WASHINGTON — When the Obama administration imposed sanctions on individual Russians last month in response to Russia’s armed intervention in Ukraine, one of the targets was a longtime part owner of a commodities trading company called the Gunvor Group.
His name, Gennady Timchenko, meant little to most Americans, but buried in the U.S. Treasury Department announcement were a dozen words that President Obama and his team knew would not escape the attention of Russia’s president, Vladimir Putin: “Putin has investments in Gunvor and may have access to Gunvor funds.”
For years, the suspicion that Putin has a secret fortune has intrigued scholars, industry analysts, opposition figures, journalists and intelligence agencies. Numbers are thrown around suggesting Putin may control $40 billion or even $70 billion, in theory making him the richest head of state in world history.
For all the rumors and speculation, there has been little if any hard evidence, and Gunvor has adamantly denied any financial ties to Putin.
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But Obama’s response to the Ukraine crisis, while derided by critics as slow and weak, has reinvigorated a 15-year global hunt for Putin’s hidden wealth. As the Obama administration prepares to announce another round of sanctions as early as Monday targeting Russians it considers part of Putin’s financial circle, it is sending a not-very-subtle message that it thinks it knows where the Russian leader has his money, and that he could be targeted directly or indirectly.
“It’s something that could be done that would send a very clear signal of taking the gloves off and not just dance around it,” said Juan Zarate, a White House counterterrorism adviser to President George W. Bush who helped pioneer the government’s modern financial campaign techniques to choke off terrorist money.
So far, the U.S. government has not imposed sanctions on Putin himself, and officials said they would not in the short term, reasoning that personally targeting a head of state would amount to a “nuclear” escalation, as several put it.
But officials said they hoped to get Putin’s attention by targeting figures close to him, such as Timchenko, and other business magnates such as Yuri Kovalchuk, Vladimir Yakunin, and Arkady and Boris Rotenberg. Among those likely to be on Monday’s list, officials said, are Igor Sechin, president of the Rosneft state oil company, and Aleksei Miller, head of the Gazprom state energy giant.
“It’s like standing in a circle and all of a sudden everyone in the circle is getting a bomb thrown on them, and you get the message that it’s getting close,” said Sen. Robert Menendez, D-N.J., the chairman of the Foreign Relations Committee.
Putin’s reported income for 2013 was just $102,000, according to a Kremlin statement this month. Over the years, he has dismissed suggestions of personal wealth.
“I have seen some papers about this,” he said in 2008. “Just gossip that’s not worth discussing. It’s simply rubbish.”
How much Putin cares about money has long been a subject of debate in Russia and in the West. On government payrolls since his days in the KGB, the Soviet intelligence agency, Putin to many seemed driven more by power and nationalism than by material gain. With access to government perks such as palaces, planes and luxury cars, he seemingly has little need for personal wealth.
“If he really does have all that money salted away somewhere, why?” asked Bruce Misamore, who was the chief financial officer of Yukos Oil before the Russian government imprisoned its top shareholder, Mikhail Khodorkovsky, and seized its assets. “What good does it do him? Is it just ego? Presumably, it’s not to pass it down to heirs. I doubt we’ll see Mr. Putin becoming one of the leading philanthropists in the world.”
Yet some have drawn attention to what appear to be expensive watches on his wrist and the construction of a seaside palace that the Kremlin denied was being built for Putin. Some say Putin may want money, or the appearance of it, because it is the measure of stature and power in a society whose transition to capitalism has produced instant billionaires out of the wreckage of Communism.
“I came to the conclusion … that some of these reports may be seeded by people around Putin himself,” said Fiona Hill, who was the chief Russia expert at the National Intelligence Council and last year co-wrote a book about Putin. “Russians have to have the biggest and the best. It’s part of the mystique, part of the image.”
The Treasury Department has not provided evidence to back up its statement about Putin, but standard policy requires it to have enough verification to withstand a court challenge.
