Saturday, October 25, 2008

Daily Mail on Deripaska

Peter Mandelson and his very dangerous friends

Let's imagine that during the height of the Cold War, a British shadow chancellor had visited a member of the Soviet Politburo privately, during which they had discussed - even in the vaguest terms - the possibility of the Kremlin donating money into his party's coffers.

Such an episode is barely conceivable: yet had it happened and become public knowledge, the result, at best, would have meant instant resignation and permanent disgrace. It could even have led to charges of treason.

Fast forward to today and it is a sign of the mental decay and moral timidity in our public life that the meetings between senior figures in both our main political parties with Oleg Deripaska, one of the richest and most powerful men in Russia, have led to no such national outrage or official censure.

You may shrug and point out that no money changed hands. Equally, it cannot be proven that anyone in power has made decisions favouring Mr Deripaska in return for his lavish hospitality.

But that is not really the point. The glaring scandal here is that neither the shadow chancellor George Osborne nor the Tory fund-raiser Andrew Feldman nor even the Labour master-fixer Lord Mandelson saw anything wrong in socialising with someone like Mr Deripaska.

My last meeting with Mr Deripaska, in Moscow a few years back, was strictly journalistic. He spoke forcefully about the ins and outs of the aluminium industry, which is the focus of his business interests.

His minders, jumpy and solicitous, were keen to keep me off other subjects, such as his relationship with the Kremlin.

They wanted me to portray him as a mainstream businessman whose fortunes came not from connections or ruthlessness but from hard work. Clearly, Mr Deripaska was a man to be reckoned with, I concluded.

The metals industry was a terrifying business in Russia in the Nineties, where the losers in commercial disputes about control of smelters, electricity, raw materials and the finished product could easily end up dead. Mr Deripaska's clearly had friends and influence at the very top.

But Lord Mandelson, George Osborne and the other people who so happily hobnobbed with Mr Deripaska on his colossal yacht, the Queen K, and elsewhere cannot have been ignorant of the fact that their host is a man unable to enter the U.S.

As officials of the FBI and the Justice Department are happy to explain privately (in briefings that could have been arranged for senior figures from a valued American ally such as Britain), the U.S. is unhappy with some of what might euphemistically be described as Mr Deripaska's 'business associates'.

Those planning to strike up a friendship with Mr Deripaska might also find a chat with British officials useful. A subject that comes up in conversation with such intelligence experts is the fate of Mikhail Gutseriyev, a Russian oilman whose company was the subject of a hostile takeover from Mr Deripaska's business empire.

He has fled Russia and gained political asylum in Britain.

Suffice it to say that a briefing from British officials dealing with Russia should have made it abundantly clear to Mr Osborne, as well as to Lord Mandelson, that any dealings with Mr Deripaska should be limited, formal and cautious.

Of course, Mr Deripaska has his side of the story, too. He denies any wrongdoing, blaming his visa difficulties with the U.S. on 'bureaucracy'. His defenders claim that U.S. officials have been influenced by malicious rumours spread by his business rivals.

Like other Russian tycoons, he may feel that moralising westerners are judging him overly harshly. True, he succeeded in the rumbustious Russia of the Nineties, when rules were few and the rewards for risk-taking were high.

But in those days, western advisers to Russia welcomed the emergence of the oligarchs - tycoons who seized control of Russia's natural resources industries, usually adding banking and media divisions to their commercial empires.

The argument then was that any kind of private ownership was better than retaining the old Soviet system of state planning.

Once things settled down, the new business class would assuredly be the backbone of a capitalist system, adopting our western values and anchoring Russia for ever in the modern era.

Now Mr Deripaska and other tycoons from that era are doing just what we asked and predicted: going respectable.

They send their children to be educated at our finest boarding schools. They buy the grandest properties in London. They diversify their businesses into western economies. They make friends with those at the heights of our establishment - and then they get pilloried. Is that not just sickening hypocrisy?

Indeed, it is. But the sickening thing is not the belated and limited complaints being voiced, but that we allowed ourselves to be bought in the first place.

For decades, London has been the global leader in the respectability business. Indeed, it is precisely that commodity which has attracted some of the world's more colourful business characters.

In the Seventies and Eighties, it was the Arab world that discovered the mix of cachet and pleasure on offer in Britain's most salubrious corners.

With mansions in Surrey, townhousesin Belgravia and everaccommodating bankers in the Square Mile, the despotic and corrupt rulers of countries such as Saudi Arabia found that Britain offered an unbeatable mixture of personal relaxation and upmarket financial advice.

