How Russian Oligarchs Exert Political Influence in the West

08.24.18
Photo illustration by John Lyman
World News /24 Aug 2018
08.24.18

How Russian Oligarchs Exert Political Influence in the West

With former Trump campaign chairman Paul Manafort freshly convicted of multiple counts of bank and tax fraud, an issue of public salience left untouched in the first trial was how the veteran lobbyist’s talent for political influence was potentially exploited by a Russian oligarch. Heavily indebted, the new master of the Trump campaign had immediately reached out to powerful Kremlin-connected oligarch Oleg Deripaska, with whom he had some prior business relationships, making sure to clearly advertise the prestige and usefulness of his newfound position. While Manafort’s solicitation to Deripaska was perhaps born of a desperate man seeking to leverage a political position for cash, not all political influence channels are predicated on opportunistic supplication to an erstwhile business partner. Some are instead, and more worryingly, based on years of economic cooperation and legitimate business links – all the while retaining the theme of personal enrichment in return for political access or influence.

In the summer of 2015, one of Putin’s inner circle, Vladimir Yakunin, the powerful decade-long serving head of Russian Railways, abruptly resigned his post and announced that he would be serving as the Kaliningrad Oblast representative to the Federation Council, Russia’s upper chamber. However, the shift from a powerful state-owned enterprise valued to be worth $63.4 billion (est. 2015), an estimated contributor of 1.5% of Russian GDP (est. 2015) and with almost 1 million employees to representing a Russian enclave in a rubber stamp Duma was no promotion.

In a similar vein to Oleg Deripaska, who had lost billions in the global financial crisis and been publicly humiliated by Vladimir Putin on state television, Yakunin’s star had also fallen. Several “ills” had befallen Yakunin in the lead-up to his demotion: gross accusations of corruption and self-enrichment by Alexei Navalny, personal sanctions from the U.S. Treasury as a result of the Ukraine crisis, his son’s rather unpatriotic decision to apply for British citizenship, and last but not least, growing consensus on his mismanagement of Russian Railways. To the last point, it had taken a whopping $1.5 billion net loss in 2014 and it was estimated that the monopoly’s very survival rested on $6.8 billion in government subsidies to stay profitable from 2016 to 2020.

However, in the end, Yakunin backtracked and declined Kaliningrad’s seat in the Federation Council, which was followed by twin, but not mutually exclusive, rumors that he had done so in order to refrain from publishing his income and because the position was beneath him. Around the same time as Yakunin, Putin’s longtime Chief of Staff and former Minister of Defense, Sergey Ivanov, was similarly given an exit-cum-demotion to a powerless federal position – the Kremlin equivalent of being put out to pasture. However, unlike Yakunin, he did not reject it.

Although the snap refusal of the dubious “honor” of Senator could be an act of defiance to someone accustomed to being driven around in German luxury cars and living in opulent palaces, Yakunin’s activities since his resignation suggest that he still has a more delicate role to play. While not granted an official diplomatic passport like Deripaska, it would be unlikely that the Kremlin would waste the talents and connections of a former high KGB official and self-styled crusader of Orthodox “traditional” values, built over a decade managing Russian Railways – connections that reach deep into Europe. Yakunin is a fierce defender of Russia’s controversial “Gay Propaganda” law and is forthcoming of his view that casts the European Union as little more than a collection of American vassal states.

Pictured: Vladimir Yakunin. (RIA Novosti)

Since his retirement, Yakunin has leveraged two assets complementary to the evangelization of his Russian-government sanctioned worldview: his massive personal wealth and his deep business and financial connections to European countries already more conducive to the Kremlin line – both assets clearly derivative from his outsized talent for graft. The most prominent of these connections are in Central Europe, specifically the Czech Republic, whose President Milos Zeman secured a second 5-year term this past January.

Taking advantage of the EU’s disinclination to personally sanction him, Yakunin launched into a huge soft power initiative promoting his Kremlin-consistent ideology in Europe. This began with the creation of the Dialogue of Civilizations (DOC) Research Institute think tank in Berlin in 2016, which Yakunin is reportedly heavily funding to the tune of €25 million euros over 5 years. The DOC is better known for hosting an annual summit called the Rhodes Forum where interestingly, President Zeman has attended (the only European leader to do so), making inflammatory statements about European unity on Russian sanctions, the Ukraine crisis, and on the mass deportation of migrants from Europe.

Yet, Yakunin’s connections to the Czech Republic do not end with Zeman, who considers him a “long time friend.” They reach into the business community as well. Key among these figures is the Slovak national Alexej Beljajev, who has had close business and friendly relations with Yakunin through Tatravagonka Poprad a.s. that is owned by Beljajev’s Bratislava-based Optifin Invest and co-investment in an array of strategic Czech businesses with the Prague-based Czechoslovak Group (CSG). CSG is founded by Jaroslav Strnad and now managed by his son Michal Strnad.

Beljajev has had several contracts with Russian state-owned entities including Russian Railways. He also notably participated in the contracting related to the 2014 Sochi Olympic venue – widely to be considered one of the largest graft schemes for participating contractors in the history of the Russian state. In the costliest ever Winter Olympics in which $51 billion was spent, Yakunin’s Russian Railways was awarded $10 billion in contracts; giving a golden opportunity to an enterprise already long known for no-bid subcontracting deals and other embezzlement schemes a huge pot of money to deal out to supporters and executives.

According to the Czech President’s published campaign account, together Strnad and Beljajev owned Dako-CZ a.s. (a company that makes brakes for railway cars) were among the largest contributors to Zeman’s successful presidential campaign. And although Zeman’s personal influence in European politics is small, the Czech Republic is an important participant in critical transatlantic institutions like NATO and the European military-industrial complex. The magnitude of participation belies a larger problem if the country’s Western ties are subverted from the heights of its own political and economic leadership. With some Financial Times-reported sources in the Czech government asserting that measures have been enacted that restrict the flow of sensitive information to their own president, it becomes clear that Yakunin’s soft power campaign in the west is bearing some fruit.

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