Putin Expels the Families
The 1990s was a time of immense suffering for the Russian people. As the impending collapse of the USSR became discernable, insiders such as Nikolai Kruchina, Viktor Geraschenko, and Leonid Veselovsky created a planning group to ensure the continued influence of Soviet-era officials by transferring Russian state assets to offshore shell companies and thus stripping the country’s wealth. One such offshore company, FIMACO, was used to pilfer an estimated $50 billion from the nation. Viktor Gerashchenko, the head of the central bank of Russia, sent a memorandum demanding transfers from FIMACO be covered up. It was through this looting that liquid capital was generated and used by future oligarchs to build their fortunes. An early beneficiary of this arrangement was Mikhail Khodorkovsky, who had started his career as a minor Soviet official and whose Yukos oil conglomerate was tied to FIMACO. In return for his help Viktor Gerashchenko was later given a position as the chairman of Yukos by Khodorkovsky.
In 1991 the Soviet Union finally collapsed. That August, state treasurer Nikolai Kruchina, responsible for Russia’s gold reserves, died by falling from his window. He had been a member of the planning group which originated the plot to steal state assets. His successor Georgy Pavlov fell to his death from a window two months later: the oligarchs were cleaning house.
In September, the Russian central bank announced the Kremlin’s gold reserves had inexplicably dropped from the estimated 1000-1500 tons to a mere 240 tons. Two months later, Victor Gerashchenko announced Russia’s gold reserves had actually entirely vanished. While the Russian public was horrified at the revelation, European bankers were less surprised. It was whispered frequently among those circles that Soviet transport planes had been flying to and from Switzerland for months and selling off large amounts of gold. Boris Yeltsin announced his plans to privatize the nation’s assets and the real looting began.
During the privatization period, international capital wasted no time in opportunistically swooping in to take over Russian industries. The Clinton administration sought to redesign the economic policies of the nascent Russian Federation according to the Washington Consensus: privatization, deregulation, austerity, and the opening up of Russia’s companies to purchase by ultra-wealthy Americans. They gave the role of economic planning in Russia to the Harvard Institute for International Development, which sent Harvard economists to meet with Anatoly Chubais, Boris Yeltsin’s head of privatization. The close relationship with Anatoly Chubais allowed a select group of American investors to be on an inside track of financial dealings in the new Russia. One Harvard grad involved in this scheme was Jonathan Hay, convicted inside trader. He became senior advisor to the GKI, Russia’s new state privatization committee.
Certain members of this network, which included Harvard graduates Hay, Jeffrey Sachs, Andrei Shleifer, Robert Rubin, Larry Summers, David Lipton, and others, misused funds from USAID that were intended for Russian economic development and rigged deals for privatization to gain control of key Russian industries in backroom negotiations. In one 1995 off market deal, Anatoly Chubais created a closed bidding process for prime national properties in which the only approved bidders were Harvard Management Company and George Soros. This resulted in the acquisition of major stakes in Sidanko Oil, Novolipetsk Steel, and Sviazinvest.
Foreign investors flocked in and the level of greed among this fifth column of new Muscovites was truly astonishing. The 1999 RICO suit Avisma Titano Magnes v. Dart Management is particularly enlightening. RICO allows victims of a racketeering conspiracy to sue conspirators for damages caused by their illegal conduct, and the following defendants were named in the action:
Kenneth Dart; Dart Management Inc, address unknown
Jonathan Hay; Dart Management Inc, address unknown
Michael Haywood; Dart Management Inc, address unknown
Michael Hunter; Dart Management Inc
Francis E. Baker; Andersen Group Inc
William Browder, Hermitage Fund
Barclays Bank, PLC
The complaint document alleges the following: the defendants and a cooperating bank called Bank Menatep, owned by Mikhail Khodorkovsky, had a controlling interest in titanium producer Avisma. They forced Avisma to sell its titanium below market price to offshore companies which they secretly controlled. Next, these offshore companies sold the titanium at a correct price on international markets for profit, which was then funneled back from the offshore companies to the defendants and Bank Menatep. Money that should have been booked as profits for Avisma was siphoned away, and the majority shareholders who were in on the scam benefitted at the expense of minority shareholders, the company, and Russian tax authorities.