An array of fixers, PR men and go-betweens opened the doors of British society to these playboy princelings. Few knew or cared that the petro-dollars were also financing the extremist form of Islam that has bubbled over to such deadly effect in the Middle East and in terrorist attacks on western countries.

Now, London is offering rich Russians that same prestige and safety. Whether it is an entree to high society or to popular culture, our wily brokers of respectability can provide it.

Buy a football team, sponsor a charity or make a hefty donation to a posh boarding school - and even dirty money suddenly gains the right up-market cachet.

In exchange for (to them) trivial amounts of cash, the oligarchs have bought that one trinket they could not acquire elsewhere - priceless respectability.

Dzentelmenski is a Russian word meaning 'politeness', 'decency' and 'trustworthiness': something that in their eyes at least is still the epitome of what Britain stands for. And what could be more valuable than that?

In retrospect, we have sold respectability rather cheaply. Blinded by enthusiasm for Russia's burgeoning capitalism and rackety democracy in the Nineties, we overlooked its dark side.

As the Soviet empire collapsed, the KGB and Communist Party squirrelled away billions through pliant banks (some of them Britishrun) in places such as Cyprus and Austria (a story brilliantly told in John Le Carre's latest novel A Most Wanted Man). That was the seedcorn for many a fortune in the new Russia.

In other cases, the money came from an even darker corner: organised crime.

The Russian mafia grew up in the undergrowth of the failing planned economy of the Soviet era, trading everything from condoms to caviar on the black market.

After private enterprise became legal, it established excellent relations with international organised crime syndicates.

But ignoring that was even less defensible once Russia's political freedom shrivelled as the old KGB returned to the Kremlin.

Even as thousands of people were being tortured and killed in Chechnya, in a war cynically started by Vladimir Putin to consolidate his grip on power, the British establishment decided that the new Russian leader was a man they could do business with.

Tony Blair went for nights at the opera with his 'friend' Mr Putin, a foul-mouthed and brutal man who loathes the West and glorifies the totalitarian Soviet Union.

Britain's elite hobnobbed lavishly and sometimes lucratively with the 'new Russians': Kremlin cronies, some with alarming mafia connections, others linked to the old KGB.

The now jailed Mikhail Khodorkovsky used to fly selected British grandees around Russia on his private jet, awash with champagne and laden with the finest caviar.

Having narrowly escaped a libel writ from Mr Khodorkovsky (after a story questioning his business practices), I dubbed this flying circus the 'plane of shame'.

That brought a furious response from one of the guests. I should be ashamed of myself, he thundered: did I not realise how fortunate we were that the most powerful people in the new Russia wanted to be friends, not foes?

It was a naive and blinkered response. But he was by no means alone. Bankers, accountants and lawyers rushed to the trough, too.

As we now know, our financial system has for years been based on perilously fragile ethical foundations. But it is still striking how quickly the guardians of our system's integrity went along with Russian businesses' attempts to subvert it.

Oil and gas companies that are little more than criminal conspiracies, stealing billions of dollars (chiefly, let it be said, from the Russian people), had their accounts signed off by our finest auditors.

Bankers handled the colossal cash flows of what was in effect mafia money flowing directly into our financial system. Top lawyers helped them set up the web of anonymous offshore companies that conceal the real owners.

In a final twist, publicity-shy Russians have discovered that Britain's ferocious libel laws provide a perfect means to intimidate journalists - British and foreign - who ask nosy and troublesome questions or dare to publish the truth about their activities.

If writs don't work, the next option is a bullet: my colleague Paul Klebnikov, the editor of the Russian-language edition of Forbes Magazine, an American business journal famous for its investigative work, was gunned down in 2004 for his temerity in probing the network of money and power that surrounds the Kremlin.

What is so galling is that the British governing class retains its moral myopia even now, when it is clear the Russian regime is a threat to our security.

In the shadows of Whitehall, officials are aghast at the way in which Russian money is buying friends and influence in our politics, officialdom and business.

All three parties have parliamentarians who are loyal members of the Kremlin chorus. British Tories, for example, supported an attempt to make a former KGB politician the head of a top human rights body, the Parliamentary Assembly of the Strasbourg-based Council of Europe.

But the LibDems and, particularly, Labour have little to be proud of either. What will it take to wake them to the reality of the situation?

Russian warplanes practise dummy nuclear missile attacks, just outside the airspace of Nato countries including Britain.

