mt paul's picture

ya

but does he have any seals

MedTechEntrepreneur's picture

But you are supposed to HATE him!  Saying he is worth 70 billion will generate lots of hate.  Uncle Sam can then fuck around with Ukraine as much as he wants!

sleigher's picture

I hate everyone equally, you can't take that out of me, no segregration, separation, just me in my world of enemies!

MedTechEntrepreneur's picture

But you are supposed to HATE him!  Saying he is worth 70 billion will generate lots of hate.  Uncle Sam can then fuck around with Ukraine as much as he wants!

andrewp111's picture

Why would Putin want "personal wealth"? For power and control, that's what. Yes, he rules Russia. But having access to vast billions allows him to control both sides of the law and to control enterprises outside his own country. Of course the KBG does this too, and I'm not sure you can separate Putin's personal wealth from the KGB's wealth. You might as well consider it all to be Russia's wealth, regardless of who controls the purse-strings on any particular shares or accounts.

assistedliving's picture

wrong wrong and wrong again.  After the Gulf War, remember Bush/Baker running over to Kuwait?

it wasnt for the weather.  $15M each.  The Kuwaiti's were shocked how cheap.  $70B?  thats f$%k u

money and thats just what he told the Saudis.

johngaltfla's picture

Yup. The commie bankers v. COMMIE bankers. Get popcorn and beef before hyperinflation make it unafforadable.

Tengri Temujin's picture

What about the quest for the TRILLIONS of dollars in missing Pentagon funds and TARP money ??????

I dont care about Putin's billions.

DavidPierre's picture

Best they start looking closer to home for the Multi-Trillions of dollars that the Bush, (et al), crime families have got socked away.

9/11 Conspiracy Solved: Names, Connections, & Details Exposed!

https://www.youtube.com/watch?feature=player_embedded&v=n_fp5kaVYhk

RevRex's picture

What hasn't Obamlied about, Frenchy?

 

Cowards are incapable of answering honestly....

Beam Me Up Scotty's picture

Maybe they are trying to raise Putins taxes??

McMolotov's picture

Right now, your country needs you to be a patriotic American. This is no time to be asking rational questions.

Being a "patriotic American" means disengaging one's brain and hating the government's current bogeyman.