The Influence Peddler, The Spy, and the Kleptocrat: Paul Manafort in Ukraine
This is the fourth article in a series covering Paul Manafort’ work in Ukraine on behalf of pro-Kremlin oligarchs and interests. While it is not necessary to read the earlier entries, it is recommended.
Part 1 covers Paul Manafort’s early career as a Republican political consultant and lobbyist.
Part 2 explains how Manafort met the organized crime-linked Russian oligarch Oleg Deripaska and how Deripaska introduced Manafort to Ukraine.
Part 3 explians how corruption and organized crime seized control of post-Soviet independent Ukraine, and led to the Orange Revolution.
Summary of Past Articles: Paul Manafort is a Republican political consultant who made a career for himself lobbying on behalf of foreign interests and providing consulting services to foreign dictators. After working on Bob Dole’s presidential campaign with Republican Rick Davis, together they formed the political consulting firm Davis Manafort Partners. DMP was hired by the British investor and financier Nathaniel (Nat) Rothschild and his partner, the Russian oligarch and Putin ally, Oleg Deripaska, to represent their interests abroad. Manafort was sent to Ukraine to advise the Kremlin’s preferred presidential candidate Viktor Yanukovych after his fraudulent election victory had been overturned by vast protests that came to be known as the Orange Revolution.
This article is an excerpt from my book, While We Slept: Vladimir Putin, Donald Trump, and the Corruption of American Democracy, available here.
PAUL MANAFORT ARRIVES IN UKRAINE
In late-2004, while on his way home from Tbilisi, an associate at Davis Manafort Partners (DMP), Phil Griffin, received a phone call from his boss Rick Davis. Instead of returning to Washington, D.C., Griffin was to fly to Ukraine on behalf of two of the firm’s top clients, the British investor and financier Nat Rothschild and his top partner, the Russian oligarch and aluminum magnate Oleg Deripaska.
The Orange Revolution had just transpired, casting the Kremlin’s preferred candidate for the Ukrainian presidency, Viktor Yanukovych, into political exile after his initial “victory” was discovered to be the product of widespread fraud.
In earlier days, Griffin, who once worked at the congressionally funded, pro-democracy group the International Republican Institute, would have stood behind the Ukrainians who had protested and eventually overturned Yanukovych’s fraudulent electoral victory. Now, however, Griffin worked for the other team and well understood why he had been sent to Ukraine. “The mission to me was perfectly clear: intelligence gathering.”
Paul Manafort, who had ample experience advising corrupt foreign kleptocrats, took the lead on DMP’s Ukraine work. Between Thanksgiving and Christmas, 2004, he and Griffin held strategy sessions in Washington, DC. They met with political contacts knowledgeable about Ukraine and learned what they could about the prevailing attitudes within the U.S. Capitol towards the events unfolding in Kyiv.
In late December, Oleg Deripaska sent Manafort to the city of Donetsk in the far east of Ukraine to meet with Rinat Akhmetov, Ukraine’s richest oligarch. Akhmetov had been Yanukovych’s most enthusiastic supporter and had bankrolled the pro-Russian “Party of Regions” for years.
Manafort spent his first few months in Ukraine holed up in the Donbass Palace, a luxury hotel situated in the heart of the drab industrial center of Donetsk. He kept a strict low profile, hanging up on a Urkainska Pravda reporter who managed to get his hotel room phone number. The reporter later described Manafort in an article as “famous for an indiscriminate assortment of clients.”
Manafort first met Yanukovych at an antiquated movie palace in Kyiv that had been converted into a Party of Regions headquarters. Yanukovych, who had just returned from exile in the Czech Republic after the humiliation of having his presidential candidacy derailed the Orange Revolution, was assessed by most third parties to be politically dead.
“People avoided him,” Phil Griffin told The Atlantic. “He was radioactive.”
