A Show Trial in Moscow

Nikita Shvetsov/Anadolu Agency/Getty Images

Alexei Ulyukaev at Zamoskvoretsky District Court, Moscow, September 7, 2017

As the sensational trial of former Minister of Economic Development Alexei Ulyukaev continued this week in Moscow’s Zamoskvoretsky District Court, it seemed more and more like a replay of the infamous show trials of the Stalin period—the charges bogus, the outcome predetermined. Ulyukaev is the first Kremlin minister to be charged with a crime while in office since Lavrenty Beria was arrested in 1953. He is accused of taking a $2 million bribe from Igor Sechin, the CEO of the Rosneft oil company, in exchange for facilitating Rosneft’s purchase of controlling shares in the state oil company Bashneft. Ulyukaev was detained by the Federal Security Service (FSB) on November 14 last year after he walked out of Rosneft’s Moscow headquarters with the cash, and has been under house arrest since. 

Ulyukaev appears to be a pawn in a larger political game. In the words of veteran Russian political analyst Anton Orekh: “He was nothing more than a worm on a hook; he was not the real target.” Orekh says that Sechin, widely viewed as the most powerful of Putin’s subordinates and the de-facto leader of the hardline “siloviki” faction in the Kremlin, was using Ulyukaev to attack the so-called “liberals” in the government, represented by Prime Minister Dmitry Medvedev and his group of economic reformers. But the case has another purpose as well. In true Stalinist fashion, President Putin, who would have given his approval for Ulyukaev’s arrest and trial, is sending a message to all members of his entourage: Watch out, you could be next. While Ulyukaev’s case points to a conflict over power and resources within Putin’s elite, it is also a manifestation of a broader crackdown by Putin—a crackdown that includes the recent shocking arrest of famed theater and film director Kirill Serebrennikov on fraud charges and the arrest last summer of Kirov governor Nikita Belykh, whose trial is now taking place in Moscow as well. With presidential elections looming in the spring of 2018, and the Russian economy still fragile, Putin may be feeling vulnerable and be concerned both about popular discontent and the loyalty of his elite. Now, more than ever, he needs to show that he is in charge. 

Ulyukaev, who faces up to fifteen years behind bars if convicted, looked visibly wan and older than his sixty-one years when he appeared in court on the first day of his trial, August 16; he told journalists that he lost more than thirty pounds since his arrest. But he was defiant, claiming that he was innocent and had been “set up” by Sechin and Oleg Feoktistov, the FSB general in charge of Rosneft security at the time: “Sechin called me [to Rosneft headquarters] on the pretext of discussing important matters and proposed we meet. That’s when the bag [of cash] was given to me.” Ulyukaev says he did not know the bag contained money, but Russian prosecutors have a different story. In their version, when Ulyukaev and Sechin were both at a BRICS summit in Goa, India in mid-October 2016, Ulyukaev complained that, while everyone got payoffs for doing deals on the Kremlin’s behalf, he was working around the clock on the Bashneft transaction and getting nothing in return. Sechin, taking Ulyukaev’s statement as a request for a bribe, reported it to the FSB, which then laid a trap for him. 

The problem with the prosecution’s narrative is that the Bashneft purchase was completed in early October, before the summit in Goa happened. Furthermore, it strains credulity that Ulyukaev, with his long years of experience in the government, would have allowed himself to be duped into taking a bribe so blatantly—especially since, by all accounts, the deal was not contingent on his approval in the first place. How could Ulyukaev exhort a bribe from Sechin for something Sechin, who manages to win out in all Kremlin internecine struggles, would get anyway? In the words of one government official: “If Alexei Ulyukaev had been accused of running over an old lady while driving a Gelandewagen at high speed through Moscow late at night, even that would look more probable.”

In addition to lack of motive, the prosecution’s case thus far seems flimsy on evidence, although in the Russian system of justice evidence often does not matter much. On Tuesday, the third day of the trial, the prosecutor read from a transcript of a taped conversation that took place between Sechin, who was wearing a wire, and Ulyukaev just before the latter was arrested as he and his driver were leaving Rosneft headquarters in a BMW. There was no discussion of money or a bribe, and it was not at all clear from the conversation that Ulyukaev knew that there was $2 million stashed inside a briefcase Sechin gave him that also contained a bottle of expensive wine. Sechin, who reportedly has a habit of giving gifts to business associates, presented Ulyukaev with a basket containing sausages as well. (Sechin is an avid hunter and often has the Rosneft chef make sausage from the wild game he catches.) According to Ulyukaev’s driver, who was questioned in court today, Sechin was with Ulyukaev when he put the parcels in the trunk, thus making sure that his plan came off.


Ulyukaev’s fall from grace was preceded by a highly successful career as an economist and central banker. (He also has published three volumes of poetry.) As he pursued a doctorate in economics, Ulyukaev became associated in the late 1980s with Yegor Gaidar and other prominent economic reformers during the years of perestroika, and eventually served as deputy head of the Gaidar Institute for Economic Policy. From 2000 to 2004, he was first deputy minister of finance under Alexei Kudrin, and then moved to the Central Bank of Russia, where he served as first deputy chairman from 2004 to 2013, overseeing assets management and making his name as a frequent speaker on financial and economic affairs. Ulyukaev was the favored candidate to become governor of the Central Bank when Sergei Ignatiev retired in 2013, but in the end Putin gave the job to Ulyukaev’s colleague Elvira Nabiullina, and Ulyukaev became minister of economic development in the cabinet of Prime Minister Dmitry Medvedev. 

