Sergei Tarasov had been frequently photographed alongside Vladimir Putin in Moscow and Saint Petersburg. He was part of the Russian leader’s inner circle, consulted on matters of finance and relations with the EU, London and more in particular the City. Under Putin, Tarasov had prospered, become an even richer man.
The first signs of discord came after the then Ukrainian leader Viktor Yanukovych hurriedly signed Putin’s Asia Union agreement, to the great surprise of Brussels and the Ukrainian parliament. Once the initial shock was over, crowds began to gather in the Maidan in Kiev in protest against the forced rapprochement with Moscow. Until then the Ukrainian government had been engaged in a long process of negotiations with Brussels for an agreement on closer economic ties with the EU, which by the sudden stroke of a pen had become null and void, consigned to the trash can.
To the astonishment and annoyance of Moscow, Ukrainians, with the exception of the Russophone east of the country, had no desire to return to Moscow’s fold, so with a nod from the Kremlin Yanukovych ordered a savage cracked down, which resulted in the tragic deaths of more than one hundred Maidan demonstrators. It was not a good time to spoil Putin’s moment of glory with the opening of the Sochi Winter Olympics at hand, in which, according to estimates, Russia had invested a staggering fifty five billion dollars.
During the various receptions and ceremonies, Pat Kennedy, who stood in for Michael Fitzwilliams as one of Tarasov’s privileged guests, had discretely noted the Russian banker had not received the habitual bear hug from the great man, but a rather a distant handshake. The reason it seemed was Tarasov had pleaded in favour of Brussels’ demand for Ukrainian auto-determination and non-interference.
Tarasov, like certain other very rich oligarchs, had many enemies in the Kremlin, some of whom were more then willing to pour poison in their leader’s ear. Amongst these was a certain Andrei Azhishchenkov, one of the shadowy denizens of the Kremlin, head of a vast and diverse business empire with interests in real estate, construction, media and entertainment companies as well as restaurants and nightclubs.
Azhishchenkov bore a grudge against Tarasov that dated back to the early Yeltsin years, when Russia’s finance sector resembled the Wild West and banks sprung up on every street corner. One of these was a shaky establishment acquired to front the booming real estate holdings of Nikolai Yakovlevich Dermirshian, the head of one of Russia’s Mafiya fratry.
Properties in cities of Moscow and Saint Petersburg had fallen into Dermirshian’s hands almost by chance, the product of rampant corruption, debt and extortion. As soon as the Russian economy opened the property prices rocketed resulting not only in huge added values but also a unique opportunity to launder the organisation’s dirty money, all of which called for a compliant bank, or better still, Dermirshian’s own bank.
Acquiring a struggling bank was easy, but running it more difficult, and Sergei Tarasov, a young and brilliant business school graduate, was hired to manage its restructuring. Tarasov was quick to seize the opportunity and thanks to his talent and discretion he quickly gained the confidence of his masters and was soon appointed him head of the resurgent bank.
At that time Tarasov made acquaintance with a nameless aid of Anatoly Sobchak’s, the then mayor of Leningrad, who was to play a role in Mosbank’s property plans in the city. That aid was Vladimir Putin, a former student of Sobchak’s at Leningrad University1. They became friends and later Tarasov acted as one of Putin’s close advisors during his first presidential election campaign.
In those early years Putin, the former KGB lieutenant colonel, was a frequent visitor at the up and coming banker’s newly acquired villa in Novo-Ogaryovo situated in the pine-scented woods on the outskirts of Moscow.
There was only one black mark on Tarasov’s otherwise successful rise, he had been promoted over another ambitious candidate: a protégé of Andrei Azhishchenkov. As Mosbank grew and was transformed into InterBank, Azhishchenkov, future member of Putin’s inner circle, saw Tarasov as having evinced his protégé, forgetting it was Tarasov’s talents that had created what had become InterBank, an influential, highly profitable, international bank. Azhishchenkov was a man to bear grudges and as he watched Tarasov become the new leader’s confident he bode his time, waiting for his moment to come, and come it did in the early summer of 2014.
