any knowledge that could be damaging to it. It had been able to suppress any political connotation to the case by leveraging the diminishing knowledge of Russia in the UK intelligence services, which had been distracted by monitoring the Islamic terrorist threat, and Pugachev’s own low profile. Before things had got tough in London, Pugachev had never given an interview in his life. Few knew who he was. Most people believed it was the recently deceased oligarch Boris Berezovsky who had helped bring Putin to power. Lawyers at Hogan Lovells had been told that Pugachev was a nobody, and the case against him had nothing to do with politics. ‘I’ve not seen any evidence of what he was doing in the Kremlin,’ said one person close to the legal team. ‘We have to be extremely careful. Pugachev seems to say whatever he wants. The people I have spoken to just say he was a blatant crook.’[13]
But in fact Pugachev had worked at the heart of the Kremlin, and had been privy to some of its deepest secrets, including how it was exactly that Putin came to power. This seemed to be one of the main reasons the Kremlin was so intent on pursuing him, and making sure he was tied up in legal knots. Even before the Kremlin took over his business empire, he’d been seeking to leave Russia, to escape the endless intrigue of business there. Already, he’d been sidelined by Putin’s KGB allies from St Petersburg, and he’d begun seeking French citizenship in 2007. For those on the inside, Pugachev was being punished precisely for seeking to exit the tight-knit system that ruled Russia, the mafia clan which no one was ever meant to leave. ‘Pugachev was like a kidney. He was essential for the functioning of the system. But he lost his mind and thought he could leave and work on his own business. Of course the order was given to destroy him,’ said a senior Russian banker involved in financial operations for the Kremlin.[14]
In the rush of his flight from the UK to France, Pugachev left behind a number of telltale signs. Detectives working for the Kremlin’s lawyers had swooped in to raid his Knightsbridge office on a court order issued in the days after his disappearance. Among the reams of documents, there were a number of disc drives. On one of the disc drives were recordings: the Russian security services had been secretly taping every meeting he held in his downtown Moscow office since the end of the nineties.
One of the recordings vividly documents Pugachev’s candid and rueful feelings about Putin and his own role in bringing him to power. The tape records Pugachev sitting in his office with Valentin Yumashev, former president Boris Yeltsin’s son-in-law and chief of staff, discussing over dinner and fine wine the tense state of affairs as Moscow hurtled through yet another political crisis. It was November 2007, and just a few months remained before Putin would come to the end of his second consecutive term as president, at which point Russia’s constitution dictated that he must step down. But although Putin had made vague statements about becoming prime minister after standing down as president, there was not yet even a whisper of his real intentions. In the warren-like corridors of the Kremlin, the former KGB and security men who had risen to power with Putin had been jostling for position, bickering and backstabbing in hopes that they, or their candidate, would be selected as his successor.
Pugachev and Yumashev quietly clinked glasses as they discussed the standoff. The uncertainty over the succession was bringing back strong memories of 1999, when they’d assisted Putin’s rise. It seemed to them an age ago. By now they had been eclipsed by Putin’s KGB allies from St Petersburg. By now they were almost relics from a totally different era. The system of power had changed irrevocably, and they were still struggling to understand what they’d done.
‘You remember how it was when he came into power?’ says Pugachev on the tape. ‘He would say, “I am the manager. I have been hired.”’ In those days, Putin had appeared reluctant to take the leading role, and seemed malleable and compliant to those who’d helped bring him to power. ‘Between us, at the beginning I think he had the idea to become rich, to live a happy life, to decide his own personal issues,’ Pugachev goes on. ‘And in principle, he decided these issues very quickly … But as the four years of his first term passed he understood things had happened that would never allow him to step down.’
Putin’s first term had been drenched in blood and controversy. It led to a sweeping transformation of the way the country was run. He faced a series of deadly terrorist attacks, including the siege of the Dubrovka theatre in Moscow by Chechen terrorists in October 2002. The hostage-taking ended with more than a hundred dead when the Russian security services botched the storming of the theatre and gassed the very theatregoers they’d been trying to free.
Putin’s battles with rebels from the restive northern Caucasus republic of Chechnya had caused thousands of deaths, including the 294 who died in a string of apartment bombings. Many in Moscow whispered Putin’s security services were behind these bloody attacks, not least because the end result was a security clampdown that strengthened his power.
The freewheeling oligarchs of the 1990s were soon brought to heel. It had taken just one big case against the country’s richest man for Putin and his men to rein in the market freedoms of the Yeltsin era, and to launch a takeover by the state.
‘He would have gone gladly after four years, I think,’ Pugachev continues. ‘But then all these controversies happened. With the West now, there is such a serious standoff that it’s almost the Cuban missile crisis. And now he’s gone even deeper … He understands that if it goes further, he will never get out.’
For both these men, the power construct built by Putin, by which the president had accumulated so much power that everything now depended on him, looked the very opposite of stable. ‘It’s a pyramid. All you have to do is knock it once and it will all collapse … He understands all this, but he can’t change himself.’
‘I don’t have the feeling he understands any of this,’ says Yumashev.
‘It would be strange if he said everything I did is backward,’ Pugachev interjects. ‘Many of the decisions he makes are based on his convictions of how the world is run. The subject of patriotism – he believes this sincerely. When he says the collapse of the Soviet Union was a tragedy, he believes this sincerely … He just has such values. What he does he does sincerely. He sincerely makes mistakes.’
Putin had often justified his consolidation of all levers of power – which included ending elections for governors, and bringing the court system under Kremlin diktat – by saying such measures were necessary to usher in a new era of stability, ending the chaos and collapse of the 1990s. But behind the patriotic chest-beating that, on the face of it, appeared to drive most of the decision-making was another, more disturbing factor. Putin and the KGB men who ran the economy through a network of loyal allies now monopolised power, and had introduced a new system in which state positions were used as vehicles for self-enrichment. It was a far cry from the anti-capitalist, anti-bourgeois principles of the Soviet state they had once served.
‘These people, they are mutants,’ says Pugachev. ‘They are a mixture of homo-soveticus with the wild capitalists of the last twenty years. They have stolen so much to fill their pockets. All their families live somewhere in London. But when they say they need to crush someone in the name of patriotism, they say this sincerely. It’s just that if it’s London they’re targeting, they will get their families out first.’
‘I think it is a terrible thing,’ says Yumashev. ‘Some of my friends who work in the Kremlin now say – with absolute sincerity – how great it is they can get so rich there. In the nineties, this was unacceptable. You either had to go into business or work for the country. Now they go and work for the state to earn money. Ministers hand out licences to make money. And of course all this comes from the boss … The first conversation [Putin] has with a new state employee is, “Here is your business. Share it only with me. If someone attacks you, I will defend you … and if you don’t [use your position as a business] you are an idiot.”’
‘Putin said this himself,’ says Pugachev. ‘Openly. I remember, I was speaking with him. He said, “What is that guy waiting for? Why isn’t he earning? What is he waiting for? He has the position. Let him make money for himself.” These are now like people who have drunk blood. They can’t stop. Now it is state officials who are the businessmen.’
‘There are very few real businessmen left,’