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The (Geo-)Political Aspects of Austrian-Russian Business Relations, Part II

The first part of this article is available here.
This article is a part of the first issue of the Kremlin’s Influence Quarterly.

You can also download this piece as a PDF.

5. Austria’s Role in the Nabucco and South Stream Pipeline Projects

The Nabucco pipeline was the EU’s flagship project with regard to the energy resources of the Central Asia and Caucasus Region. It could have brought gas from the Georgian-Turkish and/or Iraqi-Turkish border, respectively, to the gas hub in Baumgarten without passing through Russia. OMV was the head company of this project; the other partners were the Bulgarian Energy Holding, Turkey’s Botas, Germany’s RWE, Hungary’s FGSZ (a 100 percent subsidiary of the oil and gas group MOL), and Romania’s Transgaz. As initially assumed, Nabucco would cost an estimated EUR 8 billion, a figure revised to EUR 12–15billion. The 3,300-kilometer-long pipeline should have gone into operation in 2013 and reach a capacity of 31 billion cubic meters of gas (10 percent of EU-27 gas imports in 2005) by 2020. But especially since the fall of 2011, prospects for Nabucco appeared to be dwindling due to several reasons. Thus, the amount of non-Russian gas needed to fill Nabucco did not materialize; so several alternative projects, with a reduced Nabucco West pipeline among them, were under consideration.

Moscow did not want Nabucco to be built from the very beginning and did its best to derail it. An important initiative in this context was the South Stream pipeline, intended to transport gas from the Central Asian and Caucasus region. This pipeline, with a capacity of 63 billion cubic metres of gas per year, is proposed to run from southern Russia under the Black Sea to Bulgaria, then bifurcate to cross several other countries for Italy and Austria.

Russia’s opposition to Nabucco was, of course, well known throughout the entire EU. Austrian Federal Chancellor Werner Faymann (Social Democratic Party) assured then Prime Minister Vladimir Putin in November 2009 in Moscow that Nabucco is not directed against Russia.

Moscow wanted to involve Austria in South Stream at all costs, and Vienna did not take long to be persuaded. In April 2010, an Austrian-Russian intergovernmental agreement and a Gazprom-OMV cooperation agreement to bring Austria into the project were signed. Putin made it clear in Vienna it would be “realized no matter what.”[1] At the occasion of Austria’s accession to South Stream, Russian news agency RIA Novosti highlighted a “big victory for Russia and a major blow to Nabucco”[2]—which, again, left no doubt that South Stream was, above all, planned as a “Nabucco-stopper.” On 21 February 2011, Gazprom’s CEO Aleksey Miller announced in Moscow that his company and OMV had officially registered a joint venture to build and operate the Austrian section of South Stream. Its planned Austrian route practically duplicated Nabucco’s (and therefore the EU’s) envisaged route, from Hungary to the Nabucco terminal at Baumgarten.

The main supply planned for Nabucco was to be Shah Deniz natural gas field in the South Caspian Sea, off the coast of Azerbaijan. But after the Shah Deniz consortium took the decision to prefer the Trans-Adriatic Pipeline over Nabucco for its exports, the Nabucco plan was finally aborted in June 2013.

South Stream was expected to cement Gazprom’s influence over south eastern European gas deliveries. EU member-states Bulgaria and Greece are heavily dependent on Russian supplies. In 2014 the European Commission challenged South Stream on the basis of the EU’s Third Energy Package (according to this legislation, adopted in 2009, a gas company cannot own a pipeline that supplies its gas) and threatened legal action against Bulgaria. This led to the cancellation of South Stream. The Commission accused South Stream of violating EU law regarding the access of competitors to the pipeline. After the cancellation, Gazprom quickly unveiled an alternative route. The new pipeline, called TurkStream, was designed to deliver 33.5 billion cubic meters of natural gas—half of which is intended for the Turkish market while the other half is slated for the Balkans and further to Central Europe. The new Russian pipeline through the Black Sea to Turkey was inaugurated on 8 January 2020 at a lavish ceremony in Istanbul. Austria’s Baumgarten gas hub could be a key European transit point for Russian gas that flows through the TurkStream pipeline to Turkey (circumventing Ukraine) and on to the EU. Before TurkStream gas can end up in the continent, however, Gazprom will have to build a pipeline that connects this pipeline to the EU network.

6. RosUkrEnergo, Firtash, Mogilevich, and Raiffeisen

In 2004, the Centragas Holding AG, registered in Vienna and controlled by the pro-Russian Ukrainian oligarch Dmitry Firtash, teamed up with Gazprom to establish Swiss-registered RosUkrEnergo, or RUE, to exclusively import Central Asian gas to Ukraine. Firtash and Gazprom roughly split the ownership of RUE. Firtash’s share was held in trust for some time by the Austrian Raiffeisen Investment AG, or RIAG (a subsidiary of Raiffeisen Zentralbank). Given that Gazprom was then and still is controlled by the Russian Government, observers speculated that Firtash had cultivated strong ties to Putin’s inner circle in order to make RUE operational.

RUE then bought billions of dollars’ worth of cheap natural gas mainly from Turkmenistan, mixed it with expensive gas from Russia and resold it at significantly marked-up prices inside Ukraine. Critics, however, pointed out there was no purely economic reason to use the services of an intermediary in the gas trade between the former Soviet republics. It soon became clear that RUE was nothing more than a shell to siphon off profits. And the press started to speculate about ties of alleged gangster boss Semion Mogilevich to RUE. In April 2006, Raiffeisen International CEO Herbert Stepic “strictly” denied that “we came close to organized crime.” According to him, there was no “proximity [of Raiffeisen] to Mr. Mogilevich.” At this occasion, Stepic, however, declined to say for whom RIAG held its share in RUE. But he insisted that all relevant authorities in the Ukraine and Russia would know who was behind it.[3]

Raiffeisen had RUE checked by Kroll Inc., a renowned US consulting firm with good links to the intelligence community. The bank had been certified that the business relationship was unobjectionable. But finally, Raiffeisen severed all ties with RUE. As to the “relevant authorities” in Ukraine, Oleksandr Turchinov, head of the Security Service of Ukraine, or SBU, was convinced that RUE was indirectly controlled by Mogilevich. Ukraine’s then Prime Minister Yulia Tymoshenko (a gas-business insider in her own rights) said after 2006 repeatedly that she had “documented proof that some powerful criminal structures are behind RUE company.”[4] In 2009, Ukraine and Russia agreed to stop using intermediaries, referring to RUE, which was liquitated between 2014 and 2016.

The contacts between Firtash and Mogilevich were discussed for a while in some Austrian and international media outlets. According to a cable from the US Embassy in Kyiv on 10 December 2008, Firtash admitted at a meeting with Ambassador Bill Taylor, which had taken place shortly before, that he had “ties” with Mogilevich, but they were “not close.”[5] Later Firtash denied having said this and assured that he had been “misunderstood.” Be that as it may, in 2010, Ukraine elected pro-Russian Viktor Yanukovych president. Firtash was one of the main Ukrainian oligarchs who had financed Yanukovych’s campaign, which was also supported by the notorious US lobbyist and political consultant Paul Manafort.

In 2013, Firtash was charged by the US Justice Department with having overseen a criminal enterprise which paid millions in bribes to both state and central government agencies in India in order to obtain mining licenses. He was arrested by Austrian police in Vienna weeks after Yanukovych had fled Kyiv on 22 February 2014. Firtash’s contacts in the Kremlin must have been excellent because the bail of EUR 125 million, which was due for his release, came from Russia: it was within a few days (!) paid by Russian billionaire Vasily Anisimov.Therefore, it was not really surprising that Firtash remained pro-Russian also in view of Putin’s war against his homeland Ukraine.

Firtash is still in Vienna after six years and fighting against his extradition to the United States—with the assistance of a “cohort of attorneys, PR consultants and lobbyists on both sides of the Atlantic.”[6] The best-known jurist working for Firtash is Dieter Böhmdorfer (2000–2004 Austria’s Minister of Justice, nominated by the Freedom Party, of which he was not a member).

7. Former Austrian Top Politicians and Managers at the Service of Russia

On 14 February 2005 then German Federal Chancellor Gerhard Schroeder (Social Democratic Party) received Oleg Deripaska for a dinner with German and Russian entrepreneurs, although the German Foreign Intelligence Service (Bundesnachrichtendienst, or BND) had expressly warned against the Russian oligarch. An official of the German Federal Chancellery noted: “According to BND reports there are indications of [Deripaska’s] links with organized crime that go beyond the ‘normal level of dubious business methods’ for top representatives of the Russian economy.”[7] In 2007 Deripaska, who at times was Russia’s richest person and is noted for his close ties with Putin, acquired a large stake in Vienna-based Strabag, one of the largest construction companies in Europe. Its then boss Hans Peter Haselsteiner responded very emotionally to the question about Deripaska’s—benevolently formulated—controversial reputation: “Europeans and Americans have no reason whatsoever to point the finger [at Russia]: Russia has completely redistributed its national wealth in less than twenty years, without bloodshed. America has needed three generations of lawlessness and a great civil war for this; Europe has needed two revolutions and two world wars.” And addressed to the then US vice president (who wasn’t actually up for discussion at all), Haselsteiner declared: “I’d rather do business with Oleg Deripaska than with Dick Cheney,”[8] who, however, has not been known to have wanted to cooperate with Haselsteiner. Haselsteiner’s position regarding Putin’s Russia was also, and especially, fuelled by his desire to do profitable business there. Strabag then built the Olympic Village and the airport for the 2014 Winter Olympic Games in Sochi, among many other things in Russia. According to figures from 1 January 2019, 25.9 percent of Strabag was owned by Cyprus-registered Rasperia Trading, which belongs to the Deripaska-controlled diversified industrial group Basic Element.

The Chairman of Strabag’s Supervisory Board is Austria’s former (2007–2008) Federal Chancellor Alfred Gusenbauer (Social Democratic Party), who had no experience in the construction business prior to this appointment in 2010. Another interesting member of this Supervisory Board is (since June 2018; he will leave in 2020) the Russian national Oleg Kotkov, a Soviet and Russian military officer-turned-banker. He graduated from two Soviet Military Academies. From 2003 to 2007, he was Military Adviser at the Permanent Mission of Russia’s Mission to the Organization for Security and Cooperation in Europe, or OSCE, in Vienna. From 2016 to 2018, he was adviser to the Chairman of the Supervisory Board of the Russian PJSC Asian-Pacific Bank.

Haselsteiner was a MP for the Liberal Forum from 1994 to 1998 and financed it afterwards, as well as the liberal party NEOS, which is represented in the National Council since 2013. The ideology of these parties was and is respectively very far away from Putin’s or Deripaska’s. Nevertheless, Haselsteiner declared to “admire” Putin, whom he has met several times. Haselsteiner’s willingness to converge on opinions that he considered to be widespread in Russia was reflected, among other things, in his statement about a “Jewish network” among Russian oligarchs in which he “did not want to interfere.”[9] Such statements, which were largely ignored in Austria, can hardly be read otherwise than by the intention to “fish for compliments” in Putin’s Russia. In Austria, at least publicly nobody noticed that Haselsteiner and then Freedom Party leader Heinz-Christian Strache, regardless of the enmity between them (Haselsteiner believes that for Strache he represents an “enemy image”[10]), share the same—largely favorable—opinion about Putin’s rule.

In interviews Haselsteiner considered it a serious mistake that the EU had “allowed” NATO’s “rapid eastward expansion.” Instead, an attempt should have been made to bring Russia into the EU. “Putin could have been won over. That would have made Europe great.” But all this, Haselsteiner believed, had been thwarted by “the Americans and NATO,” and “the Europeans” had followed suit “in their naivety.” For the United States, there were two very bad scenarios: “A united Europe including Russia” and a functioning euro.[11] Haselsteiner thus disclosed a complete ignorance of even the basic concepts of Russian foreign and integration policy, distorted the facts (for example, EU and NATO are completely different organizations, so one cannot prevent the enlargement of the other; and post-Soviet Russia has at no time shown any interest in joining the EU, which would be completely unrealistic anyway due to the size of the country), and propagated conspiracy theories. But at least, one learned from such interviews what Haselsteiner “geopolitically dreamed” of—namely a “united Europe together with Russia,” which is opposed to the US. And coincidence or not, this is also one of the most important goals of Putin’s foreign and military policy.

Only exceptionally did Haselsteiner express somewhat more sceptical views about Russia: “I very much regret that the Putin regime is moving further and further away from the rule of law [. . .] and leaves us no choice but to impose sanctions.” But “nevertheless Russia remains an important European nation and a promising market for the construction industry.” Haselsteiner continued that this is in his interest and has “nothing to do with Russian efforts to strengthen the [political] right in Europe, destabilize Europe and denigrate the EU.” This was, according to Haselsteiner, reprehensible despite the economic interests.[12] And he, of course, maintained his cooperation with Deripaska.

Siegfried Wolf is one of the most internationally renowned Austrian managers. For him, Deripaska is an “upright, obliging and good entrepreneur.”[13] Wolf had introduced Deripaska to Strabag in Vienna. And at Deripaska’s request, Wolf became a member of Strabag’s Supervisory Board in 2007 and remained there until 2015. Also in 2007, Deripaska joined Magna International Inc. of the Austrian-Canadian industrialist Frank Stronach (who met Putin personally and gave him the highest praises), but already the following year—officially due to the financial crisis—he had to sell his share (20 percent of the stocks with 43 percent of the voting rights) to those banks that had previously helped him to handle the 1.5 billion dollar deal. In 2010 Wolf moved from Magna to the industrial conglomerate Russian Machines (which belongs to Basic Element): He became Chairman of the Board of Directors there (where he remained until 2018) and had to cooperate with Colonel General Valery Pechionkin, (in Soviet times he was a staff member of the Soviet Committee for State Security, or KGB, and from 1997 to 2000 Deputy Director of the Russian Federal Security Service, or FSB), who in 2018 became Basic Element’s CEO. Wolf is also chairman of the Supervisory Boards of GAZ, located in Nizhny Novgorod and part of Basic Element, and of Vienna-based Sberbank Europe AG, a European subsidiary of Sberbank.

In interviews Wolf always defends Putin against any criticism. Thus, Wolf said that human rights violations occur not only in Russia, but “also in other countries.” Russia, according to him, needs a “strong leadership.” And: “I can only report positively what I have experienced with Mr. Putin.” Wolf declared at the beginning of 2014 that in Russia “a more liberal society will emerge in the next few years” (in reality, exactly the opposite happened, M.M.). According to Wolf, Europe needs a “very, very close relationship with Russia.”[14] Needless to say, he is massively opposed to EU sanctions against Russia.

