Putin’s People: How the KGB Took Back Russia and Then Took on the West
Farrar, Straus and Giroux, 2020, 640 pp., $35
The British government of Prime Minister Boris Johnson was dismissive: “We have seen no evidence of successful [Russian] interference in the EU Referendum,” he said. When a UK parliamentary committee suggested that there is considerable evidence to at least warrant an investigation by the UK’s intelligence services, Johnson retorted: “A retrospective assessment of the EU Referendum is not necessary.”
According to the Intelligence and Security Committee (ISC) of the House of Commons, there are ample reasons to suspect Russian interference in the Brexit referendum. The evidence includes hacked websites and the spread of disinformation in both the 2014 referendum on Scotland’s independence and in the 2016 “Brexit” referendum over the UK’s departure from the European Union.
The ISC, in a July 21, 2020 report titled “Russia,” stated: “The written evidence provided to us appeared to suggest that HMG [Her Majesty’s Government] had not seen or sought evidence of successful interference in UK democratic processes or any activity that has had a material impact on an election, for example influencing results…We have not been provided with any post-referendum assessment of Russian interference.”
In an immediate public response to the report, the UK government did not bother to mention the issue of the Scottish referendum. Why did the government of Prime Minister David Cameron not call for an investigation of Russian actions after that referendum? Why did the government of Prime Minister Theresa May not call on the intelligence services to investigate after the “Brexit” vote? Why is Johnson so dismissive now? What has the British government got to hide?
Similar questions are also being asked on this side of the Atlantic. President Donald Trump, declares at every opportunity that Russian interference in the 2016 elections was a “hoax” and “fake news.” Attorney General William Barr has engaged John H. Durham, U.S. Attorney for the District of Connecticut, to pursue an investigation designed to support Trump’s assertions. There is a strong possibility Barr will release a report before the elections, so long as it supports Trump’s views. Durham’s problem is that to achieve that goal he has to demolish the meticulously detailed account of Russian interference in Volume I of Special Counsel Robert S. Mueller’s 2019 report and the many indictments that Mueller’s team brought, notably against 12 Russian intelligence agents.
The ISC report was stimulated by mounting concerns that the UK is a major Russian intelligence target, perhaps second only to the United States. Disrupting Western democracies, undermining Western security arrangements, and securing Western technology are among Russia’s key goals. Interference in elections may be just the tip of the iceberg.
None of this is news, of course. The really interesting question is just how the Russians have managed to exert so much influence that UK governments have not even agreed to investigations into Russian election interference. (The same question applies to the United States, and why Trump has so vigorously sought to counter any suggestions of Russian engagement in the 2016 and in this year’s elections.)
The ISC report opens the door on the answer, and a new book by former Financial Times Moscow correspondent Catherine Belton, provides mountains of supporting detail—Putin’s People: How the KGB Took Back Russia and Then Took on the West.
One thing is clear: The Kremlin has been orchestrating a complex strategic plan for about 20 years to put itself in a position to exert extraordinary influence within the political and business establishments on both sides of the Atlantic.
The ISC titled one section of its report: “Welcoming oligarchs with open arms.” It asserts that, over many years, the UK authorities have encouraged Russians to reside in the country and to invest in businesses and real estate (in what the ISC calls “Londongrad”). And, notes the report:
The money was also invested in extending patronage and building influence across a wide sphere of the British establishment—PR firms, charities, political interests, academia and cultural institutions were all willing beneficiaries of Russian money, contributing to a ‘reputation laundering’ process. In brief, Russian influence in the UK is ‘the new normal’, and there are a lot of Russians with very close links to Putin who are well integrated into the UK business and social scene, and accepted because of their wealth.
Moreover, in a country where members of the upper house of parliament do not have to provide detailed accounts of their business and financial interests, the ISC points out that: “A number of Members of the House of Lords have business interests linked to Russia, or work directly for major Russian companies linked to the Russian state.”
Belton’s 624-page volume, including many pages of notes and references, makes her core claims too difficult to dismiss as just conspiracy theories. She has talked to many Russians, including quite a few who helped Putin to reach the pinnacle of power but then fell out of favor. Importantly, the foundation blocks for Belton’s analyses of Russian engagement in the UK and in the United States rest on highly-researched stories of the deep influence exerted by the former leaders of the KGB from the downfall of the Soviet Union in the late 1980s to the present. Belton traces their partnerships with several major Russian crime groups, including Putin’s close contacts with crime bosses going back to the early 1990s, when he was an official in the office of the Mayor of St. Petersburg.
