Sunday Times
6 November, 2011
Putin's Judo Cronies Put Lock on Riches
Mark Franchetti, Moscow

Close associates and friends of Vladimir Putin, the Russian prime minister,
control assets worth £130 billion, according to an independent estimate that has
provoked claims of widespread cronyism.

An investigation, by a magazine critical of the Kremlin, revealed how Putin, who
is set to run again for president next year in a move that could see him in
power until 2024, has placed former KGB colleagues and loyalists at the helm of
key state corporations.

Dubbed "Putin's clan", the group of close associates, has interests ranging from
banking, gas and oil, defence procurement, aviation, construction, mining, media
and transport.

Friends of the prime minister who either share his passion for judo or were
fellow-members of a co-operative to manage their dachas outside Moscow in the
mid 1990s have seen their private business interests prosper dramatically since
Putin first became president in 2000.

Arkady Rotenburg, a judo master who has known Putin since the two sparred on the
mat as teenagers, is estimated to be worth some £1.2 billion. In part with his
younger brother Boris, also one of Putin's former judo partners, Rotenburg, 59,
has wide business interests in construction and energy.

He is reported to have close links to Gazprom, the state gas giant, and
companies controlled by him have won lucrative tenders to build parts of the £8
billion Nord Stream gas pipeline through the Baltic, a motorway linking Moscow
to St Petersburg and construction contracts for the 2014 Winter Olympics in
Sochi.

"There's nothing wrong with Putin surrounding himself with people he has known
for a long time and trusts. I'm sure the same is true of President Obama's
team," said Yulia Latynina, a fearless political commentator.

"But imagine if after Obama became president several of his friends became
billionaires and began landing lucrative state contracts. Members of Putin's
clan say they didn't benefit from his friendship, that they went into business
long before he became president. Fine, but the question is why much of their
incredible success came after Putin came to power?"

Another judo enthusiast who co-founded Rotenberg's judo club in St Petersburg is
Gennady Timchenko, whose oil trading company, Gunvor, reportedly went from being
a niche player in 2003 to the world's third largest by 2008 with an annual
turnover of more than £40 billion.

Timchenko – whose wealth is estimated at £3.4 billion – has vehemently denied
owing his success to his acquaintance with Putin and has won libel actions
against opposition figures who have claimed that he was a "nobody" before Putin
became president.

Putin recently addressed the issue of his reported links with Timchenko, whom he
has known since the early 1990s, saying "he had never gone near" the oil
trader's business interests. And, in 2008, he also dismissed suggestions that he
may have built a personal fortune such as Timchenko's as "just rubbish, picked
out of someone's nose and smeared on bits of paper".

In 1996 Putin and seven neighbours in a gated community on the outskirts of St
Petersburg formed a management company called Ozero, Russian for "lake", to
handle their plots of land. New Times – the investigative magazine which
compiled the list of "Putin's clan" – says five Ozero members have done
exceptionally well either in government or business since he became president.

Yuri Kovalchuk, a former scientist, is now the largest shareholder in Bank
Rossiya and a media group which has aggressively expanded its television
interests in a market controlled by the Kremlin.
Intriguingly Alina Kabaeva, an Olympic gold medal-winning rhythmic gymnast with
whom Putin has been rumoured to have fathered a love child, is an executive in
Kovalchuk's media company.

Also a shareholder in Bank Rossiya is Nikolai Shamalov, an Ozero member who
trained as a dentist and is now said to be worth £400m.
A whistleblower, who worked for him, has claimed Shamalov helped fund a lavish
Italian-style palace on the Black Sea with a fitness spa, an amphitheatre and
helicopter pad, rumoured to have been built for Putin's use – a claim denied by
the Kremlin. Shamalov was reported to have accepted a fellow Russian
businessman's $350m (£218m) offer for the property early this year.

Vladimir Yakunin, also a member of Ozero and like Putin a former KGB officer, is
now the head of Russia's state railway, the world's second largest.

"When I saw the list I couldn't help thinking of the old Soviet saying that
you're better off with 100 friends than 100 roubles," said a Moscow businessman
who is not close to the Kremlin. "Who you know helps more than what you know in
Russia."

Sons of several of Putin's friends and associates – including Kovalchuk and
Shamalov – have also landed jobs in state corporations or businesses with
Kremlin links, as have some distant relatives. One of Putin's former university
professors is on the board of Gazprom while Igor Putin, a distant cousin, was
recently made vice-president of a bank as "he will help us implement our
strategy better and faster."

Some insiders believe that Putin's decision to return as president next year,
after he stepped down in 2008 because the country's constitution does not allow
more than two consecutive terms, was in part influenced by his resolve to
protect his "clan" interests.
"There's little doubt that had he not come back, other groups would have muscled
in," said a former Kremlin aide. "Call it cronyism or genuine success, one thing
is certain: for Putin's clan the future is rosy."