Wolfgang Schuessel, from 1995 to 2007 was head of the People’s Party, during and after his tenure as Austrian Federal Chancellor (2000–2007), repeatedly praised Putin. In June 2019 Schuessel (who occasionally devoted his spare time to Russian icon painting) joined the eleven-member Board of Directors of Russian Lukoil, one of the largest publicly traded, vertically integrated oil and gas companies in the world. In 2018, Schuessel became one of nine members of the Board of Directors of the largest mobile operator in Russia and the other post-Soviet republics, Mobile TeleSystems, or MTS, with 110 million clients; it belongs to the Russian conglomerate AFK Sistema,headed by CPSU-member-turned-billionaire Vladimir Yevtushenkov. At the end of May 2019, however, it became known that Schuessel would lose this mandate: His name was missing from the list of candidates for reappointment. On it, however, there was another well-known person: Valentin Yumashev, who from 1997 to 1998 (under President Boris Yeltsin) was Head of the Presidential Executive Office.[15] He and his wife were granted Austrian citizenship in 2009, which was what the Magna Group had stood up for.

The leader of the Social Democratic Party Christian Kern, during his short tenure as Austrian Federal Chancellor (2016–2017), made himself popular in the Kremlin by polemicizing against the EU’s Russia sanctions, for example, at the St Petersburg International Economic Forum in 2017. Kern has been CEO of the Austrian Federal Railroads from 2010 to 2016. In this position, he spoke out in favor of a broad-gauge (1,520 mm) railroad project to Vienna initiated by Russia. In July 2019 Kern joined the Board of Directors of the state company Russian Railroads, where he currently is the only foreigner. One of Austria’s best-known political journalists, Hans Rauscher, commented on this, referring to Putin’s military campaign against Ukraine: “This is not a good time for a former Austrian Chancellor and Social Democrat to become a lobbyist for Russian interests.”[16] But such statements, of course, did not change anything about Kern’s financially rewarding commitment in Russia.

Austrian banks have always been strongly committed to Russia. As of 2014, Raiffeisen Bank International and Bank Austria[17] alone had EUR 36 billion in loans in Russia. Raiffeisen remained strongly represented on the Russian market even as many other Western banks have pulled back due to the impact of EU sanctions and assertiveness of Russian state-owned competitors. Deripaska’s companies had been Raiffeisen clients in Moscow for many years before he and the (1994–2012) Advocate General of the Austrian Raiffeisen Association (in German: Generalanwalt des Österreichischen Raiffeisenverbandes; an important position in the Austrian banking landscape) Christian Konrad met personally; Haselsteiner had introduced them to each other. In 2007 Konrad said: “I have no fear of contact with Russians: Raiffeisen is active in many business areas in Russia. [. . .] Deripaska has my respect. As far as I know so far, he is an incredibly direct and straightforward guy, acting in an understandable way with comprehensible reactions.”[18]

Stepic, who met Putin personally and was head of the Austrian-Russian Friendship Society from 2001 to 2003, resigned as head of Raiffeisen Bank International in 2013 and then acted as Senior Adviser to the Board of the bank. He continued to give interviews in which he (as before) made no secret of his political views mixed with conspiracy theories. For example, in June 2014 (i.e., shortly after the Russian annexation of Crimea and the start of the fighting in Donbass) said that he would “continue to defend Putin,” because “the media coverage of the conflict [in Ukraine] was totally one-sided, the formation of opinion is determined by New York and London.” The EU had wanted to conclude an Association Agreement with Ukraine “quickly,” “without talking to the Russians” (as when Russia “talks” to Ukraine before concluding any agreements, including with the EU). Stepic also justified the Russian military intervention against Ukraine with a US antimissile system in the Czech Republic and Poland (which, however , had less than nothing to do with the Russian war against Ukraine). Under “Yushchenko and Tymoshenko” a “pigsty” (Saustall) had ruled in Ukraine, but “successor Yanukovych had stabilized the country.” At least Stepic confessed that Yanukovych, at the same time, had “stolen everything so that nothing remained.” And for Stepic, the annexation of Crimea could be explained by the fact that “the West has annexed Ukraine” (!) “Russia’s goal was not to get NATO to its borders. This is the main concern.” And Putin is “light years ahead of the EU in implementing his plans—quite simply because he can decide for himself.” The EU, as Stepic supported Haselsteiner’s views, should have “moved closer to Russia”—because “the US never liked the EU as a structure.” One does not need to speculate about the main reason for such opinions, as Stepic spoke out: According to him, over the past two decades Russia had been the market where the most money could be made worldwide.[19]

8. Austria and the EU Sanctions Against Russia

The Austrian Economic Chamber constantly lamented the impact of the EU sanctions on the business of its members in Russia, although it was and is limited.[20] And the homepage of the Austrian Embassy in Moscow literally states: “Austrian-Russian trade has developed extremely dynamically in recent years.”[21] Therefore, EU sanctions do not stand in the way of this “dynamic.”

The head of the Economic Chamber from 2000 to 2018, Christoph Leitl (People’s Party), always gave Putin a very warm welcome in Vienna. Leitl, since 2009 a knight of the Russian Order of Friendship, from the very beginning opposed the EU sanctions against Russia (the Austrian public was not really interested in the fact that he was involved in two companies in Russia that produce insulation materials). And Christoph Matznetter, Deputy Head of the Economic Chamber (2005–2007 and since 2009), Deputy Head of the Austrian-Russian Friendship Society and long-standing Member of the National Council, has made it repeatedly clear that he, as well as a “broad majority” in his Social Democratic Party, wants to see the sanctions terminated[22]—as wants the EU-skeptical Freedom Party both in the opposition and, between December 2017 and May 2019, in the government.[23] Notwithstanding this, Freedom Party-nominated Foreign Minister Karin Kneissl during her tenure always agreed to the six-monthly extension of EU sanctions against Russia.

According to statistics from the National Bank (Austria’s central bank), Russian direct investments in Austria have increased two and a half times since 2013 to around EUR 25 billion in 2018, which made Russia the second-largest investor in Austria. This gave some observers reason to suspect that the EU sanctions were being circumvented via Austria: “Given Russia’s limited corporate footprint and the lack of tangible projects that would necessitate these investments, it appears Austria is used mostly as a hub or throughput for Russian investments across Europe and as a point of repatriation of capital from Russian subsidiaries in Europe.”[24]

In May 2019, Austrian President Alexander Van der Bellen noted that Austria is participating in the sanctions against Russia as a loyal member of the EU—“regardless of what the Austrian position really is.”[25] Translated into plain language, this means that “in reality,” “Austria” is against the sanctions. And Leitl in his capacity (since 2017) as president of Eurochambres (the Association of European Chambers of Commerce and Industry, representing over 20 million companies) went on to demand an abolition of the EU sanctions. According to him, they “had no use whatsoever.” Russia is “a partner with whom Europeans should engage in dialogue on economic, political, cultural and sporting issues.”[26]

9. Conclusions and Outlook

Austrian politicians and managers find it difficult to say “no” to Russian officials and/or to find critical words about its domestic, foreign, security, and foreign trade policy. Austrian media outlets have paid some attention to increasing authoritarianism and the huge corruption under Putin, but Viennese politicians and businessmen rarely raise this issue. Instead, it is a widespread argument that Russia is “too important” as a power—and especially as a supplier of energy resources—so relations must not be “spoiled” under any circumstances.

There are no significant political forces in Austria which could be labelled as “anti-Russian” by Moscow-based politicians and/or media. Truly, nobody in Austria’s political elite wants to “argue” with Moscow. The governments in Vienna and Moscow like to emphasize that they are “very close” in most of the issues of international politics, that there are very few (if any) differences between them, that their relations are “trouble-free,” “cordial” etc. It is therefore not surprising that representatives of most parties and important interest groups (as the Economic Chamber) have been calling for the lifting of EU sanctions against Russia practically from the day they were imposed.

Natural gas and oil are “nonrenewable” resources which are imported into the EU and to Austria to a considerable extent from conflict regions and/or undemocratic states (such as Russia). There is no resistance whatsoever in Austria’s politics, media, and public against the fact that OMV portrays an increasing dependence of Austria and the EU on energy source supplies from Russia as a “guarantee of supply security.” Russia does not grant a “stable and secure gas supply” for Austria and the EU, but just the opposite: Moscow, especially since 1999 when Putin rose to power, has on several occasions demonstrated its capabilities and willingness to use gas and oil supply as a political leverage and a “geopolitical weapon” in order to subdue and/or punish “disloyal” states. It is irresponsible in the sense of a sustainable energy policy to make oneself dependent on the whims of the Kremlin.

If one wanted to give a very brief forecast on Austrian-Russian relations, it is totally obvious that there will be no change in the conditions described—regardless of the composition of the Austrian Government. The opposition hardly offers any alternatives with respect to the policy towards Russia, as all the major political forces in Austria have so-called Putin understanders (Putin-Versteher) among their ranks. And what all Austrian parties and special interest groups have in common is a total lack of understanding for the functional mechanisms of Russian domestic, security, foreign, and economic policy.


[1] “Putin Hails Russia’s Gas Reserves as Austria Joins South Stream Project,” Sputnik, April 24, 2010, https://sptnkne.ws/3BcY.

[2] Andrei Fedyashin, “Vladimir Putin Goes to the Land of Strauss and Schnitzel,” Sputnik, April 23, 2010, https://sptnkne.ws/pacK.

[3] Christine Zeiner, “Raiffeisen steigt aus russischer Gasfirma aus [Raiffeisen Withdraws from Russian Gas Company],” Wiener Zeitung, April 25, 2006, https://www.wienerzeitung.at/archiv/117286-Raiffeisen-steigt-aus-russischer-Gasfirma-aus.html.

[4] Luke Harding, “WikiLeaks Cables Link Russian Mafia Boss to EU Gas Supplies,” Guardian (US edition), December 1, 2010, https://www.theguardian.com/world/2010/dec/01/wikileaks-cables-russian-mafia-gas.

[5] “Ukraine: Firtash Makes His Case to the USG,” WikiLeaks, December 10, 2008, https://wikileaks.org/plusd/cables/08KYIV2414_a.html.

[6] Stefan Melichar, Michael Nikbakhsh, and Christoph Zotter, “All the President’s Men,” Profil, no. 43 (2019): 35.

[7] “Schröder empfing 2005 dubiose Gäste aus Russland [Schröder Received Dubious Guests from Russia in 2005],” Spiegel Online, May 4, 2015, https://www.spiegel.de/spiegel/vorab/schroeder-empfing-2005-dubiose-gaeste-aus-russland-a-967403.html.

[8] Renate Graber, “Die russische Wende [The Russian Turnaround],” Der Standard, June 4, 2007, https://derstandard.at/2857801/Die-russische-Wende.

[9] Christa Zöchling, “Ein Freigeist als Milliardär [A Free-Spirited Billionaire],” Profil, no. 8, (2008): 27.

[10] Renate Gruber, “Da lachen ja die Hühner, Herr Hofer” [“That’s a Good Laugh, Mr. Hofer”] [interview with Hans Peter Haselsteiner]. Der Standard, June 29–30, 2019, 23.

[11] “Haselsteiner: Russland in der EU ‘hätte Europa groß gemacht’ [Haselsteiner: Russia in the EU ‘would have made Europe great’] [interview],” Die Presse, September 20, 2017, https://www.diepresse.com/5288922/haselsteiner-russland-in-der-eu-hatte-europa-gross-gemacht.

[12] “Haselsteiner will sich Auftragsvergabe bei Westbahn anschauen [Haselsteiner Wants to Take a Look at Contract Awards for Westbahn],” Die Presse, May 20, 2019, https://www.diepresse.com/5631337/haselsteiner-will-sich-auftragsvergabe-bei-westbahn-anschauen.

[13] Jakob Zirm, “Siegfried Wolf wechselt von Magna zu Oleg Deripaska [Siegfried Wolf Moves from Magna to Oleg Deripaska],” Die Presse, September 14, 2010, 15.

[14] Miriam Koch and Andreas Lampl, “Putin ist der richtige Mann” [Putin’s the man] [interview with Siegfried Wolf],” Format, no. 5, (2014): 22–25.

[15] Yumashev’s daughter from his first marriage, Polina, in 2001 had married (and in 2018 divorced) Deripaska.

[16] Hans Rauscher, “Neuer Job für Kern: Russian Connection. Es sind bereits etliche ehemalige Top-Politiker in Putins Reich engagiert [New Job for Kern: Russian Connection. Several Former Top Politicians are Already Employed in Putin’s empire],” Der Standard, May 1, 2019, https://www.derstandard.at/story/2000102353840/neuer-job-fuer-kern-russian-connection?fbclid=IwAR3eeZ4VLlmX3-h87hpnMKPAZftnO0NOr3A2FGpdV1lETGjxCM2r7NbQ5X0.

[17] The headquarters of UniCredit Bank Austria AG (which is its full name) is located in Vienna, but it has not been “Austrian” for a long time, as it is almost entirely owned by the UniCredit Group based in Milan, Italy.

[18] “Deripaska ist ein gerader Bursche [Deripaska is a straight guy] [interview with Christian Konrad],” Der Standard, June 4, 2007, https://www.derstandard.at/story/2859447/deripaska-ist-ein-gerader-bursche.

[19] Martina Salomon, “Stepic: ‘Putin ist EU um Lichtjahre voraus’ [Stepic: ‘Putin is light years ahead of the EU’] [interview],” Kurier, December 6, 2014, https://kurier.at/wirtschaft/stepic-putin-ist-eu-um-lichtjahre-voraus/70.074.860.

[20] Cf. Otmar Lahodynsky, “Schwein gehabt [Had Good Luck],” Profil, no. 12, pp. 56-60.

[21] Österreichische Botschaft Moskau, Wirtschaftsbeziehungen zwischen Österreich und Russland [Austrian Embassy Moscow, Economic relations between Austria and Russia], https://www.bmeia.gv.at/oeb-moskau/bilaterale-beziehungen/russische-foederation/wirtschaft/ (accessed 30 May 2020).

[22] “The Winner is: Zar Wladimir [The Winner is: Czar Vladimir],” Trend, no. 46 (2016): 21.

[23] Cf. “Strache fordert Ende von Russland-Sanktionen [Strache demands end to Russia sanctions],” Die Presse, June 2, 2018, https://diepresse.com/home/ausland/aussenpolitik/5439865/Strache-fordert-Ende-von-RusslandSanktionen.

[24] Heather A. Conley et al., The Kremlin Playbook II. The Enablers, Center for Strategic & International Studies, (New York: Rowman & Littlefield, 2019), 50, https://csis-prod.s3.amazonaws.com/s3fs-public/publication/190327_Conley_KPII_interior_v3_WEB.pdf (accessed 30 May 2020).