On paper, Rinat Akhmetov hired Manafort to represent his company System Capital Management (SCM), for which he paid Davis Manafort Partners the princely sum of €10 million. However, Manafort’s contract with SCM was merely a front for work he would do for the recently ousted Viktor Yanukovych and the Party of Regions.
From the beginning, Paul Manafort’s activities in Ukraine were shrouded by opaque front relationships and complex, often fraudulent, paper trails involving anonymous corporate vehicles. This was made clear by Manafort himself in a “CONFIDENTIAL EYES ONLY” memo he prepared for Yanukovych years later proposing to offer him additional services.
“I would have a separate contract which would be with a private company,” Manafort wrote Yanukovych. “As we did in the early days with SCM being my technical client while I, in fact, focused on your program, we will find another client (preferably not SCM since they have had this burden already), who would pay for my services under a multi-year contract.”
In the summer of 2005 Manafort and Phil Griffin traveled to Moscow and met with Akhmetov, Yanukovych, and various senior Party of Regions officials at the five-star Baltschug Kempinski Hotel, located just across the river from the Kremlin in Moscow.
A leaked confidential FBI report from 1996 claims that the hotel was owned by the infamous Eurasian organized crime lord Semion Mogilevich, whose political influence in Ukraine was covered in Part 3 of this series.
According to flight records, Manafort traveled to Moscow at least 18 times between 2004–2011 during the course of his advisory position for Yanukovych, with the bulk of the trips taking place in the 2005–2006 timeframe. Manafort at this time had serious doubts about Yanukovych’s viability as a candidate.
On June 9th, 2005, Manafort wrote Akhmetov a 35-page memo examining the reasons for Yanukovych’s loss. Yanukovych had been the designated successor of Ukraine’s second post-independence president, the fabulously corrupt Leonid Kuchma. Manafort argued that lingering disgust among Ukrainians at Kuchma’s tenure had dragged Yanukovych down.
“The intensity of these feelings is very strong. Consequently, the ability of Yanukovych to help lead a campaign against the current administration will not only fail, but it will never gain any traction. His leadership into the campaign would probably signal the death knell of the Party and Coalition that he leads.” The memo continued, “From the analysis set out in the previous section of this Report, the answer to the problem is clear — Viktor Yanukovych must be replaced.”
However, replacing Yanukovych wasn’t an option and Manafort, despite his reservations, immediately got to work. Vasyl Khara, Yanukovych’s previous campaign manager, was informed he was now campaign manager in name only and that Manafort was now fully in charge.
That autumn Manafort rented an office at 4 Sophia Street in Kyiv and established operational headquarters opposite of the 16 and 18 trolley buses. Local residents noted that the office blinds were generally drawn.
The first test of Manafort’s campaign skills and Yanukovych’s electoral durability would come with the 2006 parliamentary elections. The Party of Regions paid Manafort $20 million to manage the campaign.
THE INFLUENCE PEDDLER AND THE SPY: PAUL MANAFORT MEETS KONSTANTIN KILIMNIK
An early figure of central importance to Manafort’s efforts in Ukraine was Konstantin Kilimnik, who started as a translator for Manafort in early 2005 but eventually became the director of his operations in Kyiv. Manafort came to rely on Kilimnik’s linguistic skills and his insights into Ukrainian and Russian culture to such an extent that he would refer to him to others in the office as “my Russian brain.”
Born a dual Russian-Ukrainian citizen in 1970 in Dnipropetrovsk, the diminutive Kilimnik stands at 5-foot-3inches and goes by the nickname Kostya, or occasionally just KK.
Kilimnik attended the Soviet military’s main university for languages in the 1990s and later worked as a translator for the Russian military. The academy was considered a training ground for the GRU, Russian military intelligence. Kilimnik is fluent in English and Swedish.
Various arms of the United States Government have issued statements about Kilimnik.
The FBI has assessed that Kilimnik “has ties to Russian intelligence.”
A report released by the Senate Intelligence Committee in 2020 goes further, stating that “Kilimnik is a Russian intelligence officer.”