Following Russia’s forced annexation of the Crimea, came an uncontrolled conjugation of events. The first was the invasion of the Donetsk Region by Russian paramilitary forces, then the accidental shooting down of a Malaysian jetliner, followed by economic sanctions imposed by the US and EU against Moscow.
The effect of sanctions was marginal and it was not until Russia’s life blood was hit by the fourth event that real pain was felt. This was the result of serendipitous cyclic forces in the energy market, fortuitous from the point of view of the West. A conjuncture totally independent of political or strategic considerations by the opposing parties, which resulted in the: sudden oversupply of oil and the intervention of market forces, which was translated into the brutal collapse of prices.
The US production of shale oil had reached record levels in a market where the increased production of conventional oil met with falling demand.
Seventy percent of Russian exports consisted of oil and gas, the revenues from which made up half of the federal budget and a quarter of the Federation’s total GDP. Unexpectedly the Kremlin found itself forced to dig into its reserves, which substantial as they were could not last forever.
Tarasov’s fall from grace had not been entirely unforeseeable. In an interview with The Times of London, he had spoke in favour of a negotiated solution to the Donetsk problem, which in the Kremlin’s eyes was not his or any other businessman’s prerogative, however rich and powerful he was.
Had he deliberately distanced himself from Putin’s policy in sympathy for the Ukraine’s right to self determination? No, he was a businessman and felt no particular sympathy for Kiev. Had it been a political challenge? Again the answer was negative, he had no political ambitions. Or was it his inside knowledge as a banker and investor? The latter explanation was nearer to the point.
Tarasov with his finger on the pulse of commodity markets realised a watershed had been reached, the golden days of oil and gas were over, at least for the present, and hard days were ahead for the Russian economy.
He was not alone. Like other oligarchs he had been discretely transferring his moveable assets, namely cash and shares, to the safety of various offshore vehicles. Then came his decision to move InterBank’s subsidiary property investment business to London, which did go down at all well with the Kremlin’s master.
The final straw came with his revolt against the forced purchase of non-tradeable government bonds.
In the wake of economic sanctions, the collapse of oil revenues and the vertiginous fall of the rouble, the Ministry of Finance, in order to avoid deep budget cuts, summoned Russian businesses to exchange their dollar reserves for rouble denominated government bonds, which of course the oligarchs had no choice but to accept, that is with the exception of Tarasov who openly criticised the move.
Retaliation was swift and Putin’s until recently close relationship with the oligarch turned as icy as the hard trodden snow on Red Square. The Kremlin in a classic move, ordered the Ministry of Finance to seize the bank and its assets, justifying its moves by accusations of massive fraud tax evasion.
Wisely Tarasov postponed his return to Moscow in the hope that the crisis would pass. Any thing else would have been an invitation he could not refuse - a long sojourn in a hard labour camp in Siberia. He had no desire to suffer the same fate as that which befell Mikhail Khodorkovsky, a high flyer who had fallen out of favour with the Kremlin’s master, a consequence of the oligarch’s inordinate political ambitions.
Whilst the UK government could not prevent Tarasov from be pursued in British courts by the Russian authorities, Tarasov was protected by the absence of a bilateral extradition treaty between Russia and the UK, which had not however prevented the FSB from pursuing the Kremlin’s other enemies in London, amongst them Alexander Litvinenko and Boris Berezovsky, both of whom ended up seriously dead.
Nobody but nobody was beyond the reach of the Kremlin as Yuri Felshtinsky, a Russian historian noted. London had gone from being a safe haven for Russian expatriates to being a most dangerous place for those in the Kremlin’s sights.
Tarasov feared Putin, a man he had seen rise from a modest functionary, an assistant to the mayor of Saint Petersburg, to become one of the most powerful men on the planet. He saw him as a pure product of the Soviet system, a creation of Leonid Brezhnev’s Russia. Putin, who had no education or experience in politics, based his rule on Soviet style dictates without any other vision than that unquestionable obedience, reinforced by agents of the state who shared his ideas.
Putin’s vision was the restoration of a Greater Russia, summed up by Alexander III’s not unreasonable conviction that ‘Russia should belong to the Russian people’. Vladimir Putin was in fact a modern Emperor and Autocrat of All Russia consecrated by the Holy Synod, and his court, comprised of Russia’s wealthiest and most powerful men, was part of the Sacred Guard - a state within a state.