Defendant Francis E. Baker described the actions in a private letter as, “An immense Russian bank money laundering scheme, clearly a criminal matter.” According to the complaint, the actions were discovered when defendants attempted to swap Avisma shares for shares of mining company VSMPO and replicate the same scam at VSMPO. Baker and other defendants later excused their actions by claiming the suit was Russian targeting. Sound familiar?
The criminality was not limited to foreign speculators. During the early period of privatization in the 90s a secret society of seven Russian oligarchs entirely controlled Boris Yeltsin’s administration. This group called itself Semibankirschina, named after the Seven Boyars who controlled Russia during the 17th century. The secret society included the following oligarchs: Boris Berezovsky, Mikhail Khodorkovsky, Mikhail Fridman, Petr Aven, Vladimir Gusinsky, Vladimir Potanin, and Alexander Smolensky.
A Russian journalist named Andrey Fadin described their overwhelming power in an article, “they control the access to budget money and basically all investment opportunities inside the country. They own the gigantic information resource of the major TV channels. They form the President’s opinion. Those who didn’t want to walk along them were either strangled or left the circle.” Less than one year after publishing the article Andrey Fadin was killed. Through their front man Anatoly Chubais, Semibankirschina used control of television networks to prop up Boris Yeltsin’s low approval ratings. From the mid-90s to 1999 this clique had total authority over Russian policies and industries, judiciously using violence to enforce its monopoly. In one case Mikhail Khodorkovsky and his underling Leonid Nevzlin carried out the murder of the mayor Vladimir Petukhov, who was pursuing Yukos Oil Company’s evasion of taxes.
In late 1999, Vladimir Putin became president of Russia and the fortunes of these self-appointed rulers rapidly turned for the worse. A new group of Putin insiders such as Gennady Timchenko, Vladimir Yakunin, and Sergey Chemezov formed and began supplanting the previous access that the Semibankirschina had to the president. In 2001, a state takeover of media seized the television networks previously owned by oligarchs Boris Berezovsky, Vladimir Gusinsky, and Badri Patarkatsishvili, prompting Patarkatsishvili to denounce Russia to the New York Times and flee the country. While exiled in the UK, Patarkatsishvili died suspiciously at the age of 48. The Georgian government has called his death an assassination. Boris Berezovsky also died suspiciously in the UK after having sold his Russian assets and denounced Putin. After his television networks were seized, Vladimir Gusinsky was criminally charged with money laundering and forced to flee the country as well.
The sweep continued as three other allies of the Semibankirschina were killed: Nikolai Glushkov, Alexander Litvinenko, and Boris Nemtsov. Bill Browder was deported in 2005, and later convicted in absentia for fraud. Fraudster Konstantin Ponomarev was also convicted, sentenced to 8 years in prison for crimes relating to his extortion of $1 billion from IKEA. Jamison Firestone, an associate of Ponomarev and Browder, was forced to flee Russia due to his involvement in the Magnitsky case, and his associate Alexander Peripilichny mysteriously died while jogging near London. George Soros was banned from Russia, Belarus, and Kazakhstan.
Once the richest man in the country, Mikhail Khodorkovsky’s fortunes turned for the worse as well. In the early 2000s, Putin pushed through a number of populist reforms for criminal, tax, and land law, which the oligarchs of the 90s had strongly opposed. As the most blatantly criminal member of the original Semibankirschina, Khodorkovsky’s Bank Menatep had been founded with funds stolen as part of the looting of state assets. The bank operated as a hub of money laundering and engaged in countless financial scams, even delaying government funds to Chernobyl victims while using their money to financially speculate. It was Bank Menatep through which American fraudsters had allegedly ripped off Avisma shareholders with the titanium dumping scam.
In 2003, Khodorkovsky was criminally prosecuted by Putin for tax evasion and fraud for which he ended up serving 10 years in prison. His protege Leonid Nevzlin was convicted of ordering multiple contract murders on Khodorkovsky’s behalf, and sentenced to life imprisonment in absentia. Associate Platon Lebedev was also convicted and imprisoned. This wave of prosecution sent a message and gave Putin a strong position, which was used to negotiate a “grand bargain” with the remaining oligarchs: they retained most of their existing assets in return for alignment with Putin’s vertical rule of Russia. The era of financial gangsterism from the 1990s was over.