[25] Jutta Sommerbauer, “Van der Bellens und Österreichs ‘wirkliche’ Russland-Position [Van der Bellen and Austria’s ‘real’ position on Russia],” Die Presse, May 15, 2019, 4.

[26] Christoph B. Schiltz, “Europäische Wirtschaft ruft zur Abschaffung von Sanktionen auf,” Die Welt, December 9, 2019, https://www.welt.de/politik/ausland/article204148482/Europaeische-Wirtschaft-ruft-zur-Abschaffung-von-Sanktionen-auf.html?fbclid=IwAR0cMRb_u5mEhqAsdqNihEliLnzmfQLaSKl9KR4jl65L9SjS3_XN8Ub8Pvo.

Russian Gas and the Financing of Separatism in Moldova

This article is a part of the first issue of the Kremlin’s Influence Quarterly.

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Introduction

Over the last 200 years, the main part of the territory that today constitutes the Republic of Moldova switched sovereignties six times between the Russian Empire, the USSR, the Ottoman Empire, and Romania, which explains why Russia treats it as a less loyal territory, compared to Ukraine or Belarus. With the last change in 1991, the Republic of Moldova proclaimed its independence and, on March 2, 1992, gained official recognition by the UN, in the borders of the former Moldavian Soviet Socialist Republic, including the Transnistrian region, inhabited by a more pro-Russian population as compared to the rest of the country. On the day of official recognition of the Republic of Moldova within UN, a military conflict sprang in the Transnistrian region, initially involving police forces and civilians and later the regular army. The Russian Army stationed in Transnistria (the former Soviet 14th Guards Army) supported the Transnistrian side, first unofficially then officially, which determined the outcome of the war. The war ended by a cease-fire agreement signed between Presidents of the Russian Federation and the Republic of Moldova—Boris Yeltsyn and Mircea Snegur, reconfirming the direct involvement of Russia in the Transnistrian conflict.[1]

Since 1991, the goal of Russian policy towards Moldova was to prevent Moldova from fleeing the Russian sphere of influence, and especially to maintain the Russian military base in Tiraspol and prevent Moldova’s adherence to NATO. Transnistrian authorities served as proxies for Russia in pursuit of its foreign policy objectives, Russia’s control over Transnistria being juridically recognized by the European Court for Human Rights.[2] However, maintaining the “statehood” of Transnistria required major financial support, and the energy sector played a crucial role in Russia’s financing of separatism in the Republic of Moldova.

During Soviet times, the energy infrastructure was constructed in such a way that the energy system in the former Moldovan Soviet Socialist Republic was dependent on critical infrastructure placed in the Transnistrian region:

  • the largest power plant—Moldovan State Regional Power Station (aka Kuchurgan Power Station, also known under the Russian acronym MGRES), with total installed capacity over 2.5 GW
  • six out of seven interconnection points between Moldova and Ukraine on high-voltage (330 kV) lines, four of these lines being tied up in a transformer substation on the territory of MGRES
  • four out of five entry points on gas transmission pipelines of regional importance, including all three entry points on the Trans-Balkan pipeline system
  • the main gas compressor station on the Trans-Balkan pipeline system between Ukraine and Bulgaria, located near Tiraspol (the administrative center of Transnistrian region)

Thus, by 1992, the energy security of the Republic of Moldova almost entirely depended on Russia and its proxy regime in the Transnistrian region. Less than 10 percent of the country’s needs could be covered by electricity generation located outside the Transnistrian region. Import of electricity from Ukraine could not avoid high-voltage lines and transformation stations located in the breakaway region. Moreover, even the limited amount of generation controlled by constitutional authorities was mainly based on natural gas as fuel, while Gazprom was the only gas supplier and physical continuity of gas supply depended on infrastructural elements located in the Transnistrian region.

Since then, Russia has taken advantage of its energy leverage in relation to Moldova several times, generating crises, some of them politically reasoned[CD1] . Thus, electricity supply to the main part of Moldova was limited or even halted in 1998,[3] 2004,[4] and 2005,[5] while natural gas supply was interrupted in 2000.[6]

How Gazprom took control of Moldovas gas infrastructure

The gas price has long been used by Russia as a political tool in promoting its foreign policy in the countries largely dependent on Russian gas. The former Soviet countries are particularly vulnerable due to poverty, corruption, and weak regulation of the energy market. The Kremlin administration exploited these weaknesses to gain control of gas supply systems via Gazprom, as it happened in countries like Moldova (1995), Armenia (1997), and Belarus (2007), and only partly succeeded in other countries.[7] The energy sector has always been a copious source of illegal enrichment for corrupt politicians. In the case of Moldova, during 1994–1998 [CD2] the gas supply complex was twice exposed to hostile takeovers. Following a series of actions such as artificial debt swelling and undervaluation of assets, undertaken in conspiracy with Moldovan government officials, Gazprom gained control over companies that owned critical gas transmission and distribution infrastructure.

The trans-Balkan pipeline that crosses Ukraine and Moldova (including the breakaway Transnistrian region) has been used by Gazprom to supply about 20–25 bcm of gas annually to Balkan countries. The gas transit was one of—if not the only—negotiating tools for Moldova in relation to Gazprom. However, the corruptibility and lack of vision of Moldovan political elites allowed the Russian holding to acquire, at derisory prices, the majority stake in Moldova’s gas transmission system (1995) and distribution pipelines (1998) via debt-to-equity swaps. Prior to the acquisition, Gazprom had used its dominant position as a sole gas supplier to impose discriminatory conditions on the Moldovan side, thus artificially increasing the gas debt, as thoroughly analyzed in our 2007 research.[8] Beginning in 1994, Gazprom increased the gas price for Moldova from USD 38.5 to USD 80 for one thousand cubic meters. During that period, Gazprom supplied gas on the European market at an average price of USD 72.8,[9] although the share of transportation costs in the final price for EU countries was higher than for Moldova. At the same time, Gazprom supplied gas to the neighbouring Ukraine at a price of USD 50, which remained unchanged until 2005[10] for political reasons, aimed at retaining Ukraine in Russia’s sphere of influence. Besides the abusive price increase for Moldova, Gazprom requested advanced payments and imposed a fine of 0.35 percent per day on the amounts due (equivalent to 127.8 percent per annum in hard currency), which was seventeen times more than for other countries of the former USSR. Moldova’s debt was further increased by the fact that the Transnistrian separatist region stopped paying for gas consumption after the 1992 Transnistrian conflict, when the separatists were backed by the Russian [CD3] 14th Guards Army. Consequently, in 1994 alone, Moldova’s gas debt increased from USD 22 million to USD 291 million, including USD 100 million in fines and USD 91 million of debt from the separatist region. Moldova was under threat to remain without [CD4] gas supply due to the immense debt. In order to avoid this, in 1995 the government agreed to cede in favor of Gazprom a 50 percent+1 share of the newly formed company Gazsnabtranzit, in whose capital the transportation pipelines were transmitted. The transaction was made both with deviations from the legal norm and to the detriment of the public interest, and as a result Moldova was prejudiced with over USD 416 million for the benefit of the Russian concern.[11]

The government of Moldova admitted similar abuses in 1998 at the founding of JSC [CD5] Moldovagaz, in which Gazprom received a 50 percent share.[12] The equity of the newly created enterprise was determined on the basis of the so-called preliminary estimate of both transmission and distribution pipelines. In 1999, the assets of the gas complex were to be revalued in order to rectify the ownership quotas in the share capital of Moldovagaz, with the corresponding correction of the gas debt. However, this provision has not been executed by the government. The share capital and the gas liabilities remained the same. These and other frauds were investigated in 2000–2001 by the Moldovan Court of Accounts (Supreme Audit Institution in Moldova) at the request of the Parliament. However, following Parliamentary elections on February 25, 2001, the pro-Russian Party of Communists of the Republic of Moldova (PCRM) took over power,[13] and already in March 2001 the team leader of auditing team, Mr. Tudor Șoitu, was ordered to finalize the investigation ahead of schedule.[14] Despite the report containing pertinent proofs of frauds committed by high-level government officials and management of gas companies in favor of Gazprom, it has not been heard in the Parliament. Moreover, Mr. Șoitu was placed under accusation by the Prosecutor’s office and fired from the Court of Accounts. The data and confirmative documents that constituted the base for the report were partially published later, within policy papers produced by IDIS “Viitorul” think tank in 2007,[15] 2017[16] and in Watchdog.md in 2019.[17]

Gas debt and the financing of separatism

The supply of Russian gas to both Moldova and the self-proclaimed Transnistria has been carried out under contracts signed by Gazprom with entities registered in Moldova and officially recognized (initially it was Gazsnabtranzit, afterwards—Moldovagaz). Under such a contractual scheme, the gas debt of the separatist region is accumulated by the Moldovan side.[18] This was possible due to the fact that Transnistria’s gas infrastructure was included in the capital of the Moldovan gas supplier under the pretext of paying the gas debt. Thus, Gazprom supplies gas to Moldovagaz, while the latter supplies gas to Moldovan consumers and to Tiraspol-Transgaz from Transnistria. De jure Tiraspol-Transgaz is a subsidiary of Moldovagaz, but de facto its assets were nationalized by the separatist authorities.[19] Currently the outstanding amount owed by Moldovagaz to Gazprom at the end of 2019 totalled USD 7860.6 million[20] (including USD 1201.2 million to its subsidiary Factoring-Finans).[21]

Tiraspol-Transgaz resells the gas at subsidized tariffs to local Transnistrian households and enterprises, including to MGRES (Молдавская ГРЭС) power plant that supplies Moldova with electricity. The obtained revenue is accumulated on the so-called special gas account and is transferred directly to the separatist budget as loans from Tiraspol-Transgaz. Between 2007 and 2016, the separatist region received a USD 6 billion “gas subsidy,” out of which USD 1.3 billion was converted into budgetary funds. In this way the self-proclaimed Transnistrian authorities covered 35.3 percent of the total budgetary expenditures for the respective ten-year period.[22] The amount of “gas subsidy” generously provided by Gazprom is equivalent to 48 percent of the self-proclaimed Transnistria’s GDP for that period. These findings point out that the unconstitutional regime in Tiraspol would not be sustainable without the permanent support of the Russian Federation. Given the subsidized tariffs, many people in Transnistria are unwilling to rejoin Moldova because they would have to pay more for gas consumption.[23]

The largest gas consumer in Transnistria is MGRES power plant (generation capacity of 2520 MW), controlled by Russian energy holding Inter RAO UES. MGRES generates electricity from gas provided by Tiraspol-Transgaz and supplies 80 percent of Moldova’s electricity consumption. Using Moldova’s dependence on Russian gas, including for electricity generation, the Russian Federation has imposed a contractual scheme whereby Moldovan consumers are forced to finance separatism in their own country by purchasing energy from MGRES located in Transnistria and accumulating gas debts.

Although Gazprom mentions in all its financial reports that Transnistria does not pay for gas consumption and it leads to the increase of Moldova’s gas debt, gas supply to the region still continues.[24] From an economic point of view, the supply of gas without recovery of value is in fact a subsidy. In other words, Gazprom’s activity in Moldova does not have an economic purpose, because it would never recover the gas debt from Moldovagaz, whose assets are below 20 percent of the total gas debt. In fact, Gazprom and senior Moldovan officials compel Moldovagaz to legalize the financing of the unconstitutional regime in Transnistria by supplying gas “on credit” and passing the debt to Moldovagaz. Moreover, according to contract provisions, Moldovagaz cannot interrupt the gas supply to the Transnistrian region without the written agreement of Gazprom.[25] It is probably the only case in history when legalization services of financing the separatism are not paid, but are provided in exchange for debt accumulation.

Even if Gazprom takes over all Moldovagaz assets to recover the debt, we estimate their value at almost USD 1.4 billion, which is under 20 percent of total gas debt.[26] Therefore Gazprom’s activity in Moldova has nothing in common with genuine economic interests, but rather serves as a tool to promote the strategic agenda of the Kremlin administration in Moldova. This geopolitical agenda can be summarized as follows: strengthening Russian influence in Moldova by financing separatism and maintaining the role of mediator of the Transnistrian conflict in its own interest.

Russiangas subsidyconverted into benefits for Russian businesses

Since the 1990s, consumers in the Transnistrian region have benefited from heavily subsidized gas prices. The main beneficiaries were the large industrial enterprises—MGRES and the Moldovan metallurgical plant, also known under its Russian acronym MMZ. These companies consume a lot of energy and gas, and have been, or continue to be, controlled by Russian capital. Subsidized gas and energy tariffs provided them with significant competitive advantages compared to other companies in the region. At the same time, they exported the production at market prices, collecting strong currency. Respectively, the subsidies obtained by these factories through Russian gas were converted into real income.

The MGRES power plant is 100 percent owned by the Russian concern Inter RAO UES. As mentioned, the power plant is the main consumer of gas in the separatist region, using it as a basic source for electricity production.[27] MGRES benefited from a subsidized tariff that covered between 28 percent and 68 percent of the real cost of gas. Based on the financial reports of Inter RAO UES, during 2008–2015, the Russian investors obtained a profit of USD 291.8 million only through MGRES.[28]

The separatist authorities have established subsidized tariffs for the MMZ metallurgical plant as well, through secret decisions. In the period 2005–2015 MMZ was part of the MetalloInvest holding controlled by the Russian oligarch Alisher Usmanov. The plant paid only 11.5 percent of the real gas price and was sometimes generally exempt from paying for gas. In the period 2007–2015, the plant reported sales of over USD 2.3 billion according to the data published by the so-called central bank of Transnistria. However, the real market prices for metallurgical production in Ukraine were 65–85 percent higher. We assume that this margin is explained by the fact that MMZ sold its production through traders affiliated to the MetalloInvest group, where the group accumulated most of its profits. Based on this assumption, we estimated that in the period 2007–2015, the profit related to MMZ production, accumulated by MetalloInvest traders, amounted to over USD 1.5 billion.