The Treasury Department has described Kilimnik as a “known Russian intelligence services agent.”
Fiona Hill, former senior director for Europe and Russia at the National Security Council, and who in the 1990s worked for the Kennedy School of Government and interacted with Kilimnik, stated in sworn congressional testimony that, “all of my staff thought he was a Russian spy.”
Kilimnik has denied these accusations.
In 1995, Kilimnik’s fluency in English landed him a job at the International Republican Institute (IRI) office in Moscow. When asked during his interview how he had become fluent in English, Kilimnik replied “Russian military intelligence.”
An IRI official speaking with Politico later quipped, “I never called GRU headquarters for a reference.”
The IRI had been chaired by Republican Senator John McCain since January of 1993 and had offices in over 70 countries.
David A. Merkel, who headed IRI’s Moscow office at the time Kilimnik was hired has said that Kilimnik “took the job for the money. Not because he believed in the mission of the IRI or in advancing the principle of free-market democracy.”
IRI officials in Washington grew so reliant on Kilimnik that they eventually named him acting director of the Moscow office. During the lead up to the 2004 Ukrainian election, the IRI was actively working to help the pro-Western Ukrainian opposition politician Viktor Yushchenko and his Orange Coalition.
According to the Russian investigative news outfit Proekt, Kilimnik was already working in support of Viktor Yanukovych in 2004 without the knowledge of his colleagues at the IRI.
According to Taras V. Chernovyl, a former member of the Party of Regions, within the party Kilimnik was “known as the representative of Russia.”
A source within IRI told Proekt that Kilimnik’s work in Ukraine was presumably organized through Oleg Deripaska. Between late 2004 and early 2005, Kilimnik sent IRI employees to the offices of Deripaska’s company Basic Element on Rochdelskaya Street in Moscow at least twenty times. They would be handed envelopes stuffed full of cash or air tickets for Kilimnik and his designated political consultants.
Sometime in early 2005, former-IRI employee turned Manafort Davis Partners associate Phil Griffin, who had worked with Kilimnik while at the Institute, hired him to join Manafort’s effort in Ukraine.
By the spring of 2005, officials at the IRI became aware that Kilimnik was working for Paul Manafort in an effort to support Yanukovych. There were also suspicions that he had leaked information about an IRI conference held in Bratislava to Russia’s domestic intelligence service, the FSB.
Stephen Nix, a senior IRI official in Washington, called and summarily fired Kilimnik. Kilimnik, who had been known for avoiding email and photographs, wiped his IRI computer before he left.
Later in April, FSB head Nikolai Patrushev denounced the IRI in a speech before the Duma, accusing the organization of planning the “continuation of velvet revolutions in the post-Soviet territory.” Patrushev’s speech contained information from the IRI meeting in Bratislava in which Kilimnik had been one of only two non-Americans in attendance.
RESURRECTION: PAUL MANAFORT REVIVES THE POLITICAL FORTUNES OF VIKTOR YANUKOVYCH
Now with Kilimnik as his full time deputy, Manafort brought the most sophisticated American campaign methodology to Ukraine, hiring 40 political consultants for the job, many based out of Washington. He conducted large-scale polling of the Ukrainian electorate to establish what the most pressing social and economic issues were.
Manafort and his team shaped the Party of Regions advertising campaign. Overall strategy for the pro-Russian Party of Regions party was placed in the hands of a man who had once considered himself at the vanguard of the Reagan Revolution.
Yanukovych had absolute confidence in Manafort, largely because he believed that the Orange Revolution itself had been the product of secret American machinations.
“Yanukovych was sure there was some magic technology that can mobilize people,” Mustapha Nayyem, a prominent Afghan-Ukrainian and one of the first investigative journalists to look into Manafort’s work in Ukraine told New York Magazine. “He really was sure everything was inspired by the Department of State, and that if you hire Americans, they will help you fight this war.”
