Putin's Palace
Encyclopedia
"Putin's Palace" is a name used by the media for a large Italianate palace located on the Black Sea
coast near the village of Praskoveevka in Gelendzhik
, Krasnodar Krai
, Russia
. It has been claimed that the dacha
was built for the personal use of Prime Minister
Vladimir Putin
, and that its construction began during his Presidency. Detailed claims about the project, which allegedly made improper use of state resources, were made by Sergei Kolesnikov
, a businessman with ties to Putin dating from his time in Saint Petersburg
prior to entering Kremlin politics
.
In December 2010 Kolesnikov wrote an open letter to President Dmitry Medvedev
detailing the involvement of himself and others in the project and calling for Medvedev to investigate and to take action against corruption in Russia. Good quality photographs of the palace and its extensive grounds were subsequently published by the Russian language
Wikileaks
website in January 2011, which showed the apparently complete lavish interior decor. Following the release of the photographs the site was temporarily blocked.
Spokespeople on the behalf of Putin and the Russian government have consistently dismissed Putin's connections to the property and the related allegations of corruption. In February 2011 the independent Russian newspaper Novaya Gazeta
reported that it had seen documents which supported Kolesnikov by implicating Vladimir Kozhin, Head of the Presidential Property Management Department, who had denied any involvement. A spokesman refused to comment on the Novaya Gazeta article. The presence of Federal Protective Service
(FSO) activity in the area has been claimed as further evidence of state involvement.
In March 2011 it was reported that the palace had been sold for $350 million to Alexander Ponomarenko, a businessman with links to Putin who made his money by controlling the Black Sea port of Novorossiysk
. Ponomarenko bought the palace from Nikolai Shamalov, another member of Putin's circle and the businessman at the centre of Kolesnikov's claims, and his partners. While he did not reveal his plans for its use, Ponomarenko confirmed that the property's value would be close to $350 million.
, David Ignatius
of the Washington Post and Masha Gessen of Snob.ru, give the following account of what the whistleblower revealed was known to its participants as 'Project South'.
In early 2000, Nikolai Terentievich Shamalov, a representative of the multinational company Siemens AG
in North West Russia and somebody thought close to Russia's new President Vladimir Putin, approached Kolesnikov with a business proposition. The two men had known each other through business since 1993-1994, when Kolesnikov was deputy director general of Petromed, a St. Petersburg-based firm that specialised in the procurement of medical supplies. It was also through Petromed that Kolesnikov had got to know Putin, on whose behalf Shamalov said he made the approach. Putin had been head of the St. Petersburg Council on External Economic affairs which when Petromed became a private company in 1992 held a 51% stake.
Putin's plan, as delineated by Shamalov to Kolesnikov, was as follows. Some extremely wealthy Russian businessmen were to provide large sums of money which were to be spent on improving Russia's healthcare infrastructure. They included Roman Abramovich
($203 million) and Alexei Mordashov
($14.9 million). It was arranged that a donation, in the first instance from Abramovich's Pole of Hope charity to the Sergei Kirov Military Medical Academy, would be directed to Petromed as the contractor for the modernisation programme. Kolesnikov said that 15-20% of its contracts with suppliers went to Siemens, run by Shamalov.
However, Putin stipulated that 35% of the funds should be held in offshore accounts rather than spent on the projects for which they were ostensibly intended. The source of these funds was invisible, because Petromed negotiated discounts from its suppliers (including Siemens) which it did not pass on, claiming that it had paid more than it actually had. Thus, according to Kolesnikov, Petromed claimed to have spent Abramovich's $203 million, but in fact spent $130 million. The remaining $70 million found its way to Switzerland
, under Shamalov's control. Kolesnikov estimates that by 2007 $500 million had accumulated in Switzerland. In 2005, when around $200 million had been reached, Rosinvest, a subsidiary of the Swiss registered company Lirus Management, was established to invest the money in Russia.
Putin held 94% of shares in Rosinvest, with Kolesnikov, Shamalov and Dmitry Vladimirovich Gorelov (director of Petromed and another friend of Putin from his time in St Petersburg) taking 2% each. Rosinvest's interests included shipbuilding, construction, and lumber/timber processing. Kolesnikov is reported as saying that Abramovich and the other donors to health projects acted 'nobly', implying they were unaware that a significant proportion of their donations was being diverted into an investment vehicle run for the benefit of the President and his partners in Rosinvest. This is despite the huge sums involved and disputed claims that the relationship between Putin and Abramovich has been very close.
