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The second point on the list makes the same complaint: “As of late January 2018, Deripaska was reported to
have financed projects upon request of Vladimir Putin and senior Russian officials.”
There is nothing illegal about the Kremlin having pressured oligarchs to invest in Sochi or anything else, nor are investments evidence of corruption. Indeed, as bne IntelliNews reported in 2007 in a cover story “ZAO Kremlin”, Putin has always met with all the oligarchs to discuss their investment plans to ensure they dovetail with
the Kremlin’s own plans. Indeed,
it is common practice across the Commonwealth of Independent States (CIS), where oligarchs are all major economic actors.
What stands behind the Sochi allegation is the widespread reporting on “the most expensive/corrupt Olympics ever”, as
a total of circa $50bn was spent on the Sochi preparations.
That is a lot of money, as much as
10 times more than is usually spent
on Olympic preparations. But as bne IntelliNews reported at the time, these investments were not just about the Olympics because the Kremlin used
the event as a template for regional regeneration across the board – a model that was then extended to the 2018 FIFA World Cup football tournament in Russia, where 14 more major regional cities enjoyed some transformation through sporting event infrastructure spending.
After the two big sports events, the Kremlin followed up with the renewal of the May Decrees in 2018, which were also focused on regional development but went into a lot more detail, specifying wage increases for doctors, teachers, firemen, and so forth, as well as ordering regional governmental infrastructure spending. That was
then followed by RUB25.7tn ($390bn) of investments planned for the 12 national projects, in which almost eight times more will be spent on regional development than in Sochi. There has been a clear growing focus on regional
development in Russia that started with Sochi and has been gathering momentum ever since.
While there was of course corruption involved in the Sochi preparations,
as it was the test bed for the regional development strategy, since then the city has flourished. Its population has doubled in size as a result of the Olympic regeneration programme – a fact that has not been widely reported. And the oligarchs, as the leading economic actors in the country, have been pressed into service.
GAZ: One of the claims spelled out by the letter is that Deripaska cancelled
a planned IPO of his car plant GAZ “to hide Russian President Vladimir Putin’s money-laundering through the company, as recently as September 2017”.
However, GAZ is already publicly listed and has been since 2007. The company reports IFRS accounts and has major international minority shareholders.
In other words, in a country like Russia where everything is possible if you are willing to pay, using GAZ as a money- laundering vehicle is a very poor choice of vehicle.
It’s possible that the USTD letter is referring to reported plans to list GAZ shares in India in 2008, or a listing in Hong Kong where Rusal was listed in January 2010. The Indian plan was
sponsored regional development. As bne IntelliNews has been reporting, the mooted US sanctions on GAZ threaten not only Deripaska’s wealth, but the entire economy of Nizhny Novgorod where the plant is located. As the major employer in the region and owner of the company that makes up a large part of the local economy, Deripaska is obliged to co-operate with the local and federal- level governments.
In December, a group of GAZ workers went on a road trip from their home town to Germany to publicise their plight.
“We have driven here from Nizhny Novgorod to raise awareness of the effect that the US sanctions have on normal people and the collateral damage that these sanctions are going to have on
the lives of 40,000 workers,” Yevgeny Morozov, the head of the GAZ trade union, who is leading the expedition, told a bne IntelliNews correspondent
who was on the trip with them. “If you include the families of the workers then the knock-on effects will affect the whole population of Nizhny Novgorod.”
Morozov claims that the livelihoods of over a million people are on the line if sanctions force the plant that was set up by Lenin himself to close. Rather than giving Putin money, Deripaska lobbied the government for RUB300bn ($469mn) of state support in April last year to help the plant out. It has been
“Reportedly identified as one of the individuals holding assets and laundering funds on behalf of Russian President Vladimir Putin”
quickly abandoned and a Hong Kong listing was never seriously discussed in public, especially after the Rusal listing there turned out to be a disappointment. However, it is also possible OFAC is referring to classified evidence, but it looks more like simple ignorance of the fact that GAZ is already a listed company.
GAZ is also a good example of why oligarchs are expected to invest in state-
struggling financially since the first phase of sanctions were imposed on it by the USTD.
Putin proxy: the fourth item on the list claims: “In December 2016, Deripaska was reportedly identified as one of
the individuals holding assets and laundering funds on behalf of Russian President Vladimir Putin.” And the fifth item says much the same thing.
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