Hello! This week there was no escaping the Mueller report, and we have put together a list of the Russian businessmen, celebrities and diplomats the Kremlin used as middlemen in an attempt to get in touch with President Donald Trump. We also look at why a spymaster looks like he will get one of Russia’s top political jobs, the new U.S. law that means it’s much harder for Russians to receive Fulbright awards and some of the country’s newest non-oil billionaires. As a bonus this week, we also have a quick rundown of Sunday’s Ukrainian elections and an explainer of one of the more juicy ironies of the so-called sovereign internet law that was passed by the State Duma this week.
Mueller exposes the Russians who tried to help Putin reach out to Trump
There were no big surprises Thursday’s release of Special Counsel Robert Mueller’s report into Russian election interference (there was meddling but no collusion). However, the report did shed light on how the Kremlin attempted to forge ties with Trump’s administration. Russia’s middlemen were on the whole unsuccessful and unusual and The Bell has selected the most interesting characters:
- Kirill Dmitriev is influential not only through his position as head of the Russian Direct Investment Fund, but through his wife’s ties to Katerina Tikhonova, who is assumed to be Putin’s daughter. At the end of 2016, Dmitriev was introduced to financier Rick Gerson, a close friend of Trump’s son-in-law, Jared Kushner. Together, they put together a plan to stabilize relations between Russia and the U.S. that covered coordination in the fight against terrorism, joint economic projects and rebuilding political ties. In his correspondence with Gerson, Dmitriev referred to President Vladimir Putin as “the boss”. After the first phone call between Putin and Trump after his election, Gerson and Dmitriev exchanged messages saying how well it had gone, but they did not stay in touch.
- The testimony of Pyotr Aven, head of the board of directors at Alfa Bank, reveals a lot not only about negotiations with the Trump administration, but how the Kremlin works. Aven told Mueller that oligarchs meet with Putin in the Kremlin every three months and some — like Aven — have one-on-one meetings. Aven said that he took these meetings very seriously, and would expect problems if he did not do what Putin asked. In a meeting at the end of 2016, Putin warned him about possible U.S. sanctions against Alfa Bank and him personally and told him to be prepared. Putin also confided that the Kremlin was having difficulties establishing contact with the Trump administration. Aven did not get a direct request to set up channels of communication, but said he would try to do this. In the end, Aven enlisted his U.S. business partner Richard Burt, who gave the scheme the codeword ‘Project A’. When Aven got a summons from the FBI, the whole thing was shut down. Putin’s trust in Aven is no accident: the two men know each other from St. Petersburg in the 1990s. Until the arrest of billionaire Mikhail Khodorkovsky, Aven and Putin are understood to have been in very close contact.
- The former Russian ambassador to the U.S. Sergei Kislyak also played an important role in building bridges, and he was praised by Kushner. In 2016, Kislyak offered to arrange a meeting for Kushner with someone he said had direct access to Putin: Sergei Gorkov, the then-head of state-owned development bank VEB. The meeting took place on the following day and it began with Grokov gifting Kushner a drawing and bag of earth from the village in Belarus where some of Kushner’s relatives were apparently born. The participants in this discussion have different memories of what was talked about: Kushner told Mueller that the meeting was diplomatic, whereas Gorkov has said that they talked about financial cooperation.
- Celebrity and fashion investor Miroslava Duma is perhaps the most unusual go-between in the Russia-Trump story. As far back as 2015, Deputy Prime Minister Sergei Prikhodko (who was caught on a yacht with billionaire Oleg Deripaska and escort Nastya Rybka) gave Duma an invitation to the St. Petersburg Economic Forum to pass to Trump’s family via Ivanka Trump, who she knows from the fashion industry. In March 2016, Prikhodko extended the same invitation directly through a Trump adviser, but the visit to St. Petersburg never happened.
Why the world should care
It seems clear that Trump’s impeachment is now off the cards, but the middlemen used by the Kremlin to reach out to Trump’s team could yet be targeted by U.S. sanctions.