1. Kremlin Rising: Vladimir Putin's Russia and the End of Revolution-Peter Baker, Susan Glasser
As Kennedy watched the suburbs of Beijing roll by he was reminded of the high-speed train disaster that cost the lives of forty passengers. A humiliating loss of face for China’s technology and state railway. The minister responsible, who had cut corners in the race to build a world beating system, was tried for corruption and during his trial it was revealed he had received a four percent commission on contracts which he used to keep eighteen mistresses.
It was no secret that corruption was endemic in China, where officials, great and small, used their position for graft, enriching their family businesses and building networks that reached into every corner of the economy.
Financial institutions including the Wu’s own bank operated within a system that encouraged corruption. Every property and land development project was an opportunity for graft via state-owned banks which had been instrumentalised to promote growth at almost any cost regardless of the viability of the projects.
A very public example was Bo Xilai, the head of the Communist Party in Chongqing, a vast urban conglomeration of thirty million souls, where Bo’s family had amassed a fortune of nearly three billion dollars. The former Politburo member and commerce minister was involved in the most sensational murder scandal in China’s Communist Party’s post-Mao history. Bo was sentenced him to life in prison for corruption and abuse of power after a dramatic trial and his assets seized.
Others high profile Communist Party members tried for corruption included Zhou Yongkang, former chief of domestic security and member of the Politburo, who was convicted of abuse of power, accepting bribes and revealing state secrets. He was sentenced to life in prison.
Similarities existed with Putin’s system in Russia, where political opponents were tried for corruption in secret trials, avoiding the kind of scandal that occurred in China. Both countries had a long tradition of targeting enemies of the system, real and perceived, which dated back to the days of Mao and Stalin.
Xi Jinping, General Secretary of the Communist Party of China, whose crackdown on corruption hit the China National Petroleum Corp. and other top state owned companies, had vowed to hunt down tigers as well as flies in his drive to rid the Party of corruption, was himself accused of accumulating a vast fortune via his extended family through the property and industrial empire they controlled.
The existence of a web of princelings, descendants of prominent and influential senior communist officials, at the heart of the ruling clique ensured the continuation of the system, was a fact commonly known by the man in the street in China, who was anything but naive. More than ninety percent of the population believed that political corruption lay at the source of the richest Chinese families’ wealth, such was the case of Wen Jiabao, a former Prime Minister, exposed by investigative journalists, who disclosed his extended family had accumulated a fortune estimated at nearly three billion dollars.
As Beijing looked to its frontiers, Chinese businessmen, especially those in the south turned their eyes to new labour sources. Vietnam bordered China’s southern provinces of Yunnan and Guanxi, a one hour flight from Hong Kong or Canton to Hanoi. It offered a cheap educated labour force and access to ASEAN, an association of nine South-East Asean nations with a combined population of over six hundred million.
As INI’s Chinese investors set up manufacturing plants in and around Vietnam’s coastal cities Kennedy set out with John Francis to discover the attractions of the country as an investment centre.
Francis, who had visited Vietnam on many occasions, had chosen Ho Chi Minh Ville, or Saigon, the country’s economic capital to start their visit. There from the roof top of the Caravelle Hotel he pointed out the main landmarks of the vast conurbation, a modern city of eight million, to Kennedy.
He was astonished at the city’s speed of change. With each passing visit it seemed to grow before his eyes, an almost unbelievable transformation from the French colonial city he had once known and which before the war had been described as the Pearl of the Orient, and it was: a garden city and a port onto the South China Sea.
Francis could not help seeing the goods produced by its factories as another onrushing tsunami soon to flood Europe. The country’s population was going on one hundred million, with its workers aspirated by the new production lines being built across the country.
The casual tourist only saw workshops producing lacquer ware, silk scarves, conical hats and cultured pearls, but behind that charming façade were countless new manufacturing plants pouring out an endless stream of electronics and consumer goods, situated in new industrial zones, owned by Chinese, Japanese, Taiwanese and American firms.