By late 2005-early 2006, the Ukrainian “Orange” government was in a tense standoff with Russia which culminated in the “gas war,” a conflict over natural gas supplies to Ukraine and the transit of Russian natural gas over Ukrainian territory to the energy markets of the Eurozone.
The conflict culminated in the gradual cut-off of Russian natural gas starting on January 1st, 2006, in the height of winter. Gazprom at the time supplied 25% of Europe’s natural gas. For Putin, who had replaced Gazprom’s leadership with subordinate allies, triumphing in the showdown was a matter of personal pride and vital strategic national importance.
“The key connection must be made to the poor judgment of the Government and the disastrous impact not only [on] the Ukrainian economy but directly on the interests of the Ukraine people,” Manafort wrote in a memo to Yanukovych and Akhmetov. He would use the crisis to benefit Yanukovych politically, emphasizing his good relations with Russia.
“The message will emphasize that Yanukovych will not make such a colossal misjudgment and has the relationships in Russia needed to fix the problem created by Yushchenko and his team.”
American diplomats in Kyiv soon took note of Manafort’s activities.
“As part of an effort to transform its image into that of a democratic political force,” wrote U.S. Ambassador John Herbst in a confidential leaked diplomatic cable a month before the 2006 parliamentary elections, “Ukraine’s Party of Regions — long a haven for Donetsk-based mobsters and oligarchs — is in the midst of an “extreme makeover.””
The cable continues, “The effort enlists the help and advice of veteran K street political tacticians.”
Manafort’s version of an extreme makeover for Yanukovych was to rebrand him much in his own image. Yanukovych began wearing finely tailored Italian suits and changed his hairstyle to one similar, many noted, to Manafort’s.
Following the March 26th, 2006 parliamentary elections, the Party of Regions won a plurality of the vote with 32.1%. The Yulia Tymoshenko bloc, bitter foes of Yanukovych and his oligarch backers, came in a distant second place with only 22.3%. The result briefly elevated Yanukovych to the office of Prime Minister, leaving him poised to run for President in 2010 from a position of strength.
After stage-managing Yanukovych’s Lazarus-like return from the political grave, Manafort enjoyed his absolute confidence. With the Ukrainian presidential elections fast approaching, the next step was to permanently annul the already faltering Orange Revolution by having Yanukovych return to the highest office in the land, the office that protestors and the courts had prevented him from occupying six years earlier.
Ukrainian politics in the period between 2006 and 2010 was characterized by shifting alliances and chaotic infighting among the factions that had once formed the backbone of the Orange Revolution. This internecine political warfare was personified by the intense rivalry that formed between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, who narrowly edged out Yanukovych for the job of Prime Minister in the 2007 elections.
Yanukovych was appointed chairman of the Government Chief Council of the Commonwealth of Independent States and prepared for his presidential run in 2010.
YANUKOVYCH’S POLITICAL RIVAL: YULIA TYMOSHENKO
Yulia Tymoshenko’s time as Prime Minister coincided with the global financial crisis and vicious political infighting that derailed her most ambitious policy initiatives. With her distinctive beauty and golden blond hair braided like a crown in the traditional Ukrainian manner, Tymoshenko emerged as the global face of Ukraine.
While she had joined the Orange Revolutionaries in 2004, her past was not without controversy. The “Gas Princess,” as she was known, had amassed a fortune in the notorious post-Soviet Ukrainian natural gas industry.
Tymoshenko was born to a family without political connections and grew up in Dnipropetrovsk. While in Dnipropetrovsk State University she married Oleskandr Tymoshenko, whose father was a powerful Soviet official. Using her newfound family connections, Tymoshenko received permission to start a small-but-lucrative business selling popular Western films via pirated videocassettes.
After Ukraine declared independence in 1991, Tymoshenko’s father-in-law arranged for a $2 million loan from a State bank that Tymoshenko used to purchase gasoline from Russia. As there was a gasoline shortage in Ukraine during the immediate days following independence, Tymoshenko established a lucrative barter business selling Russian oil in Ukraine and Ukrainian goods back to shortage ravaged Russia.
