As U.S. sanctions bit into Russia’s billionaire class in 2018, an accounting firm in Singapore issued a secret appraisal of a $200 million debt owed by one of the targeted oligarchs.
The verdict was bracing. The money was owed by a company controlled by Oleg Deripaska, according to a copy of the appraisal, at a time when his energy and mining empire was reeling from sanctions the United States had imposed on Russian oligarchs in response to “Russia’s worldwide malign activity.”
Now Deripaska’s assets were at “risk due to the unstable political situation, demonstrated by the latest round of sanctions,” the accounting firm wrote. Recovering more than a small fraction of the $200 million, the firm concluded, “would be difficult if not impossible.”
This meant a loss of tens of millions of dollars, as the impact of sanctions rippled across a hidden corner of what critics call Russia’s kleptocracy.
U.S. Officials involved with sanctions policy claim that visibility into private ledgers of target oligarchs, even when in classified situations, is very rare. The International Consortium of Investigative Journalists(ICIJ) has uncovered details of the Deripaska-debt-gone-bad and provided them with a huge trove of financial records. This information was shared with The Washington Post (and other news agencies). The Pandora Papers , as it is known, give insight into U.S.-European sanctions against a variety of Russian elites during a period when punitive actions are the dominant weapon in Washington’s hostile relationship with Moscow.
Story continues below advertisement
Over the past seven years, the United States and Europe have imposed sanctions on more than 800 Russian individuals and entities for alleged “malign” behavior including Russia’s annexation of Crimea, armed incursions into Ukraine, attempted assassinations of political dissidents, cyberattacks on Western institutions and disruptions of U.S. Elections.
The Pandora files show sanctions not only hitting their Russian targets but then triggering losses that spread across their interconnected financial networks.
The documents contain material on at least 46 Russian oligarchs who appear on the Forbes list of billionaires. Gennady and Deripaska, both of whom amassed fortunes through oil trading, are among them. Peter Kolbin is also a close friend of Russian President Vladimir Putin. He was allegedly able to hold hundreds of millions in assets.
Pandora documents show that Timchenko and Kolbin changed the registered ownership of offshore companies as sanctions hit.
But the files also underscore the limits of sanctions, making clear that vast quantities of Russian money continue to slosh through secret global accounts while Moscow’s actions beyond its borders seem undeterred. Russia still controls Crimea. A prominent Putin critic was poisoned last January. The U.S. intelligence agency accused Moscow of launching a new attack against a U.S. Presidential election.
Current and former U.S. officials said the losses and reactions depicted in the documents demonstrate the reach of the West’s financial arsenal. These punitive actions can influence Kremlin calculations, if it is not changing its course.
“What it shows is that these networks don’t feel untouchable,” said Julia Friedlander, who served in senior positions at the Treasury Department and the White House during the Obama and Trump administrations. “Although sanctions have often failed to deliver on larger political goals,” she said, they disrupt adversaries who “rely on our financial markets as an element of their own power.”
A losing $200 million shuffle
Deripaska, 53, was among seven Russian oligarchs sanctioned in 2018 by the U.S. Treasury Department. In an attempt to increase pressure on Russia, several of his companies were targeted, including Rusal which is one of the largest conglomerates of aluminum in the world.
The impact of such measures can be severe. These designations can have a severe impact on global markets where the U.S. currency is dominant.
Treasury cited Deripaska’s close ties to the Kremlin and noted that he had been “investigated for money laundering and … accused of threatening the lives of business rivals, illegally wiretapping a government official, and taking part in extortion and racketeering.”
In 2016, Deripaska had used a company called A-Finance Ltd. to issue a promissory note for $200 million, according to records related to that transaction in the Pandora files. The documents do not explain why the Russian billionaire took on that debt, which required interest payments of $10 million a year. A Deripaska spokeswoman dismissed the U.S. accusations against him, and she also denied questions regarding the promissory notes. Larisa Belyaeva replied to The Post’s written questions by email, “None” of his allegations regarding illegal activity were ever upheld.
Belyaeva said that “Deripaska did own A-Finance Limited” but “denies allegations that would suggest any illegal activity by this company.”
