A Russian leader, a sprawling fortune
Putin’s financial empire built with methodical system
“He has run his financial affairs in a way that’s totally consistent with the biggest organized crime boss on the face of the earth.”
David Asher Former State Department and Pentagon official
St. Petersburg was one of the richest seaports in Russia. But in the early 1990s, it was starving.
The city once known as Leningrad was reeling amid the breakup of the Soviet Union. Grocery shelves were bare. So its deputy mayor hatched a plan. St. Petersburg would license the export of some of the region’s natural resources and use the money to feed its people.
Timber, ore and oil departed by sea, but much of the food money never arrived. Instead, investigators later found, it went to export businesses favored by the deputy mayor – a former KGB agent named Vladimir Putin.
Putin had only recently been installed in the government hierarchy there, and while his official responsibilities included foreign trade and investment, city officials suspected he was really there to watch over the city for the spy agency’s interests.
The food shortage was not solely because of post-Soviet economic turmoil, either.
Putin had deliveries withheld and rerouted to keep the wares on government-store shelves at a bare minimum, said Karen Greenaway, a former FBI agent who taught in the city at the time and has spent much of her career investigating Russian organized crime. With the pressure to supply food, superiors in Moscow were happy to approve the idea of the export-license deal.
The plan issued noncompetitive contracts to companies largely of Putin’s choosing. Another city official later concluded that as much as $122 million that could have gone to food instead went to a close circle surrounding him – and likely to Putin himself.
“And what does he do with part of the money? He sends it to Spain, where he buys his first villa,” Greenaway told USA TODAY.
In the three decades since his first moves in St. Petersburg, Putin has amassed a fortune that some authorities believe is so vast that it makes him one of the richest people in the world.
Now that wealth is in the crosshairs of the West. Russia’s invasion of Uk
raine, which is believed to have killed thousands of civilians, has triggered economic sanctions that target him, his associates and now his adult children.
But the system that built Putin’s riches has also frustrated U.S. and European efforts to punish him. Each round of sanctions raises new questions about whether those efforts can affect the man who treats the wealth of an entire nation as his own.
That wealth was not built solely by simple corruption or theft, according to statements from an array of government officials, interviews with experts in U.S. intelligence and law enforcement, and a USA TODAY review of thousands of pages of reports and documents. Instead, Putin built a financial empire methodically.
He looted and co-opted public resources, investigators say, in St. Petersburg, as a Kremlin functionary, and then on a national scale once he assumed the presidency.
There he reached a turning point. While Putin was far from the first to capitalize on the wealth of the formerly communist country, he turned the tables on Russia’s oligarchs, using the power of his office to put himself in control of their futures – and their fortunes.
He installed his closest allies from St. Petersburg as a new class of oligarchs whose business riches became, effectively, Putin’s own. Today, while Putin declares a $123,000 salary, his actual wealth is as hard to imagine as it is to quantify. Billions of dollars reportedly have passed through bank accounts of people close to him, with little way to gauge how much of that money really belongs to the president.
And the final step of amassing riches goes beyond any one person’s bank account. With public resources and entire industries effectively under Putin’s control, intelligence veterans say, his personal wealth has become indistinguishable from the wealth of Russia.
“He’s clearly, obviously, been in a position where he can amass pretty much as much as he wants,” said Steven Hall, a onetime Moscow station chief who retired from the CIA in 2015 after 30 years of running and managing intelligence operations in Central Eurasia and Latin America.
“There may be a sort of quibbling question with regard to when Putin, for example, builds one of these huge castles … whether he paid for that out of his quote-unquote personal funds or if he simply used Russia as his personal bank account,” Hall said.
“But that might be sort of a distinction without much of a difference.”
‘The biggest organized crime boss on the face of the earth’
The web of holdings linked to Putin throughout the world make those of the world’s other tyrants and tycoons look small in comparison, according to David Asher, who has helped lead many of the U.S. government’s economic and financial pressure campaigns against defiant states, terrorist organizations, drug cartels and weapons proliferation networks over the past 25 years, including those targeting Iran, North Korea, the Islamic State group and al-Qaida.
