Month: March 2022

Exiled Russian oligarch Sergei Pugachev, who became dubbed “the Kremlin’s banker”, was once part of Vladimir Putin’s inner circle, until he was eventually cast out by the Russian president and took refuge abroad. In this interview with Mediapart, he details how Putin and his close allies, what he calls “a junta which has captured power, all the money and all the institutions of the state”, function. He denounces a system of corruption on a vast scale, including that of foreign politicians, argues why the decision to wage war on Ukraine marks “the end of Putin’s Russia”, and describes French President Emmanuel Macron’s frequent calls to Putin as “ridiculous”.

In this interview with Mediapart, exiled Russian oligarch Sergei Pugachev offers a rare and detailed insight into the workings of the regime of President Vladimir Putin, which he describes as “a junta which has captured power, all the money and all the institutions of the state”.

He says Putin is “cut off from reality, he lives in a parallel reality”, that “one has never seen such a political system in history”, and that the decision to wage war on Ukraine marks “the end of Putin’s Russia”.

For years, Pugachev, 59, once nicknamed “the Kremlin’s banker”, was part of Putin’s inner circle, before being cast out, beginning in 2009, and losing his vast business empire.

Pugachev was one of the first of the oligarchs to emerge in post-Soviet Russia, establishing a bank, the Mezhprombank, as early as 1992, subsequently climbing to the upper levels of Russian economic and business circles.

He played an important role in securing Putin’s selection as successor to Boris Yeltsin, the first president of the Russian Federation from 1991 to 1999, whose re-election in 1996 also owed much to Pukachev as an election campaign director. For a time, the oligarch and his family were neighbours of Putin in Moscow. Today he says he is among the “principal enemies” of the latter, along with opposition leader Alexie Navalny, now serving time in a penal colony, and Ukraine’s president, Volodymyr Zelensky.

Pugachev was behind the initial contract for the ill-fated sale by France to Russia of Mistral-class amphibious assault vessels, called “projection and command” ships, or BPCs, which he had planned to construct under licence at his shipyards in Saint Petersburg. In the end, Putin in person removed Pugachev from the deal, which was signed without him in January 2011.

That contract, for two of the helicopter- and tank-carrying ships, was inked by then French president Nicolas Sarkozy, and finally cancelled by Sarkozy’s successor François Hollande following Russia’s invasion of Crimea in 2014. They were subsequently sold on to Egypt.

On the orders of Putin, Pugachev lost his banking licence in 2010, along with large slices of his business empire, OPK, including its shipbuilding, mining and property development activities, which were sold off to others. Meanwhile, Pugachev in 2009 took up French nationality, subsequently finding refuge in France before moving on to Britain.

Pugachev became targeted by death threats, and Moscow launched what became lengthy legal action against him to reclaim assets he was accused of plundering, claims he firmly denies. In 2015, he succeeded in filing a 12-billion-dollar claim against the Russian Federation before the Permanent Court of Arbitration in The Hague for compensation of the huge assets in Russia that he lost.

That same year he secretly fled London, after the Russian Federation’s legal action successfully led to a court order for the impounding of his passport, and settled in Nice, on the French Riviera, where he has owned a property since 1996, from where he gave this interview, via video link, to Mediapart.

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Mediapart: For you, with close knowledge of the workings of the upper spheres of the Russian government, was the decision to wage war on Ukraine that of Vladimir Putin alone, or was it taken collectively by the clan that surrounds him?

It was Putin who took the decision, while attempting to demonstrate on television that it was a collegial decision; we all saw this scene with Sergey Naryshkin. Putin took the decision by adopting the position of the hawks ready to attack Ukraine.

Mediapart: Is a large part of the state apparatus therefore in favour of the war?

Sergei Pugachev: It must be understood that Russia is a quasi-state which has nothing in common with the usual conception of the structures of a state. There doesn’t really exist a ministry of foreign affairs, or anything. What there is, is a group of people who represent the state. It is a junta that has captured one hundred percent of power. So there is nothing to say that the foreign affairs minister looks after foreign affairs, or that the head of the FSB [intelligence service] looks after security. Everything is mixed together. It involves a small number of people whose prerogatives are mixed, and who have usurped power. We’re talking about a total usurpation. From there, to know who is in charge of what has no importance.

As to whether the state apparatus, or let’s say the government, was in favour of going to war, the fact is that no such government exists. The Federation Council and the Parliament are institutions only on paper, attributes, in the grip of a small group of people.

Mediapart: Who are we talking about?

S.P.: The close entourage. Over the past twenty years, the balance has changed. Latterly, it can be seen clearly that the siloviki [editor’s note, individuals from the military, security forces or similar] prevail, people who Putin brought in – with the exception of [defence minister] Sergei Shoigu, who was already around before him –, military figures, men from the FSB. Apart from Shoigu, who is part of the inner circle, there is Nikolai Patrushev, secretary of the security council, Alexander Bortnikov, head of the FSB. It is them who take decisions. There exist no secret advisors who we don’t know about.

Mediapart: So Putin is not isolated, as one might have believed?

