The fall of the Soviet Union ushered in an aggressive and ungoverned form of capitalism across the Kremlin’s former domains. Party officials, gangsters, and young outsiders were able to seize huge amounts of wealth — if they were able to survive the sometimes violent contests for it. The rise of Vladimir Putin has changed the structure of the game but not the overall logic. US State Department cables published years ago by WikiLeaks declared that Russia had become a kleptocracy and “virtual mafia state.” State agencies were alleged to be involved in organized crime.
At times, Putin’s interests result in his support for national champions of industry. At other times, his interests seem to be leveraging resource wealth for his own gains or his muscular foreign policy. Wealthy Russians and other Former Soviet Union oligarchs are interested in helping Russia for potential future benefits. But, the oligarchs are not a class like in previous oligarchies, but rather a network full of competitors and potential allies — and on any given day the former can become the latter or vice versa. Business is politics and politics is business. Mere contracts develop into powerful patronage. The roaring, manic capitalism of the 1990s and 2000s have sloshed through the world’s markets. As James S. Henry notes in his lengthy account of Trump’s many ties to Russia, the Post-Soviet era unleashed looted wealth onto the global stage through capital flight. The real estate market has been no exception. Donald Trump, who was close to finished financially in the early 1990s was arguably saved by this rush of cash. Luxury real estate attracts the super-rich and this was Trump’s core business — especially after his airline, casinos, and football teams floundered. His business model changed as well — he sold his brand and reached out to less conventional financiers.
Now, the question before the United States is the extent to which our president is influenced by the interests of Russia and the various FSU oligarchs who have crossed his path. If he is not beholden to these interests, then is he in any way vulnerable to them due to other circumstances? If he is not beholden nor is he vulnerable, then are any of his people compromised?
Unfortunately, this is not meant to resolve those questions. In fact, this is meant to give these questions new emphasis. Several fine accounts have been assembled on these topics, such as the Henry article cited above or the Financial Times extensive work on this topic before the election. Nothing that follows is new. This account is based on about 50 published sources, perhaps more, ranging from the mid 1990s through tonight.
The purpose of this account is to argue two points. First, there is a compelling need for an independent investigation of the Trump campaign and the administration with regard to Russia. Second, and perhaps more importantly, there is an urgent need to address campaign financing and lobbyist practices in our country because there are many fabulously wealthy quasi-capitalists and kleptocrats in the world who do not have our best interests at heart and who can today leverage significant influence within our politics to our detriment.
All the President’s Oligarchs
Paul Manafort told Congress in 1989 that lobbying could also be seen by some as “influence peddling.” His notorious client list has been well-documented in the press. He rehabilitated the political career of Viktor Yanukovich after Yanukovych’s machinations sparked the Orange Revolution in Ukraine. Manafort was initially brought into the Orange Revolution’s maelstrom by Donestk based oligarch Rinat Akhmetov. Akhmetov has faced allegations of involvement in organized crime and Yanukovych’s party was seen as similarly compromised. Manafort engineered a speedy reimaging of the candidate and his party. Manafort claims to have pushed Yanukovych to be more sympathetic and appealing to the West, but there is not much indication that advise was every followed. Despite this, Manafort worked with Yanukovych for a decade, supported by the oligarch Dmytro Firtash. Firtash is a Ukrainian industrialist who has worked with Gazprom and benefited from massive credit lines from a Putin controlled bank — possibly in appreciation of his support for Yanukovych. After Yanukovych’s fall, Manafort rebranded the former ruler’s political party once again. According to Politico, Manafort had some outstanding debts from his clients and has been using a longtime associate, Konstantin Kilimnik, to help collect these debts. Kilimnik has claimed to be a former member of Russian Military Intelligence. Unnamed individuals in Politico’s story stated that Kilimnik, Manafort and an unnamed oligarch remained in contact.
Manafort and his partners Richard Davis and Rick Gates worked for other oligarchs with strong ties to Putin. Manafort and Davis helped to arrange meetings for Oleg Deripaska with Senator John McCain prior to the senator’s presidential run. Deripaska was also on the defensive at this time, as his visa had been revoked due to alleged organized crime ties. Deripaska and his lobbyists struck a deal to invest millions of dollars in Ukrainian and Russian companies in order to harness economies of scale. These deals involved advisory payments to Manafort and offshore accounts. Part of the plan included “special purpose vehicles” in Cyprus to avoid taxes. With the financial crisis, the deal was eventually scuttled. Deripaska was essentially bailed out during the crisis by the Russian government. He has an apparently genuine interest in building Russian industry (hence the deal with Manafort to buy firms is in character at least for the oligarch). Putin may have been interested in bailing out his domestic industrialist to keep Russian industry out of foreign hands — a contemporary take on national champions of industry. Deripaska was another prominent backer of Yanukovych. Gates has remained on the Manafort team while working with Trump. Manafort entered into a prospective business relationship with Firtash, to renovate the Drake hotel. One of Fred Trump’s real estate brokers was also involved in the deal.