The Pandora records show that the note was held by Saffron International Assets Ltd., a shell company controlled at the time by another Russian oligarch, Evgeny Novitsky, a billionaire who has held shares in one of Russia’s largest cellphone networks.
But the promissory note changed hands in 2017, according to Pandora records, when Saffron was acquired by a prominent Russian financier, Kirill Androsov, as part of what one document describes as an “offsetting agreement” between Androsov and Novitsky. Androsov had served as senior aide to Putin, during his tenure as prime minister between 2008 and 2012, before leaving government, setting up investment funds and establishing a presence in Singapore.
The transactions are recorded in the internal files of a Singapore-based firm, Asiaciti Trust, which helped Androsov, 49, and other clients set up companies, including in the British Virgin Islands, where Saffron was registered.
In November 2018, Androsov expressed concern about collateral damage from the sanctioning of Deripaska. According to an Asiaciti internal account, Androsov said that Deripaska’s note “posed some reputational risks to the whole structure” of his offshore businesses.
Story continues below advertisement
At the time, Saffron was part of a collection of companies Androsov controlled in an interlocking structure, according to diagrams in the Pandora files. According to documents, his representative requested that Asiaciti remove Saffron’s name from the web. He also asked for “all issued shares” in Saffron be transferred to his own personal address.
Asiaciti officials at first seemed skeptical, calling the request “slightly abrupt,” but ultimately agreed that “it would be prudent” to isolate Saffron from Androsov’s other companies, according to notes of Asiaciti officials’ internal discussion.
In a written statement, Asiaciti denied any wrongdoing but declined to discuss its interactions with Androsov, citing its desire “to maintain confidentiality and protect personal data.”
A month later, in December, Abacus Capital, a financial services firm based in Singapore, issued the grim appraisal of this problematic asset on Androsov’s books.
In its report, Abacus noted that the promissory note’s value had already been downgraded substantially because Saffron had failed to secure any collateral or a guarantee of repayment from Deripaska. Abacus looked into his distressed assets and created charts that showed En Plus Group’s shares dropping on international exchanges after sanctions were imposed. In the end, Abacus concluded that Androsov and Saffron were unlikely ever to collect more than 10 percent of what was owed. Just two years after the $200 million note was issued, it was worth barely more than $18 million.
Abacus did not respond to requests for comment.
The records leave some questions unanswered, including why Androsov was willing to take on Deripaska-related debt with no collateral. Asiaciti is suspicious of this as well as other aspects about Androsov’s company, according to the files.
Asiaciti ultimately concluded that Novitsky was actually in control of companies registered to Androsov and cited a “lack of economic sense” behind transactions involving the two men.
In an April 2019 board meeting, Asiaciti executives decided that concerns about the matter exceeded the firm’s “acceptable risk appetite” and moved to sever its relationship with Saffron and other Androsov companies, according to an account of that meeting. According to the document, Asiaciti planned to also file suspicious transaction reports with authorities.
An audit of Asiaciti by the Monetary Authority of Singapore questioned its handling of accounts related to Androsov, Novitsky and others, concluding that the firm’s compliance practices “were assessed to be weak,” according to a copy of the report in the Pandora trove.
In response to a letter sent to the firm by the ICIJ and The Post, Asiaciti said it is “committed to the highest business standards, including ensuring that our operations fully comply with all laws and regulations.” The firm said it “found many inaccuracies and instances where important details were missing” in the letter sent to it enumerating details found in the Pandora documents. Asiaciti did not provide any details.
Belyaeva, the spokeswoman for Deripaska, rejected any suggestion that there was hidden or nefarious purpose to the A-Finance-related transactions. She stated that it was impossible to believe that companies [Deripaska], which generate billions in revenue and adhere to the highest standards in corporate governance, would engage in such petty scheming.
Androsov, whose resume lists a master’s degree in business from the University of Chicago, did not respond to requests for comment sent to his personal email account or an address provided by Altera Capital, a Moscow-based investment firm where Androsov serves as managing partner.
In a recent interview with the Australian Broadcasting Corporation, Androsov denied that sanctions had hampered his business prospects and downplayed their overall impact. He said that the sanctions are not an “economic tool” but a “much greater political instrument.” “Most of the Russian companies are quite successful operating, even under the sanctions, in other parts of the world, like China and Southeast Asia.”