'Project South', directed by Shamalov, was less mainstream as an 'investment project'. Part one, begun in 2005, was a small 'wellness centre' located at Praskoveevka in 73.96 hectare
s of protected forest; part two, begun in 2007, was a vineyard in the same area. In the aftermath of the 2008 world financial crisis
funds were redirected to Project South from Rosinvest's other projects to facilitate its expansion. It was no longer to be a small 'wellness centre', as the photographs published online by RuLeaks.net show. By this stage, Praskoveevka was home to a Italianate palace of tens of thousands of square metres with casino, winter theatre, summer amphitheatre, church, swimming pools, sports grounds, heliports, landscaped parks, tea houses, staff apartments and technological buildings. Kolesnikov pointedly described it as a modern version of the Peterhof Palace
, built on the orders of Peter the Great, and believes that by October 2009 the costs of construction (by the state company Spetsstroi) had reached $1 billion. In addition, it is alleged that money from the state budget was used to provide the complex with infrastructure — a gas supply pipeline, an electric power line, and a new mountain road.
Kolesnikov claims that in 2009 he and others were barred from the project when he objected to Shamalov's circumvention of customs regulations for supplies for the complex. Kolesnikov has expressed the view that the whole scheme was from the outset a balance between good and evil, but that in 2009 the closure of sensible investment projects in favour of the palace was a step too far. He claims that this order came from Putin, to whom he would give progress reports on Rosinvest. He alleges that Shamalov was sacked by Siemens for not answering bribery allegations but in 2009 was registered as the owner of the complex via the companies Indokopas and Rirus.
On 20 April 2011, Kozhin gave an interview to Pavel Korobov and Oleg Kashin of Kommersant
, which included the following exchange:
- Probably the most controversial episode in which the property management department figures is the so-called project "South", the residence in Gelendzhik. Do you have a position on this? What kind of residence is it? What is its status?
- I have already said and I can repeat that in terms of its construction and creation the Presidential Property Management Department had not, has not and will not have any connection to this project. In fact, the story is quite simple and clear. It began in 2004. Then the situation in the country was completely different, especially the financial situation, and so far as the complex is concerned, we then had a widespread practice of so-called investment contracts. We built housing in this way, we renovated some sites, because, frankly, there simply wasn't any money. We attracted investors' money and thus proceeded in order with their complexes, built housing, and economised on budgetary resources, which at times simply weren't there. So, the story began in 2004, and it concerned one of our sites — a small holiday home "Tuapse". At that time, this, like many of our sites, was in a very sorry state. And we were considering whether to close it or to do something with it — it was impossible to maintain in that condition. I must say that this leisure centre was always average. You know, in the old days there was such a detailed hierarchy of who went where — Sochi, the Crimea and the like, and this leisure centre was in, one might say, the "lower sector". But even within this sector, it had gone into decline. And we were approached by investors with a proposal not to repair it, but independently to use another plot of land to build a new guest-house. And we, as in all other investment contracts, were given a stake in this guest-house.
- Was the investor the same Sergei Kolesnikov of the cooperative "Ozero", who first said that the palace was being built for Mr Putin?
- No, it was a company.
- The company "PETROMED," in which the businessman worked?
- No. The investment contract was signed with the company "Lirus." Who was there among the founders, who came from where, I am not commenting on, we had dozens and dozens of such agreements. We, as always, controlled only the fulfilment of the agreement. The investor made an offer, we valued it and gave consent — this was the extent of our involvement. Hence our signatures in the documents your colleagues obtained. The rest — construction, design, all that was needed for construction, all approvals, permits, as well as all other analogous projects, the investor took on himself. We were in no way involved, while they designed and built it. Then 2008 arrived, the financial crisis, and the investor came and said: Gentlemen, the situation is clear, let's get connected to some financing. At that, accordingly, we said that if we had money, then we wouldn't need you, we would have built it ourselves. And we refused to finance it, and there was an official procedure to value the share of the Russian Federation, i.e. our share. Rosimushchestvo was involved, all the legal procedures were undertaken, and the investor bought out the Russian Federation, and directed to the "Tuapse" leisure centre a defined sum of money which was all to the last kopek invested in the reconstruction of the site. It was brought to order, and today you can go and see what it is. All of it! In late 2008, the investment contract was terminated, the procedure is completed, at the same time we parted ways with the investor. He took the land leased from the Rosimushestvo. What the investor next did there, how they redeveloped, redesigned that initial project — I do not know.