The so-called gas subsidy and respectively the subsidized electricity price in self-proclaimed Transnistria continue to be exploited by Russian cryptocurrency businesses as well. Igor Chaika, the son of the Russian ex-Prosecutor General, not only expressed openly his interest to invest in mining farms in Transnistria,[29] but also his organization Delovaya Rossiya (Business Russia) helped the separatist government to develop the legislation on blockchain technology.[30] At least a part of the mining equipment was supplied through Moldovan customs. In December 2018 the separatist authorities announced their plans to increase the output capacity of MGRES power plant by 100 MW by suppying energy to the mining farms.[31]

Cryptocurrency and Russian subversive operations overseas

Cryptocurrency has been used by Russian hackers for various cyber attacks in recent years as a part of the “hybrid warfare,” following the rise of the political tension between Russia and Western countries after the annexation of Crimea. Cryptocurrency transactions are difficult to trace and this fact allowed the perpetrators to hide their identity and the source of funds, in order to circumvent the sanctions or the Know-Your-Client (KYC) procedures applied by commercial banks. The GRU-linked hackers used cryptocurrency to attack the German parliament in 2015,[32] and the US Democratic National Committee (DNC) in 2016.[33] Cryptocurrency-funded cyber operations also targeted FIFA, WADA (World Anti-Doping Agency), and the Court of Arbitration for Sport in 2016.[34]

Hard-to-trace cryptocurrency became a common tool in Russian subversive operations. In October 2017 Russian president Vladimir Putin even issued five presidential orders on the legal framework for digital currencies and mining.[35] Shortly after that, a spike in cryptocurrency mining activities has been observed in several pro-Russian breakaway regions. Besides Transnistria, the mining of virtual currency has also expanded to Donbass[36] and Abkhazia,[37] with the aim of creating a virtual trading platform in Crimea and providing services to the unrecognized pro-Russian territories.[38] Moreover, acccording to Ukraine’s Deputy Prosecutor General Anatoliy Matios, cryptocurrency mined in Ukraine has been used to buy military equipment, weapons, and ammunition for the separatist groups fighting in the regions of Donetsk and Luhansk.[39] Given that, the trace of the cryptocurrency mined in the pro-Russian breakaway regions becomes necessary to prevent and expose the subversive operations conducted by the Kremlin in its attempt to achieve political goals in other countries.

Russian gas “subsidy” stimulating corruption of Moldovan political elites

Although Moldova was ruled by parties of different geopolitical orientations, since its incorporation in 1998, Moldovagaz remained a dangerous territory for control bodies. Throughout this period, Gazprom along with Moldovan decision-makers tolerated and even facilitated fraudulent schemes in the energy sector to the detriment of the national interests of Moldova.[40] At the same time, investigations of alleged fraud in the gas sector turned against their initiators and none of them finalized with proper prosecution of decision makers from Moldovagaz or Moldovan officials. Moreover, despite catastrophic dynamics in Moldovagaz’s financial situation, two of its top officials were decorated with the Glory of Work presidential award: Mr. Alexandr Gusev, President of the Administration Council (2012)[41] and Mr. Iacov Cazacu, Vice President of the Administration Council (2017).[42] This suggests that some of the illicit proceeds from these schemes were used to bribe Moldovan politicians. Thus, each of the parties pursues its own interest: Moldovan political decision-makers aim for personal enrichment from corruption schemes, while Gazprom executes the Kremlin’s agenda on financing separatism and increasing Moldova’s dependence on the Russian Federation.

As mentioned above, the Court of Accounts’ attempt to verify the activity of Moldovagaz in 2001 resulted in an open criminal investigation against the head of the audit team, Tudor Soitu.[43] However, the situation did not change even after the so-called pro-European coalition came to power in 2009. In 2012, the National Energy Regulation Authority (ANRE) issued four inspection reports on procurement irregularities at Moldovagaz’s subsidiary. Frauds worth MDL 243 million (approximately USD 20 million at that time) were found in the purchase of goods at prices that exceeded 3–4 times the market price. This time the control ended with the assasination attempt on one of ANRE directors[44] just two weeks after the first inspection report was issued. Despite its odiousity—the explosion of a grenade under the car of a senior official, appointed by Parliament—this assassination attempt remains uninvestigated until present.

In 2014, following a conspiracy between Moldovan oligarch Vladimir Plahotniuc and self-proclaimed Transnistrian President Yevgheny Shevchuk, the electricity produced by MGRES (owned by Russian Inter RAO UES) was supplied to Moldova through an intermediary company, Energokapital. The electricity was supplied at the same price as previously, while the internal gas tariffs for electricity generation in self-proclaimed Transnistria were decreased by 15 percent.[45] The illicit margin was syphoned off via Energokapital, whose beneficiaries are hidden behind a Scottish limited partnerships.[46] An investigation conducted by the Blacksea.eu revealed that Energokapital has a complex series of off-shore owners connected to the “theft” of a billion dollars from three Moldovan banks. Undoubtedly the energy supply scheme via Energokapital was coordinated at the highest levels in Gazprom and the Russian government, given the visit of the Deputy Prime Minister Andrian Candu to Moscow in September 2014,[47] just two weeks before the incorporation of Energokapital.[48] Moreover, in 2016 civil society watchdogs publicly presented[49] copies of payment orders for transfer of dividends by Energokapital to its offshore mother company worth over USD 19 million[50] and solicited the Prosecutor’s office to verify whether these were made in compliance with anti-money laundering legislation. Instead of investigating the facts, after just 2 weeks, the Prosecutor’s office issued a press release claiming that “experts did not present any documents that would confirm the illegalities.”[51]

In March 2019 Moldova’s Prime Minister Pavel Filip secretly sent a letter to his Ukrainian counterpart, in which he called for the removal of the Transnistrian metallurgical plant MMZ from the sanctions list and the termination of the antidumping investigation against MMZ.[52] Why would the Moldovan prime minister lobby for the metallurgical plant located in the separatist region? The reason is obvious if we follow the money. MMZ is the main customer of the state-owned company Metalferos, which has a monopoly on the collection and export of scrap metal from Moldova.[53] In 2015–2019, the payments from MMZ to Metalferos amounted to at least USD 127 million, a part of which was embezzled to offshore companies directly controlled by Moldovan oligarch Vladimir Plahotniuc,[54] the former leader of the Democratic Party to which Pavel Filip belongs. The Prosecutor’s office started the investigations at Metalferos only after Plahotniuc left the country.[55] In exchange for insignificant personal benefits and acting to the detriment of national interests, Moldovan political elites ensured the temporary registration of MMZ in Moldova and allowed its exports to be made through Moldovan customs[56] and the state-owned Railway company.

The large-scale corruption in the energy sector poses a real threat to economic and energy security, and even the territorial integrity of Moldova. Even today the Moldovan government continues to support the large energy-consuming enterprises in Transnistria, despite the fact that it leads to the increase of the gas debt. In March 2020 the Commission of Emergency Situations canceled the energy procurement tender and the state-owned trader Energocom signed a new agreement with MGRES power plant from Transnistria.[57]

How to take a country hostage for USD 1 billion in 27 years

As mentioned above, by the end of 2019 the total debt of Moldovagaz to Gazprom and its subsidiary Factoring Finans Ltd amounted to USD 8 billion, including about USD 7.5 billion related to gas supplied to the Transnistrian region. These figures are based on contract prices of gas, however the cost of natural gas supplied by Gazprom in the Transnistrian region via Moldovagaz is much lower than the invoiced amounts. According to Gazprom’s officials, in 2016 the average cost for natural gas extraction was around USD 20 per one thousand cubic meters, including taxes.[58] Before switching to the “European price formula” in 2006, Gazprom supplied natural gas to Ukraine at USD 50 for the same amount,[59] which included the cost of transmission services to the border.

Between 2007 and 2016, the average gas consumption in the Transnistrian region was 1.8 billion cubic meters per year. Taking into consideration the cost of transit services on Ukrainian territory, one thousand cubic meters of natural gas delivered to the Ukrainian-Moldovan border (Transnistrian segment) cost Gazprom approximately USD 65 per one thousand cubic meters. Thus, the total costs incurred by Gazprom with financing the Transnistrian separatism over twenty-seven years are slightly more than USD 3 billion. In the mean time, at least around USD 2 billion have been recovered by just two Russian corporations (Metalloinvest and Inter RAO) by benefiting from subsidized gas prices in the Transnistrian region. Thus, the bottomline costs for Russia with maintaining Transnistria as its main instrument of influence in Moldova was at most USD 1 billion—not too expensive for twenty-seven years of influence in a European country of 3 million people.

Thus, by exercising its monopolistic position as a natural anti-dumping gas supplier to Moldova and by loyalizing corrupt political elites from Chișinău, Gazprom served as the main instrument of financing the Russian foreign policy agenda in Moldova.

This malign influence can only be countered by consolidating Moldova’s energy security and eliminating dependency on critical energy infrastructure controlled by Russia via its Transnistrian proxies. However, little has been done in this respect since 1991, despite the fact that the need for diversification has been acknowledged and even included in all energy strategies. Thus, the Energy Strategy until 2010 adopted in 2000[60] mentions diversification of energy supply sources and routes five times, while the Energy Strategy till 2020 adopted in 2007[61] mentions it six times and the Energy strategy till 2030 adopted in 2013[62] refers to it nine times. De facto, despite strong political and financial support provided by the European Union and other international development partners, no major progress has been achieved until the second half of 2019!

In terms of natural gas supply diversification, the largely publicized Iași-Ungheni interconnector started in 2014 still cannot be operated at its full capacity. Moreover, even after finalization of all works around this interconnection route, its capacity (1.5 bcm per annum) won’t be sufficient to cover the winter peak consumption in Moldova even except Transnistrian region. Also, the southern part of Moldova would still remain fully dependent on the traditional natural gas supply route—the Trans-Balkan pipeline system—where the flow of gas could be disrupted by Transnistrian authorities. In the mean time, Gazprom has finalized the Turkish Stream project and is able to supply natural gas to Turkey and other Balkan countries bypassing the Ukrainian and Moldovan part of the Trans-Balkan pipeline. The breakthrough in terms of natural gas supply options for Moldova has been achieved only in the second half of 2019, and mainly due to external factors. Uncertainties around the gas transit contract through Ukraine after 2019 forced Gazprom to look for alternative scenarios for supplying gas to the Balkans. The only feasible emergency alternative was to upgrade the Trans-Balkan pipeline system to be able to operate in reverse mode, which would enable Gazprom to supply gas to Bulgaria, Macedonia, Romania, and Moldova via Turkey. Thus, in just about six months, this project of strategic importance was implemented. It is worth mentioning that civil society experts signalled the strategic importance of the reverse flow on the Trans-Balkan pipeline system and its priority compared to the Iași-Ungheni interconnector since at least 2014.[63]

The implications of the Trans-Balkan reverse flow for Moldova cannot be overestimated as it also reverses the balance of power between Moldovan constitutional authorities and the Transnistrian proxies of Russia in the gas sector: presently, should Moldovagaz solicit Gazprom to supply natural gas to Moldova’s southern border (instead of the eastern, as previously) the Russian supplier would have to comply with it. In this case, if Transnistrian authorities maintain the practice of nonpayment, the supply of natural gas to the secessionist region could be physically limited or even completely interrupted at Căușeni measurement station. The main risks associated with this scenario is on the electricity side: not only would it leave Moldova without its largest source of electricity, which is MGRES fueled by natural gas, but it is also highly likely that Transnistrian authorities would respond by shutting down high-voltage (330 kV) lines that would become critical for importing electricity from Ukraine thus leaving the entire country dependent on a single high-voltage line. Therefore, the next and the last logical step on the path of eliminating the risk of energy blackmail on behalf of Russian proxies in Transnistria is securing the electricity supply by interconnecting with the Romanian electricity transmission system in an asynchronous mode.

Similar to “diversification” efforts on the gas side, construction of electricity interconnections with Romania are being long delayed. Civil society experts have already lost track of all technical and feasibility studies commissioned in the last more than ten years around interconnection options. So far, despite about 250 million euros allocated for these purposes by international partners (World Bank, European Investment Bank, European Bank for Reconstruction and Development), including a 40 million euro grant from the European Union, construction has not even been started. The only plausible explanation is that the entire process is being sabotaged by Russian agents of influence among Moldovan decision makers.

In conclusion, consolidation of Moldova’s energy security by diversification of energy supply options and integration into European energy markets is not only vital for countering Russian malign influence in Moldova, but also key to solving the Transnistrian conflict, which affects regional security.


[1] For more details on historical background and evolution of transnistrian war see Christopher Borgen, “Thawing a Frozen Conflict: Legal Aspects of the Separatist Crisis in Moldova: A Report from the Association of the Bar of the City of New York,” Record of the Association of the Bar of the City of New York, Vol. 61, 2006, pp. 13-24.

[2] “Case Ilașcu and others vs Moldova and Russia. (Application no. 48787/99)”, European Court of Human Rights (website), July 8, 2004, http://hudoc.echr.coe.int/eng?i=001-61886.

[3] https://www.mold-street.com/?go=news&n=8275

[4] https://www.rbc.ru/politics/05/08/2004/5703b64e9a7947783a5a599c

[5] https://www.ng.ru/cis/2005-11-11/5_endoftheworld.html

[6] https://www.vedomosti.ru/newspaper/articles/2000/03/03/moldova-sdalas

[7] Gazprom profile by Steve Thomas, May 2006, PSIRU, Greenwich University, https://www.epsu.org/sites/default/files/article/files/Gazprom_profile_May.pdf.

[8] IDIS Viitorul, “The gas industry in Moldova: The burden of ignorance and the cost of errors”, 2007, https://bit.ly/37IL3L5

[9] М.М. Судо, Э.Р. Казанкова, ”Энергетические ресурсы. Нефть и природный газ. Век уходящий”, 1998

[10] Slovoidilo.ua, ”Как менялась цена российского газа для Украины на протяжении 24 лет?”, 2016, https://bit.ly/2S8lPiP

[11] IDIS Viitorul (2007), Supra note 8 at page 10

[12] IDIS Viitorul (2007), Supra note 8, §2.6

[13] http://www.e-democracy.md/elections/parliamentary/2001/

[14] https://www.watchdog.md/wp-content/uploads/2019/09/Studiu-Moldovagaz-09-2019_compressed-1-1.pdf

[15] IDIS Viitorul (2007), Supra note 8

[16] IDIS Viitorul, “Energy and politics: the price for impunity in Moldova”, Apr 2017, https://bit.ly/2Nss3Yh

[17] Community Watchdog.MD, “Moldovagaz – 20 years of massive fraud under the protection of shareholders and state institutions”, Sept 2019, https://bit.ly/37M7z5P

[18] IDIS Viitorul (2017), Supra note 16 at chapter 3

[19] Order no. 723 from Oct 13, 2005, of the self-proclaimed President of Transnistria, https://bit.ly/2YgkDgO

[20] Gazprom financial report for Q4/2019 at page 83, https://www.gazprom.ru/f/posts/77/885487/gazprom-ifrs-2019-12m-ru.pdf

[21] Gazprom financial report for Q4/2005 at page 47, http://www.gazprom.ru/f/posts/91/747099/repiv_2005.doc

[22] IDIS Viitorul (2017), Supra note 16 at page 15.