Russia’s third most powerful political post could be filled by a spymaster
Valentina Matvienko, who recently turned 70, may soon be replaced as speaker of the upper house of parliament (formally the third most powerful position in Russian politics after the presidency and the prime ministership), according to sources cited by Kommersant newspaper and Dozhd TV station. The same media outlets reported that she would be moved to manage the Pension Fund and replaced by Sergei Naryshkin, a long-time colleague of Putin currently in charge of the SVR, Russia’s overseas espionage outfit.
- There doesn’t seem to be any obvious reasons for getting rid of Matvienko. Although, one of Dozhd’s sources pointed to the arrest of Senator Rauf Arashukov earlier this year on the chamber floor, about which Matvienko was only informed minutes beforehand. There has also been some speculation that she has some problems in her personal life.
- Matvienko has been speaker of the Federation Council since 2011 and, under her leadership, the body has proved absolutely loyal to the Kremlin. However, Matvienko does not shy away from publicly criticizing government officials. After opposition leader Aleksei Navalny’s blockbuster investigation into corruption associated with Prime Minister Dmitry Medvedev, Matvienko was one of the only senior politicians to urge him not to “hide his head in the sand.” Either way, the reasons for the change are more likely to be Naryshkin’s qualities than Matvienko’s inadequacies.
- Naryshkin already has a lot of parliamentary experience: before his current position at the SVR he was speaker of the State Duma for five years. No-one has any criticism of his work at the SVR and he has been able to build working relationships with his counterparts across the world, including at the CIA. But he clearly wants to return to a more public political position.
Why the world should care
A final decision about Matvienko, one of the most powerful women in Russian politics, will reportedly take place when she meets with Putin in May. The role of the Federation Council is unlikely to change under Naryshkin, but it seems more than possible that he will bring his espionage experience to bear.
Fulbright awards are now much less accessible to Russians
New U.S. attempts to block human trafficking mean it is now much harder for Russian officials and employees of state universities and high schools (the overwhelming majority of educational establishments) to get a prestigious Fulbright award.
- The new limitations became public by accident when a Twitter user published a letter dated April 2 from Dr. Joel Ericson, the head of Fulbright in Russia to a semi-finalist in the Foreign Language Teaching Assistant Program (FLTA). The letter said that “officials or employees of Russian government institutions” cannot take part in the FLTA’s 2019-2020 program. Other applicants have to prove that they are employed by private universities or schools, or that they work as a private tutor. FLTA is one of dozens of programs that Fulbright runs in Russia.
- The reason the letter gives for the restrictions is an unusual one: in 2018, Russia was placed on a U.S. list of 22 states that are not doing enough to fight human trafficking. Other countries also on the list include Syria, North Korea and Eritrea. One of the main reasons the U.S. included Russia was the so-called labor camps for North Korean workers that existed in Russia in 2017. Russia is accused of not investigating the matter sufficiently despite widespread media reporting on the subject. Carnegie has looked into these charges more closely.
- In a conversation with The Bell, Ericson confirmed the authenticity of the letter published on Twitter, but was unable say whether the restrictions would apply to every employee of a state-owned university or school. “Every case is looked at individually,” a representative of the U.S. Embassy in Moscow told The Bell. Aside from Fulbright, there are another 12 similar programs in which Russians can take part listed on the State Department’s website. The new restrictions will likely affect them as well.
Why the world should care
At first glance, school teachers in Russia’s regions and North Korean officials have little in common. But the situation with the Fulbright is a classic of case of international punishments penalizing those it wasn’t supposed to penalize. Even Russian officials win Fulbrights far less often than academics and teachers.