- But it has been written that the FSO has been protecting it.
- We are not the FSO.
- But it's possible to go from them, to look in your direction?
- In our direction? This is a private project, I repeat — from 2008, I did not even know what was there, I just read that there have been changes over there. I read these scandalous publications. Who its owner is today, into what it has been transformed, in that its appearance has altered, I can not comment, contact the person who owns this site. We now don't have any legal connection. That's the whole sensation, which has been exaggerated with such detail.
(FSO), the agency responsible for guarding state property and high-ranking officials. Despite the confiscation of their equipment they were able to publish additional photographs of the site. Activists made another sortie into the property in June 2011, when they claimed to have found an illegally constructed marina.
Black Sea
The Black Sea is bounded by Europe, Anatolia and the Caucasus and is ultimately connected to the Atlantic Ocean via the Mediterranean and the Aegean seas and various straits. The Bosphorus strait connects it to the Sea of Marmara, and the strait of the Dardanelles connects that sea to the Aegean...
coast near the village of Praskoveevka in Gelendzhik
Gelendzhik
Gelendzhik is a resort town in Krasnodar Krai, Russia, situated on the Gelendzhik Bay of the Black Sea, between Novorossiysk and Tuapse . Greater Gelendzhik sprawls for along the coastline and covers an area of 122,754 ha...
, Krasnodar Krai
Krasnodar Krai
-External links:* **...
, Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
. It has been claimed that the dacha
Dacha
Dacha is a Russian word for seasonal or year-round second homes often located in the exurbs of Soviet and post-Soviet cities. Cottages or shacks serving as family's main or only home are not considered dachas, although many purpose-built dachas are recently being converted for year-round residence...
was built for the personal use of Prime Minister
Prime Minister of Russia
The Chairman of the Government of the Russian Federation The use of the term "Prime Minister" is strictly informal and is not allowed for by the Russian Constitution and other laws....
Vladimir Putin
Vladimir Putin
Vladimir Vladimirovich Putin served as the second President of the Russian Federation and is the current Prime Minister of Russia, as well as chairman of United Russia and Chairman of the Council of Ministers of the Union of Russia and Belarus. He became acting President on 31 December 1999, when...
, and that its construction began during his Presidency. Detailed claims about the project, which allegedly made improper use of state resources, were made by Sergei Kolesnikov
Sergei Kolesnikov (whistleblower)
Sergei Vladimirovich Kolesnikov is a Russian businessman and former associate of Vladimir Putin currently believed to be living in exile in Europe...
, a businessman with ties to Putin dating from his time in Saint Petersburg
Saint Petersburg
Saint Petersburg is a city and a federal subject of Russia located on the Neva River at the head of the Gulf of Finland on the Baltic Sea...
prior to entering Kremlin politics
Politics of Russia
The politics of Russia take place in a framework of a federal semi-presidential republic. According to the Constitution of Russia, the President of Russia is head of state, and of a multi-party system with executive power exercised by the government, headed by the Prime Minister, who is appointed...
.
In December 2010 Kolesnikov wrote an open letter to President Dmitry Medvedev
Dmitry Medvedev
Dmitry Anatolyevich Medvedev is the third President of the Russian Federation.Born to a family of academics, Medvedev graduated from the Law Department of Leningrad State University in 1987. He defended his dissertation in 1990 and worked as a docent at his alma mater, now renamed to Saint...
detailing the involvement of himself and others in the project and calling for Medvedev to investigate and to take action against corruption in Russia. Good quality photographs of the palace and its extensive grounds were subsequently published by the Russian language
Russian language
Russian is a Slavic language used primarily in Russia, Belarus, Uzbekistan, Kazakhstan, Tajikistan and Kyrgyzstan. It is an unofficial but widely spoken language in Ukraine, Moldova, Latvia, Turkmenistan and Estonia and, to a lesser extent, the other countries that were once constituent republics...
