Overreach, page 18
But by the beginning of 2020 the only men left in the inner circle were not technocrats but Soviet-era fantasists and paranoiacs – people whom Putin trusted for no better reason than that they had proved their personal loyalty to him over 45 years of working relations. The Kremlin’s mind was closing. And it was at this crucial moment that a black-swan event occurred that would make that closure into a physical reality. On 31 January 2020 two Chinese citizens in Siberia tested positive for a dangerous new virus.
Bunker Mentality
Covid hit Russia hard. Officially, the pandemic has caused nearly 310,000 deaths in the country – the ninth-highest fatality rate in the world. But the true figure may have been much higher. Government demographic statistics showed that Russia’s population had declined by 997,000 between October 2020 and September 2021, its biggest-ever annual drop in peacetime.
In early March 2020 Putin at first tried to downplay the danger, then disappeared from public view. It was left to local leaders like Moscow mayor Sergei Sobianin to introduce draconian quarantine measures that included allowing Muscovites to leave their homes only on certain days, block by block, starting on 30 March. Schools, theatres, museums and international borders were shut all over Russia.
As the pandemic gathered pace in April, Putin retreated from his usual residence of Novo-Ogarevo in the suburbs of Moscow to a more remote presidential residence near Lake Valdai, between Moscow and St Petersburg. According to a reporter who has worked for over a decade in the Kremlin press pool, a small group of official photographers and cameramen were asked to sequester themselves with domestic and secretarial staff in a service wing of Novo-Ogarevo, where they were tested daily.22 ‘Everyone assumed that [the President] would be back in a few days,’ recalled the reporter, who still works in the Kremlin. ‘No one from outside was allowed anywhere near the residence.’ But Putin was not to return to Moscow until 9 May, and then only briefly and in conditions of extreme Covid security, to publicly lay a wreath at the Eternal Flame in the Alexander Gardens after public celebrations were cancelled.
At Novo-Ogarevo and Valdai some $85 million was spent on building quarantine accommodation for staff and visitors as well as buying state-of-the art testing equipment.23 Anyone coming into contact with Putin was required to observe strict individual quarantine on-site for at least a week. Fresh from victories in Tokyo, Russian Olympic medallists were told they would have to spend a week in quarantine before meeting the president – and were banned from any interaction with each other. ‘I still can’t believe I’ll have to sit in one room for seven days,’ Angelina Melnikova, a gymnast, wrote on social media.24
Moscow officially emerged from lockdown on 9 June 2020. Restaurants re-opened on 23 June, and the next day the postponed Victory Day parade took place with full military pomp in Red Square. Russian media announced that the pandemic was under control and generally avoided the alarmist, round-the-clock coverage that characterised the Western media response at the time. Deaths from Covid were also massaged down, under official pressure, with strict criteria for reporting deaths from Covid rather than with Covid present. As a result, a Levada poll showed that some 50 per cent of Russians declared that they were ‘unconcerned’ about Covid (though, in a comment about Russian fatalism, 27 per cent also reported that they knew someone who had died of it). Fully 61 per cent of Russians also said they believed that Covid-19 was a biological weapon.
Putin, however, remained in lockdown. He would continue to be extremely cautious to the point of paranoia about the virus two years later. In February 2022 French President Emmanuel Macron refused a Kremlin request that he take a Russian Covid-19 test when he arrived to see Putin in Moscow. According to two sources in Macron’s entourage, French security advisers had warned their president not to allow Russia to get hold of his DNA.25 (Putin himself had been equally cautious about his DNA for years, taking a chemical toilet with him on all foreign trips.) As a result, at their Kremlin meeting Macron and Putin sat at opposite ends of a vast white table at least six metres long, prompting much satirical comment on social media.