[23] ECHR, case Ilascu v. Moldova and Russia, Annex: Witness Y, §261, http://hudoc.echr.coe.int/eng?i=001-61886

[24] Gazprom financial report for Q1/2020 at page 55, https://www.gazprom.ru/f/posts/05/118974/gazprom-emitent-report-1q-2020.pdf

[25] Rise.md, (2016) „Confidential contract: Gazprom empire in Moldova”, Agreement no. 1 to the Contract of gas supply no. 1GM-07-11, §2.8, https://www.rise.md/contract-confidential-imperiul-gazprom-in-moldova/

[26] IDIS Viitorul (2017), Supra note 16, chapter 4.

[27] MGRES technical indicators for 2019, https://bit.ly/2BtiV2t

[28] IDIS Viitorul (2017) Supra note 16, §2.4.1

[29] Kommersant.ru, ”Приднестровье примайнивает инвесторов”, Feb 2018, https://bit.ly/2UYnoS0

[30] Novostipmr.com, ”Начало большого пути. […]”, Dec 2017, https://bit.ly/3didSPC

[31] Anticoruptie.md, “The cryptorepublic”, Apr 2019, https://bit.ly/2YhYjUc

[32] Netzpolitik, “Digital Attack on German Parliament”, Jun 2015, https://bit.ly/3155DT7

[33] Mueller indictment from Jul 13, 2018, https://bit.ly/2NPPpGf

[34] Indictment of the Western District of Pennsylvania, § 21 and 22, https://bit.ly/30hnE1t

[35] Kremlin press release from Oct 21, 2017, http://kremlin.ru/acts/assignments/orders/55899

[36] BBC, “”Морячок” из ДНР купил биржу криптовалют и начал охоту на сокровища Винника”, Dec 2018, https://www.bbc.com/russian/features-46444479

[37] Abkhazia signed a memorandum of cooperation with the Russian Association of Crypto Industry and Blockchain (RACIB), Bitfeed.ru, “Абхазия разрабатывает нормативную базу для регулирования майнинга”, Dec 2018, https://bit.ly/2UZ92Rl

[38] Supra note 36

[39] Politico.eu, “How Ukraine became the Wild East of cryptocurrencies”, Mar 2018, https://politi.co/3fiZEPM

[40] Community Watchdog.MD, “Moldovagaz – 20 years of massive fraud under the protection of shareholders and state institutions”, Sept 2019, https://bit.ly/37M7z5P

[41] http://lex.justice.md/index.php?action=view&view=doc&lang=1&id=344965

[42] Presidential decree 362 from Sept 03, 2017, https://www.legis.md/cautare/getResults?doc_id=100273&lang=ru

[43] ECHR, case 18835/08 Tudor Șoitu vs Moldova, http://hudoc.echr.coe.int/eng?i=001-191880

[44] ANRE press release, Apr 2012, https://bit.ly/2YZpxOy

[45] Press release of self-proclaimed Transnistria Government, Jul 2016, http://gov-pmr.org/item/7269

[46] Blacksea.eu, Bird, M. and Cotrut, A., “Moldovan energy intermediary company linked to “billion-dollar bank theft” scandal”, Mar 2016, https://bit.ly/2NhyzAK

[47] Ministry of Economy press release, Sept 2014, https://bit.ly/2V4iQtb

[48] Energokapital incorporation agreement, Oct 2014, https://bit.ly/310nxIj

[49] https://www.ipn.md/en/economie/77740

[50] https://sergiutofilat.files.wordpress.com/2016/08/plati-energokapital.pdf

[51] http://procuratura.md/md/newslst/1211/1/6723/

[52] Rise.md, “Rescuers of the Transnistrian metallurgic plant: Filip and Poroshenko have helped Transnistria earn mmillions”, May 2019, https://bit.ly/39Whff7

[53] Newsmaker.md, “Люди бьются за металл. Кому выгодна продажа Metalferos и сколько денег там украли”, Jan 2020, https://bit.ly/3fxcZE2

[54] Zdg.md, “Дело Metalferos: Эпизод с Владимиром Плахотнюком”, Aug 2020, https://bit.ly/33sQZYv

[55] Tv8.md, “В ходе обысков на предприятии Metalferos задержано 7 человек”, Dec 2020, https://bit.ly/2Prjgqd

[56] Commission Regulation (EC) No 112/2009 at (48) and (109), https://bit.ly/39Y169i

[57] TV8.md, “Контракт на поставку энергии с Молдавской ГРЭС продлен до 30 июня”, March 2020, https://ru.tv8.md/2020/03/31/kontrakt-na-postavku-energii-s-moldavskoj-gres-prodlen-do-30-ijunya/

[58] Vedomosti.ru (2016), ”Газпром назвал текущую себестоимость добычи газа”, https://bit.ly/2BtkCgl

[59] Supra note 10

[60] https://www.legis.md/cautare/getResults?doc_id=73726&lang=ru

[61] http://lex.justice.md/viewdoc.php?action=view&view=doc&id=325108&lang=2

[62] http://lex.justice.md/ru/346670/

[63] http://www.vedomosti.md/news/viktor-parlikov-gazoprovod-yassy-ungeny-sam-po-sebe-ne-imeet


 [CD1]Another word that will also work here is motivated.

 [CD2]Number ranges are separated by an en dash. Hereafter this change will be made silently (i.e. without track changes on).

 [CD3]On p. 1 you describe this army as former Soviet. For consistency, and to avoid confusion for the reader, it helps to be consistent with terms. Please make the necessary changes so that these terms match.

 [CD4]Was Moldova already not having gas supplied (as is suggested by the word, remain)? If this is correct, leave as is.

If this is not the case, this phrase could be simplified to of losing

 [CD5]Please spell out this abbreviation (joint-stock company?) and insert the before it. E.g. …the joint-stock company…

Since it is only used once it is unnecessary to include the abbreviation in parentheses.

Russian Lawfare and other malign influence operations in Spain

This article is a part of the first issue of the Kremlin’s Influence Quarterly.

You can also download this piece as a PDF.

Introduction

Relations between Russia and Spain at the end of the late twentieth and early twenty-first centuries were not a priority for either of these countries. They were not completely friendly: Spain is a member of NATO and took part in the sanctions campaign against the Russian regime after the invasion of Ukraine in 2014. On the other hand, they did not become directly hostile, and their relationships could be called “favorably neutral.”[1] Spain continues to trade with Russia, and the export of clothes, olive oil, wine and some other products that have not been subject to “import substitution sanctions” is worth mentioning. Spain also imports oil from Russia. The countries continue cooperating in the military sphere: for instance, Spain recently provided its ports for Russian military ships for the needs of Russian military operations in the Middle East. In addition, tourism is developed (or was, before COVID-19 struck), and a significant number of citizens of the Russian Federation own real estate in Spain and show business activity.

Some citizens of the Russian Federation who have chosen Spain as their main place of residence are representatives of organized crime. Having settled in Spain, they have not retired at all, but, on the contrary, have developed a wide network of criminal business.

Until a certain point, Russian actors (affiliated with both the state and the underworld) did not carry out large-scale interventions in the activities of the Spanish democratic institutions. However, the onset of the crisis associated with the escalation of separatism in Catalonia provided them with an opportunity not only to interfere on the state level in Spain but also to destabilize the development of the European Union as a whole.

The malign influence of the Russian regime on the democratic and market institutions of Spain, is most clearly reflected in several areas of public life. First of all, it concerns the provision of Russian organized crime in Spain. Representatives of the Russian criminal community, deeply integrated into the power structures of the Russian regime, have resided continuously in this country since the 1990s and influence trade, launder money, and involve representatives of Spanish politicians and officials in corruption relations. To provide comfortable conditions for their “business,” the Russian criminals need to work simultaneously in two main directions.

On the one hand, they need to establish cooperation between the police and the judiciary in the criminal law sphere in Spain itself. On the other hand, they need to constantly maintain close cooperation with the power structures of the Russian Federation (for example, the head of the Investigative Committee of the Russian Federation is a protege of the Russian mafia in Spain). This, among other things, allows them to have a “safe airfield” in Russia and to receive the necessary official conclusions about themselves and their activities from the Russian authorities. They successfully use such judgments and certificates to prove their innocence in Spanish courts.

Since the greatest threat to the activities of the Russian mafia in Spain is the development of European integration, they put most of their effort into obstructing the democratic progress.

Overview of relations between Spain and the Russian Federation

Relations between Spain and Russia have traditionally developed in the most comfortable format for the latter. As some researchers rightly point out: “Spain drive toward closer relations with Moscow has been made within and outside the EU.”[2] For Russia since the beginning of the 2000s, the development of relations with the European Union as a supranational organization has been a great difficulty. First of all, in our opinion, this is due to the inability to understand the essence of the EU integration method, the nature and structure of relations between the organization and its members. Thus, the foundation of relations between the Russian Federation and the EU remains the Partnership and Cooperation Agreement.[3] It was supposed to terminate in 2007, but instead, it has been automatically extended every year to the present. A draft of a new treaty was being prepared, but negotiations were unsuccessful.

Meanwhile, bilateral relations were thriving. The Spanish government has consistently supported Russian attempts to build a new “multipolar world” and attempts to counter US “hegemony.” This was especially pronounced during the government of Jose Luis Zapatero.[4] Spain presented itself as the ‘heart of Europe’ and developed closer relations with France and Germany. In addition, Spain was more actively included in the work of the Second Pillar of the European Union. Russian-Spanish relations have developed in the field of combating the threat of terrorism, cultural cooperation, and other areas important to the Russian Federation. At the same time, Spain supported the international policy of the Russian Federation; mutual visits at the highest level were regularly made.

Like Russia, Spain still refuses to recognize the independence of Kosovo, even after the decision of the International Court of Justice[5] (among EU countries only Slovakia, Greece, Cyprus and Romania hold this position), although this has to do more with Spain’s own problem with separatism, rather than with Russian foreign policy. Support for separatism in Spain is a particularly important area of activity for Putin’s regime. Unable to do this openly, Russia acts with the help of its criminal representatives and, apparently, with the help of its special services.

It is significant that Spain, together with Austria, Bulgaria, Cyprus, Greece, Italy, Luxembourg, Malta, and Portugal, was opposed to sanctions against Russia for the invasions of Russia in neighboring countries.[6] In these countries, Russia’s informal influence is very strong.

In general, Spain acted as a full-fledged partner of Russia. There are several main aspects worth discussing: the cooperation in the fight against terrorism and regional security (this was especially evident in the 2000s, after 9/11), economic cooperation, mutual investment, and cultural exchange.

Mutual trade relations developed rapidly. Spanish companies entered Russian markets, Russian companies invested in the Spanish economy and exported natural resources. Russia became the second, after Saudi Arabia, oil exporter to Spain. Russian tourism has become a significant phenomenon: by 2010, more than a million Russians visited Spain every year. In 2008, Gazprom tried to conclude a deal to acquire 20% of the Spanish energy company Respol. A major share in Repsol could increase Russia’s weight in Latin America’s energy market, where most of the company’s oil and gas production was centered.[7]

Spain only reluctantly supported EU sanctions against Russia, which had limited economic impact on Spain. Some of Spain’s food exporters were affected, but leading exports[8] were not included in Russia’s counter-sanctions.[9]

In the military sphere, Spain’s policy towards Russia is somewhat inconsistent. On the one hand, as a member of NATO and the EU, Spain is taking part in strengthening its military presence in Eastern Europe. First of all, this concerns the Baltic countries.[10] On the other hand, Spain provides Russia with the opportunity to take full advantage of its Ceuta base in the Mediterranean.

In 2016, eleven members of the European Parliament, including representatives from the Baltic states, Poland, and the Catalan politician Ramon Tremosa, filed a High-Representative for Foreign Affairs and Security Policy Federica Mogherini request for the Ceuta naval base. In particular, they were interested in whether she knew that these naval operations were “the key to maintaining the position of the Russian army in Ukraine,” emphasizing that this could violate EU sanctions against Moscow. “The frequency with which Russian navy ships call into the port—at least 10 times a year—have turned the Spanish exclave into the main base of the Russian fleet in the western Mediterranean. The Russian army has an official base in Tartus (Syria), although its ships have also docked in Maltese and Greek ports.”[11] The supply of Russian warships brings significant revenue to the Spanish treasury, Russia systematically uses this base to refuel its vessels to date, which causes indignation among representatives of the UK and the USA.[12] The only exception was 2017, when Russia itself withdrew a request for three warships.[13]

Russian mafia in Spain

In the early 1990s, a significant number of representatives of the Russian criminal world chose Spain as their main place of residence. It would be an exaggeration to say that this was due to Spanish corruption or other objective reasons. It can be assumed that the determining factors were, on the one hand, the climate (the most influential Russian mafiosi came from cold St. Petersburg and its environs), and on the other, positive image of Spain in the Russian collective historical memory. Spain (unlike, for example, France) is associated with the image of masculinity—which is also a painful issue for the rigid hierarchy of criminal circles in Russia. At the same time, Spain is associated with Ernest Hemingway, which for the Soviet Union of the 1960s (namely, the childhood and youth of the influential representatives of the criminal world), was a cult hero and, in a certain sense, a symbol of freedom. On the whole, the most likely, reason for choosing Spain as one of the main countries where the Russian criminal world is based abroad was a combination of random factors and a generally positive image of Spain in Russia.

The most influential criminal group in Russia by the end of the 1990s was the Tambov-Malyshev organized crime group. It remains so to the present; however, its members have changed their official statuses, from bandits to business representatives and large lobbyists.

They were a part of a criminal structure that was located in Spain since 1996 and consisted of immigrants from Russia who already had a criminal record or were under a trial either in Russian Federation, US, or other EU countries. Residing in Spain, they controlled the activities of the respective criminal groups in their home country. According to the records of the preliminary investigation No. 321/06 of the Spanish Prosecutor’s Office, these activities included murders, arms trafficking, extortion (under duress), fraud, document forgery, communications, bribery, illegal transactions, smuggling, drug trafficking, crimes against the Treasury, fraudulent decapitalization of companies, beatings and threatening conditions. The profits obtained through these illegal activities were sent to Spain with the help of legal and financial consultants, who eventually became a part of the Tambov-Malyshev criminal group. As stated in the records, their “main goal in our country is to conceal illegally obtained funds by legitimizing them and integrating them into the regulated financial system by increasing the authorized capital of “companies” and inter-partner loans, financial transfers from / to offshore zones and investments in other countries, for example, to Germany.” [14]

The central figures in the investigation of the Spanish prosecutor’s office were Gennady Petrov, Alexander Malyshev, Vladislav Reznik (a member of the Russian State Duma since 1999) and dozens more. The community leaders, Petrov and Malyshev, have been directly associated with Vladimir Putin since he was deputy mayor of St. Petersburg for external affairs. The materials of the Spanish case contain retellings of wiretapping of dialogues between the participants of this criminal group. Among other things, there is a conversation between Viktor Gavrilenkov (one of the leaders of the Velikiye Luki criminal group) and a certain “Sergey,” which took place in 2007. They discuss investments in the Spanish economy, possible problems from the “blue” (FSB of the Russian Federation), especially logistics, and this phrase also slips into the conversation: “Victor says that there are several hotels in Alicante, Putin’s house is not too far from here, in Torrevieja.” The Insider conducted a special investigation into this matter and found out that, according to the memoirs of local residents, in 1994 Putin came to Torrevieja and stayed there in the La Mata area.[15] At that time, Torrevieja was the “Russian capital in Spain,” this was the place where the shootings took place, and “the money was carried in backpacks.” According to The Insider, it was in this city that the deputy mayors of St. Petersburg, Vladimir Putin, Alexey Kudrin, and Mikhail Manevich (assassinated in 1997[16]), and their “partners,” through controlled companies, acquired several real estate properties. Both Russian and Spanish specialists were involved in these operations, and the then leader of the criminal community of St. Petersburg Viktor Kumarin (Barsukov) controlled the money laundering process. Subsequently, after a fierce struggle, control over most of Kumarin’s area of responsibility was seized by Petrov. Kumarin went to prison, where he remains to the present.