S.P.: No, not at all, he is not alone. He is cut off from reality, he lives in a parallel reality, but he is not alone. It’s obvious. These last years, Putin had lost influence over his entourage, just like over his country. But with going to war, he has taken back power. Today, he is fully the leader of the country, and that came about at the very moment he declared war, on television. It changed all the power construction.

Mediapart: What might be the impact of sanctions on Putin and his entourage?

S.P.: Let’s make one thing clear, this bloc which took the initiative of war, not involved with looking after the economy but rather with pseudo-politics, did absolutely not take into account the economic issue. It did not anticipate the capacity of the West to be united, nor the force of pressure exerted by the sanctions. The other thing is that they are also cut off from life and that they don’t really understand how the economy functions. In Putin’s entourage, there is no-one who had envisaged that. No-one.

In my view the fact that in one week the military objectives were not achieved, and that such sanctions were adopted, allows one to mark the end of Putin’s Russia. It no longer exists. We are in a state of rupture, like the transition between the USSR of Gorbachev and the Russia of Yeltsin. We are exactly at that moment of rupture. There will be no going back. Nothing will subside.

Mediapart: The end of Putin’s Russia perhaps, but not yet the end of the war?

S.P.: It is politicians who begin wars and it is them who put an end to them. The military cannot put an end to the war. That the military take hold or not of all of Ukraine, it is not that which will end the war. The end of the war is a political decision. Putin is at a dead end. He anticipated nothing.

Mediapart: What do you think can be expected to happen?

S.P.: Several thousand Russian soldiers are already dead. The consequences of the war are catastrophic. An enormous number of civilians have died. Kharkiv resembles Stalingrad. It is the first war of its kind since the Second World War in Europe. We had never seen anything like it anymore; the total destruction of European cities, civilian deaths by the thousands.

Over ten years in Afghanistan, around 10,000 Russian troops died. In Ukraine, it’s 5,000 in ten days. It is a brutal catastrophe of which the effects will be lasting. Moreover, the sanctions are catastrophic for Russia on the economic front – the freezing of gold and currency reserves – as was the case with Iran. But Russia is in a more difficult situation than Iran, because seventy-five percent of what it consumes is imported. People will very quickly be hard-hit to find anything other than bread in the shops. The sanctions work, and they work immediately.

Mediapart: Jailed Russian opposition leader Alexei Navalny has denounced the extent to which the Russian president’s path has been marked by corruption, and that this corruption was characteristic of the regime. Do you agree with that analysis?

S.P.: The corruption is total, but it is nothing like ‘corruption’ as it is understood in France. Navalny used that word for want of another, but what he is designating is what we spoke about at the beginning; a junta which has captured power, all the money and all the institutions of the state. It is very different to corruption as it is usually talked about, when you give money so that a person with power does something for you.

In Russia, the so-called businessmen, or the oligarchs as they are called, are an integral part of the political system. It seems to me that one has never seen such a political system in history. There is no longer any distinction between the siloviki and the oligarchs, all that is merged as the state. Where have you seen such a decision-making system? Zero-point-one percent of a population of 140 million inhabitants possess one hundred percent of power and one hundred percent of resources. That’s no longer corruption.

Putin and those in office have simply to serve themselves. Before the sanctions, Putin could dispose at will of gold reserves, of Gazprom, of Rosneft, of any private company, and that’s what he did. Putin’s palace is exotic. What’s essential however is to be able to buy the European Union, political leaders from the EU or elsewhere. We’re talking here of a total corruption. That type of corruption, outside Russia, has occupied Putin a great deal these last years. That’s his foreign policy.

Mediapart: Did those in power in Russia, and Putin in particular, take control of your assets in the country, notably the shipyards, before they were taken in hand by the state? Otherwise put, were you an oligarch like Roman Abramovich and others?

S.P.: I was an oligarch in the sense that I have had money and power. But I owe nothing to Putin. When he arrived in power, thanks to me, in 2000, I already had the totality of assets which were subsequently taken away from me. The arrival of Putin gave me nothing, on the contrary. Abramovich is the opposite. It is often said that Putin placed the oligarchs under a tight rein. That’s false. He took hold of their assets for his profit, while handing them fortunes to manage.

Which is why today all the Russian businessmen, great or small, should be considered as Putin’s serfs. They have all accepted the rules of the game. When the presidential administration summons them to urgently demand 10 million dollars for this or that, they bring the money straight away. With me, it was never like that, and Putin knew that it wasn’t even worth talking about.

Mediapart: Do the sanctions that have now been taken against the oligarchs appear to you to be effective in their targeting, or still insufficient?

S.P.: They have forgotten a lot. I think that 2022 should be taken as a demarcation line. All those who possessed significant assets at the beginning of this year should be placed under sanctions, without giving it any thought, because these people finance Putin’s regime.

In Russia, ownership is fictional. It’s the same principal as the ‘nominees’ of offshore companies who, on paper, possess the assets. Putin has made sure that all of Russia is populated by fictional owners, because everything belongs to him.