Computer games and cannabis: Russia’s new non-oil billionaires
This week, Bloomberg added two people to its official list of Russian billionaires: Igor and Dmitry Bukhmanov, the founders of gaming company Playrix. The brothers are from Vologda, a city about 300 miles north of Moscow, and together are worth $2.8 billion. At the same time, Forbes Russia added 8 new people to their rich list, including Andrei Blokh, an ex-milk magnate who was once CEO of Roman Abramovich’s oil company, Sibneft. Blokh’s fortunes have recently revived with a series of investments (Rus) in the cannabis business.
- The Bukhmanovs released their first game in 2001, which brought them a monthly revenue of $100. They then released others, gradually boosting their revenue stream. When they set-up Playrix in 2004 they had a monthly income of $10,000.
- Today, Playrix’s main markets are the U.S., China and Japan. They have more than 30 million players and annual sales of $1.2 billion (the games themselves are free but you can make purchases within them — advertisements are only 3 percent of their revenue). The company has about 1,100 employees, including developers in Russia, Belarus and Ukraine, but most work in the head office in Ireland. In August 2017, Playrix had higher revenues than Google Play and the App Store in Europe, and even overtook Finland’s Rovio (the makers of Angry Birds).
- Blokh owns 28 percent of U.S. marijuana producer Curaleaf Holdings (their slogan is: “Live well!), one of the few vertically-integrated manufacturers of the drug. The company owns both cannabis farms and chemists, and is worth $4.5 billion. Another 31 percent of Curaleaf is held by a different Russian investor with U.S. citizenship, Boris Jordan.
- Of the 8 newcomers to the Forbes list, only two are real newcomers (the others have been featured before). The first ‘real’ newcomer was the founder of financial start-up Revolut Nikolai Storonsky, who is valued at $500 million. The second is Filipp Gens, valued at $750 million, whose father, Grigory Gens, founded software company Lanit and died last year.
Why the world should care
The Bukhanov brothers, Blokh, Storonsky and Gens are all non-oil billionaires which, yet again, shows that, while oil and gas are Russia’s main exports, the economy is not a one-trick pony. More and more people are earning millions (sometimes billions) outside the natural resources sector.
Zelensky set to win Ukrainian presidency, vows to ‘destroy the system’
There is a little more than 24 hours until Ukraine begins voting in the second round of its presidential election. The run-off between incumbent Petro Poroshenko and political newcomer Volodymyr Zelensky has become a big political event not only in Ukraine, but also Russia. According to the final opinion polls, comic actor Zelensky is the clear frontrunner, with forecasts giving him something like 70 percent of votes. His performance during a televised debate Friday in a 70,000 seater stadium in Kiev appears to have done nothing to dent his chances. From the stage he proclaimed himself a “ordinary person” who has “come to destroy the system.” Even his well-publicised ties to Ukrainian billionaire Ihor Kolomoyskyi have not harmed his image. The Bell has estimated (Rus) Zelensky to be worth $15.6 million, and he owns several apartments, three cars and a collection of expensive watches. But this is not surprising: Zelensky runs a huge production company with multi-million dollar revenues (which he has declared — unlike Poroshenko). At the end of Friday’s debate, Poroshenko was booed by the audience.
The paradox of internet ‘bans’ in Russia
The State Duma has passed the so-called sovereign internet law, which will give the authorities the power to cut off the Russia from the global internet, and will mean internet providers incur huge costs (we wrote about the legislation in more detail here). To become law, it still requires the approval of the Federation Council and Putin’s signature — but these are mere formalities. One of the last hopes of many Russians is that the law will be a mere formality, like attempts to ban messaging service Telegram. Despite the ban on Telegram, officials and state employees continue to make very public use of it. This week, for example, journalist Nailya Asker-Zade, who works for state television, opened a new Telegram channel in which she publishes TV clips and exposes “media myths”. But here the irony moves to another level: internet watchdog Roskomnadzor has blocked more than 1,000 articles about Asker-Zade in recent months. Of questionable legality, the articles were targeted after media allegations that the head of state-owned VTB Bank, Andrei Kostin, used his bank’s resources to gift Asker-Zade expensive apartments.