A lot of investigations are devoted to the analysis of the materials of the Spanish prosecutor’s office, and the activities of Petrov and his entourage. In particular, he was involved[17] in the appointment of Alexander Bastrykin as the head of the Investigative Committee of the Russian Federation, Igor Sobolevsky as his deputy, Anatoly Serdyukov as the Minister of Defense of the Russian Federation and many other personnel decisions in the Russian Federation.[18] Spanish mafiosi constantly supported communication with partners at home.[19]

The work of the Spanish prosecutor and investigative journalists[20] from all over the world was not left without attention. In particular, in the January 2018 report from the Committee on Foreign Relations of the United States Senate , more than half of the chapter on Spain is devoted to the activities of Petrov and his colleagues.[21] The report uses the Sebastian Rotella study published in ProPublica as one of its primary sources.[22] Spanish prosecutors met with Alexander Litvinenko, a former Russian intelligence officer. Litvinenko was to advise Spanish investigators and share information on the activities of the Russian mafia in Spain. As an officer of Russia’s intelligence services, Litvinenko specialized in working with organized crime and apparently possessed a lot of classified information regarding Russian organized crime in Spain. However, Litvinenko was killed before he could testify at a trial. As was told in an inquiry by the UK’s House of Commons the order to kill Litvinenko was “likely approved by Putin.”[23] Jose Grinda Gonzalez, Spain’s leading law enforcement expert on Russian organized crime, told ProPublica, “We had accepted the idea that the world of the Russian mafia was like that. But it’s true that the case made other people think this gentleman had told the truth because now he was dead.’’

During an investigation into the activities of the Petrov’s gang, the Spanish law enforcement authorities were able to find a large amount of evidence showing that “that they named over a dozen of them in the indictments, including the former defence minister.”[24]

Petrov was arrested in 2008 during a major operation by the Spanish authorities against Russian organized crime, which ultimately led to the pretrial indictments of 27 suspects on charges of creating a criminal community and money laundering. Among the main actors of the criminal group was Vladislav Reznik, a senior Duma member and member of Putin’s United Russia party, and the indictment alleges that he operated at ‘‘the highest levels of power in Russia on behalf of Mr. Petrov and his organization.”

Before the start of the trial, Petrov left Spain and settled in Russia. Russian authorities did not take any action to return him to Spain. Moreover, they interfered with the investigation by sending false information to Spain or using opportunities to delay the process. Thus, the consideration of the Petrov case lasted more than ten years.

Nevertheless, despite Petrov’s flight, the investigation continued in 2008. In 2009, while pursuing a lead from the case, Spanish police entered the office of a lawyer suspected of money laundering, only to see him grab a document from his desk, crumple it up, and begin to eat it.[25] The document, after being forcibly spat out, led investigators to a new group of alleged money launderers in Barcelona who have suspected ties to Kremlin-linked organized crime.[26] The efforts of the Russian mafia in Spain were aimed at creating an effective and secure money-laundering machine in Catalonia. Representatives of Russian organized crime, themselves and through the experts they hired, have for years strengthened their influence on Catalan politicians and businessmen. One important tool for this disruptive influence was the use of rivalry between regional and national law enforcement agencies.[27]

Grinda’s investigation has been so productive and informative over the years, that it garnered the attention of the FBI who reportedly directed years ago that an FBI agent was to be embedded into the Spanish investigation to obtain further information with regard to Russian organized crime and corruption.[28]

Thanks to the efforts of Jose Grinda, the investigation into the activity of the Russian criminal network in Spain entered the international level:

Criminal activities including drugs, counterfeiting, extortion, car theft, human trafficking, fraud, fake IDs, contract killing, and trafficking in jewels, art, and antiques. This was done on an international scale. Not just in Russia. Solntsevskaya[29] has also demonstrated active cooperation with other international criminal organizations, like Mexican mafias, Colombian drug cartels, Italian criminal organizations (particularly with the Calabrian ’Ndrangheta and the Neapolitan Camorra), the Japanese yakuza, and Chinese triads, among others.[30]

Then one of the most senior leaders of the Russian criminal world, Zakhariy Kalashov (“Shakro the Young”) was taken under arrest.

If the fugitives were intimidated, Rueda [a former Spanish police commander] saw little sign of it. Law-enforcement officials in Georgia told him that Oniani [Tariel Oniani—one of the leaders of the Russian criminal world] was threatening to kill Spanish investigators […] Rueda spent weeks preparing a secret operation with the help of law-enforcement officials from several nations […] in what was one of the most important convictions overseas of a gangster from the former Soviet Union. But the Spanish fight did not end there. Kalashov, considered the most dangerous inmate in the country’s prison system, bombarded courts with appeals, plotted repeatedly to escape, and did his best to corrupt any officials he could reach, investigators say. In 2012, the FBI passed along a formal warning that the mafia was prepared to spend a million dollars to bribe a Spanish official for Kalashov’s release, a confidential FBI document indicates.[31]

After several unsuccessful attempts to assassinate the prosecutor, in 2017, the representatives of the Russian criminal world started to spread a rumor about Grinda allegedly being a pedophile through a Spanish lawyer.[32] In one of the interviews Grinda quoted a Spanish saying coined by the king of the Colombian narcos Pablo Escobar, plata or plomo, which literally translates to “silver or lead”: “Do you know what I mean if I say plomo or plata? With them it is like this: either take the plata, the money, or there is civil death.”[33] Fortunately, the process on charges of pedophilia against the prosecutor was not started, but in 2017 after French police intercepted a phone call from a Georgian mafia member ordering a hit on Grinda, he started using bodyguards to protect himself and his family.[34]

Despite all the efforts of the investigation, the accused were acquitted. During the process, the name of Vladimir Putin sounded many times and his direct relationship with the accused was not in doubt.[35]

The result of the trial of the Russian mafia in court can be an example of disruptive Russian influence that destroys the institution of justice and the inevitability of punishment. A massive team of lawyers and other professionals acted with the direct support of Russian law enforcement agencies. The Spanish court was obliged to accept the findings of Russian law enforcement without criticism, a priori recognizing the conclusions of the Russian authorities as real. (Possibly this follows from the spirit of the agreement on legal assistance between Russia and Spain in 1996).[36]

As a consequence, the Spanish judges even acquitted two defendants who acknowledged themselves to be guilty of money laundering and organized crime, Mikhail Rebo and Leon (Leonid) Khazine, stating the court is allowed to do so.

Spanish investigators complained to El País that courts have been too ready to grant bail to the numerous alleged Russian mafia members they have detained. “We had gained a lot of prestige in Europe for our operations against the Russian mafias and these decisions have thrown part of that work into the dustbin.”[37]

These drawbacks of the Spanish justice system can be clearly illustrated by Petrov’s case. The Spanish judges seem to have such faith in the reports of Russian FSB that any information provided there undermines all investigation efforts. As mentioned in Transborder Corruption Archive, “the Spanish sentence pretends that Petrov was not involved in organized crime, based on two reports from the Russian FSB and several more letters from different Russian law enforcement bodies, as well as on the conviction for defamation of a Russian media outlet for linking Gennady Petrov and Ilias Traber to organized crime.”[38]

Intervention in the Catalan referendum

However, the troubles of the leaders of the Russian criminal world in Spain did not end there. They turned out to be participants in Russia’s interference in the referendum in Catalonia.

Gennady Petrov was involved in financing radical parties. It seems reasonable to assume that he did this not so much on his own initiative, but rather at the request of his partners in Moscow. And in 2013, the Catalan regional government appointed Xavier Crespo, a former mayor belonging to the Romano Codina i Maseras (CiU) party, to the post of security secretary, which controls the Catalan police.[39] The appointment was cancelled when intelligence services in Madrid provided evidence that Crespo was involved in money laundering, and in 2014 he was charged with bribery from Petrov. As it was discovered during an investigation known as Operation Clotilde, the CiU also received money laundered by Russian crime syndicates through Catalan banks and shell companies.[40]

Part of the CiU teamed up with two left-wing parties to form a coalition that held a referendum on the independence of Catalonia from Spain on October 1, 2017. The referendum has been advancing for many years on domestic political, cultural, and economic issues. Still, it also gave Moscow many opportunities to develop a result that would weaken one of the central EU states. And now there is growing evidence that the Kremlin, at least through state-owned media, has launched a large-scale disinformation campaign aimed at a referendum.

The U.S. State Department reported that Russian state news outlets, such as Sputnik, published a number of articles in the run up to the poll that highlighted alleged corruption within the Spanish government and driving an overarching anti-EU narrative in support of the secessionist movement. These Russian news agencies, as well as Russian users on Twitter, also repeatedly promoted the views of Julian Assange, the founder of WikiLeaks, who has taken to social media to call for Spanish authorities to respect the upcoming vote in Catalonia. Spanish newspapers have also reported that Russian bots attempted to flood social media with controversial posts in support of Catalonian independence prior to the referendum.[41]

In November 2017, the Instituto Elcano research center published a report by Mira Milosevich-Juaristi on Russia’s alleged role. They registered a 2,000% increase in Russian digital activity related to Catalonia during September that reflected another Russian attempt “to influence the internal political situation of another country, to sow confusion and to proclaim the decline of liberal democracy.”[42]

According to the report, the main goals of malign influence in Catalonia were the following:

  • Discrediting Spanish democracy and alienating Spain from its EU and NATO partners;
  • Destroying credibility of European institutions and sowing confusion;
  • Compromising the liberal order created and maintained by the US;
  • Distracting the attention of Russia’s own citizens from internal problems.

The work of Russian communications media, including RT, Sputnik, Russia Beyond the Headlines and many state TV stations, social networks (Facebook and Twitter) by trolls (online profiles created to disseminate pre-fabricated information), bots (dissemination of information by autonomic processes) and sock puppets (online profiles created with the objective of generating and transmitting false news)[43] loudly declared itself to the world and various political and expert communities have developed a large number of recommendations to combat fake news.

It is important to note that Catalonia’s gaining or not gaining independence was by and large indifferent to Russian propaganda channels. The main goal was to balance the Catalan events in the public mind with the “referendum” in Crimea and thus push Europe’s public opinion to the idea of lifting international sanctions from Russia.[44]

At the end of 2019 Spain’s High Court, the Audiencia Nacional, opened an investigation into the alleged activities of a group linked with the Russian intelligence service during the 2017 Catalan breakaway bid.[45]

The Russian foreign ministry spokeswoman, Maria Zakharova, said that some media organizations seem obsessed with bringing back “a half-forgotten issue,” and she talked about “an anti-Russia campaign.”[46]

Apparently, not only the Russian disinformation forces and representatives of the criminal world, but also the Russian special services took part in the Catalan campaign. A Spanish court has already sentenced members of extremist groups[47] to plan various acts of violence.[48] Representatives of Russian special services, including agents of GRU Unit 29155, could take part in coordinating and supporting the activities of these organizations.

The investigations of malign Russian influence will bring more evidence. Unofficial sources increasingly point to the direct impact of Russian intelligence services in Spain. We can safely assume that Russia uses Spain as a “recreation center” and “operational space” for Russian security services. In the course of official and journalistic investigations of the murders in Britain by the representatives of the Russian authorities, it became possible to conclude that the special GRU unit 29155[49] was responsible for these acts. It is still impossible to undeniably confirm the direct connection between this unit and the Russian mafia, but new evidence gives more reasons for this. For example, an agent of the Unit 29155 “Fedorov” (Denis Sergeev) visited Catalonia just before the referendum.[50]

“While the referendum did not result in Catalonia’s independence from Spain, it showed that Spain is a growing target of the Kremlin’s malign influence operations. Spain can strengthen its resiliency by studying the experiences of and cooperating with other similarly-targeted European countries, and the U.S. government should take steps to help shore-up ongoing effort.”[51]

Extradition problems and problems of cooperation

The Spanish authorities had trouble handling thriving Russian criminal groups, the population of which was steadily growing in Spain since the 1990s when citizens of the former Soviet Union started arriving in the country, residing primarily in three areas: Costa del Sol, Valencia (including already mentioned Torrevieja), and the Catalonian coast. In his article on transnational organized crime in Spain, Carlos Resa Nestares claims that weak government and administrative institutes of Russia and general reluctance of Russian authorities to cooperate were the primary reasons why attempts to stop growth of Russian mafia influence were unsuccessful: “In many cases, the Russian mafias take advantage of the lack of co-operation of the Russian police with Spanish investigations. The collapse of governmental structures, which has decimated the police force, is one reason for this lack of co-operation. Others are the pervasive corruption which plagues the Russian police as well as their spotty training in new types of criminality.”[52]

It is obvious that it was the refusal of the Russian investigation to cooperate with the Spanish investigating authorities that later became the main official argument justifying the difficulty of investigating the activities of Russian criminal groups and officials all over the EU.