While there are a number of stories and interviews that Belton recites that are fresh, this credible tale of the total corruption and criminality of Russia’s leadership will be familiar to all who have read the Karen Dawisha’s landmark study, Putin’s Kleptocracy: Who Owns Russia? (Simon & Schuster, 2014). Surprisingly, I could not find any reference to this book in Belton’s new volume.
In the opening paragraphs of the first chapter of Dawisha’s book, there is this comment:
Russia under Putin had become a virtual ‘mafia state’ in which structures operate hand in glove with criminal structures to their mutual benefit, while the mafia operating within guidelines established by top Kremlin elites for the purpose of strengthening Putin’s hold on power, silencing critics, and maximizing mutual economic benefits.
Belton embraces fully this core view and sets about describing all of the key characters who forged the “mafia state,” who profited greatly from it, and who are now in power. Throughout the 1990s and into the early years of this century, Putin often appeared as just one of the members of the KGB gang, sometimes following orders, sometimes forging partnerships. Then, he took charge.
The key transformative moment came, says Belton, with Putin’s decision to arrest and subsequently jail Mikhail Khodorkovsky. It was October 2003 and Khodorkovsky might still have avoided a decade in a Siberian gulag had he agreed to pay a large amount of cash in response to charges of tax fraud, and had he been willing to transfer control of his vast Yukos oil empire to the care of the Kremlin.
Khodorkovsky, at the time the richest of all of the oligarchs, underestimated Putin’s ruthlessness and overestimated his own power. He had openly challenged Putin at times and then went too far with a PowerPoint presentation to a leading group of Kremlin officials and businessmen titled: “Corruption in Russia: A Brake on Economic Growth.”
Encouraged by former KGB colleagues, and old and new business associates, Putin came to believe that he could restore Russia’s greatness, reviving the empire of Peter the Great and deploying the enormous wealth of his country’s natural resources, especially oil and natural gas, in pursuit of this goal. In this regard, Belton argues that efforts to exert great influence on UK and U.S. politics in particular, as well as on the politics of many other Western democracies, has long been part of the grand plan.
Two tasks were vital to the success of this plan: termination of likely opponents to Putin’s power, and Kremlin control of Russia’s vast oil and natural gas resources. Jailing Khodorkovsky not only paved the way for the Kremlin to seize Yukos and, eventually, all of the major Russian oil and gas companies, but it also sent a blunt message to all of the oligarchs: defy Putin and Siberia may become your home. But the other side of Putin’s bargain, which is still operative today, is that the oligarchs may continue to boost their wealth so long as they step up whenever he asks them for favors. These favors run from selling major business shareholdings at low prices to Putin’s friends to using their U.S. political contacts to try and influence U.S. public policy, as the Mueller report details.
Belton reports that in the late 1980s, as the Soviet Union was in an increasingly parlous condition, the KGB was sending agents abroad to develop businesses, funded with Soviet cash, to secure assets and Western business contacts. When Putin became President, the strategy shifted into high-gear, and after the oligarchs understood that they had no choice other than to be at Putin’s beck and call, the strategy accelerated.
An important early role, writes Belton, was played by oil oligarch Roman Abramovich. He made a fortune in the 1990s in oil and, earlier than most oligarchs, saw which way the wind was blowing when Putin took over from Yeltsin. In mid-2003, Abramovich announced that he had bought Chelsea Football Club in London for $240 million. As Belton reports, “Putin’s Kremlin had accurately calculated that they way to gain acceptance in British society was through the country’s greatest love, its national sport.”
Kremlin official Sergei Pugachev, who Belton says played important roles in Putin’s rise to power and who then was forced out and fled to the UK and then to France, is frequently quoted in her book. He states at one point that Putin personally told him that getting Abramovich to buy Chelsea was an important means of strengthening Russia’s presence in the UK. Indeed, as the new ISC report says, the UK was “welcoming the oligarchs.”
Scores of wealthy Russians bought London homes; some added country estates in the UK. They created business ventures, listed Russian companies on the London Stock Exchange, and raised cash for Russian ventures in the international bond markets and by building strong relationships with major Western banks. As Russia’s oil and gas income flourished, so too did capital flight into the West’s safe investment assets, while the West’s leading businessmen and bankers visited Moscow in droves in search of deals and joint ventures.
The West welcomed the Russians with open arms, because it was profitable. From a posh office in London’s Mayfair, Khodorkovsky reflected on why there was so little Western outcry when he was imprisoned and Yukos was effectively transferred into the Kremlin’s hands. He said to Belton, in a phrase that may explain a great deal about the warm embrace of Russia by UK and U.S. business and finance: “It was a strategic mistake of some Western institutions to think they could live without principles.”