Wikileaks
Wikileaks
WikiLeaks is an international self-described not-for-profit organisation that publishes submissions of private, secret, and classified media from anonymous news sources, news leaks, and whistleblowers. Its website, launched in 2006 under The Sunshine Press organisation, claimed a database of more...
website in January 2011, which showed the apparently complete lavish interior decor. Following the release of the photographs the site was temporarily blocked.
Spokespeople on the behalf of Putin and the Russian government have consistently dismissed Putin's connections to the property and the related allegations of corruption. In February 2011 the independent Russian newspaper Novaya Gazeta
Novaya Gazeta
Novaya Gazeta is a Russian newspaper well known in the country for its critical and investigative coverage of Russian political and social affairs....
reported that it had seen documents which supported Kolesnikov by implicating Vladimir Kozhin, Head of the Presidential Property Management Department, who had denied any involvement. A spokesman refused to comment on the Novaya Gazeta article. The presence of Federal Protective Service
Federal Protective Service (Russia)
In the Russian Federation, the Federal Protective Service is a federal government agency concerned with the tasks related to the protection of several, mandated by the relevant law, high-ranking state officials, including the President of Russia, as well as certain federal properties...
(FSO) activity in the area has been claimed as further evidence of state involvement.
In March 2011 it was reported that the palace had been sold for $350 million to Alexander Ponomarenko, a businessman with links to Putin who made his money by controlling the Black Sea port of Novorossiysk
Novorossiysk
Novorossiysk is a city in Krasnodar Krai, Russia. It is the country's main port on the Black Sea and the leading Russian port for importing grain. It is one of the few cities honored with the title of the Hero City. Population: -History:...
. Ponomarenko bought the palace from Nikolai Shamalov, another member of Putin's circle and the businessman at the centre of Kolesnikov's claims, and his partners. While he did not reveal his plans for its use, Ponomarenko confirmed that the property's value would be close to $350 million.
The whistleblower's claims
Kolesnikov's letter to Medvedev and subsequent media interviews, including to Novaya GazetaNovaya Gazeta
Novaya Gazeta is a Russian newspaper well known in the country for its critical and investigative coverage of Russian political and social affairs....
, David Ignatius
David Ignatius
David R. Ignatius , is an American journalist and novelist. He is an associate editor and columnist for The Washington Post. He also co-hosts PostGlobal, an online discussion of international issues at Washingtonpost.com, with Newsweek 's Fareed Zakaria...
of the Washington Post and Masha Gessen of Snob.ru, give the following account of what the whistleblower revealed was known to its participants as 'Project South'.
In early 2000, Nikolai Terentievich Shamalov, a representative of the multinational company Siemens AG
Siemens AG
Siemens AG is a German multinational conglomerate company headquartered in Munich, Germany. It is the largest Europe-based electronics and electrical engineering company....
in North West Russia and somebody thought close to Russia's new President Vladimir Putin, approached Kolesnikov with a business proposition. The two men had known each other through business since 1993-1994, when Kolesnikov was deputy director general of Petromed, a St. Petersburg-based firm that specialised in the procurement of medical supplies. It was also through Petromed that Kolesnikov had got to know Putin, on whose behalf Shamalov said he made the approach. Putin had been head of the St. Petersburg Council on External Economic affairs which when Petromed became a private company in 1992 held a 51% stake.
Putin's plan, as delineated by Shamalov to Kolesnikov, was as follows. Some extremely wealthy Russian businessmen were to provide large sums of money which were to be spent on improving Russia's healthcare infrastructure. They included Roman Abramovich
Roman Abramovich
Roman Arkadyevich Abramovich is a Russian businessman and the main owner of the private investment company Millhouse LLC.In 2003, Abramovich was named Person of the Year by Expert, a Russian business magazine. He shared this title with Mikhail Khodorkovsky...
($203 million) and Alexei Mordashov
Alexei Mordashov
Alexey Mordashov was born on 26 September 1965 in Cherepovets, Vologda Oblast. He is a Russian business oligarch and self-made billionaire...