Alarmed by Russia's invasion and dismemberment of Georgia, Nato is making contingency plans to defend its members from Russian attack for the first time since the end of the Cold War.

Our brave allies in the Baltic states and Poland are braced for another onslaught - perhaps financial, perhaps diplomatic, perhaps something more sinister.

Even the Swedes and Finns are seeking new security ties as they watch their eastern neighbour's increasingly paranoid and xenophobic behaviour.

Yet Britain, which under Margaret Thatcher provided a blazing moral beacon to dissidents inside the Soviet Union, has doused its lights.

Once it was us who bailed out the Kremlin, supporting Mikhail Gorbachev and Boris Yeltsin as they tried to establish some semblance of Russian democracy and salvage an economy ruined by state planning.

Now the money is flowing the other way, from the Kremlin to our rulers. Yet the bitter truth is that the tainted millions from Russia make our true bankruptcy - of morals, not money - even more humiliating and dangerous.


Martin said...

Mr. Lucas,

Mr. Klebnikov's murder has never been solved, and his murderers never caught. As far as I have been able to gather from information in the public domain, then if he was not in fact pro-Putin he was certainly in favour of Putin's reforms; indeed, the greatest controversies of his career seemed to involve his unauthorised biography of Boris Berezovsky.

There would appear to be absolutely no evidence that he was murdered because he investigated the Kremlin. Your comment that your friend was murdered because he was doing so would therefore to be not factual but speculative, and a letter saying so has gone to the 'Daily Mail'.

Any information to the contrary to which you can point your readers would, of course, be welcome.

Martin said...

This article indicates that Mr. Klebnikov might as easily have been killed as a result of his investigation into the politics of Togliatti, or by Khozh-Akhmed Nukhayev; neither subject would appear to be connected to any 'network of money and power which surround the Kremlin' -

Edward Lucas said...

Hi Martin

I am aware the Klebnikov was pro-Putin and that his death is still a mystery. All I am trying to say is that rich and powerful Russians use the libel laws to try to shut journalists up, and when that doesn't work they may consider killing them


akarlin said...

You haven't answered the question that Martin implicitly asked, Lucas. Unless you do that, one can only conclude that you have sunk to a new low even by your sordid standards - milking the deaths of your "colleagues" for your propaganda campaign against Russia.

Time to see some straight talk to "nosy questions", respectability and moral solvency from you for a change.

trilirium said...

martin is absolutely right.

Pavel (Paul) Khlebnikov (to spell his last name correctly) actually was investigating the criminal activities of some well-known ex-russian mafiosos, like Boris Berezovskiy and Badri Patarkatsishvili. *They* were the people seriously threated by journalist's work, and they, obviously, are the prime suspects in his death.
*Big* surprise for Mr. Lucas readers, I guess.

Edward Lucas said...

Paul Klebnikov used that spelling himself. I still have a business card that he used. Berezovsky and Badri both fit the description "web of power and money around the Kremlin". I don't know who killed Paul. But I do know that being an investigative journalist in Russia is an almost insanely risky business.


La Russophobe said...

It is established fact that Klebnikov was investigating corruption relating and adverse to the Kremlin when he was murdered. I'm stunned at the total lack of any effort to research the question by the commenters on this thread. You all should be spending more time reading La Russophobe -- and to some extent that includes you too, Edward!

Read all about it right here:

Martin said...


There is absolutely no evidence in the piece to which you provide a link that supports the assertion you have made.

La Russophobe said...


You are simply lying. Klebnikov's own colleague reports that he was working on a story about high-level corruption within the Kremlin.

Martin said...


Your assertion of mendacity weakens your position. When I click on the link, and through those to Weiss's original piece, I see no actual evidence that Mr. Klebnikov was killed because of his investigations into what you describe as 'corruption relating and adverse to the Kremlin' other than Weiss's assertion that 'At the time of his death, Paul was believed to have been investigating a complex web of money laundering involving a Chechen reconstruction fund, reaching into the centers of power in the Kremlin and involving elements of organized crime and the FSB (the former KGB).'

The differences between what you state to be fact and what is actually stated in the document you provide in support of your position should be clear to anyone with primary school level skills in English interpretation. If you think that Weiss's 'beliefs' amount to what you call 'established fact' then you are not a credible commentator, and your opinions should not be taken seriously.

At the start of this thread, I asked for evidence that Mr. Klebnikov had been killed because he was investigating the Kremlin. None has been produced, and I adhere to my original position.