Putin: The Silent Tsar

This club is extraordinarily prestigious—having won the European Cup nine times and the Olympic Games four times. Gennady Timchenko, the club’s primary financial backer, is also one of Putin’s top aides—a figure we’ll revisit later. A few years later, Yeltsin felt he could no longer control Russia and decided to hand over power to a new leader. After cycling through numerous prime ministers—none of whom satisfied him—he ultimately selected Putin, who belonged to Sobchak’s political circle, largely due to Putin’s perceived loyalty and his unlikelihood of turning against Yeltsin’s legacy. Putin’s meteoric rise to power was followed by widespread patronage toward childhood friends and longtime colleagues—enabling him to consolidate authority firmly in his own hands. Arkady Rotenberg was among the very first people Putin promoted. Putin’s method for enriching Rotenberg was straightforward: he awarded him nearly all of Russia’s major infrastructure construction projects. Under Russian law, state procurement contracts must be awarded via open tender—unless the project is deemed “strategically important.” Crucially, the state itself decides what qualifies as strategically important—and no justification is required. Such projects may then be awarded through closed, non-competitive procedures. The manipulation here is transparent: whenever a project was destined for Rotenberg, Putin simply declared it “strategic,” thereby granting exclusive rights. When even that seemed too blatant, fake companies were sometimes registered solely to stage sham bidding competitions. According to a 2015 Russian government report, 95% of state procurements lacked genuine competition, and 40% were awarded to single suppliers. Many of Rotenberg’s largest contracts were thus secured without open tenders. Because he consistently won government contracts with ease, he earned the nickname “Russia’s Tender King” (a literal translation would be “Russia’s Command King”). In 2001, Putin replaced senior executives at Gazprom—the Russian gas giant—with his loyalists, effectively transforming the company into “the president’s private firm.” According to Mikhail Krutikhin, head of Moscow-based energy consultancy RusEnergy, the Rotenberg brothers first established SMP Bank in 2001 (holding 76% of its shares), then used this bank to acquire stakes in construction, gas, and pipeline companies—thereby positioning themselves as government contractors. In 2007, Gazprom needed to transport natural gas from a newly discovered Arctic field; this contract went to Rotenberg’s firm. Originally planned as a short 350-mile connection to the existing gas network, the project inexplicably expanded into a brand-new 1,500-mile pipeline running southward—ultimately costing $44 billion. Thereafter, Gazprom routinely awarded domestic pipeline construction contracts to Rotenberg. Yet Krutikhin contends that these pipelines cost two to three times more than comparable European projects—even in Russia’s southern regions, where climate and infrastructure conditions are far more favorable. In 2008, Rotenberg acquired five construction and maintenance firms from Gazprom for just $348 million—a price so low it baffled market observers. He merged two of them into Stroigazmontazh and soon after acquired Nord Stream Pipeline. These firms have since become among Gazprom’s principal contractors; within just one year of operation, they reportedly earned $2 billion.

Putin and His Inner Circle: A Chronicle of Old Ties

Putin’s ‘streetwise’ personality is vividly illustrated by an old anecdote: during a 2007 meeting with German Chancellor Angela Merkel, he deliberately brought along his large black dog, Konni—knowing full well Merkel’s fear of dogs. She visibly tensed up. Afterwards, Putin claimed he had no idea she was afraid of dogs. During Russia’s 2004 presidential election, Boris Berezovsky—a former oligarch exiled by Putin—financed Ivan Rybkin, one of Putin’s rivals. That February, Rybkin mysteriously disappeared for several days, only to reappear in Kyiv, Ukraine. He claimed he had been kidnapped there by officers of Russia’s Federal Security Service (FSB), drugged, filmed, and threatened. On March 5, 2004, he withdrew from the race, declaring he did not wish to be part of this “farce.” This string of events exposed a key inner circle of Putin’s closest allies—comprising long-standing friends who had known him for decades. Many had collaborated with him commercially during the 1990s, when Putin held various posts in the St. Petersburg city government. Putin and His Friends Among those closest to Putin are Gennady Timchenko, Arkady Rotenberg, and Yuri Kovalchuk. Others occupy a secondary tier—some having amassed enormous wealth, others having left Russia altogether—but none of these shifts has undermined the stability of the “Putin circle.” Timchenko and Putin were both born in 1952. In the 1980s, they worked together at a foreign trade agency in Leningrad (now St. Petersburg); later, along with two other colleagues, they launched a private business trading oil with local refineries. His fortune soared dramatically after entering the 21st century. In 2000, Timchenko co-founded the oil trading conglomerate Gunvor with Swedish oil trader Torbjörn Törnqvist. Starting in 2003, Gunvor became Russia’s leading oil exporter—and rapidly grew into the world’s third-largest oil trading firm. Most of the oil it exported came from three Russian state-owned enterprises: Surgutneftegaz, Rosneft, and Gazprom Neft. Gunvor’s ownership structure is highly opaque, layered with multiple shell companies—so much so that journalists long failed to identify its mysterious third owner. Only years later was this revealed: the third owner was Petr Kolbin, Putin’s childhood friend. Timchenko also holds two other major investments: Novatek—the largest independent natural gas producer in Russia—and Stroitransgaz, a gas pipeline transportation company. Between 2008 and 2009, Timchenko purchased a 23.5% stake in Novatek, triggering a sharp rise in its share price. The company further benefited by acquiring various natural gas assets from Gazprom.

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