From their vantage point at the roof top bar of the Caravelle, in the heart of down-town Saigon, they could see the city extending along the banks of Mekong to the east and Cholon to the south. Francis felt his throat tighten as the force that emanated from the vast heaving city rose up before him.
His first visit to the Caravelle went back more than three decades and though it had not been so grand it had been one of the city’s landmarks. During the latter days of French Indochina and during the Vietnamese war it had been a favourite haunt of foreign journalists.
The iconic hotel was no longer recognisable, dwarfed by a new rose coloured tower. It was a mere appendage on the flank of a shiny thirty storey glass and marble edifice that resembled so many hotels across the world, and more especially those of Asia.
The first time Francis touched down in Saigon, newly re-baptised Ho Chin Minh Ville by the Communist government in Hanoi, it was under the control of the conquering People’s Army of Vietnam, until recently, at the time, known as the North Vietnamese Army. It was not long after the humiliating debacle of 1975, which saw the American backed South Vietnam, or Republic of Vietnam, government overrun by the Communist forces.
The first images that flashed by as the Air France 747 touched down remained fixed in his mind forever: a vast and astonishing parking lot overflowing with countless numbers of abandoned American helicopters, fighter jets, reconnaissance and transport aircraft of every possible description, all packed tightly together, as far as the eye could see.
He had arrived on one of the first postwar flights from Paris and had checked into the then run down Caravelle, renamed Independence Hotel. It was a remarkable moment, he was the sole client in the desolate establishment. Late into his first night in Ho Chi Min Ville, no longer the capital of Vietnam, he was awoken by the cries of the conquering soldiers of the Vietnam People’s Army, the smashing of glass and overturning of table, as they quit the street level terrace, refusing to pay for their food and drinks, insulting the staff and treating them as capitalist lackeys.
Since that remarkable visit, Francis had witnessed the changes that had taken place over the intervening forty odd years, as the city was transformed into a pulsating capitalist metropolis, where millionaires were made overnight, where the homeless huddled in shop doorways after eking out their miserable existence scrummaging through the garbage piles heaped up outside the city’s bustling markets.
The Vietnamese Communist Party had portrayed the South’s liberation as a victory: reality was different, their victory was Pyrrhic, and the newly unified nation faced long years of hardship. A decade and a half later the proverbial dominoes started to fall, but not those of capitalism! First the DDR, then Moscow, Beijing, Hanoi, Havana and the rest of the Communist camp fell as capitalism and globalisation triumphed.
Hanoi, after more than two decades of trying to impose Marxist economic policies, slowly realized the path traced by Deng Xiaoping was the only possible route to prosperity, that is to say via a market economy, the only means of fulfilling the needs and aspirations of Vietnam’s burgeoning population.
They visited the Museum of Remembrance where Pat Kennedy was marked by the military aircraft parked in the museum’s forecourt: triste souvenirs of war. But the sparkling new Pepsi-Cola vending machine standing a few steps from a Chinook gunship told another story. On the one hand the United States had abandoned a war that had cost too many American lives, and on the other the Communism and its adherent nations had been bled dry in the long confrontation against what they described as Western imperialism.
Francis could not help thinking the arrival of one nearly hundred million Vietnamese to the consumer society would surely be at the expense of the West. Was there a solution? It was a philosophical question, a subject for future historians to study. In sort it was not his problem. His was to guide Pat Kennedy, and more precisely Michael Fitzwilliams, through the dangerous shoals of capitalism in order to ensure the continued success of the INI Banking Corporation.
RUSSIA’S FAR EAST
It was not only China’s southern neighbours who were worried by Beijing’s expansionist policies in the South China Sea. To the north, from its vast Far Eastern Federal District, the Kremlin cast a wary eye on each new territorial claim made by the Middle Kingdom, fearing it would one day turn its attention to north.
“Russia’s remote Far East is slowly and inexorably being colonised by Chinese immigrants,” Francis informed INI’s managers at one of the bank’s regular internal seminars, held to review changing economic perspectives and the effect of geopolitics on their business objectives. “One day, sooner than later, population, economic pressures and political ambitions will surely result in an overflow into those huge almost empty regions.”