For Putin insiders, evasive maneuvers
Another case in the Pandora trove focuses on two close associates of Putin who have known him for decades.
Timchenko, 68, has been accused by critics of using Kremlin connections to amass an oil-trading fortune estimated at nearly $20 billion. U.S. authorities claim that Putin was an investor in Timchenko’s Gunvor Group. This group became the biggest oil-trading company in the world. Timchenko in 2014 denied that Putin “had any ownership, beneficial or otherwise, in Gunvor.”
Kolbin and Putin were childhood friends whose fathers met in the 1950s, the elder Kolbin once told a Russian newspaper. Before his rise to wealth, the younger Kolbin worked as a butcher at a St. Petersburg grocery before he became a millionaire.
Current and former U.S. officials say they suspect that Kolbin has served as one of many “wallets” for Putin — trusted associates enlisted to secretly hold money and property in their names on his behalf.
As the United States targeted Timchenko and Kolbin for sanctions, the two men moved to reconfigure their offshore accounts, several documents in the trove show.
Timchenko and Kolbin had both been tied to a petroleum venture called LTS Holdings based, at least on paper, in the British Virgin Islands, according to the documents. For years, ownership of LTS had been split between two shell companies. One, called Lerma Trading, was listed by the U.S. Treasury Department in 2015 as a Timchenko front. Southport Management Services Ltd. isn’t explicitly listed as a Kolbin business in the documents. However, the sequence of events in the files suggest that it was.
That split-ownership arrangement was stable for nearly a decade until Timchenko was sanctioned in 2014 for “providing financial, material or technological support” to the Russian government as it annexed Crimea, according to the Treasury Department announcement.
Within months, Timchenko’s shell company was no longer listed as co-owner of LTS Holdings in Pandora documents. Southport Management instead held all outstanding shares.
Story continues below advertisement
A spreadsheet listing Kolbin as the “ultimate beneficial owner” of LTS Holdings indicates that Southport Management was probably his shell company all along.
The maneuvers didn’t shield LTS Holdings or Kolbin. The Treasury Department sanctioned both for being associated with Timchenko the year after.
After Timchenko and Kolbin were sanctioned, Alcogal, the Panamanian law firm that had handled the transactions for LTS Holdings, filed a suspicious activity report with authorities in the British Virgin Islands, flagging that Kolbin and Timchenko held accounts in the islands’ jurisdiction and had been sanctioned by the United States. Alcogal quit as an agent for LTS Holdings. According to documents, Alcogal said that the “higher risk” to his office was greater than what the company could bear.
In a detailed written statement, Alcogal did not specifically address questions about its handling of accounts linked to Kolbin and Timchenko but said, “We resign in cases where we suspect that the client is involved in money laundering, terrorism financing or other illicit activities,” or where the firm fails to get “full cooperation” from a client or cannot “carry out the required customer due diligence.”
Rather than dissolve, LTS Holdings moved to another offshore registry, according to another Alcogal document that does not provide additional details.
Registration documents that are separate from the Pandora files show that LTS Holdings was registered in Cyprus in 2017, and that Kolbin’s daughter, Tatiana Kolbina, was the sole shareholder. Moscow journalists and Russia experts believe Peter Kolbin has died recently. There has been no obituary.
Kolbin’s relatives did not respond to requests for comment. The London-based law firm Carter-Ruck declined to respond to questions regarding the transactions that involved Kolbin and LTS Holdings. The firm, Carter-Ruck, said that “our client’s unequivocal position is that he has always acted entirely lawfully throughout his career and business dealings.”
In recent years, U.S. sanctions have repeatedly prompted Russians to take evasive steps.
In 2014, the Treasury Department targeted Arkady Rotenberg, a childhood friend of Putin whose construction companies won contracts estimated at $7 billion for projects associated with the 2014 Winter Olympics in Sochi.
When Rotenberg then passed control of his companies to his son, Igor, Treasury responded by sanctioning the younger Rotenberg. Italian court documents shared with the ICIJ as part of the Pandora project show that the son’s companies suddenly faced difficulties paying bills.