Stolen Russian gold reserves have now been restored and are at the highest levels in history. Because of the lack of collaboration with other central banks it is certain that Russian gold is present in Moscow’s vaults: there are none of the surreptitious leasing or swap agreements which call into question the claimed size of Western bank holdings. So instead of buying US treasuries or dollars for its reserves, the Bank of Russia can demand physical gold delivery into Moscow vaults. This will continually strain the fraudulent COMEX and London Bullion Market systems with the pressure of physical shipments and threaten the dollar. Unlike China, Russia is in the position to attack the dollar as a net commodity exporter, meaning when its gold purchases bid up the price of metals it is simply increasing the receipts of its own domestic commodity producing companies like Norilsk Nickel and VSMPO-AVISMA.
The economic crisis of 1998 has heavily influenced the Kremlin’s financial policy, and the last twenty years have been spent creating a resilient system. One of Putin’s first agenda items was to pay off all debt to the IMF and holdover loans from the Soviet era. Russia is now positioned to attack the dollar, as the only powerful state not operating on a debt-based system. A decade of economic warfare in the form of sanctions has cut off access to international capital: the result is one of the lowest levels of external debt of any country in the world, with cash reserves large enough to pay off all debt at once. These low debt levels have tangible benefits, primarily that Russia is now able to withstand large economic fluctuations without crumbling as a result of internal defaults. By comparison, the financial system of America would disintegrate if it attempted to sustain the decline in GDP Russia incurred from 2013-2016.
The Bank of Russia actively enforces stringent lending standards in order to prevent the emergence of consumer credit bubbles, and forces banks to hold extra cash on their balance sheets (as a result, most applications for personal credit are declined). So sanctions have actually made the country stronger, as hubris of the McCain class of American politicians has created a competitor state with no stake in the survival of the existing debt-based financial order. Russia’s mission to create resiliency and restore sovereignty foreshadows a tumultuous future, while America bets everything that the world will remain the same. The concerted plot to loot Russia has been foiled.
In December of 1999, Edmond Safra was murdered at his fabulous mansion, the Villa Leopolda in Monaco. The Safras are one of the oldest and most secretive of the banking families, with a fortune dating back to the gold trading caravans of the Ottoman Empire. Coincidentally, Safra means yellow, or gold, in Arabic. It was Edmond Safra who served as Bill Browder’s mentor in Russia, providing him with an initial seed funding of $25 million to start his Hermitage Fund. When Browder needed protection during a business dispute with an oligarch, Safra sent his emissary four armored vehicles and fifteen bodyguards led by a former Mossad agent. While Edmond Safra spent much of his later life defending himself from drug trafficking and money laundering allegations, he was accomplished, nonetheless. He founded his first bank at 23 years old and had dreamed of creating a banking dynasty that would last 10,000 years.
Just after Putin’s takeover as president, Villa Leopolda was broken into. Safra’s nurse, a former Green Beret named Ted Maher, was stabbed by two masked intruders who entered the premises, after which Safra was killed. Under pressure from Monacan authorities, Ted Maher was forced to sign a nonsensical confession in which he claimed that he stabbed himself and admitted to setting the fire in order to attempt to gain his employer’s adoration. He has since recanted this confession, saying that his defense attorneys coerced him into signing and threatened he would never see his family again otherwise. Jean-Christophe Hullin, the chief judge in the case, revealed in 2007 that the guilty conviction was a predetermined outcome which had been planned in a secret meeting with himself, Maher’s attorneys, and the chief prosecutor of Monaco: in short, Ted Maher was a fall guy for the real murderers of Edmond Safra. Now free, he believes Safra was ordered killed by Putin, “in retaliation for a plot orchestrated by Safra and Russian oligarchs to take control of all of Russia’s assets.”
It was during the purge of oligarchs and vulture capitalists that the true power behind Mikhail Khodorkovsky emerged. When it became likely he would be arrested, he arranged to have all his shares from the Yukos Oil Company transferred to the ownership of Jacob Rothschild. The transfer took place in November of 2003, giving Lord Rothschild control of shares estimated by the Sunday Times to be worth $13.5 billion. Putin subsequently liquidated and nationalized Yukos by seizing and selling off its shares to state oil companies at much below market value.
So Putin has declared war on the most powerful people on the planet.
The Ister is a researcher of financial markets and geopolitics. Author of The Ister: Escape America