The district, from Pavlovich in the Sakha Republic, to the Sea of Okhotsk and the Pacific in the east and the East Siberian Sea to the north, represented one third of all Russia’s territory, with a population, barely six million, a mere five percent of Russia’s total population.
“The Russian Far East was once known as Outer Manchuria. It was first reached by Russians explorers in the mid 17th century, whilst we, that is to say Western Europeans, colonised the world by sea,” Francis told his audience. “The czars expanded their empire eastwards, leading to a long series of conflicts between Russia and the wary Middle Kingdom. In the eighteenth century Russian explorers continued on to what is now Alaska, where they came face to face with the British in Canada.”
“I believe there’s a lot of Chinese in Vladivostok today,” said Liam Clancy, the junior of the group.
“A good point Liam. In 1860 Alexander II founded Vladivostok and as it expanded fifty thousand Chinese flocked into a small district of the city known as the Millionka. It was a labyrinth of alleys, about the size of a couple of city blocks, filled with opium dens, brothels and gambling halls, all under the control of Chinese triads.”
Francis explained how Stalin, in 1937, viewed the Asian population of Vladivostok as a menace, and the Chinese, along with many other non-Russian immigrants, were deported. For the next half a century only Soviet citizens of mainly ethnic Russian origin, that is Russian speaking Europeans, lived in Vladivostok. Then, in 1992, following the dissolution of the Soviet Union the Chinese returned and the city quickly became the home to Russia’s largest Chinese population, second only to that of Moscow.
“Today we’re looking at a dramatic turning point in Moscow’s historic ambitions. Young ethnic Russian are heading west, their numbers in the Far East have fallen by twenty percent, and the vacuum is being filled by East Asians.
“Vladimir Putin’s ambitious resettlement programme has failed miserably. Moscow had planned to attract eighteen million Russians to the Primorye Region, of which Vladivostok was the capital, but since the programme was launched only a few thousand have migrated eastwards, in fact many more have moved in the opposite direction, to the lights of Moscow and Saint Petersburg. We only have to look at official Russian statistics to see the population of Primorye is shrinking by fifteen thousand a year.
“In contrast, over one hundred million people live in the three Northeast provinces of China, while the population of the Russian Far Eastern Federal District, over six million square kilometres, has fallen to a bare fraction of that.
“It’s the story of modern Russia, declining population and declining perspectives, which probably goes a long way to explain Putin’s interest in annexing the Ukraine with its forty million souls,” concluded Francis sadly. “A paradoxical situation given Vladimir Putin’s recent overture to China. Russians look west and Putin points to the east.
“It’s as inexplicable as Putin himself, a democratically elected autocratic. In contrast to most Western leaders he’s loved by most of his compatriots, he’s a proud patriot, who, despite its cost, puts his vision of Russia before all other considerations.”
“Unlike our lame duck leaders … Cameron and the like,” commented Tom Barton sadly, “prepared to sell their country’s values down the road for their own electoral ambitions and their sorry ideas of the politically correct.”
Kennedy was revelling in it, surrounded by oligarchs and their bejewelled wives and mistresses. He was seated at Sergei Tarasov’s twenty thousand dollar table at the Conservative Party spring fund raising dinner, a special event situated somewhere between the black tie ball and summer party, held to raise campaign funds to fight the coming general election.
The guests at the Old Billingsgate Market, including the men from INI, were all together, worth many billions.
One of the evenings attractions was the auctioning of a bronze bust. At first Tom Barton was puzzled; the bust was a likeness of who? It was rumoured to have been sculpted by an eminent Harley Street plastic surgeon. Barton was not impressed by the effort and jokingly whispering to Kennedy, “I hope he does a better job on his patients.”
Then the penny finally dropped, Barton realised the hilarious effort was a likeness of the star of the evening himself: David Cameron, who finally appeared, loudly applauded, followed by other distinguished guests.
With the burst of exceptionally warm weather and positive opinion polls, the Conservative leader was looking relaxed: tieless, in a navy blue suit, with Samantha at his side wearing a dress designed by a modish Serbian fashion designer. Taking the cue from their leader, the male guests offed their ties. The ladies, discretely alerted by the Prime Minister’s communications staff, were mostly wearing stylish, but unostentatious dresses, which would not have gone down well on tabloid readers who would soon be going to the polls. That was of course with the exception of one or two Russian wives, or mistresses, present, who wouldn’t have felt dressed without a layer of ???????: a bling dress, totteringly sky high heels, and adorned with a mine of diamonds, looking as though they had stepped out of a paparazzi Marbella nightclub shoot.
