Lead book review

Moscow rules in London: how Putin’s agents corrupted the British elite

Putin’s corrupt cronies may change, but the paranoid world view they all share remains the same, says Owen Matthews

25 April 2020

9:00 AM

25 April 2020

9:00 AM

Putin’s People: How the KGB Took Back Russia and Then Turned on the West Catherine Belton

William Collins, pp.640, 25

In the past year alone, Russia-watchers have been treated to books entitled The Code of Putinism; Putin’s World; Putin vs the People; The Putin System and We Need to Talk About Putin — just to mention the ones with Putin’s name in the title. In addition, Robert Service’s Kremlin Winter, Sergei Medvedev’s The Return of the Russian Leviathan and Andrew Monaghan’s Dealing with the Russians have also offered their own insights into the history, politics and future of Putin’s Russia.

In this crowded field, is there a place for Putin’s People? Happily, there is. Catherine Belton is a former Moscow correspondent for the Financial Times — and before that worked for the estimable Moscow Times, proving ground for a whole generation of Russia experts. Her book is fast-paced, thoroughly researched and packed with new — or at least not widely known — facts. Her purpose is not just to chronicle the rise of a mid-level KGB apparatchik to the heights of power but also to trace how his cronies helped effect a hostile takeover of a whole country and its finances.

This is the best kind of journalist’s book, written with an eye for a well-turned story and compelling characters, and steering mercifully clear of academic theorising. And what tales Belton has to tell. The most fascinating part covers the early part of Putin’s rise in the 1980s, when the security institutions of both the Soviet Union and East Germany were already thoroughly corrupted. The Kommerzielle Koordinierung of the East German foreign trade ministry, for instance, known as the KoKo, was established, says Belton, primarily to ‘earn illicit hard currency through smuggling, to bankroll the Stasi acquisition of embargoed technology’:

A string of front companies was set up across Germany, Austria, Switzerland and Liechtenstein, headed by trusted agents, some with multiple identities, who brought in vitally needed hard currency through smuggling deals and the sale of illicit arms to the Middle East and Africa.

Small wonder, as cracks appeared in the edifice of communism, that smart young KGB officers such as the Dresden-based Major Putin moved not only to take over these shady businesses but also to implement their methods of combining public powers with private profit.

By 1991 Putin had established himself as the right-hand man of the mayor of St Petersburg, Anatoly Sobchak. But his real job, as Belton illustrates in hair-raising detail, was to act as an intermediary between City Hall, the city’s burgeoning criminal community and such foreign investors as were ready to brave the shark pool of wild capitalism. Belton interviews one such would-be conquistador of capitalism — who, like many of her sources, sadly but understandably remains anonymous — as he recalls an encounter with the mafia boss of St Petersburg, Ilya Traber. The visiting foreigner remembers being

whisked from the city’s Pulkovo airport straight to Traber’s lair, in an armoured car accompanied by police and Traber’s guards. On arrival at the high-gated compound in a back street, he was escorted past armed guards and snarling German shepherds.

Traber himself, surrounded by religious icons and wearing tracksuit bottoms, slippers and a huge gold cross on a thick chain — ‘the uniform of the city’s bandits’ — gives the nod to the proposed deal for investment in the Port of St Petersburg. He leaves the details to his clean-cut business partner, whose father happens to be a senior spook, and to the 40-year-old Vladimir Putin, who runs the city’s ‘foreign economic relations’ and is a former KGB colleague of the mafia boss’s dad.

This story, like a sprawling Russian novel, is interlaced with networks of patronage, trust and friendship that all have their origins in the KGB. Belton interviews key associates and former colleagues of Putin, including Horst Jehmlich, an affable special assistant to the Dresden Stasi chief, who was ‘the fixer in chief’ to the Soviet agents based in the city. Another source is the former KGB officer turned railways minister, Vladimir Yakunin, who admits candidly that as the USSR collapsed he and his KGB colleagues

needed to redirect ourselves. We needed to create commercial enterprises that would earn money. We were all part of this process. The traditions of communication and co-operation remained.

As Putin moved to Moscow and rose through the ranks of Yeltsin’s presidential administration in the mid-1990s, he emerged as the leader of a network of ex-KGB men that centred around the elite Ozero dacha development outside St Petersburg. Belton writes:

He and his allies from the Ozero dacha group began to capture strategic sectors of the economy, creating a tight-knit network of loyal lieutenants — trusted custodians — who took control of the country’s biggest cash flows and excluded everyone else.

The Ozero group went on to produce a swathe of top ministers, billionaire oligarchs and heads of Russia’s so-called power ministries.

The crucial moment came in 1999. Putin, by now head of the KGB’s successor agency, the FSB, stepped in to remove the troublesome prosecutor general Yury Skuratov, who had been refusing to leave his post and was accusing Yeltsin’s senior lieutenants of corruption. The FSB filmed Skuratov cavorting with prostitutes, and released the footage to the media. Putin appeared alongside Sergei Stepashin, the country’s interior minister, to confirm that the tape was authentic. Sergei Pugachev, a Putin crony banker and senator who is now in exile in Europe, tells Belton: ‘Putin spoke very coolly. He looked like a hero on TV. I thought, he looks good… We’ll make him president.’ Putin’s mixture of decisive ruthlessness, coolness under pressure and a willingness to play dirty have remained the hallmarks of his rule ever since.

Belton mines insider gold from Pugachev’s candid recollections of his dealings with top Kremlin officials — including tapes of revealing conversations with Valentin Yumashev, Yeltsin’s son-in-law and chief of staff, who was instrumental in promoting Putin to ultimate power. ‘You remember how it was when [Putin] came into power?’, Pugachev says to Yumashev on the tape in 2007:

He would say, ‘I am the manager. I have been hired’… But as the four years of his first term passed, he understood things had happened that would never allow him to step down.

Among the most alarming and shameful revelations in Belton’s superbly researched book concern the unseemly enthusiasm with which British and European bankers, lawyers, real estate agents and politicians have rushed to take dirty Russian cash. ‘In the UK, the main thing was always money,’ Pugachev tells Belton. ‘Putin sent his agents to corrupt the British elite.’ The moment Russia’s mega-rich began parking their money in the UK signified, she writes, ‘the arrival of Moscow rules in London, where the Kremlin could twist and distort the legal process to suit its agenda’. She also quotes one exiled oligarch claiming that Putin directed Roman Abramovich to buy Chelsea ‘to raise Russia’s profile with ordinary Brits’.

But perhaps the most sinister observation of Putin’s People is how neither wealth nor the experience of power seem to shift the unshakeably Soviet, essentially paranoid world view of Putin and his close allies. In 2014, faced with an upswell of people power in neighbouring Ukraine, Putin’s reaction was the same as when he

had watched the Soviet empire crumble around him from his perch in the KGB villa overlooking the river Elbe in Dresden — that they were surrounded by a Western plot to undermine Russia’s power… It was as if all the talk of Russia’s global integration, the need to bring in foreign direct investment, to modernise the economy and reach accommodation with the US, had been cast aside, and Putin’s regime had suddenly shown its true face.

Putin’s instinct was to lash out, fault international law and effect a mob-style power grab for Crimea. In the words of one former aide to Mikhail Gorbachev: ‘It was as if someone had flung open the cellar doors of the Kremlin and the ghosts and the stench of the Soviet past had come flying out.’

Belton’s portrait is of a leader stuck in a fatal, late-1990s mindset, where mafia values and great power fantasies are equal and interchangeable, where rules are for the little people and only the most paranoid survive.

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