($14.9 million). It was arranged that a donation, in the first instance from Abramovich's Pole of Hope charity to the Sergei Kirov Military Medical Academy, would be directed to Petromed as the contractor for the modernisation programme. Kolesnikov said that 15-20% of its contracts with suppliers went to Siemens, run by Shamalov.
However, Putin stipulated that 35% of the funds should be held in offshore accounts rather than spent on the projects for which they were ostensibly intended. The source of these funds was invisible, because Petromed negotiated discounts from its suppliers (including Siemens) which it did not pass on, claiming that it had paid more than it actually had. Thus, according to Kolesnikov, Petromed claimed to have spent Abramovich's $203 million, but in fact spent $130 million. The remaining $70 million found its way to Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
, under Shamalov's control. Kolesnikov estimates that by 2007 $500 million had accumulated in Switzerland. In 2005, when around $200 million had been reached, Rosinvest, a subsidiary of the Swiss registered company Lirus Management, was established to invest the money in Russia.
Putin held 94% of shares in Rosinvest, with Kolesnikov, Shamalov and Dmitry Vladimirovich Gorelov (director of Petromed and another friend of Putin from his time in St Petersburg) taking 2% each. Rosinvest's interests included shipbuilding, construction, and lumber/timber processing. Kolesnikov is reported as saying that Abramovich and the other donors to health projects acted 'nobly', implying they were unaware that a significant proportion of their donations was being diverted into an investment vehicle run for the benefit of the President and his partners in Rosinvest. This is despite the huge sums involved and disputed claims that the relationship between Putin and Abramovich has been very close.
'Project South', directed by Shamalov, was less mainstream as an 'investment project'. Part one, begun in 2005, was a small 'wellness centre' located at Praskoveevka in 73.96 hectare
Hectare
The hectare is a metric unit of area defined as 10,000 square metres , and primarily used in the measurement of land. In 1795, when the metric system was introduced, the are was defined as being 100 square metres and the hectare was thus 100 ares or 1/100 km2...
s of protected forest; part two, begun in 2007, was a vineyard in the same area. In the aftermath of the 2008 world financial crisis
Late-2000s financial crisis
The late-2000s financial crisis is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s...
funds were redirected to Project South from Rosinvest's other projects to facilitate its expansion. It was no longer to be a small 'wellness centre', as the photographs published online by RuLeaks.net show. By this stage, Praskoveevka was home to a Italianate palace of tens of thousands of square metres with casino, winter theatre, summer amphitheatre, church, swimming pools, sports grounds, heliports, landscaped parks, tea houses, staff apartments and technological buildings. Kolesnikov pointedly described it as a modern version of the Peterhof Palace
Peterhof Palace
The Peterhof Palace in Russian, so German is transliterated as "Петергoф" Petergof into Russian) for "Peter's Court") is actually a series of palaces and gardens located in Saint Petersburg, Russia, laid out on the orders of Peter the Great. These Palaces and gardens are sometimes referred as the...
, built on the orders of Peter the Great, and believes that by October 2009 the costs of construction (by the state company Spetsstroi) had reached $1 billion. In addition, it is alleged that money from the state budget was used to provide the complex with infrastructure — a gas supply pipeline, an electric power line, and a new mountain road.
Kolesnikov claims that in 2009 he and others were barred from the project when he objected to Shamalov's circumvention of customs regulations for supplies for the complex. Kolesnikov has expressed the view that the whole scheme was from the outset a balance between good and evil, but that in 2009 the closure of sensible investment projects in favour of the palace was a step too far. He claims that this order came from Putin, to whom he would give progress reports on Rosinvest. He alleges that Shamalov was sacked by Siemens for not answering bribery allegations but in 2009 was registered as the owner of the complex via the companies Indokopas and Rirus.
The official response
On 23 December 2010, a spokesman for the Prime Minister dismissed Kolesnikov's allegations against Putin as untrue, maintaining that he had never had any connection to the property. In February 2011 Vladimir Khozhin listed the official residences operated by the Presidential Property Management Department and asserted that the government does not maintain any residence as described by the media.On 20 April 2011, Kozhin gave an interview to Pavel Korobov and Oleg Kashin of Kommersant
Kommersant
Kommersant is a commerce-oriented newspaper published in Russia. , the circulation was 131,000.- History :The newspaper was initially published in 1909, and it was closed down following the Bolshevik seizure of power and the introduction of censorship in 1917.In 1989, with the onset of press...