So, for example, this argument is regularly used in the Indictment of the Special Prosecutor Against Corruption and the Organized Criminality to the Court.[53]

It can be concluded with certainty: the Russian prosecutors are directly (at least passively) opposing the Spanish investigation. The case of Tariel Oniani clearly demonstrates the level of Russian cooperation. In June 2005, Oniani fled to Russia just hours before he was to be arrested in Spain, and in April 2006, despite the fact that he was wanted by the Spanish authorities, Russia granted him citizenship. Obtaining Russian citizenship is a complicated and bureaucratic procedure. However, in Oniani’s case, it went surprisingly quickly. It is doubtful that Oniani was just lucky, and Jose Grinda Gonzalez alleges that such a generous gesture from the authorities suggests “an example of Russia putting crime lords to work on behalf of its interests.” Grinda is also sure that the Russian Interior Ministry and the FSB were protecting Oniani even while he was held in prison. Later, in June 2009, following Oniani’s arrest in Russia, Spain requested his extradition for charges related to Operation Avispa. However, the Russian authorities denied this request, claiming it was his Russian citizenship that prevented extradition. As Grinda concluded, “A virtue of the Russian government is that it will always say and do the same thing: nothing.”[54]

Despite the efforts of Spanish authorities to investigate and prosecute illegal activities of Russian criminal groups and eliminate the effect of their malign influence on internal affairs, the results are still underwhelming. As stated in “Defining and Prosecuting Transborder Corruption,” “a major problem preventing European law enforcement bodies from investigating transborder corruption is the absence of agreements on legal assistance between Russia and European countries.”[55]

In conclusion, it is safe to say the Russian authorities are directly affiliated with criminal groups in Europe. With their help, they launder their incomes, provide themselves and their loved ones the opportunity to live comfortably in developed countries. In addition, as it has become clear recently, criminal groups, together with the Russian special services, are systematically working on destroying the institutions of democracy and justice. This activity so far is proceeding quite successfully and with impunity.


[1] Alexander Dunaev, “Why Spain Doesn’t Fear the ‘Russian Threat,’” Carnegie Moscow Center, March 5, 2018. https://carnegie.ru/commentary/75698

[2] Maxine David, Jackie Gower, and Hiski Haukkala, eds., National Perspectives on Russia: European Foreign Policy in the Making? (Routledge, 2013), 111.

[3] “EU–Russia partnership and cooperation agreement 1994,” Official Journal of the European Communities (November 28, 1997): L 327/3, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:21997A1128(01)

[4] Maria Shagina, “EU Sanctions Policy Towards Post-Soviet Conflicts: Cases of Crimea, Eastern Ukraine, South Ossetia And Abkhazia,” Revista UNISCI / UNISCI Journal, no. 43 (Enero/January 2017); and David, Gower, and Haukkala, National Perspectives on Russia, 109.

[5] Hannah Jamar and Mary Katherine Vigness, “Applying Kosovo: Looking to Russia, China, Spain and Beyond After the International Court of Justice Opinion on Unilateral Declarations of Independence,” German Law Journal 11 no. 7-8 (August 2010): 921–922, https://www.cambridge.org/core/journals/german-law-journal/article/applying-kosovo-looking-to-russia-china-spain-and-beyond-after-the-international-court-of-justice-opinion-on-unilateral-declarations-of-independence/8A9AAA20549A0A2A70611F43090CCB56

[6] Shagina, “Eu Sanctions Policy”

[7] Giles Tremlett, “Gazprom seeks 20% of Spanish oil group,” Guardian (US edition), November 4, 2008, https://www.theguardian.com/business/2008/nov/14/oil-russia-gazprom-spain-repsol

[8] “Russia’s import in 2017,” The Observatory of Economic Complexity, https://oec.world/es/profile/country/rus/#Exportaciones

[9] Dunaev, “Why Spain Doesn’t Fear ‘Russian Threat’”

[10] Aurora Mejía “Spain’s contribution to Euro-Atlantic security,” The Elcano Royal Institute, http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_es/zonas_es/defensa+y+seguridad/ari60-2017-mejia-spain-contribution-euro-atlantic-security

[11] Miguel González “Ceuta: an unofficial Russian naval ‘base’ in the Strait of Gibraltar? Right-wing groups in the US and UK criticize frequent stopovers in the Spanish exclave,” El Pais, March 28, 2016. https://english.elpais.com/elpais/2016/03/28/inenglish/1459157481_130448.html

[12]George Allison “Spain complains about British military while refuelling Russian warships,” UK Defence Journal, (June 2019), https://ukdefencejournal.org.uk/spain-complains-about-british-military-while-refuelling-russian-warships/

[13] “Russian warships: Spain says refuelling request withdrawn,” BBC News, October 26, 2016, https://www.bbc.com/news/world-europe-37779204

[14] Fiscalia Especial Contra La Corrupción Y La Criminalidad Organizada, Protocols of the preliminary investigation No. 321/06, http://www.compromat.ru/files/51434.pdf

[15] Anastasiya Kirilenko, “Dom sen’ora Putina. Den’gi merii Peteburga otmyvalic’ v Ispanii?” The Insider, November 9, 2015, https://theins.ru/korrupciya/15823

[16] “Gangland-Style Slaying of Russian Official” New York Times By Associated Press, Aug. 19, 1997, https://www.nytimes.com/1997/08/19/world/gangland-style-slaying-of-russian-official.html

[17] Anastasiya Kirilenko, “Dom Russkoy Mafii: ‘tolik’ ‘sasha’ ‘tsar,’” The New Times November 30, 2015, https://newtimes.ru/articles/detail/104858

[18] Anastasiya Kirilenko, “Mafiya na goszakaze. Kak novye kremlevskie oligarkhi svyazany s prestupnym mirom,” The Insider, July 2, 2015, https://theins.ru/korrupciya/10407

[19] Anastasiya Kirilenko, “Primaya liniya s Tambovskoy OPG. Kak mafiya druzhit s glavoy Sk, ministrami I prochim okruzheniem Putina (proslushki),” The Insider, November 6, 2018, https://theins.ru/korrupciya/125116

[20] Sebastian Rotella, “Gangsters of the Mediterranean. The story of the Russian mob in Spain—and the detectives who spent years trying to bring them down,” The Atlantic, November 10, 2017, https://www.theatlantic.com/international/archive/2017/11/russian-mob-mallorca-spain/545504/

[21] “Putin’s Asymmetric Assault On Democracy In Russia And Europe: Implications For U.S. National Security,” A Minority Staff Report Prepared For The Use Of The Committee On Foreign Relations United States S. Doc. No. 115-21 (January 10, 2018), https://www.foreign.senate.gov/imo/media/doc/FinalRR.pdf

[22] Sebastian Rotella, ‘‘A Gangster Place in the Sun: How Spain’s Fight Against the Mob revealed Russian Power Networks,’’ ProPublica, Nov. 10, 2017, https://www.propublica.org/article/fighting-russian-mafia-networks-in-spain

[23] An inquiry by the UK’s House of Commons concluded that order to kill Litvinenko was likely approved by Putin. United Kingdom House of Commons, “The Litvinenko Inquiry: Report into the Death of Alexander Litvinenko,” at 244 (March 2015), https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/493860/The-Litvinenko-Inquiry-H-C-695-web.pdf

[24] While mentioned in court documents, the officials were not actually charged.

[25] Rotella, “Gangsters of the Mediterranean;” and Rotella, ‘‘Gangster Place in the Sun”

[26] Rotella, “Gangsters of the Mediterranean;” and Rotella, ‘‘Gangster Place in the Sun”

[27] “Putin’s Asymmetric Assault On Democracy In Russia And Europe: Implications For U.S. National Security,” A Minority Staff Report Prepared For The Use Of The Committee On Foreign Relations United States S. Doc. No. 115-21 (January 10, 2018), https://www.foreign.senate.gov/imo/media/doc/FinalRR.pdf

[28] Martin Sheil, “Is Russian Organized Crime the link between the Danske Bank money laundering scandal and the Novichok poisoning of ex-Russian spy Sergei Skripal?” Medium, Sep 20, 2018, https://medium.com/@sheil51/is-russian-organized-crime-the-link-between-the-danske-bank-money-laundering-scandal-and-the-cc431f1c2de6

[29] Criminal group from Moscow. Many members of this group were arrested in Spain in 2017. “Two Main Russian Mafia Groups Dismantled In Spain With Europol’s Support” Europol Press Release, September 28, 2017, https://www.europol.europa.eu/newsroom/news/two-main-russian-mafia-groups-dismantled-in-spain-europol%E2%80%99s-support

[30] Melissa Rossi “Spain’s Robert Mueller takes on the Russian mob,” Yahoo News, January 19, 2018, https://www.yahoo.com/news/spains-robert-mueller-takes-russian-mob-202248019.html

[31] Rotella, “Gangsters of the Mediterranean”

[32] Rossi “Spain’s Robert Mueller”

[33] Il Fatto Quotidiano “Mafia russa, su Fq MillenniuM l’intervista esclusiva al giudice Grinda: C’è Mosca dietro le accuse di pedofilia contro di me” June 13, 2017, https://www.ilfattoquotidiano.it/2017/06/13/mafia-russa-su-fq-millennium-lintervista-esclusiva-al-giudice-grinda-ce-mosca-dietro-le-accuse-di-pedofilia-contro-di-me/3655094/

[34] Rossi “Spain’s Robert Mueller”

[35] Anastasia Kirilenko, “The top man says he’ll consider it.” Vladimir Putin in wiretapped calls of Tambovskaya gang, The Insider, April 27.04.2018, https://theins.ru/uncategorized/100981?lang=en

[36] “Dogovor mezhdu Rossiyskoy Federatsiey i Korolevstvom Ispaniya ob okazanii pravovoy pomoshchi po ugolovnym delam. Moskva, 25 marta 1996 goda. Ministerstvo yustitsii RF,” https://to14.minjust.ru/ru/dogovor-mezhdu-rossiyskoy-federaciey-i-korolevstvom-ispaniya-ob-okazanii-pravovoy-pomoshchi-po

[37] González “Ceuta: unofficial Russian naval ‘base’”

[38] Transborder Corruption Archive; “Sentence, Troika criminal case, Spain,” October 19, 2018, https://tbcarchives.org/sentencia-operacion-troika/

[39] Martin Arostegui, ‘‘Officials: Russia Seeking to Exploit Catalonia Secessionist Movement,’’ VOA News, November 24, 2017, https://www.voanews.com/europe/officials-russia-seeking-exploit-catalonia-secessionist-movement

[40] Arostegui, ‘‘Officials: Russia Seeking to Exploit”

[41] Chris Sampson, “Introduction” in Putin’s Asymmetric Assault on Democracy in Russia and Europe Implications for U.S. National Security (Simon and Schuster: 2018), https://www.simonandschuster.com/books/Putins-Asymmetric-Assault-on-Democracy-in-Russia-and-Europe/Chris-Sampson/9781510739888

[42] Mira Milosevich-Juaristi, “The ‘combination’: an instrument in Russia’s information war in Catalonia,” The Elcano Royal Institute, November 11, 2017, http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/defense+security/ari92-2017-milosevichjuaristi-combination-instrument-russia-information-war-catalonia

[43] Milosevich-Juaristi, “The ‘combination’”

[44] David Alandete How Russian news networks are using Catalonia to destabilize Europe. Media stories in English, Russian and German equating crisis in Spain with conflicts in Crimea and Kurdistan,” El Pais September 25, 2017, https://english.elpais.com/elpais/2017/09/25/inenglish/1506323273_063367.html

[45] Óscar López-Fonseca and Fernando J. Pérez, “Spain’s High Court opens investigation into Russian spying unit in Catalonia. Judge Manuel García-Castellón is probing whether an elite military group known as Unit 29155 carried out actions aimed at destabilizing the region during the separatist push,” El Pais, November 21, 2019, https://english.elpais.com/elpais/2019/11/21/inenglish/1574324886_989244.html

[46] María R. Sahuquillo, Russia denies interference in Catalonia or in Spain’s domestic affairs. A week after it emerged that the Spanish High Court is probing the activities of an elite military group, the Foreign Ministry is talking about an anti-Russia campaign by the media,” El Pais, November 29, 2019, https://english.elpais.com/elpais/2019/11/29/inenglish/1575016033_266352.html

[47] Rebeca Carranco and Marta Rodríguez, “Authorities in Catalonia clear protests on AP-7 freeway near Girona. Supporters of independence for the northeastern region have been trying to block the road, which links Spain with France, since Monday,” El Pais, November 13, 2019, https://english.elpais.com/elpais/2019/11/13/inenglish/1573644554_106668.html

[48] Reyes Rincón, “Prosecutors uphold prison requests for Catalan separatist leaders. Oriol Junqueras faces 25 years in jail for his involvement in the 2017 secession drive after four months of hearings that did not alter the legal teams’ positions,” El Pais, May 20, 2019, https://english.elpais.com/elpais/2019/05/30/inenglish/1559199477_834254.html

[49] Michael Schwirtz. “Top Secret Russian Unit Seeks to Destabilize Europe, Security Officials Say,” New York Times, October 8, 2019, https://www.nytimes.com/2019/10/08/world/europe/unit-29155-russia-gru.html

[50] López-Fonseca and Pérez, “Spain’s High Court opens investigation”

[51] “Putin’s Asymmetric Assault On Democracy In Russia And Europe: Implications For U.S. National Security,” A Minority Staff Report Prepared For The Use Of The Committee On Foreign Relations United States S. Doc. No. 115-21 (January 10, 2018), https://www.foreign.senate.gov/imo/media/doc/FinalRR.pdf

[52] Carlos Resa Nestares. “Transnational Organized Crime in Spain: Structural Factors Explaining its Penetration,” in Global Organized Crime and International Security, ed. Emilio C. Viano, 47-62, https://www.researchgate.net/publication/330288240_Transnational_Organized_Crime_in_Spain_Structural_Factors_Explaining_its_Penetration

[53] Fiscalia Especial Contra La Corrupción Y La Criminalidad Organizada, Protocols of the preliminary investigation No. 321/06, http://www.compromat.ru/files/51434.pdf

[54] Luke Harding, “WikiLeaks cables: Russian government ‘using mafia for its dirty work.’ Spanish prosecutor alleges links between Kremlin and organised crime gangs have created a ‘virtual mafia state,’” Guardian (US edition), Dec 1, 2010, https://www.theguardian.com/world/2010/dec/01/wikileaks-cable-spain-russian-mafia

[55] Harry Hummel and Christopher Starke, “Defining and Prosecuting Transborder Corruption,” in Failed in Action Why European Law Enforcers Are Unable to Tackle EU-Russian Transborder Corruption, EU-Russia Civil Forum. Expert Group “Fighting Transborder Corruption,” Report, 2017, 8-11, https://www.researchgate.net/publication/322519997_Defining_and_Prosecuting_Transborder_Corruption

The (Geo-)Political Aspects of Austrian-Russian Business Relations, Part I

This article is a part of the first issue of the Kremlin’s Influence Quarterly.

You can also download this piece as a PDF.

1. Introduction

This article focuses on the political framework conditions, side effects and consequences of Austrian-Russian economic relations over the past two decades. The supply of natural gas and crude oil from Russia to and via Austria has a special role to play here, since it accounts for the lion’s share of Moscow’s exports; it is also relevant for other EU countries which likewise purchase Russian gas. And it is a matter of common knowledge that the production and export of energy sources are at the heart of Russia’s economy, without which the country would be negligible in global political terms, regardless of its size.

