McCain's Kremlin Ties
Research support was provided by the Puffin Foundation Investigative Fund at The Nation Institute.
Over the course of the presidential campaign, John McCain has repeatedly emphasized his willingness to stand up to Russian Prime Minister Vladimir Putin as proof that only he possesses the fortitude and judgment to become the next leader of the free world. In his acceptance speech at the Republican convention, McCain lashed out at Putin and the Russian oligarchs, who, "rich with oil wealth and corrupt with power...[are] reassembling the old Russian Empire." McCain rushed to publicly support the Georgian republic during its recent conflict with Russia and amplified his threat to expel Moscow from the G-8 club of major powers. His running mate, Sarah Palin, suggested in her first major interview that the United States might have to go to war with Russia one day in order to protect Georgia--the kind of apocalyptic scenario the United States avoided during the cold war.
Yet despite McCain's tough talk, behind the scenes his top advisers have cultivated deep ties with Russia's oligarchy--indeed, they have promoted the Kremlin's geopolitical and economic interests, as well as some of its most unsavory business figures, through greedy cynicism and geopolitical stupor. The most notable example is the tale of how McCain and his campaign manager, Rick Davis, advanced what became a key victory for the Kremlin: gaining control over the small but strategically important country of Montenegro.
According to two former senior US diplomats who served in the Balkans, Davis and his lobbying firm, Davis Manafort, received several million dollars to help run Montenegro's independence referendum campaign of 2006. The terms of the agreement were never disclosed to the public, but top Montenegrin officials told the US diplomats that Davis's work was underwritten by powerful Russian business interests connected to the Kremlin and operating in Montenegro. Neither Davis nor the McCain campaign responded to repeated requests for comment. (Davis's extensive lobbying work, especially on behalf of collapsed mortgage giants Fannie Mae and Freddie Mac, has already attracted critical media scrutiny.)
At the time, Putin wanted to establish a Russian outpost in the Mediterranean, and Montenegro--a coastal republic across the Adriatic from Italy--was seen as his best hope. McCain also lobbied for Montenegro's independence from Serbia, calling it "the greatest European democracy project since the end of the cold war." For McCain, the simplistic notion of "independence" from a country America had gone to war with in the late 1990s was all that mattered. What Montenegro looked like after independence seemed not to interest him. This suited Putin just fine. Russia had generally sided with Serbia against the West during the Balkan wars of the 1990s, but for the Kremlin, cutting Montenegro free from Serbia meant dealing with a Montenegro that could be more easily controlled. Indeed, today, after its "independence," Montenegro is nicknamed "Moscow by the Mediterranean." Russian oligarchs control huge chunks of the country's industry and prized coastline--and Russians exert a powerful influence over the country's political culture. "Montenegro is almost a new Russian colony, as rubles flow in to buy property and business in the tiny state," Denis MacShane, Tony Blair's former Europe minister, wrote in Newsweek in June. The takeover of Montenegro has been a Russian geostrategic victory--quietly accomplished, paradoxically enough, with the help of McCain and his top aides.
In mid-September The Nation's website published a photo of McCain celebrating his seventieth birthday in Montenegro in August 2006 at a yacht party hosted by convicted Italian felon Raffaello Follieri and his movie-star girlfriend Anne Hathaway. On the same day one of the largest mega-yachts in the world, the Queen K, was moored in the same bay of Kotor. This was where the real party was. The owner of the Queen K was known as "Putin's oligarch": Oleg Deripaska, controlling shareholder of the Russian aluminum giant RusAl, currently listed as the ninth-richest man in the world, with a rap sheet as abundant as his wealth. By mid-2005 Deripaska had already virtually taken control of Montenegro's economy by snapping up its aluminum plant, KAP--which accounts for up to 40 percent of the country's GDP and some 80 percent of its export earnings--in a nontransparent privatization tender strongly criticized by NGO watchdogs, Montenegrin politicians and journalists. The Nation has learned that Deripaska told one of his closest associates that he bought the plant "because Putin encouraged him to do it." The reason: "the Kremlin wanted an area of influence in the Mediterranean."
In mid-2005 Ambassador Richard Sklar, the former lead US official in the Balkans, ceased advising the Montenegrin government (he'd worked as a pro bono adviser after leaving the US diplomatic service) when it became clear the plant was being handed to Deripaska under heavy Russian pressure. "I quit because it was a bad deal, not for any political reasons. The Russians scared all the other buyers off. They offered far too little money and got themselves a sweetheart deal."
Russia's virtual takeover of Montenegro was well under way by January 2006, when Rick Davis introduced Deripaska to McCain at a villa in Davos, Switzerland. They met again seven months later, at a reception in Montenegro celebrating McCain's birthday, as reported in the Washington Post.