, which included the following exchange:
- Probably the most controversial episode in which the property management department figures is the so-called project "South", the residence in Gelendzhik. Do you have a position on this? What kind of residence is it? What is its status?
- I have already said and I can repeat that in terms of its construction and creation the Presidential Property Management Department had not, has not and will not have any connection to this project. In fact, the story is quite simple and clear. It began in 2004. Then the situation in the country was completely different, especially the financial situation, and so far as the complex is concerned, we then had a widespread practice of so-called investment contracts. We built housing in this way, we renovated some sites, because, frankly, there simply wasn't any money. We attracted investors' money and thus proceeded in order with their complexes, built housing, and economised on budgetary resources, which at times simply weren't there. So, the story began in 2004, and it concerned one of our sites — a small holiday home "Tuapse". At that time, this, like many of our sites, was in a very sorry state. And we were considering whether to close it or to do something with it — it was impossible to maintain in that condition. I must say that this leisure centre was always average. You know, in the old days there was such a detailed hierarchy of who went where — Sochi, the Crimea and the like, and this leisure centre was in, one might say, the "lower sector". But even within this sector, it had gone into decline. And we were approached by investors with a proposal not to repair it, but independently to use another plot of land to build a new guest-house. And we, as in all other investment contracts, were given a stake in this guest-house.
- Was the investor the same Sergei Kolesnikov of the cooperative "Ozero", who first said that the palace was being built for Mr Putin?
- No, it was a company.
- The company "PETROMED," in which the businessman worked?
- No. The investment contract was signed with the company "Lirus." Who was there among the founders, who came from where, I am not commenting on, we had dozens and dozens of such agreements. We, as always, controlled only the fulfilment of the agreement. The investor made an offer, we valued it and gave consent — this was the extent of our involvement. Hence our signatures in the documents your colleagues obtained. The rest — construction, design, all that was needed for construction, all approvals, permits, as well as all other analogous projects, the investor took on himself. We were in no way involved, while they designed and built it. Then 2008 arrived, the financial crisis, and the investor came and said: Gentlemen, the situation is clear, let's get connected to some financing. At that, accordingly, we said that if we had money, then we wouldn't need you, we would have built it ourselves. And we refused to finance it, and there was an official procedure to value the share of the Russian Federation, i.e. our share. Rosimushchestvo was involved, all the legal procedures were undertaken, and the investor bought out the Russian Federation, and directed to the "Tuapse" leisure centre a defined sum of money which was all to the last kopek invested in the reconstruction of the site. It was brought to order, and today you can go and see what it is. All of it! In late 2008, the investment contract was terminated, the procedure is completed, at the same time we parted ways with the investor. He took the land leased from the Rosimushestvo. What the investor next did there, how they redeveloped, redesigned that initial project — I do not know.
- But it has been written that the FSO has been protecting it.
- We are not the FSO.
- But it's possible to go from them, to look in your direction?
- In our direction? This is a private project, I repeat — from 2008, I did not even know what was there, I just read that there have been changes over there. I read these scandalous publications. Who its owner is today, into what it has been transformed, in that its appearance has altered, I can not comment, contact the person who owns this site. We now don't have any legal connection. That's the whole sensation, which has been exaggerated with such detail.
Other reports
In February 2011, environmentalists and a journalist visited the site to investigate concerns that the construction violated laws protecting the area's ecology. They report that they were harassed and detained by members of the Federal Protective ServiceFederal Protective Service (Russia)
In the Russian Federation, the Federal Protective Service is a federal government agency concerned with the tasks related to the protection of several, mandated by the relevant law, high-ranking state officials, including the President of Russia, as well as certain federal properties...
(FSO), the agency responsible for guarding state property and high-ranking officials. Despite the confiscation of their equipment they were able to publish additional photographs of the site. Activists made another sortie into the property in June 2011, when they claimed to have found an illegally constructed marina.