A Key figure who helped facilitate Tymoshenko’s rise was Dnipropetrovsk’s regional governor Pavlo Lazarenko.
In 1996 Lazarenko was elevated by then President Kuchma to the role of Prime Minister and it was in this role that Lazarenko corruptly enriched himself through the selective awarding of public contracts. Tymoshenko’s company United Energy Systems of Ukraine (UESU) was awarded a contract to supply one third of all Ukraine’s natural gas needs via byzantine deals cut with Gazprom.
It was the most profitable contract in the country at the time and accounted for between one fifth and one quarter of Ukraine’s entire GDP.
Lazarenko was alleged to have received payments from the companies to whom he awarded these lucrative monopolies. A Ukrainian parliamentary inquiry discovered that UESU earned $11 billion in revenue in 1996 alone and had paid nothing in taxes.
Under pressure from foreign leaders complaining about corruption, Kuchma forced Lazarenko out of government in the summer of 1997.
Lazarenko briefly mounted a political challenge to Kuchma, which ended in failure and the revocation of licenses to UESU. Facing prosecution, Lazarenko fled Ukraine and ultimately ended up in the United States where he filed for asylum.
By that time, it was discovered that Lazaranko had funneled $6.75 million into an 18,000 square foot Marin County, California mansion once owned by movie star and comedian Eddie Murphy. This was in addition to a suspected $250 million that the former Prime Minister was alleged to have stashed in offshore accounts in Guernsey, Switzerland.
Instead of receiving asylum, Lazaranko was indicted and convicted of money laundering, wire fraud and extortion in a case planned and executed by one of America’s fiercest and most respected prosecutors, Robert S. Mueller III, then the United States attorney in San Francisco.
During the case it was discovered that the Panamanian law firm Mossack Fonseca had established a British Virgin Islands shell company that funneled millions of dollars from Tymoshenko’s company UESU to Lazarenko and his associates.
Lazarenko became only the second former head of state, after Manuel Noriega, to be convicted of money laundering in American courts. However, by that time Tymoshenko had reinvented herself as a reform politician back in Ukraine.
Tymoshenko’s most controversial episode as Prime Minister again involved the natural gas trade.
During the depths of winter in January 2009, another gas crisis had broken out between Ukraine and Russia. On January 1st Gazprom reduced gas pressure to Ukraine and six days later it shut off the flow of natural gas completely, accusing the Ukrainians of theft.
The dispute between the two countries immediately blossomed into a full-blown international crisis as Europe lost 23–30% of its natural gas supplies overnight. On January 18th, 2009, Tymoshenko traveled to Moscow and entered into direct negotiations with Putin.
Tymoshenko was at the time involved in a fierce battle with the oligarch Dmytro Firtash and his natural gas intermediary RosUkrEnergo (RUE).
Firtash’s and RUE’s connections to organized crime, in particular his relationship with Semion Mogilevich, and his funding by Russian banks tied to Putin, are covered in Part 3 of this series.
Tymoshenko decried what she saw as an unnecessary, mob-linked middleman who were ripping off the Ukrainian people. However, critics were quick to point out that any diminution of RUE would benefit Tymoshenko politically as Firtash was one of the chief financial sponsors of her political enemies, Viktor Yanukovych and the Party of Regions.
The deal Tymoshenko struck with Putin in Moscow was politically explosive in Kyiv.
Tymoshenko established a clear price formula for the first time in Ukrainian-Russian gas relations and succeeded in her number one goal of eliminating RUE as an intermediary. As part of the deal, 11 billion cubic meters (bcm) of natural gas was seized from RUE and transferred to the Ukrainian national gas company Naftogaz.
Furious, Firtash responded by suing Naftogaz in a Stockholm arbitration court. However, there were serious downsides to the deal. The price negotiated was significantly higher than those paid by other European importers and short-term prices immediately leapt.