“He has run his financial affairs in a way that’s totally consistent with the biggest organized crime boss on the face of the earth,” said Asher, a former State Department and Pentagon official.
“His networks are highly sophisticated, and they are set up in a way that is very difficult for the world to disrupt them. They’re so vast in scale and scope that it is almost mind blowing when you look at them.”
Perhaps the most notorious byproduct of that is “Putin’s Palace,” the Black Sea villa that political adversaries say was built under the president’s direct supervision and may be worth more than $1 billion.
Other riches, according to investigators and Russian political opponents, include perhaps 20 palaces and villas across Russia and Europe, 43 aircraft and various yachts, including the 459foot Scheherazade.
Experts also believe Putin has taken care to amass an overseas stash of personal assets in case his political support dries up. Estimates vary widely, in part because it may sit in the names of relatives, associates and layers of anonymous front companies.
All of Putin’s strategic wealth-building and protection, Asher, Greenaway and other former U.S. officials say, depends on a core group around him. That group’s origins are intertwined with the roots of Putin’s political career and the place where his empire began.
The first step: Riches of St. Petersburg
After the Berlin Wall fell in November 1989, Vladimir Putin returned to the city of his birth.
More than 100,000 KGB agents were dismissed as the Soviet Union broke up. Putin, though, remained with the spy agency after leaving his five-year posting in Dresden, East Germany. It was there, running agents from West Germany, that he encountered the kinds of material riches that most Russians never see.
In the early 1990s, St. Petersburg was considered a Wild West of sorts, a “state within a state” where the KGB was allpowerful and, investigators say, worked closely with black-market mafias.
Men in St. Petersburg then, like Gennady Timchenko, Yury Kovalchuk and Vladimir Smirnov, would later become some of Putin’s closest friends and allies.
He first oversaw foreign relations at his alma mater, Leningrad University, and soon became a chief aide to St. Petersburg’s mayor, Anatoly Sobchak, who needed someone to liaison with the federal security services.
As deputy mayor, Putin had a broad portfolio, including the new position of promoting foreign relations and trade with the West in the post-Communist era. But his close associations with former spy colleagues and known organized crime figures raised concerns among some city officials.
“Everyone knew … that Putin was there as KGB and was watching over Sobchak,” St. Petersburg City Council member Nikolai Andruschenko would later say in an investigative documentary, “Who is Mr. Putin?”
At the time, St. Petersburg – Russia’s second-largest city – was in many ways more strategic than the landlocked capital, Moscow. It had a thriving seaport at the head of the Gulf of Finland and lucrative oil terminals from which the country’s richest resource was shipped to Europe and beyond. Other natural resources also flowed through the port and the Pulkovo international airport for sale in the West.
So when Putin offered to raise money for food by issuing export licenses for the sale of a quota of those raw materials, political leadership in Moscow gave their enthusiastic approval.
But when little or no food arrived, city official Marina Salye investigated.
“I learned that we had allocated quotas for timber, oil, metals, rare metals and aluminum for barter,” Salye said in a videotaped interview.
“Licenses were issued by the St. Petersburg Committee on External Economic Relations – that is, by Putin,” Salye added. “Then the goods left for abroad, but the foodstuffs … never arrived.”
Salye concluded that as much as $122 million overseen by Putin had disappeared. Further investigation suggested that as much as $900 million from other quota contracts orchestrated by Putin and associates also had vanished – and that he had earned commissions worth millions of dollars on those too, according to numerous sources.
The investigations turned up no evidence that Putin had benefited personally. But he was widely suspected of receiving kickbacks too from the companies that made a fortune by getting contracts from him to sell off Russian resources overseas, Salye and others said.
Putin would later deny any wrongdoing, suggesting in one videotaped interview that the export quota contracts were never issued. But Salye kept documentation of everything, including contracts with Putin’s signatures on them.
Putin eventually would be tied to numerous other alleged scams in St. Petersburg, connected to the city’s fastgrowing casino and gambling industry and other businesses that sprang up as the country moved from communism to capitalism.