Dmytro Firtash entered into the economic chaos of Post-Soviet Russia as a food trader. He has been dogged by allegations that Semion Mogilevich helped him get his start in more profitable pursuits, a claim he has repeatedly denied … although he is one of the supposed sources for a leaked US cable on the subject. His gas business in the early 2000’s was centered on Central Asian production, out of Turkmenistan, but he eventually began to work with Gazprom as well. According to an interview he gave to Bloomberg, the merger with his gas business and Gazprom was Putin muscling in on Firtash’s turf and not patronage from the Kremlin.
Firtash struck a remarkably profitable deal with Gazprom, however, to provide Ukraine with gas in the 2010’s. Gazprom is believed to be controlled by Putin. He also received a massive line of credit from a Putin controlled bank that enabled the acquisition of other industrial companies in the country.
Firtash is enmeshed in the carbon politics of Ukraine with Yulia Tymoshenko as a principal rival. Tymoshenko canceled the Firtash-Gazprom gas deal. Much of the dirt on Firtash citied in reports comes from claims made by his rival in various court proceedings. Firtash has claimed that these generous deals were struck to enable economic development in Ukraine under a sympathetic leader in Yanukovich. However, the offshore nature of these business dealings would deprive Russia and Ukraine of tax benefits as Reuters has noted. Tymoshenko is the source of allegations that Firtash teamed up with Paul Manafort to redevelop the Drake Hotel — which she alleged would facilitate money laundering as well. Firtash is in legal limbo right now as Austria decides whether to extradite him to Spain or the United States on unrelated charges. Firtash has insisted that he has committed no crimes in the building of his business empire.
Trump has also established ties with another Putin-linked oligarch, Aras Agalarov. Agalarov and Trump teamed up to bring the Miss Universe pageant to Moscow in 2013. There is an evident affinity between the two — they are both in the high-end property business. Trump even appeared in some of Agalarov’s son’s music videos. Agalarov has received major government construction contracts and was awarded the Order of the Honor of the Russian Federation.
As was reported by the Washington Post prior to the GOP convention, the Trump campaign only sought to tone down the GOP’s foreign policy platform with regard to support of Ukraine against Russian backed separatists. It also should be added that offshore accounts and “special purpose vehicles” registered in friendly business environments are not in themselves improper or illegal. Manafort’s fees from these various clients certainly have eclipsed $10 million, although he has said that he is also responsible for paying staff, conducting research, etc.
For more on Firtash consult the following: Reuters: Putin’s Allies Channeled Billions to Ukraine Oligarch. Bloomberg: Will Trump Rescue the Oligarch in the Gilded Cage?
For more on Manafort consult the following: Bloomberg: Trump’s Manager is a Master of Post-Soviet Business. Politico: Manafort’s Man in Kiev. NBC News: Donald Trump Aide Paul Manafort Scrutinized for Russian Business Ties.
For more on Deripaska and particularly his financial ties to Putin: The Globe and Mail: At Home with Russian Oligarch Oleg Deripaska.
For more on Agalarov see: Politico: When Donald Trump Brought Miss Universe to Moscow.
All the President’s Gangsters
Much has been made about Felix Sater, who has a life story that would give a Hollywood screenwriter pause. A Russian immigrant turned stockbroker, he had a violent altercation at a bar in the early 1990s. He went to jail and lost his license to trade. This did not prevent him from setting up a stock firm affiliated with prominent Mafia families as recounted by the New York Times in 2007. That story, which has a similar plot to the recent film Wolf of Wall Street, surfaced when Sater was working with the Bayrock Group to develop several Trump properties in the United States. The New York property, Trump SoHo, became embroiled in lawsuits from resident-investors. In one of the lawsuits, the plaintiffs accused the developers of using questionable financing from Russia and Kazakhstan. Financing came from an Icelandic bank that was popular among Putin surrogates. The Manhattan District Attorney was looking into these allegations, but as part of the eventual settlement, Trump and his developers required plaintiffs notify investigators that they were no longer interested in pursuing the defendants or cooperating with the investigation. Sater maintained ties with Trump after leaving Bayrock, although Trump’s attorney told the Washington Post that Sater was not compensated. Sater’s purpose was to continue to look for deals for Trump. According to Sater, he helped Trump’s children on their 2006 trip to Moscow. Sater’s account places him as the tour guide for the trip whereas Trump’s lawyer claims their time in the city merely coincided.