Indeed, Belton suggests that Putin has a “long-standing cynical view that anyone in the West could be bought, and that commercial imperatives would always outweigh any moral or other concerns.”
One of those Western businessmen who fits the Putin description well is Donald Trump, the subject of the final chapter of Belton’s book. Belton starts by recounting how Shalva Tchigrinsky—one of the KGB agents moved to the United States in the late 1980s who received resources to build a significant business—met Trump in November 1990 at the Trump Taj Mahal casino in Atlantic City. This is just one of a very large number of Russians whom Trump befriended over many years. Many of them, Belton writes, went into business with the Trump Organization and financed more than a few of his property developments.
Some of those deals were out in the open, some were through offshore and Delaware-registered holding companies that masked their true beneficial ownership, and some were financed through banks, notably Deutsche Bank. Among the many deals I was fascinated by was one that involved saving the Taj Mahal from bankruptcy. Trump was bailed out by bondholders—many of whom were Russians or had Russian connections—who agreed to extend his debt payments. One of the investment bankers at the time was Wilbur Ross.
In all the investigations into Trump’s Russian dealings, Ross’s name has hardly ever surfaced, yet he may well know a great deal. Today, Ross is Trump’s Secretary of Commerce. Before being forced to divest himself of his investment assets on joining the Administration in 2017, Ross was the co-owner of the Bank of Cyprus, which had been plundered by Russians and had failed in 2013, and which was then acquired by Ross together with Viktor Vekselberg, one of Russia’s wealthiest financiers (who in April 2018, was sanctioned by the U.S. Treasury).
In a rare effort to counter the mounting influence of Russians in the United States, Vekselberg and six other oligarchs, the 12 companies that they owned, and 17 senior Russian government officials were sanctioned by the U.S. government on April 6, 2018. The action came following the ousting by the UK of 30 Russian diplomats in March 2018, in retaliation for a failed effort two weeks earlier by Russian intelligence agents to assassinate a former Russian spy and his daughter living in the city of Salisbury, UK.
The ISC report and Boris Johnson’s response to it both highlight those actions in 2018 as evidence that there is heightened awareness of the potential of Russians operating within the UK against British interests. One might question Johnson’s sincerity, given that he also stressed that there is no need for any form of investigation into Russian engagement in the “Brexit” poll.
The facts are that, while the Russians were building their operations and investments over many years in the UK and the United States, and while they were establishing formidable relationships with Western corporations, nobody was ringing alarm bells.
In part this was due to the money that the Russians were bringing with them, and the respect they bought from establishment universities, think tanks, and the many prominent charities that they financed. In part, it was because the Russians accelerated their push into the UK and the United States at a time when all Western intelligence services were fully preoccupied with the post-9/11 terrorist threat. And, after all, the Cold War had ended a decade earlier; the time had come to befriend Russia and open new trade and cultural and political relationships. British and U.S. governments alike saw positive opportunities here and seemingly had failed to comprehend fully Putin’s global ambitions.
To its credit, the U.S. authorities have done a far better job than the British in limiting some of the activities of the Russians and in guarding against Russian inflows of laundered cash—but this is only a matter of degree. The fact is that two decades of meticulous implementation of Kremlin strategies to penetrate the bastions of wealth and influence in the UK and the United States appear to have been paying off handsomely.
Trump and Johnson often appear to be puppets in a Russian game. Our election systems on both sides of the Atlantic are endangered, and U.S. and UK government leaders seem to have no urgency about this problem. The Russians are increasingly open about financing political opposition parties they like in the West and supporting authoritarian regimes closer to their borders.
Belton rather lamely argues at the very end of the book that internal rivalries in the Kremlin may end the Putin era, but this reads more like wishful thinking. Meanwhile, the UK’s ISC suggests that the Russians have become so entrenched that we probably can do little about this now except focus on how to ensure that they do not deepen their engagements, thus doing our democracies still more harm. The ISC seems resigned to the success of Putin’s schemes.
Nevertheless, the ISC concluded its report by arguing:
The clearest requirement for immediate action is for new legislation: The Intelligence Community must be given the tools it needs and be put in the best possible position if it is to tackle this very capable adversary, and this means a new statutory framework to tackle espionage, the illicit financial dealings of the Russian elite and the ‘enablers’ who support this activity.
Yes, that would be a start. But only a start.