To the acclamations of the guests, Sergei Tarasov acquired the bust for an eye watering one hundred thousand dollars. Pat, present with a dozen other convives at the Russian’s table, jokingly remarked to his neighbour, Steve Howard: “He could give it to Putin as a birthday present.”
Howard laughed.
“Seriously, it would’ve been better to donate the whole fuckin cost of the evening to some worthy cause, it’s a bit of a bloody farce with all this arse licking.”
“No Pat, it’s electioneering. Politics.”
“It’s beyond me.”
Tarasov was intelligent enough not to keep the bronze, diplomatically offering the object to the Carlton Club, the bastion of the Conservative party, where it was, they later learned, relegated to a quiet corner of the lower ground floor library, amongst dusty copies of parliamentary debates and the Hansard, pending the result of the spring general election.
Sergei was rewarded by a very relieved Prime Minister with a warm manly hug to the enthusiastic cheers of the guests. The Russian banker, an experienced exponent on the importance of friends and relations in high places, had become a regular figure at such evenings.
The fund raising event was part of the Conservative Party’s plan to top up its treasure chest for the election, less than a year away. For the rich and powerful businessmen present, many of whom were City bankers like Tarasov and Michael Fitzwilliams, the idea of a Labour win would spell disaster.
On their arrival Prime Minister and his wife had been ushered into private cocktail offered by Ronald Gould, the property magnate, owner of the Gould Tower, which housed the headquarters of the INI Banking Corporation. Gathered together were Fitzwilliams, Tarasov and a handful of VIP guests who had paid for privilege of a moment of before dinner bonhomie with the Prime Minister.
Lord Carneigham, a member of the Cabinet, an Old Etonian, an intimate of the Prime Minister and one of the Conservative Party’s leading fund raisers, was a longtime friend of Fitzwilliams, and had, following a hefty contribution, had ensured the Russian’s presence. Fitzwilliams had informed Carneigham the Prime Minister could count on Tarasov’s support in the on going discussions with Moscow relating to the cease fire between the Russian backed rebels and Ukrainian forces in the Donetsk region.
Tarasov reassured the Prime Minister, informing him of Vladimir Putin’s good intentions in the Ukrainian crisis, as intense behind the scenes negotiations continued. To his mind it was in the Russian’s best interest that the conflict be de-escalated as quickly as possible.
On the Prime Minister’s side, was the fear of a larger conflict in the Ukraine, and worse the prospect a direct confrontation with Moscow in the Baltic if things really soured, which Britain could not afford economically or militarily. Cameron’s government, like that of Labour before him, had cut defence spending to the quick and a European skirmish would have disastrous consequences.
The changes in London had been no less than phenomenal and few noticed it more than a returning expat, which James Blake was. He had lived in Miami for seven years, where he was responsible for the development of legal and financial services for Guthrie Plimpton’s Caribbean real estate division.
His hurried return was provoked by the sudden decline of his father’s health. The old man had been hospitalised at St Georges Hospital in Tooting, South London, after a malaise while visiting his brother in Wimbledon.
On arrival at his parent’s home in Camden, Blake was reassured with the news his father was out of danger. Relieved he grabbed a cab and was soon crossing the Thames heading south to Tooting. Arriving from the from the Sunshine State, London seemed damp and dismal with the late morning traffic in a stop-start, bumper to bumper snarl.
Blake had always tried to avoid the ‘this is why I left’ feeling, though the challenge of finding the England he held in his mind’s eye had become confusing. Leaving England had opened his eyes and made him realize he had been fed and conditioned with a wrong image of the world ‘over there’.
This time, however, he felt something had changed, as the taxi made its way across what was London’s heart: Westminster, the West End and the City, he discovered a certain dynamism. Then after crossing London Bridge and past the Shard, the traffic inched forward at a snail’s pace and urban landscape wa