Critics accused Tymoshenko of signing the agreement in exchange for Russia dropping corruption investigations of her from the 1990s and potentially even supporting her presidential bid in the 2010 election.
MANAFORT’S UKRAINIAN TRIUMPH: YANUKOVYCH’S ROAD TO THE PRESIDENCY
Paul Manafort smelled blood in the water.
Having transformed Yanukovych’s appearance from that of a soviet bureaucrat to a slick, Italian suit-wearing 21st century politician, Manafort honed his message and modernized his campaign methodology.
Drawing from his experiences pursuing the “Southern Strategy” for Republican candidates in the U.S., Manafort understood the potency of political and cultural polarization. Polling told him that Yanukovych could motivate his base by inflaming divisions over the perceived mistreatment of Russian language speakers.
Manafort also encouraged Yanukovych to criticize NATO, particularly its exercises in Crimea. From January through April 2008, the Party of Regions ran an aggressive “NATO No” campaign, plastering the slogan across televisions screens and at rallies wherever Yanukovych spoke.
American diplomats in Ukraine grew concerned over Yanukovych’s harsh rhetoric and Manafort’s role in promoting it. At one point the new American Ambassador to Ukraine William Taylor, a Vietnam veteran with years of diplomatic experience, called Manafort into his office and requested that he use his influence with Yanukovych to have him tamp down his anti-NATO rhetoric.
“American to American,” Taylor said, “I’m asking you to talk to him.”
Manafort refused, saying that the rhetoric polled too well.
In addition to honing his message, Manafort added extra firepower to his team and hired a group of Democratic Party political consultants. Among them were Tad Devine and his associate Julian Mulvey. Devine later managed Senator Bernie Sanders 2016 presidential bid, while Mulvey would work as the creative director of Sanders’ TV advertising operation.
In addition to Devine and Mulvey, Manafort brought Democratic media consultants Daniel Rabin and Adam Strasberg on board. Rabin had developed ad campaigns for Democratic candidates for decades and Strasberg had worked on the Kerry campaign and would go on to work on the Sanders campaign.
Manafort rounded off the new additions with the veteran public relations giant Edelman, which celebrated Yanukovych’s “accomplishments in economic development” for $35,000 a month.
Viktor Yanukovych accepted the Party of Regions nomination for president at a party convention much like the one Manafort had organized for Republican nominees for years. As confetti rained down, rapturous supporters raised portraits of the transformed leader.
On January 17th, 2010, Yanukovych came in first in early voting returns with 35.8% of the vote, with Tymoshenko coming in second with 24.7%. In a runoff election that took place less than a month later on February 7th, Yanukovych was elected the President with 48.95% of the vote.
“Having work[ed] campaigns for the last 35 years, this one will be at the top of the list of most satisfying,” Manafort wrote to his campaign team, savoring the victory.
He had overseen one of the most dramatic political comebacks in modern history, but his work was far from done. Yanukovych’s victory speech was drafted by Tad Devine.
Later at the inauguration, Manafort was greeted by Rinat Akhmetov with a kiss on the cheek.
In the next installment of this series, we will explore how Manafort leveraged his relationships with corrupt and criminal elements in Ukraine and Russia to enrich himself.
Part 5 describes Paul Manafort’s activities on behalf of Oleg Deripaska outside of Ukraine, and how Deripaska uses his wealth to spread influence abroad.
Part 6 explains Paul Manafort’s money laundering and corrupt business activities with Oleg Deripaska and the Ukrainian oligarch Dmytro Firtash.
Part 7 shows how Paul Manafort and the law firm Skadden Arps laundered Viktor Yanukovych’s reputation.
Part 8 reveals how Manafort assembled a public relations team to smear Viktor Yanukovych’s political opponents.
Part 9 explains how Manafort lobbied on behalf of Viktor Yanukovych in the halls of the Capitol in Washington, DC.