The Financial Times uncovered more details about the Kazakh source of funding for Trump SoHo. Bayrock partnered with Viktor Khrapunov and his relatives. Kazakhstan has accused Khrapunov of looting millions while mayor of Almaty and the nation’s energy minister and then using shell corporations to pass some of that wealth into the United States. Trump was not directly involved in Bayrock’s marketing of Trump SoHo properties, but he was an equity partner in the venture. Mortgage lenders are required to check their customer’s backgrounds but no such provision was in effect at this time if the customer was paying cash for properties. Sater, according to the Financial Times, continued to maintain a professional relationship with the Khrapunov family.
The Bayrock financing network has potentially even more convoluted links into kleptocratic networks than just what was mentioned above. As James S. Henry details, several Kazakh investors in Bayrock were aligned with the current president of that country, Nursultan Nazarbayev as well as with a Russian-Canadian businessman named Boris Birshtein. Birshtein’s former son-in-law, Alex Shnaider, was one of the financiers for the Trump Tower and Hotel in Toronto. Birshtein is reported to also have ties to organized crime as well as industrial pursuits. He seems to have employed Shnaider in the 1990s in Zurich. The fate of Trump’s Toronto project mirrors that of the SoHo project, although the Toronto tower provided the current president with no equity ownership.
Felix Sater’s father may have been a member of Semion Mogilevich US franchise. Mogilevich, according to intelligence from the FBI and Israel, has an extensive criminal enterprise concerned with “nuclear materials, drugs, prostitutes, precious gems, and stolen art” although money-laundering reportedly has been his major industry within the United States. He has a degree in economics, and a reputation for well thought out schemes. As early as 1994, his operatives were attending political fundraisers in America. His activities have stretched into multiple countries in Eastern Europe and he has reportedly sought to work with Italian Mafia families. US State Department cables included reports that Mogilevich was involved in the businesses of Dmitry Firtash, a claim Firtash has denied — although he was the source for one of the cables. Firtash, as discussed in another part of this account, rose from a small-time food trader in Post-Soviet Ukraine to one of the leading industrialists of the country.
Mogilevich has alleged links to a number of scandals in the world of finance including the YBM Magnex securities fraud. The brother of YBM’s CEO had ties to organized crime and was formerly a resident of multiple apartments in Trump Tower. In the late 1990s, two financial novices concocted a scheme to use Bank of New York accounts to move more than $6 billion from Russian businesses seeking to dodge tariffs and potentially move illicit funds as well.
Mogilevich has insisted that he is a legitimate businessman. Sater says that he made mistakes in his youth. He has reportedly assisted the US Government in investigations of organized crime and also in other matters of national security.
There have been other prominent criminal residents of Trump Tower. One major crime figure in Russia even went to Trump’s Miss Universe pageant in Moscow in 2013. For more see Mother Jones: How Did an Alleged Russian Mobster End Up on Trump’s Red Carpet?
For a more detailed account on Mogilevich consult the following: Village Voice: The Most Dangerous Mobster in the World.
For more on Trump SoHo and Sater see: New York Times: Donald Trump Settled a Real Estate Lawsuit, and a Criminal Case was Closed.
A lengthier discussion on Bayrock, Sater, Mogilevich, and the Icelandic bank can be found in the American Interest: The Curious World of Donald Trump’s Private Russian Connections.
All the President’s Russians
We now know that campaign surrogates Michael Flynn, Carter Page, and Jeff Sessions — despite their statements to the contrary — were in contact with Russia’s Ambassador to the US, Sergey Kislyak, throughout 2016. Kislyak, who is either a model diplomat or a spy recruiter depending on who you listen to, also attended various rallies as well. The New Yorker reported that Paul Manafort was practically swimming in Russian Intelligence agents, whether he knew their roles or not. Donald Trump, Jr., was also reportedly paid by a French Think Tank with Kremlin ties as well. Speaking fees are not unusual, but these fees could be a potential test for further developing a relationship with Kremlin outlets.
The head of the Russian American Chamber of Commerce was also supportive of Trump during the campaign. Sergei Millian, according to the Financial Times, arranged for 50 US businessmen to travel to Russia in 2011. Upon their return home, the FBI debriefed the travelers to see if they had been approached by Russian intelligence. Millian has claimed that Trump several years ago directed him to Michael Cohen, Trump’s attorney, who authorized Millian to promote Trump projects in the Former Soviet Union. This arrangement predates Donald Trump, Jr.’s, now famous quote about his father’s business ties to Russia in 2008: “We see a lot of money pouring in from Russia.” As the election approached, Millian quietly packed his bags and went to Asia. His activities have in part led some analysts, quoted in the Financial Times, to conclude that Russia has returned to the old Soviet tactic of using chambers of commerce to recruit agents in the West.
In this story, we have seen autocrats, oligarchs, gangsters, lobbyists, politicians, and think tanks. Although some court filings are referenced, I have made an attempt to portray everything in as neutral a way as possible. This is deliberate even though I do not believe some of the protestations of innocence. I believe the saga in itself provides sufficient justification for an independent investigation into the role of foreign influence in our political system.