Why was Putin so scared of Covid? An explanation suggested by an open-source investigative group was that Putin was suffering from a chronic illness. In April 2022 the investigative journalism site Proyekt.media published a detailed study based on flight movements of top Russian cancer doctors and Putin’s disappearances from the public eye between 2016 and 2020. From 2019 onwards Putin was accompanied on all his trips by no fewer than nine staff doctors – and the head of his medical team was appointed a deputy head of the presidential administration. Among the doctors who spent time with Putin were a team of neurosurgeons from the Central Clinical Hospital and Dr Evgeny Silovanov, a renowned oncologist specialising in thyroid cancer in the elderly, who spent 166 days with Putin over 36 visits. The Proyekt team suggested that Putin may have undergone surgery for cancer in September 2020.26 His puffy appearance since that time has also been attributed to steroids used to treat cancer. In May 2022 the US filmmaker Oliver Stone – who interviewed Putin many times between 2015 and 2019 – claimed that Vladimir Putin has ‘had this cancer’ but ‘I think he’s licked it.’27
However, none of the sources interviewed for this book were able to confirm that Putin was chronically ill during lockdown or afterwards. ‘Putin is not ill,’ said Molody, who coordinated Putin’s TV appearances throughout the lockdown. ‘I watched dozens of hours of raw footage. He was fitter than ever … But he has always been very protective of his health.’28 In July 2022 CIA Director William Burns also said that he had found no evidence of Putin’s alleged illness – and quipped dryly that Putin was ‘entirely too healthy’.29
The Kremlin’s behaviour during lockdown also belies the speculation that Putin’s days were numbered. On the contrary, a nationwide referendum on a package of constitutional reforms that would allow Putin to run again for two more six-year presidential terms (as well as constitutionally banning same-sex marriage and placing the constitution above international law) was held, after a Covid-related delay, on 1 July 2020. It was the exact opposite of the course suggested by Surkov in his essay in February. Instead of preparing for a transition of power, Putin’s inner circle seemed to be laying the political ground for him to remain in office until his death.
Always intensely private, Putin’s personal contact had for years been limited to a small group of no more than three dozen insiders. During Covid that bubble had shrunk far tighter still. For the greater part of 2020 and 2021, the majority of Russia’s most senior officials saw their president solely via video link. Only the closest personal friends and allies were admitted to Putin’s presence. Most could not spare a week from their schedules for the necessary quarantine every time they went to see the president.
In the ‘seclusion and inaccessibility’ of his Covid bunker, surrounded with ‘ideologues and sycophants’, Putin developed a ‘deep belief that Russian domination over Ukraine must be restored’, according to former Kommersant political editor Mikhail Zygar.30 Or as the CIA’s Burns would put it in April 2022, ‘Putin’s risk appetite has grown as his grip on Russia has tightened. His circle of advisers has narrowed and in that small circle it has never been career enhancing to question his judgment or his almost mystical belief that his destiny is to restore Russia’s sphere of influence. Every day Putin demonstrates that declining powers can be at least as disruptive as rising ones.’31
Over two years in isolation, Putin developed a longstanding enthusiasm for historical theorising which would culminate in the essay on Russia and Ukraine, published in July 2021. The essay, according to TV executive Molody, was ‘entirely [Putin’s] own work … he consulted advisers of course, but it was really the result of much research and deep thought.’ His companion in that process of deep thought was an old and trusted friend who was willing to put his business on hold and spend time inside Putin’s Covid world – Yury Kovalchuk.