Rotenberg subordinates in Moscow and Spain traded emails in 2018 in which they discussed revising contracts to swap out the names of companies under scrutiny and sending invoices to a new company still able to send money.
One of the employees joked about what colleagues should do if they got caught. According to documents, the employee said, “Remember guys. Should they arrest me. Don’t bring me Oranges.” “Go for chocolate cakes.”
The Rotenbergs did not respond to requests for comment.
‘Safe option,’ limited deterrence
U.S. officials and experts believe that sanctions have taken a cumulative toll on Russia’s economy, sapping its gross domestic product by as much as 1.5 percent annually. The past several years have seen new manifestations of Russian aggression.
Last year, the Kremlin was accused by the United States and other Western governments of poisoning political activist Alexei Navalny, waging another assault on an American presidential election and carrying out a massive cyberattack known as SolarWinds on U.S. targets including federal agencies and Microsoft.
Then, this year, Russia moved forces to the border of Ukraine as part of a military buildup that rattled nerves in the region and raised fears of an invasion. U.S. officials say they believe Putin backed away from escalating Russia’s armed incursions into Ukraine in 2014 when his government and many of his closest associates were hit hard by U.S. and European sanctions.
The Biden administration announced two waves of sanctions against Russia within months of taking office and has threatened more.
The repeated reliance on sanctions reflects a belief in the coercive power of the U.S. economy and currency — but also a lack of palatable alternatives for confrontation with another nuclear-armed power, officials and experts said.
Sanctions represent a “safe option” on the menu of retaliatory measures against Moscow, said James Nixey, head of the Russia-Eurasia program at the Chatham House policy institute in London.
“You can’t ignore outright medieval-style” behavior by Russia, Nixey said. However, “we do not want to invade.” “We don’t want war to begin. We don’t want to endanger anybody any more than we have to.”
Story continues below advertisement
Stung but still maneuvering
Early on, Timchenko was cavalier about the punitive financial measures taken against him, saying he had no sizable assets in the United States and didn’t expect to feel a pinch. However, unexpected costs arose. In 2014, Timchenko told the Russian news agency ITAR-Tass that because of sanctions, his wife “was unable to pay in Germany for a complex surgery on the spine.” When she tried to settle the bill with the clinic that performed the operation, he said, “the payment did not go through.”
Timchenko said the bill was ultimately paid, but expressed annoyance, calling the complications created by sanctions “a great stupidity.”
Four years later, Timchenko sold a private jet, according to aircraft registration records obtained by the Reuters news service. After telling ITAR Tass that Gulfstream (the U.S.-based manufacturer of aircraft) would not continue to service the plane, Timchenko sold it.
For Deripaska and Androsov, the impact of U.S. sanctions and their fallout has been mixed.
Earlier this year, a U.S. federal court dismissed Deripaska’s lawsuit seeking to have the sanctions against him lifted. Derispaska is appealing that decision. In 2019, he succeeded in getting the measures against several of his companies, including Rusal and En Plus, waived when he agreed to reduce his ownership stakes in them.
Several former U.S. officials said the U.S. government agreed to lift the penalties against his companies in part because of economic repercussions beyond Russia. Officials claim that thousands of jobs were at risk in an Irish aluminum plant when Western companies did business with Rusal.
Androsov, whose net worth is listed in the tens of millions of dollars in documents included in the Pandora trove, surfaced in media reports earlier this year as the buyer of a castle-like hotel in Lucerne, Switzerland. Androsov purchased Chateau Gutsch, a historic Russian property, from Alexander Lebedev (another Russian oligarch who owns newspapers in London) and was previously a lieutenant colonel with the Soviet spy agency the KGB.
“It’s my private and personal investment,” Androsov said in the interview with Australian broadcasters, adding that it is “kind of a trophy asset that could be inherited by your kids.”
About this story
Paul Sonne contributed to this report.
The Pandora Papers is an investigation based on more than 11.9 million documents revealing the flows of money, property and other assets concealed in the offshore financial system. The Washington Post, along with other news agencies, exposed political leaders and examined the rise of the US industry. They also showed how secretiveness protects assets from creditors, governments and the powerful and wealthy. International Consortium of Investigative Journalists organized the investigation and obtained the vastest amount of confidential information. Read more about the project.