The story of how Oleg Deripaska, 40, rose from a Cossack village to become a Putin-blessed aluminum tycoon with an estimated $40 billion fortune does not begin with a lemonade stand and old-fashioned elbow grease. Like most post-Soviet success stories, Deripaska's rise began abruptly and violently, during the chaotic reign of Boris Yeltsin. Among all the battles for control of valuable state assets in the 1990s, none were as bloody as the "aluminum wars," in which organized-crime gangs hired by competing interests assassinated dozens of executives, shareholders and bankers. During a visit to the United States in 1995, Deripaska threatened the lives of two aluminum rivals, Yuri and Mikhail Zhivilo, according to a RICO lawsuit filed against Deripaska in New York district court in 2000. The RICO case is just one of many lawsuits, including one filed in Israel by a former business partner claiming that Deripaska illegally wiretapped an Israeli cabinet minister. In addition, German prosecutors have begun a criminal money-laundering investigation in Stuttgart. (Deripaska did not respond to requests for comment.)
Deripaska understands that success in Russia today comes from a mixture of brute force, political influence and personal connections. In 2001, about a year after Putin signed a decree granting legal immunity to Yeltsin's family, Deripaska married Yeltsin's granddaughter, thereby cementing his own immunity and power. Throughout Putin's reign, Deripaska has adhered to an unwritten understanding between Putin and the oligarchs: as long as they support the Kremlin, they can operate with impunity. Deripaska has thus taken on numerous projects dear to Putin, such as building a new airport in Sochi for the 2014 Olympics and buying out Tajikistan's aluminum plant to help Putin reassert control over that key ex-Soviet republic. Deripaska openly admits that his RusAl holdings are subservient to the Kremlin's wishes, telling the Financial Times last year, "If the state says we need to give it up, we'll give it up."
Yet Deripaska faced a serious obstacle to his business ambitions, hampering his duties as a Putin surrogate. Because of numerous accusations of involvement in death threats, extortion, racketeering and money laundering, he had been barred from entering America since 1998. Putin has lobbied for Deripaska's US visa. In an interview with Le Monde earlier this year, Putin complained, "I have asked my American colleagues why. If you have reasons for not delivering him a visa, if you have documents on illegal activities, give us them.... They give us nothing, explain to us nothing, and forbid him from entry."
The visa ban was costing Deripaska billions: for years he and fellow RusAl shareholders had sought to cash in their wealth by launching an IPO in London, which could have netted up to $10 billion for RusAl's owners. However, finding institutional buyers would be difficult if not impossible as long as RusAl's primary owner was barred from entering the United States.
Despite rampant Russophobia among Republicans, Deripaska turned to powerful GOP figures to solve his problem--especially to Republicans connected with McCain. In 2003 Deripaska hired former presidential candidate Bob Dole, who had nearly picked McCain as his running mate, and Dole's lobbying partner Bruce Jackson (also a McCain aide) to lobby the State Department to overturn the visa ban, according to Glenn Simpson and Mary Jacoby of the Wall Street Journal. Over the next few years Dole's firm, Alston & Bird, was paid more than $500,000 to push for Deripaska's visa.
Deripaska also reached out to a Washington-based intelligence firm, Diligence, chaired by GOP foreign policy hand Richard Burt, McCain's top foreign policy adviser in 2000 and an adviser in '08 (Burt left Diligence in 2007 to join Henry Kissinger's consulting firm). Deripaska's business partner in London, Nathaniel Rothschild, an heir to the English Rothschild fortune, bought a stake in Diligence, according to the New York Times and confirmed by a Rothschild spokesman. The firm offered Deripaska many useful services: corporate intelligence gathering, visa lobbying through considerable GOP connections and, crucially, help in obtaining a $150 million World Bank/European Bank for Reconstruction and Development loan for a Deripaska subsidiary, the Komi Aluminum Project. Getting the loan was useful in providing a layer of comfort to Western investors skittish about RusAl. So Diligence, now partly owned by Rothschild, provided a "due diligence" report to the World Bank, which the Bank then used to approve its loan to Deripaska.
Not surprisingly, the lobbying worked: in December 2005 Deripaska was issued a multientry US visa, according to the State Department. During his brief stay he signed his World Bank loan, spoke at a Carnegie Endowment meeting and attended a dinner for Harvard University's Belfer Center, where, thanks to a generous donation, he became a member of its international council.
However, Deripaska's trip did not end well. Under the visa's terms, he was forced to endure lengthy FBI questioning. According to the mining-industry newsletter Mineweb, the list of his enemies had grown from jilted former business partners to the heads of powerful US metals companies and government officials unhappy with RusAl's control of key Third World bauxite mines, which threatened beleaguered US aluminum giants. The interview went badly--according to people who know him, Deripaska had little patience for prying bureaucrats. When he left the country, the visa ban was reinstated. Once again Deripaska turned to powerful Republicans--this time, to McCain and campaign manager Davis, who arranged the January 2006 Davos introduction. The McCain campaign later claimed that "any contact between Mr. Deripaska and the senator was social and incidental," but afterward Deripaska thanked Davis for arranging "such an intimate setting." The Washington Post reported that Davis was "seeking to do business with the billionaire." Indeed, Deripaska's subsequent thank-you letter mentioned his possible investment in a metals company Davis represented through a hedge-fund client.