Kovalchuk
If Nikolai Patrushev was Putin’s most powerful silovik colleague and ally, Yury Kovalchuk was his most powerful friend from the world of business. For Putin, Patrushev was an older and much respected former boss – as well as his closest connection to the KGB of their shared youth. Kovalchuk was a friend from a different stage of Putin’s career – the tangled web of business, Communist Party and organised crime interests that Putin navigated with great skill as consigliere to St Petersburg’s mayor Anatoly Sobchak. According to a Russian government official I will call Sergei Ryzhy, a longstanding friend and colleague of a former prime minister who remains at the top of the Kremlin’s ‘power vertical’, Patrushev was for Putin ‘an ideal of KGB rectitude’ and implacable, ‘vigilant patriotism’. His relationship with Kovalchuk was different, if no less close. Kovalchuk was ‘a man of a less exalted world’, said Ryzhy, someone whom Putin trusted with the ‘more mundane matters’ of his personal business interests and those of his immediate family.32
When the Soviet Union began to disintegrate, Kovalchuk was a physicist at Leningrad’s Ioffe Institute. In 1990 the Leningrad Regional Committee of the Communist Party of the Soviet Union (KPSS) had established a new bank as a repository for Party funds. They called it Bank Rossiya – ‘Russia Bank’ – just one Cyrillic letter different from Bank Rossii, which was the Central Bank of Russia. When the Communist Party was banned by Boris Yeltsin after the coup of August 1991, Bank Rossiya was suspended too. A group of Party members from the Fursenko Institute (a commercial affiliate of the Ioffe Institute) that included Kovalchuk and Vladimir Yakunin, a seconded KGB officer who headed the Institute’s foreign department, set out to gain control of the bank and put the KPSS’s frozen funds to good use. By Yakunin’s account, the motivation for taking over Bank Rossiya was not profit but the desire to ‘do something positive’. The would be-bankers shared ‘an ideological affinity and it consisted in the fact that a complete shitstorm is coming’.33 Yakunin appealed to his old KGB colleague Vladimir Putin, who by that time had become vice-mayor of St Petersburg, and introduced him to his physicist colleague Kovalchuk. Together, they helped re-found the former KPSS slush fund as one of the new Russia’s most successful banks. In his memoirs Yakunin described the group of Bank Rossiya founders as a ‘kibbutz’ – and though Putin himself was not a shareholder, he quickly became one of the kibbutz’s key members. Thanks to Putin’s political rise, the kibbutz’s members would ascend to being Russia’s wealthiest and most powerful men – along with Putin’s childhood friends Arkady and Boris Rotenburg and cellist Sergei Roldugin, who introduced Putin to his future wife Ludmila.34
In the early 1990s Kovalchuk bought a large country house in Solovyovka in the Priozersky District of the Leningrad region, located on the eastern shore of Lake Komsomolskoye near St Petersburg. Soon other key members of the city’s elite – including Putin, Vladimir Yakunin, Andrei Fursenko and his brother Sergei (founders of the eponymous institute), Viktor Myachin, Kovalchuk’s brother Mikhail, Vladimir Smirnov and Nikolai Shamalov – would also buy properties nearby. In November 1996 they united their adjacent dachas into a private compound under a co-operative society they called Ozero (or the Lake).
By 1997, when Putin joined the presidential administration in Moscow, Bank Rossiya had become one of St Petersburg’s most profitable banks. Yakunin was responsible for working with government agencies, and Kovalchuk was responsible for attracting shareholders. Kovalchuk had introduced Gennady Petrov, one of the bosses of the notorious Tambov-Malyshev organised crime group – of whom we will hear more below – as a shareholder.35
By 1999 Putin had been appointed prime minister and was under serious consideration from the family of Boris Yeltsin as a possible successor. In the winter of 2000, between Yeltsin’s resignation on New Year’s Eve and Putin’s election as president in March, Yeltsin’s daughter Tatyana Dyachenko and her husband Valentin Yumashev visited the Ozero compound for a meal with Putin’s own closest associates – including Putin himself, the Kovalchuk and Fursenko brothers, and Yakunin, among others. Yeltsin’s entourage got to know Putin’s closest associates over cutlets and wine. As Yumashev confirmed, the invitation was ‘from Putin’s family’ – but more symbolically, the Ozero get-together marked a handover of power from one extended family clan to another.36
In 2008 Kovalchuk’s sometime candidate as a Bank Rossiya shareholder Gennady Petrov and other key members of the Tambov gang were arrested and convicted in Spain for racketeering. A key witness for the Spanish prosecutors had been ex-FSB officer Alexander Litvinenko, but he was poisoned in London in November 2006 on the orders of Patrushev while the Tambov gang investigation was still underway.37 According to a separate investigation by the Bulgarian prosecutor’s office, more than €1 billion – part of the Tambov gang’s proceeds from drug trafficking, prostitution and protection rackets – had been laundered through banks in Bulgaria and Estonia.38,39
