I am convinced that this whole marathon of “smear films” launched on state TV is a reaction to the “Panama Papers” and the “Roldugin case.”
What has actually been exposed here is a corrupt scheme for funneling money into an offshore slush fund, and the details that have come to light leave no doubt: it is Putin’s slush fund, his money, his $2 billion.
So they keep throwing topics into the mix—it does not matter whether they are convincing or not, decent or not. The main thing is to give people something to talk about, so the agenda gets blurred and the information noise serves as a distraction.
At Putin’s annual call-in show with the public on Thursday, it will all be rattled off in one breath: ahem-ahem, people on the internet are writing a lot that Navalny is a spy and that I’m a billionaire, and that Kasyanov, ahem-ahem, but we lived badly in the 1990s, ahem-ahem, the unipolar world, ahem-ahem.
We need to understand this and not let go of the billionaire cellist story. Here is an important article by Vladimir Milov, which I have decided to republish in full.
Milov explains just how enormous this sum—$2 billion—is for Russia’s current economy.
Read it:
After the publication of the Panama Papers, many people shrugged it off—oh come on, what is $2 billion anyway, that is pocket change for Russia’s leadership. In recent years, all we have heard about are mega-projects costing tens of billions of dollars—$50 billion for the Sochi Olympics, $70 billion for the Power of Siberia gas pipeline, and so on. Compared with figures like that, $2 billion may indeed seem small.
But here is what should not be forgotten. The tens of billions spent on major projects are by no means pure profit for Putin and his cronies. The overwhelming majority of that money still goes toward actual work and services—even if at inflated prices, with kickbacks, and so on. Buying pipes, rebar, construction materials, paying workers’ wages, and the like.
For example, the annual revenue of Gazprom’s largest contractor, Stroygazmontazh, owned by Arkady Rotenberg, is 225 billion rubles, while its profit is 15 billion rubles (rubles, not dollars!). Gennady Timchenko’s Stroytransgaz has annual revenue of 103 billion rubles and profit of 4 billion (data here).
In dollar terms, the profits of Rotenberg’s and Timchenko’s biggest contracting companies amount, at today’s exchange rate, to $0.22 billion and $0.06 billion respectively. In other words, they handle projects worth tens of billions of dollars, but their profits top out at a few hundred million.
And then you have some violinist who has never been known for any serious business dealings, and whose value as a counterparty is completely unclear—what unique services could he possibly provide? what makes him valuable as a business partner?—yet the accounts of his offshore companies show turnover of $2 billion in incoming payments from Russia’s largest financial-industrial groups.
Of course, this turnover should not be counted entirely as profit. However, judging by the nature of most of Roldugin’s companies’ operations—receiving huge penalties from major Russian financial-industrial groups for failing to meet terms that no one ever intended to fulfill, reselling to those same groups shares bought cheaply the day before at triple the price (read more about all this here, if you have not already)—a significant portion of the $2 billion turnover of Roldugin’s companies is profit, because he provided no real services to anyone and incurred no actual costs.
Or take another example: this year’s richest Russian on the Forbes list, Leonid Mikhelson, with a fortune of $14.4 billion, who owns stakes in Novatek and Sibur. How much profit do Novatek and Sibur make? According to their IFRS financial statements, in 2015 Novatek made 74 billion rubles (source) and Sibur made 62 billion rubles excluding foreign-exchange losses (source; including foreign-exchange losses, Sibur’s 2015 profit was 6 billion rubles, but let us set exchange-rate effects aside here for simplicity). Seventy-four plus sixty-two—at the current exchange rate—comes to a total of $2 billion.
So, in total, the two companies of Russia’s richest businessman, Leonid Mikhelson—Novatek and Sibur—generated about $2 billion in profit in 2015. Yet Mikhelson owns only about 25% of Novatek and 50% of Sibur, meaning not all of that profit accrues to Russia’s richest businessman himself.
And Roldugin, let us note, owns only minority stakes in companies that are not especially large.
And yet, de facto, Roldugin receives profit comparable to—or even greater than—the profit officially Russia’s richest businessman receives from the operations of his companies.
And roughly ten times more profit than Rotenberg earns from all of his Gazprom contracts combined.
And with all this wealth, so painfully acquired, he goes off to buy musical instruments to bring into Russia. Everything for the household, everything for the family.
You do understand what kind of idiots Putin takes us for, right?
So stop insisting that Roldugin’s $2 billion in cash is supposedly “not much” (never mind that only the tip of the iceberg has been exposed).
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