When his boss Sobchak lost his bid for reelection in June 1996, Putin was recruited by top federal bureaucrat Pavel Borodin to be his deputy, managing all of the Kremlin’s vast business and property holdings.
In Moscow, Putin was responsible for overseeing the foreign property of the state and the organized transfer of the former assets of the Soviet Union to the Russian Federation. In other words, it was a license to steal, and an opportunity to sell off “anything from buildings to art, all of that stuff” for a cut of the proceeds, Hall said.
Putin was also working for Borodin when he was allegedly handing out inflated contracts for a $1 billion-plus renovation of the Grand Kremlin Palace complex.
The scandal became public when Swiss authorities launched a sweeping fraud and money laundering investigation that initially focused on a Swiss construction company, Mabetex, accused of making many secret milliondollar payments into the Swiss bank accounts of leading Russian officials in exchange for those refurbishment contracts.
Borodin received more than $25 million in commissions for awarding the contracts, according to documents produced by investigators in Switzerland. In all, $62.5 million was paid in bribes for contracts worth $492 million on the project, with some of it distributed to friends and fellow Kremlin officials, including then-President Boris Yeltsin and his influential daughters, Swiss authorities alleged.
In July 1998, the ailing Yeltsin and his daughters elevated Putin, a relatively obscure functionary, to the position of director of the Federal Security Service, or FSB, the successor state security organization to the KGB. A year later, Putin was appointed prime minister, or Yeltsin’s top deputy and heir apparent. Yeltsin soon stepped down, which made Putin president on Dec. 31, 1999, and allowed him to coast to victory in the election that March.
Putin’s activities in St. Petersburg and at the Kremlin were a springboard in his rise to the pinnacle of Russian government. So were his successful efforts to block investigations of those activities.
Numerous St. Petersburg officials would ultimately go public in accusing Putin of establishing a highly developed racketeering enterprise and monetizing his relationships with contacts in both the KGB and the criminal underworld.
Salye, the former city official who investigated the exports-for-food licensing deal, made public her findings and openly called for Putin to resign.
“The firms were obviously completely fake, phony,” Salye said during a videotaped interview later included in the “Who is Mr. Putin?” documentary, which was released by Radio Free Europe.
Salye revived her allegations against Putin just as he was assuming the presidency, backing them up with evidence from her investigation. A decade later, she revealed she had been in hiding ever since.
“I have everything in my files,” Salye told a reporter who visited her remote hideaway. She fled in 2000, she said, because she believed “they’re going to kill me.”
Two years later, just weeks after again criticizing Putin publicly, Salye died, at 77, of a heart attack that some associates said was suspicious.
Another corruption investigation into Putin’s activities in St. Petersburg had been launched by the major fraud section of the regional government.
As soon as Putin became president, Russia’s top prosecutor shut down the case, and the chief investigator, Lt. Col. Andrei Zykov, was fired.
That same month, Swiss authorities issued an arrest warrant for Borodin in the Mabetex probe. Putin appointed him secretary of state overseeing the new union between Russia and Belarus, protecting him from prosecution.
Another of his first acts as president was to grant Yeltsin immunity.
Borodin would later be arrested in New York on money laundering charges but released – mostly because of lack of cooperation from Russian officials, Swiss authorities said.
Putin moved quickly to consolidate power with the help of his former KGB network known as the “siloviki,” the Russian term for security strongmen. He launched a major reorganization of the FSB that would give it broader powers and placed it under his direct control.
The new president also began using his insider knowledge of what Russia owns – at home and internationally – for his personal benefit.
“Because he’s the president of Russia, he can now avail himself of just enormous amounts of property and perks that technically belong to the Kremlin; the leased planes and dachas and ships and all kinds of things,” Putin biographer and former U.S. intelligence analyst Fiona Hill said in an interview.
And he knew exactly how to access it, she said, “because he was the head of the Kremlin property agency.”
Many Russians initially looked to Putin as their savior from the oligarchs who had snapped up the nation’s industries and resources during the rush from communism to capitalism.
Putin, they believed, was the dynamic young leader needed to bring the oligarchs to heel.
As businessman Sergey Kolesnikov would later write in a whistleblower letter, “How wrong we were.”