Ben Judah - Fragile Empire - How Russia Fell in and Out of Love With Vladimir Putin

‘I first met Putin in 1991… and he was an absolutely normal man. He was absolutely normal. His voice was normal… not tough, not high. He had a normal personality… normal intelligence, not especially high intelligence. You could go out the door and find thousands and thousands of people in Russia, all of them just like Putin… I was surprised when Putin became president. Of course I was surprised, everyone was surprised. At first I really wanted to support him and help him in any way I could. The 1990s had been a criminal, dangerous time. I hoped for something different.’

Soon after the inauguration, Kolesnikov claims he was approached by Nikolai Shamalov, one of Putin’s ‘friends’ who had begun to grow fantastically rich. He asked him to do the new president a favour:

‘Mr Shamalov explained that many oligarchs were coming to Putin offering to do something for him. “How can I help you Mr Putin?” “What do you need Mr Putin?” And he had decided it would be very nice for them to help some hospitals. And this was to be done through our medical equipment company Petromed. The first man to come to us was Roman Abramovich.’

But there was another, less noble side to Putin’s request:

‘Shamalov said to us – Putin wants us to put part of this money in an offshore account. So I asked: “For what? Personal needs?” To which he replied, “He wants to invest it in the Russian economy.” So I thought, after he finishes his presidency, he just wants some money for himself, his family, his wife. And part of the money goes into the Russian economy, to help Russia… but of course I knew this was corruption. But it was normal corruption. It wasn’t stupid or bad corruption.’

According to Kolesnikov, the scheme worked like this: Putin had stipulated that 35 per cent of the funds for urgently needed medical equipment would be held in offshore accounts. For example, of the $203 million that the original donor Roman Abramovich gave to help the hospitals, Petromed only spent $130 million, with the remainder ending up in a Swiss bank account. Kolesnikov says that Abramovich was blind to where the money went. By 2005, the fund had accumulated over $200 million and a firm called Rosinvest of which Putin held 94 per cent of the shares was created. 2

Power and property in Russia are one and the same. As Putin consolidated his regime, his ‘friends’ financial consolidation followed. Mirroring his ascendancy, Kolesnikov alleges that Putin’s ‘friends’ organized themselves as a business between 2002–3. However, only after the arrest of Khodorkovsky and the 2004 election did they ‘go to the maximum’ and their acquisitions ‘explode’:

‘The change started after the arrest of Khodorkovsky. The words used to address Putin started to change. At first it was “boss” but then more and more would call him “tsar”. It began as a joke. But then it became serious. This is because it was fast becoming true that nothing could be decided without him. You couldn’t go to a governor anymore to get something started, because the governors would have to go straight to Putin to check it. But the 2004 election was the most important thing. They cemented everything.’

In 2005, he claims he was approached by Shamalov to do another favour for his ‘tsar’. It began as a small house of 1,000 square metres on the Black Sea for $14 million dollars. Kolesnikov says that though he knew it was corruption from the start, the sums involved seemed small when many homes worth over $10 million or $20 million were being built along the Rublevka highway out of Moscow, the home of the elite:

‘I understand that in the Western mentality this is not a good thing but, we thought, in three years his term will be up and it will be good for him. When this began I was convinced I was building Putin’s retirement home. I think… Shamalov thought like me. We thought it would be very nice for him.’

In wanting a palace in the south Putin was now following in the footsteps of the Soviet leadership. Russia’s rulers have always summered on the Black Sea. Studded in the subtropical forests of Abkhazia are the ‘dachas’ of the general secretaries, each a tomb-like time capsule. The gates to Stalin’s Lake Ritsa summerhouse are locked and the local militia pace outside. Inside it is wood-panelled and the furniture all low to fit his frame. The fittings are sparse. The bathrooms, simply tiled, are plain, cramped and unremarkable, like a provincial hotel. The bedroom is sparse and, into the dark wood panelling, the German prisoner of war who carved it, notched twists and cuts into the woodwork behind the bed, so at the flick of the light-switch, ghoulish shadows wrap round the room, like the swirling gloom in Eisenstein’s Ivan the Terrible . There is no gold in sight; the dachas become more ornate as you move through time. The residence of Gorbachev is gaudy. It has the feel of a luxury hotel. Putin’s domain further up the coast in Russia proper would surpass anything seen since the time of Nicholas II. Times were changing again. Kolesnikov remembers:

‘By 2006 the impression started to emerge that Putin would rule forever. In 2006 the plan for the house on the Black Sea changed completely. Putin now wanted a palace. I think that it was in 2006 that Putin decided to stay and for that he wouldn’t need a private home by the sea.’

Putin’s power was expanding; the assets of his ‘friends’ were growing and so was his sense of self as a ruler. The project ballooned. Its size swelled from 1,000 square metres to 4,000 square metres. Modelled like a contemporary Peterhof, one of Peter the Great’s most grandiose residences outside St Petersburg, it had evolved into an Italianate palace with everything the ‘tsar’ could need. They had built him a casino and a church, swimming pools and helipads, a summer amphitheatre and a winter theatre, and of course apartments for the staff and other servants.

‘It’s a fantastic place. The climate is wonderful. It’s in a forest. It’s so much nicer than Sochi,’ said Kolesnikov. It was raining in Tallinn. ‘Please, eat some of my sweets.’ Throughout the period, Kolesnikov claims he was using the diverted funds not only to manage ‘Project South’ but also to invest in a host of other businesses across Russia, including factories and a port. These deals were what actually took up most of his time. ‘At least some of the money was going back to Russia, and staying in Russia.’ Kolesnikov then said: ‘But you must understand Putin never really changed in this period… his voice became a little tougher, but he was still the same person. What happened was that the court created the “tsar”. They created this very vulnerable system where all business and political connections went through him. The last time I talked to Putin about the palace was in 2008, at the beginning of autumn. We were having a meeting at a high-tech centre. And when the meeting was over Putin came over to me and said, quietly: “How is the situation coming together in the south?”’

Months later, the financial crisis tipped Russia into recession. Kolesnikov said he needed more money for the non-palace investments, the ones he enjoyed and which took up most of his time. But Putin said there would be no more money for the other projects and all the funds should now be spent on the palace. Kolesnikov admits that had Putin given him the money for the other projects, he might never have become a whistle-blower. ‘Things might have turned out differently.’

Now working on the palace alone, the new situation was not to his liking at all. So in 2009, he alleges, he went to Shamalov and explained to him that he wasn’t interested in doing things this way:

‘What he said to me horrified me. “Do you not understand? He is the tsar and what are you? You are only… his serf !”’