Oleg Deripaska: In the Shelter of the Kremlin Walls

Last year in November the Government of Cyprus decided to deprive nine citizens of Russia of the citizenship, including a billionaire Oleg Deripaska, who has been considered the wealthiest person in Russia. Alongside this man…

Last year in November the Government of Cyprus decided to deprive nine citizens of Russia of the citizenship, including a billionaire Oleg Deripaska, who has been considered the wealthiest person in Russia. Alongside this man of property citizenship of the island was also deprived to his son and daughter.   
The so-called ‘golden passport’ was issued to O. Deripaska and another two thousand foreigners (except for their family members) during implementation of the citizenship for investment program that started in 2013. It allowed granting citizenship of Cyprus to everyone who invested minimum 2 million Euro to the real estate intended for residential use, four parts of which had to be assigned to the dwelling of the person applying for citizenship. If the potential inhabitant of the island wished to make investments in other fields, the amount of investment would grow up to 2.5 million Euro, however half a million would necessarily be assigned for purchasing of the permanent home. In this way the government of Cyprus wanted to be guaranteed that the investor would remain closely connected with this country even if he/she didn’t live here.      
This program has been useful to both parties – Cyprus received numerous direct investments to its economy and the rich people from third parties could travel around Schengen zone without any obstacles, to open bank accounts with Swiss banks, to use rather liberal and explicit Cyprus tax system and its simple business environment.     
Most states of the EU – Austria, Bulgaria, Germany, Ireland, the United Kingdom and Malta among them follow similar practice. Malta, same as Cyprus, was issuing ‘golden passports’ very easily and this caused concerns of Brussels. Last year in January the European Commission required strengthening rules for submission of citizenship to citizens of the countries that are not members of the European Union. Cyprus fulfilled the requirements – made procedure for issuing passports stricter and started checking all people who were granted citizenship after that date. This how a list of he mentioned 26 persons came to light, which includes O. Deripaska, too.            
By the way, the official Moscow has not rushed to defend its oligarch. When Dmitri Peskov, the press secretary of the President of Russia, was asked about how the government of Russia assesses the Nicosia decision, he told the journalists that the issue of citizenship is the matter of Cyprus and O. Deripaska exclusively that is not connected with the Kremlin.    
On the other hand, the decision of the government of Cyprus does not mean that all people, who were included in this list, had automatically lost their citizenship. Cyprus law does not provide for the mechanism for deprivation of citizenship. It has to be prepared by a special committee. Besides, the decision to deprive the ‘golden passport’ may also be contested.
Nonetheless, attempts of Cyprus to deprive O. Deripaska of his citizenship, was just a detail compared with all mess that happened to the oligarch in the United States. There because of sanctions assets of the company of O. Deripaska Basic Element – one of the biggest diversified industrial group that consolidates assets in Russia and abroad owned by O. Deripaska, has been blocked. This company is also the founder of the social innovations support fund Volnoje delo – the biggest charity organizations in Russia.
O. Deripaska and his controlled companies already in April 2018 were included in the black list of the U.S. In January last year sanctions to the companies , and of the oligarch were lifted, however they continued to apply sanctions to the businessman.   
What were the reasons that the Russian billionaire got into disfavour of the Department of Finance of the U.S? On 14 February the British daily Financial Times (FT) published an article where it stated that allegedly O. Derimaska was laundering Vladimir Putin’s, President of Russia, money. The article also produced a letter of the Office of Foreign Assets Control of the U.S. (OFSC) to the lawyers of the billionaire where it was indicated that this was one of the reasons for sanctions applied to him.   
O. Deripaska was identified as one of V. Putin’s money launderer already in 2016. Besides, in July 2011 the oligarch at least once transferred money to the President of Russia. These transactions were described as ordinary business operations; however V. Putin used these funds for his personal interests. The document says that money could be laundered through the motor vehicle factory owned by O. Deripaska and that this oligarch could invest 800 million US dollars to construction of ‘dirty’ money to Sochi Olympic Park under the order of President of Russia.
O. Deripaska was firmly denying his participation in unlawful financial operations. In his profile on the chat platform he called the article of the ‘an ordinary portion of nonsense’. ‘What money? He (V.Putin – author’s remark) did not trust me even a pen for ten minutes’, the businessman added.  This was a hint to the episode that happened in 2009 when President of Russia made the oligarch sign the agreement for renewal of production , when he arrived at the protest of workers at the factory of Pikalov town. V. Putin lent a pen to O. Deripaska and then he asked him to return it.   
A story with sanctions has not come to an end yet. Last year in spring O. Deripaska contested the Department of Finance of the U.S. to the Court of District of Columbia and asked for lifting the sanctions. In December the Department of the Treasury promised to later make data that justified its decision public.
Until this data becomes available in public, let’s look into the facts how a modest physician has become the wealthiest man in Russia in 18 years time. How did he manage to maintain his business empire not being V. Putin’s clansman, although he lost the biggest share of his assets within the last decade? This question is very interesting that some oligarchs who were antagonistic to the Kremlin have lost not only their property but also freedom during that time.   