But by that time Kovalchuk had moved on from the murky world of St Petersburg business. In May 2008 Forbes Russia listed him as Russia’s 53rd richest man, with an estimated fortune of $1.9 billion and Bank Rossiya’s largest shareholder, holding 30.4 per cent of its stock. Part of Bank Rossiya’s handsome profits came from a government contract to collect utility bills from millions of customers in Moscow, St Petersburg and other regions. The state-controlled company in charge of collection – Inter RAO – was from 2009 headed by Kovalchuk’s son Boris.40
A rising tide floats all boats. Several St Petersburg protégés of Kovalchuk rose to powerful state positions – including Sergei Kiriyenko, a future prime minister, Alexander Beglov, who became governor of St Petersburg, and Lyubov Sovershaeva, a former Bank Rossiya employee who became Beglov’s deputy.41 Kovalchuk acquired media holdings, including the Izvestia newspaper and STS Media. Sergei Mikhailov, a long-time friend of the Kovalchuk family and the founder of the Mikhailov and Partners PR agency used by Rossiya Bank, became director of the TASS news agency – which in 2014 received a 350 million ruble credit line from Kovalchuk’s bank. Yury Kovalchuk’s son Boris joined the Board of Trustees of the Innopraktika Foundation – a body set up to help facilitate meetings between businessmen and heads of state companies – that was headed by Putin’s daughter Katerina Tikhonova. In 2013 Tikhonova made a dynastic marriage inside the Ozero cooperative to Kirill Shamalov, son of Putin’s old neighbour Nikolai Shamalov – who also owned a 9.6 per cent share in Bank Rossiya. Kovalchuk hosted the wedding at his ski resort at Igora in the Leningrad region, at which Putin was naturally guest of honour.42
Kovalchuk was also able to make financial arrangements for less official members of Putin’s family, including shares in Bank Rossiya given to Putin’s alleged mistress (and mother of his third, illegitimate daughter) Svetlana Krivonogikh through a shell company called Relax.43 In 2014 the US government personally sanctioned Kovalchuk, alleging that he was the ‘personal banker’ for many senior Russian government officials, including Putin. The 2016 Panama Papers leak revealed that Kovalchuk had transferred at least $1 billion to a specially created offshore entity called Sandalwood Continental. These funds had come, according to the leaked records of Mossack Fonseca financial services firm, from a series of enormous unsecured loans from the state-controlled Russian Commercial Bank (RCB) located in Cyprus and other state banks. Some of the cash obtained from RCB was also lent back onshore in Russia at extremely high interest rates, with the resulting profits siphoned off to secret Swiss accounts.44 The Panama Papers also appeared to link Kovalchuk’s offshore holdings to payments totalling hundreds of millions of dollars made to entities owned by Putin’s old cellist friend Sergei Roldugin.45
But international finance was not Kovalchuk’s only interest. According to business associates who spoke to Mikhail Zygar, Kovalchuk had long been fascinated by the mystical nationalist writings of Ivan Ilyin, a 1930s philosopher of Russian fascism. Kovalchuk also, by his own account, had another key skill – never to bring the boss bad news. ‘Put yourself in my shoes,’ a friend of Kovalchuk’s told Zygar, as related in Zygar’s book All the Kremlin’s Men. ‘If I annoy Putin like [Finance Minister Aleksei] Kudrin does, telling him what he doesn’t want to hear, what will happen? I’ll get less access to “the body” [of the President]. I’ll end up punishing myself. Why would I do that?’46
As Putin sat in lockdown researching and penning his long historical essay on Russian destiny and its relationship with Ukraine, Kovalchuk spent much of the time by his side at the Valdai residence. As president and banker sat together the ideological manifesto of the coming war’s philosophy was born.47
CHAPTER 6
Truth or Bluff?
The weight of this sad time we must obey
William Shakespeare, King Lear
Breaking Out of Orbit
The appointment of Dmitry Kozak to replace Vladislav Surkov as the Kremlin’s Ukraine supremo in January 2020 marked a decisive shift in Moscow’s policy towards Donbas. As we have seen, Surkov’s policy of using the rebel republics of Donbas as a brake on Ukraine’s westward momentum had failed. In Paris in December 2019 Putin believed that he’d got the measure of Zelensky. Putin was convinced that ‘Zelensky was weak, a puppet’ of the West, recalled a close colleague of Foreign Minister Lavrov’s. At the same time Putin also came to see Zelensky as a man with whom he could no longer do business, an ‘incorrigible servant for NATO interests … there was no point talking to him, only to his masters in Washington.’1 The only course left to the Kremlin was to prepare the ground either for the Donbas republics’ independence, or their incorporation into Russia.