Gunvor, a Swiss-based firm that is the world’s fourth-largest oil trader and that generated $91 billion in revenue last year, said it had subsequently provided documents to the Treasury Department that it said disproved any connection to Putin.
Some Obama administration officials have argued for releasing details of what the United States knows about Putin’s wealth to expose him to the Russian public, a suggestion so far resisted. Some lawmakers in Congress are discussing legislation to require the administration to publish an estimate of Putin’s overall worth.
U.S. diplomatic cables obtained by the anti-secrecy organization WikiLeaks show sustained attention to the subject. The cables tied Putin not only to Gunvor but also to Surgutneftegaz, a large oil company, and to Gazprom, but they used words such as “rumored.”
In one cable, for instance, diplomats cited a General Electric executive working in the region who privately said Yakunin, president of the state-owned Russian Railways, “has made sizable cash payments to Putin” and estimated the Russian leader was worth “well over $10 billion.”
The CIA in 2007 produced a secret assessment of Putin’s wealth that has never been released, according to officials who have read it. The assessment, the officials said, largely tracked with assertions later made publicly by a Russian political analyst who said Putin effectively controlled holdings in Gunvor, Gazprom and Surgutneftegaz that added up to about $40 billion at the time.
From the start of his political career, Putin has been dogged by suspicion. While he was deputy mayor of St. Petersburg in the 1990s, his office signed deals giving favored companies licenses to export $92 million in oil, timber, metal and other products in exchange for an equal amount of imported food. But the food never materialized.
Putin was not accused of personally benefiting, but a City Council committee led by Marina Salye recommended Putin’s dismissal for “incompetence” and “unprecedented negligence and irresponsibility.”
Secret oil stakes
Stanislav Belkovsky, a political analyst with ties to the Kremlin, told European newspapers in December 2007 that Putin had amassed a fortune of “at least” $40 billion through sizable shares of some of Russia’s largest energy companies.
Putin secretly controlled “at least 75 percent” of Gunvor, 4.5 percent of Gazprom and 37 percent of Surgutneftegaz, Belkovsky said, citing only unnamed Kremlin insiders.
“The reality is that Putin has others and entities to move money that he controls or that he might control ultimately,” said Zarate, the former Bush adviser.
“The challenge with him is you don’t have an easy way of drawing the line to the assets he actually owns and controls currently. There’s a dimension of layering and relationships with people with whom he’s close and entities that serve as conduits that make it tricky to determine what is Putin’s and what is not.”
Some of those hunting for Putin’s private wealth have encountered obstacles.
Last month, Cambridge University Press declined to publish a book by its longtime author Karen Dawisha, a Miami University professor, exploring how Putin built “a kleptocratic and authoritarian regime in Russia.”
The publisher wrote her saying it had “no reason to doubt the veracity” of her book, but deemed the risk of a lawsuit too high, according to letters published by The Economist. In a return letter, Dawisha called the decision “pre-emptive book burning.”
All of which makes the Treasury Department’s recent assertions so striking.
In addition to targeting Timchenko, one of the founders of Gunvor, the department froze any U.S. assets of Kovalchuk and his Bank Rossiya. It described Rossiya as “the personal bank for senior officials,” and described Kovalchuk as one of Putin’s “cashiers.”
Timchenko denied the assertions and sold his 43 percent share in Gunvor to his partner, Torbjorn Tornqvist, the day before the sanctions were issued to avoid repercussions to the firm.
Tornqvist now holds 87 percent of the company, while senior employees own the rest, the company said.
Seth Thomas Pietras, Gunvor’s corporate-affairs director, said Putin “does not and never has had any ownership, direct, indirect or otherwise, in Gunvor,” nor is he “a beneficiary of Gunvor,” and “he has no access to Gunvor’s funds.” After the sanctions statement, Gunvor executives flew to the U.S. to meet with State Department officials and congressional aides.
Pietras said the company’s banking partners had been satisfied by its explanations.
The Treasury Department, however, was not. “We remain confident that the information on the relationship between Putin and Gunvor is accurate,” said a Treasury official, who asked not to be identified.