Ulyukaev’s influence in the financial world grew after he became chairman of the supervisory board of VTB Bank in mid-2015, and the next year was appointed to the board of Gazprom. But his reputation started to be tainted with scandal. The state-controlled VTB Bank, which was placed on the Western sanctions list in 2014, had become notorious for its illicit financial practices and its lack of transparency, problems that Ulyukaev apparently made no effort to address. The anti-corruption blogger and now presidential candidate Alexei Navalny once said: “VTB is a group of money-laundering thieves endlessly devouring money allocated as ‘financial assistance.’” (Coincidentally, it was VTB Bank that President Trump’s lawyer Michael Cohen was supposedly lining up to finance the planned Trump Tower in Moscow.)

Mikhail Metzel\TASS via Getty Images

Alexei Ulyukaev and Rosneft CEO Igor Sechin during the G20 summit in Hangzhou, China, September 2016

In 2015, Ulyukaev was featured ignominiously in the Panama Papers, which disclosed his secret offshore family company, operating in the British Virgin Islands from 2004 to 2009. It is illegal for Russian government officials to own companies abroad, so Ulyukaev got around the problem by listing family members as directors: Ulyukaev’s twenty-one-year-old son Dmitry was initially listed as director of the company, followed by Ulyukaev’s second wife, Yulia. Navalny later revealed another offshore company, listed in Cyprus in the name of Ulyukaev’s father, who is in his eighties. All this was technically legal, but certainly looked bad. As for Ulyukaev’s reported income, according to documents unearthed by Navalny it was around a million dollars in 2015. At that time Ulyukaev owned twelve parcels of land, a residential house, an apartment, and a dacha, while his wife owned five parcels of land, two houses, and two apartments. This was a substantial holding for a Russian civil servant and his spouse.

It should come as no surprise that Ulyukaev took advantage of his privileged Kremlin position to enrich himself and his family. As the Russian journalist Evgenia Albats said to me this week: “Of course Ulyukaev is corrupt, who isn’t in the government? That is the rule of the game in Russia, otherwise you are lacking weight on the bureaucratic market.” Indeed, Ulyukaev’s accuser, Sechin, is a notorious crook. In September 2016, Navalny’s Anti-Corruption Fund documented the rewards Igor Sechin has earned as the chairman of Rosneft, including a $150 million yacht and a mansion in the exclusive Rublevka suburb of Moscow that, together with its land, is valued at close to $60 million.

According to Navalny, Sechin is a “witless, mediocre manager” who got his powerful position as Rosneft CEO because he was for several years Putin’s secretary and “carried his briefcases.” Rosneft’s acquisition of Bashneft, which led to Ulyukaev’s arrest, may in fact be an example of Sechin’s poor management skills. Supposedly the private company Lukoil, Russia’s second largest oil producer, had been engaging in joint ventures with Bashneft for several years and wanted to acquire the controlling shares in Bashneft. Two senior ministers in Medvedev’s cabinet, Igor Shuvalov and Arkady Dvorkovich, were reportedly lobbying on behalf of Lukoil and had opposed the Rosneft purchase, as did Ulyukaev before he was persuaded otherwise late in the summer of 2016. They argued, with justification, that Rosneft is not a private company because more than two thirds of its stock is owned by Rosneftgas, which is state-owned, so the purchase would just be assets shifting from one state corporation to another. In their view, the transaction undermined Russia’s privatization efforts. Sechin, who is not a fan of privatization, won out, but the deal has not been beneficial for Rosneft, which was already in debt and had to sell 19.5 percent of its assets to cover the purchase of Bashneft stock for $5.3 billion—higher than the market price.


Although at this point the case against Ulyukaev boils down to his word against Sechin’s, it is not clear that either Sechin or FSB General Feoktistov, who facilitated the covert operation against Ulyukaev, will appear at the trial as witnesses. Feoktistov, who has gained notoriety as the investigator in several high-profile corruption cases, including that of Nikita Belykh, was seconded from the FSB to Rosneft by Sechin in August 2016, presumably to work on the Ulyukaev case. He reportedly fell out of favor for going too far in investigating members of the elite after he returned to the FSB, and was sent into retirement. As for Sechin, who just yesterday repeated to journalists his claim that Ulyukaev took a bribe from him, he has good reason to avoid facing the former minister in court. The transcript of his conversation with Ulyukaev on the fateful evening of the arrest reveals treachery on his part that rivals that of Shakespeare’s worst villains. Using the familiar “you” (ty) with Ulyukaev and addressing him by his diminutive, “Losha,” Sechin fusses over him and feigns concern that Ulyukaev is not wearing a jacket and will get cold. (He knows, of course, that Ulyukaev will be spending the night in a dank prison cell.) He talks cryptically about “completing a task,” presumably to imply that he is referring to a bribe, but without arousing Ulyukaev’s suspicions. 

The basket of sausage was an added touch, and its irony has not been lost on Ulyukaev. He blurted out to journalists in court yesterday: “Beware of Danaans [Greeks] bringing gifts of sausages.” This might be amusing if it were not for the chilling parallel between Sechin’s actions and those of Stalin and his henchmen. Alexei Navalny, himself a victim of false corruption charges, has said that the prosecution of Ulyukaev is part of Putin’s plan to create a “nightmare” for the Kremlin elite: “The elite hates Putin and is scared of him. He is afraid that the elite will betray him, so he is doing what all authoritarian leaders—from Stalin to the chief of an African tribe—do: periodically repress some unsuspecting person, so that the others will grumble less and actively fight each other.”

Perhaps Ulyukaev will avoid prison and receive only probation or a suspended sentence. Whatever happens, he can at least be thankful that he is still alive. Eleven years ago this month, Ulyukaev’s colleague, Central Bank First Deputy Chairman Andrei Kozlov, an advocate of reforms that were resented by the banking community, was brutally gunned down on a Moscow street. 

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