O Deripaska in the interview to the daily Financial Times told that he has been simply lucky: as if riches have come from nowhere to his hands. Actually, the starting position of the future oligarch was without any prospects, to say the truth, even if we see in on the Soviet scale. He was born on 2 February 1968 in Dzerzhinsk town in Gorky (now – Nizhny Novgorod) region. He almost didn’t see his father – he was killed in the accident when Oleg was just one year old. He was staying with his grandparents in Kubanm in the area of Ust-Labinsk until he was 11. Then his mother moved to Ust-Labinsk and took him to live with her.         
At local school the future billionaire was a talented pupil, who had special skills for exact sciences. These skills led him to Moscow University, Department of Physics in 1985. After the first year of studies he had to go the Soviet army and later he continued his studies and graduated the University in 1993. He entered Plekhanov Academy of Economics the same year and graduated it with award of Master’s degree.  
These studies came in handy to O. Deripaska more than Master’s degree. Because at that time when the Soviet Union was collapsing there was no place for academic activities as a result of lack of funds, thus the diploma was equal to nothing. ‘We had no money. The biggest concern was looking for everyday means of subsistence’, O. Deripaska remembered in one interview about this miserable period in his life.      
Nonetheless, collapse of the USSR opened a horizon for new possibilities. Thus, O. Deripaska started a business that was popular at that time – trade in metals with his former university friends. A huge price difference between countries in Russia and Western world enabled him to make a fortune easily and he invested money to the aluminium factory in Eastern Siberia. In 1994 O. Deripaska became the owner of the controlling stake of this company and three years later he founded an industrial group Sibirskij aliuminij (SibAl), that later was called the already mentioned Basic Element that became one of top ten in aluminium producers in 2004. Two years later after the merger of O. Deripaska and other oligarch Viktor Vakselberg’s assets a corporation – an absolute leader in the world in this area was born.     
Currently the holding Basic Element controlled by O. Deripaska owns the companies of energetic, mining, metallurgy, financial services, building, aviation and other areas.
In 2008 O. Deripaska with 28 billion US dollars was the wealthiest person in Russia and was the ninth in the list of wealthiest people in the world published by the magazine . However, the oligarch lost most of his assets during the global financial crisis the same year. At the end of these losses his property was worth 4 billion US dollars according to the data of the same magazine. Not only financial crisis is to blame for these losses, but also the already mentioned sanctions of the U.S., as a result of which the oligarch had to waive his control of the companies and RusAl and did not get any compensation for them. Thus, the losses incurred to O. Deripaska were the biggest among all billionaires of Russia.
Sanctions that were imposed by the U.S. on the activities of the billionaire and his controlled companies were not the only scandalous story O. Deripaska was related to. In summer 2006 the government of the U.S. blocked visa of the billionaire having suspicions that he was linked with organized criminal groups.     
In October 2009 law enforcement authorities of Spain also suspected the oligarch of the same links. According to the information of the daily El Mundo, from 2001 to 2004 O. Deripaska was participating in laundering around 4 million US dollars via bank accounts of the Russian mafia. The billionaire himself denied this information firmly and promised to answer all questions of the Spanish law enforcement authorities. Then the rumpus calmed down, but in 2012 the government of Spain threatened to reopen the investigation if Russia fails to do that. Inevitably, in October 2017 the Investigation Department of the Ministry of Interior of Russia closed the case in the absence of corpus delicti.      
The same year O. Deripaska was also linked to a potential intervention of Russia in the scandal of election of the US president. American media then published information, telling that two weeks before Donald Trump was elected as a president, Paul Manafort, Chairman of his Election Campaign, in his electronic message offered personal consultations to the Russian magnate on the course of elections. This was one of four thousand documents examined when D. Trump team’s connection with Russia was investigated.    
In February 2018 Alexei Navalny, leader of the Russian opposition, published the investigation material of this Fund Against Corruption that gives rise to suspicion that O. Deripaska likely offered a numerous bribe to Sergei Prikhodko, Vice Minister of Russia. The investigation was based on the records of the escort girl named Nastya Rybka posted on a social network Instagram and a book written by her. According to the testimony of this girl, whose real name is Anastasia Vashukevich, the team of A. Navalny came to a conclusion that a member of the government spent several days in O. Deripaska yacht, where he was taken by a private jet of the oligarch.     
The investigation was closed and the court limited access to websites of A. Navalny investigations and N. Rybka started denying some of his words. Moreover, the court upheld O. Deripaska claim and obligated A. Vashukevich to pay half a million roubles (almost 6.5 thousand euro) damage to the oligarch. 
As we can see, the Russian billionaire so far used to get away with it and used to sustain just financial losses from all scandals and ambiguous stories. This suggests that this oligarch although he does not belong to V. Putin’s clan, has a reliable shelter in the top level of power.  Otherwise, most likely he would not be able to survive as most wealthy people who displeased the government.    
Aras Lukšas

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