Putin’s Russia is like the inside of a watch, a clock mechanism. There are little cogwheels, big cogwheels, average ones, and enormous ones like [Mikhail] Fridman’s Alfa Group and [Petr] Aven, Abramovich, [Alisher] Usmanov, the big, well-known names. But by just taking out a small [watch] part you stop the mechanism. Only Putin knows how the whole of it should work, and that’s been the case for twenty years.

Mediapart: France’s far-right Front National party was bailed out by a loan from an oligarch. Can one presume that that was a decision at a level of the state?

S.P.: It should be understood that when these people finance Marine Le Pen [leader of the Front National, now renamed Rassemblement National] they couldn’t care less if it’s Le Pen, Macron or Lukashenko or whoever. We come back to the junta, a junta which has totally captured financial, economic, administrative and military power.

When they are told ‘Marine Le Pen must be given funds’, it’s not for them to decide. It’s a question of survival for them. That they finance tanks or Le Pen is of no difference, it’s an order from Putin. A political decision. The decision was taken at the Kremlin, ‘finance Le Pen’. It doesn’t work – that’s no big problem, their opinion isn’t asked for. Don’t imagine a gathering of oligarchs who are invited to reflect on the question of who to give funds to. It’s much simpler: ‘100 million has to be sent over there. Is it done? Very good.’

This is what the West did not prepare for after the Cold War. The USSR tried to corrupt, recruit agents, but it was the ideology that took precedence, not money. Russia [today] doesn’t have an ideology. So it uses money, that’s all.

Mediapart: Is the offering of places on the boards of Russian companies to former French president Nicolas Sarkozy, and his ex-prime minister François Fillon, also a thought-out, centralised strategy?

S.P.: I’m going to tell you something terrible. One hundred percent of these people, beginning with [former German chancellor, Gerhard] Schröder, who after their exit from office were signed up in Russia, receive their money not for their position at Rosneft, Rostelecom or MTS, but in thanks for the services they rendered when they were in government. I saw how Putin behaved with Schröder, he well knew that he had recruited him when he was still chancellor.

It is very difficult to follow them all. There is Schröder, his friends, the former president of the Bundestag, they all sit on companies over there. They are retired, they no longer serve any purpose, but they receive this money as a thank you, for what they did when they were in office: the Nord Stream lobby, the awarding of the Légion d’honneur, whatever you want. It’s in compensation for their services at the time. It’s a way of legalising corruption – they were promised 10 million, 100 million, and here’s how they receive it.

Mediapart: It’s a tried-and-tested system aimed at establishing Russia’s influence?

S.P.: I’ve seen how it works. Someone lives in Germany, they call someone in Russia among Putin’s entourage. They have good contacts with so-and-so – the chancellor, his deputy, whatever. ‘Does it interest you?’, ‘Yes’. ‘Right, we can organise a delegation in Russia, an invitation to an agricultural fair’. And it moves along like that.

It is systemic. There are whole queues of people who offer their ‘services’. Imagine, you know the French prime minister, and you know a friend of Putin’s. You organise a rapprochement and you sell the connection, it’s a business. And you are told, ‘Super, we’ll have a contract made out with Gazprom to be paid 10 million, 100 million or perhaps 200 million, if you do that well’.

Putin disposes, or rather disposed, of an instrument that is unique in the world: an incredible amount of money, outside of any book-keeping, totally free and which can be used at will – contracts, constructions. We’re talking about billions of dollars. It’s like the operations of special services. They’re everywhere, journalists, friends, friends of friends. They look for contacts. When they find them, they begin to recruit them. The services in every country do the same thing.

With what aim? Find information. In Russia, as those who came to power were from the services, they don’t know how to do anything else. So they recruit spies and, even better, decision-makers. With spies, you wait for information. But if you recruit a prime minister from one country or another it’s for a decision, ready to be executed.

Mediapart: If you had the possibility of sending a message to Putin, what would it be?

S.P.: I have that possibility. I think that it is too late for me to say anything at all to him. I have known him since 1990, and I have already told him everything I had to say to him over all these years. But one must think of the future. Putin is the past.

To call Putin to tell him to stop the war is grotesque. And it’s pathetic. Look at Macron. When Macron phones him like that, I can’t stop myself from thinking of Schröder. Macron who calls, for the twenty-fifth time, and tells us that he tries to convince Volodia [Vladimir] to stop killing children, that’s ridiculous. Before the war, one could still talk. It was necessary. Twenty-four hours per day. But today?

I don’t understand Macron. He is nonetheless an intelligent person. He knows well that these conversations only lead to a sad confusion. He cannot fail to understand that it doesn’t work. On each occasion that he calls him, he tells himself ‘what follows will be even worse’, but the day after he calls him up again. What is the aim of these calls? Either they themselves don’t understand what’s going on, or they are too focussed on their interests, gas for Germany, re-election for Macron – even if these calls are not good for his campaign, it seems to me.

Imagine Hitler in his bunker in 1945, ready to commit suicide, and the English, the Americans and the Russians call him to ask his news: ‘Adolf, how are you feeling? Be careful, eh. Don’t target children too much.’ What is the sense of these calls? Where is this diplomacy heading?

I believe the strategy should be a total isolation of Russia, not only financially and economically, but above all politically.