Vladimir Putin has been at war since the day he took office as Prime Minister in August 1999 (at that time in the breakaway North Caucasian Republic of Chechnya). Between 1999 and 2008 the oil price rose sharply, which Putin took advantage of in his military policy. Without or with significantly less oil and gas revenues, Putin would not have been able to finance the secret services (the backbone of his power), the modernization of his army, several de facto states in former Soviet republics (Donetsk People’s Republic and Lugansk People’s Republic in Ukraine, Transnistria in Moldova; Abkhazia and South Ossetia in Georgia) and his wars (currently against Ukraine and in Syria) to the same extent as before, not to mention the funding of occupied Crimea peninsula, which has cost Moscow the equivalent of around USD 20 billion since 2014. Russia’s reliable oil and gas customer—Austria—also contributes to this state of affairs, but without this being the subject of any attention from the country’s politicians, press, or political scientists. Hardly anyone in Western Europe and North America cares about the undeniable fact that Putin’s world power ambitions are financed by Western oil and gas customers, not to mention that someone wants to change this.

This article cannot deal with the “export” of Russian corruption to Austria; the operations of Russian oligarchs, and the activities of the “Russian Mafia” in Austria. This has reasons of space alone and is not due to the author’s assumption that this would be insignificant in the context of Austrian-Russian (economic) relations. Thus, the Russian opposition politician Aleksey Navalny said: “Everyone [in Russia] loves Austria—especially the crooks and thieves.”[1]  Thus, the trade relations between Russia and Austria also, to a certain extent, advance Russia’s malign influence. In addition, an ideological moment was always present in the Austrian-Soviet and then Russian business relations (even if most, if not almost all, of the Austrian and probably also Soviet/Russian politicians and managers involved would strongly deny this). The political background for this is Austria’s neutrality (which has existed since 1955), the observance of which Moscow monitored “with Argus eyes” in both Soviet and post-Soviet times. And for the Austrian side, neutrality was and is a good excuse to show itself “as friendly as possible” towards Putin’s Russia. This can be demonstrated by numerous events. So, in June 2014 Austria was the first EU member country to receive Putin after the annexation of Crimea; and the politicians meeting him in Vienna seemed to be very proud of this.

Austrians sometimes console themselves about the low international importance of their country by quoting Friedrich Hebbel: “This Austria is the little world in which the big one holds its rehearsal” (in German it rhymes: Dies Österreich ist eine kleine Welt, in der die große ihre Probe hält.”) When these words were spoken in 1862, Austria was territorially much larger than it was after 1918 and up to the present day: It was a major European power then and is now a small state. Russia, on the other hand, was then and is now a great power, and the character of its political system at that time was by no means dissimilar to that of Putin’s Russia today: authoritarian, with a ruler who cannot be voted out of office; very nationalistic, ambitious, and self-confident; with an (almost) powerless society; and with a political class that is also and especially concerned with self-enrichment. These are the real starting conditions for any proper analysis of Russia’s domestic, foreign, military, security, and economic policy—and therefore also for an approach to its relations with Austria in general and in the field of trade in particular.

2. Russia as Austria’s Trade Partner—an Overview

During each of his stays in Vienna, Putin visited the Austrian Federal Economic Chamber, which is dominated by the Austrian People’s Party and claims to represent the interests of business and foreign trade. Putin also collects his standing ovations there. Thus, an uninformed person, watching such TV coverage, could gain the impression that Russia is the most important or at least a very significant trade partner for Austria. But what is the truth? In 2018, 35.8% of Austria’s import came from Germany; 6.4% from Italy; 5.8% from China; Switzerland and the Czech Republic each account for 4.4%; 3.8% came from the US; France, the Netherlands, Poland and Hungary each account for 2.7%; 2.2% came from Slovakia and only 2.1% from Russia. Among Austria’s top export partners are (1) Germany, (2) US, (3) Italy, (4) Switzerland; Russia with a share of 1.4% occupied only 17th position.[2] However, “such economic data show only part of the story. […] Austrian economic players dealing with Russia are more important than the aggregate trade numbers might suggest. Some key business sectors linked to Russia have ties to the state, strong corporate lobbies, or both.”[3]

Austrian imports from Russia continue to consist mainly of energy sources (oil, natural gas), followed by metals. According to the Austrian Embassy in Moscow, the largest share of exports from Austria is attributed to the manufacturing industry, especially mechanical engineering and plant construction. Approximately 500 Austrian companies are active in Russia, particularly in the wood and paper industry, mechanical and plant engineering, construction, and banking.[4]

3. Austria in the EU Context as a Customer of Russian Oil and Gas

Since 2013 (until January 2020, when the UK left) all 28 member states of the EU are net importers of energy. In 2017, 55% of the EU’s energy needs were met by net imports. Russia has maintained its position throughout the period 2007–2017 as the leading supplier to the EU of the main primary energy commodities—natural gas, crude oil, and hard coal.

The EU’s natural gas dependency reached 77.9% in 2018, up from 74.4% in 2017. In 15 member states natural gas dependency was higher than 90%. For Austria, this dependence was 91% in 2017 and 88.4% in 2018.[5] Russia’s share of EU imports of natural gas between 2007 and 2017 did not change (38.7%). The lowest level was recorded in 2010 (31.9%), the peak of 41.1% occurred in 2013. Russia was and is also the principal supplier of EU crude oil imports: Its share stood at 33.7% in 2007 and fluctuated between 34.7% (2011) and 29% (2015). In 2017, its share was 30.3%, in 2018—27.3% (for comparison: Norway—11.2%, Nigeria—8.1%, Kazakhstan—7.8%).[6] As to hard coal, in 2017 38.9% of the EU’s imports came from Russia.

The EU has known for many years that “the security of the EU’s primary energy supplies may be threatened if a high proportion of imports are concentrated among relatively few partners.”[7] However, no decisive action was taken: In 2017, almost three quarters (74.6%) of the EU-28’s imports of natural gas originated from Russia, Norway, and Algeria. The same year, close to three quarters (72.7%) of the EU-28’s hard coal imports originated from Russia, Colombia, and the United States, while imports of crude oil were less concentrated among the principal suppliers, as Russia, Norway, and Iraq accounted for roughly half (49.9%) of the EU-28’s imports.

With regards to the origins of imports in 2017–2018, Norway was the source of 30.2% of the natural gas entering the EU (intra-EU trade and entries from Switzerland both excluded), followed by Russia (20.5%), Ukraine (16.3%), and Belarus (10.3%). However, considering that most gas entering the EU from Ukraine and Belarus initially comes from Russia, the dependency on gas imports from this country is in practice much higher than on gas from Norway.[8]

As to Austria, it has long-standing links in the energy sector with Moscow. In 1968 (when the ostentatiously anti-communist Austrian People’s Party was the sole political force in power), the Vienna-based oil and gas group OMV became the first non-communist European company to conclude a natural gas supply deal with the Soviet Union. The consequences of this decision are still felt strongly today. Other Western European countries followed suit, and Austria enjoyed its role as a major hub for Soviet and, after 1991, Russian gas exports across Europe.

During his talks with Putin in November 2009, Austrian Federal Chancellor Werner Faymann (Social Democratic Party) mentioned that Austria has no nuclear power plants; Putin laughed calling this a “very good decision for Russia as well.”[9] Indeed, Austria has to buy Russian gas in the foreseeable future and, therefore, remains dependent on Moscow to a great extent.

The OMV today is 31.5% state-owned and forms the single biggest integrated petroleum company in Central Europe. It undertakes petroleum exploration and production, refining, as well as wholesale and retail sales on domestic and international levels. OMV also operates Austria’s only refinery (based in Schwechat, a suburb of Vienna) and three natural-gas-storage facilities. OMV and Russian natural gas giant Gazprom cooperate in gas production, transportation, and supplies. In June 2018, an Agreement was signed to extend until 2040 the existing contract between Gazprom Export and the OMV Gas Marketing & Trading GmbH for Russian gas supplies to Austria. In October 2018, Gazprom and OMV signed a Memorandum on Strategic Cooperation, which envisages the creation of a Joint Coordinating Committee on collaboration in the natural gas sector, both upstream and downstream, in the area of science and technology, as well as staff training. OMV called this “strengthening the partnership” with Gazprom.[10] Its CEO Rainer Seele presents any such “strengthening” as “diversification of supply” and “support to ensure security of supply”[11]—in manifest contradiction of the facts. There are even Austrian politicians, as Karlheinz Kopf (People’s Party), who stated that with OMV providing Gazprom “access to Europe,” Austria “is once again performing its role as mediator in some way.”[12] This was an example of the skill of many Austrian politicians (and managers) in presenting the business of Austrian companies and banks with Russia as an “expression of traditional Austrian neutrality.” Kopf is also Secretary General of the Economic Chamber (since 2018) and Chairman of the Parliamentary Group Austria—Russia.

In the past there have been repeated speculations about Gazprom’s entry into OMV. The Russian side has usually been evasive or, for example, claimed that “at present no talks are being held.” This, of course, leaves all options open for the future. Sometimes rumors appeared that Gazprom might try to take over OMV. Former Austrian oil industry manager Wolfgang Schollnberger, who had worked for OMV (among others), commented with “black humor” in January 2016 that this was not even necessary if Gazprom had “enough followers” on the OMV Management Board itself, the OMV Supervisory Board, the Supervisory Board of the Österreichische Bundes-und Industriebeteiligungen GmbH (ÖBIB) (which managed the state shares in several companies from 2015 to 2019 before it was transferred to the Österreichische Beteiligungs AG, or ÖBAG), or in the relevant Austrian federal ministries. From Schollnberger’s point of view, it had to be assumed that “some of these submissive people know exactly what is at stake, but others are short-sighted followers.”[13]

According to the latest yearbook of the Austrian statistics authority, only 5.6% of crude oil demand and 11.6% of gas consumption originate from domestic production. Since the closure of the Styrian lignite mining facilities in 2005, Austria’s foreign dependence on coal has been 100%. Furthermore, the yearbook states unequivocally that Austria’s dependence on foreign energy supplies is “continuously” increasing.[14]

In 2018, Gazprom delivered to Austria 12.3 billion cubic meters of gas, an increase of 34.8% against 2017 (9.1 billion cubic meters). In 2018, OMV imported a total of 8.3 million tons of crude oil to Austria, an increase of 13.5% over the previous year. Crude oil was procured from fourteen countries in very different quantities. Kazakhstan was in the lead with almost 3.1 million tons, followed by Libya with 1.9 million tons, Iran with 988,000 tons and Azerbaijan with 782,000 tons.[15] In this context, however, it usually goes unmentioned that the oil from Kazakhstan is transported viapipelines which also pass through Russian territory.

Practically all Austrian and Western European advocates and supporters of an “extended cooperation” with Gazprom in general and of the Nord Stream pipeline projects in particular justify this as an “interdependence” and “mutual intertwining”: the Kremlin would not be able to blackmail the EU with gas supplies because it is massively dependent on these revenues itself. This is, however, “pseudo-plausible”: there is no doubt that in a theoretical massive political conflict situation Moscow could “endure” much longer without these funds than many EU states could last without Russian oil and gas. Fortunately, the leaders of (most) EU states are accountable to their respective populations, which is completely absent in Putin’s case. Thus, Mikhail Korchemkin, founder and head of the Pennsylvania-based consulting firm East European Gas Analysis, said: “The Kremlin is ready to abandon revenues at any moment in order to achieve some political goals. I have no doubt that if the Kremlin doesn’t like something—the decision of some court, the actions of some German companies—then gas supplies will be immediately cut and stopped. Although normal practice suggests that one should go to an arbitration court.”[16]

It is, however, unlikely that Austria alone would become the victim of (howsoever motivated) political blackmail by Russia by refusing to supply energy sources, including natural gas; this would also affect other EU states. A historical example of such a scheme is the oil boycott against Western countries by the Organization of the Petroleum Exporting Countries (OPEC) in 1973, which also affected Austria, although it had nothing to do with the Middle East conflict and was, of course, not militarily involved at all; its then Federal Chancellor (Prime Minister) Bruno Kreisky (Socialist Party)[17] was also considered very critical of Israel, but that did not “help” either.

Austria can also suffer “collateral damage,” and this has already happened. For example, in January 2006 and January 2009 Russian natural gas supplies to Austria and some other European countries were temporarily cut off because the Kremlin wanted to put political pressure on Ukraine (whose President Viktor Yushchenko, elected in 2004, was despised in Moscow). There were no supply shortages in Austria, as the country was able to draw on stored reserves. But such events should have severely damaged Moscow’s reputation as a “reliable supplier” to the EU; for some mysterious reasons, this did not happen.

But the Austrian Ministry for European and International Affairs, which usually selects its phrasing very carefully, wrote in its annual report for 2007: “Russia uses its energy policy as a mighty tool of its foreign policy.”[18] In May 2007, the Austrian Minister for Economic Affairs Martin Bartenstein (People’s Party), who also co-chaired the Austrian-Russian Joint Commission for Trade and Economic Cooperation, was aware that Putin pursued a “foreign policy” using Gazprom. Bartenstein said, “with its huge gas reserves Russia is playing back into the power poker of world politics,” but he immediately put this into perspective by claiming that “many [other] states […] also make world politics with energy.” However, Bartenstein (wo had received the Russian Order of Friendship in 2002) did not mention such “other” examples here, so that it remained open whom he meant specifically.[19] Such “whataboutism” is typical for Putin’s defenders in the West and in Austria as well: they constantly refer to different events that often have nothing at all to do with Russia under discussion and which cannot explain or justify its behavior; nevertheless, many politicians and media consumers (and even many political scientists) are impressed and influenced by this. In February 2014, Austrian banker Herbert Stepic did not even deny that Putin was making “politics” with gas supplies, but found nothing wrong with that—Putin wanted to “simply build his Great Russia.”[20] And Stepic had no intention to criticize this or ask why Austria should participate in the realization of Putin’s ambitions.

During the 2009 gas supply crisis Austrian politicians and managers rescued themselves into veritable “verbal contortions.” For example, OMV‘s then head Wolfgang Ruttenstorfer (who had been State Secretary in the Ministry of Finance for the Social Democratic Party from 1997 to 1999) declared that Russia “will continue to be a reliable supplier of natural gas after the end of the bilateral conflict with Ukraine.”[21] And of course, Austrian politicians “nobly restrained” criticism of Putin because of the supply stops. It was left to Austrian satirist Rainer Nikowitz to use a fictional interview with “Putin” to announce findings that Western European politicians, managers, and political scientists (with “Russia experts” among them) were unwilling to make public: “If I [‘Putin’] only blackmail the Ukrainians, it will take endlessly for them to give in. But if I blackmail the mollycoddled EU as well, I’ll get my way much faster.”[22]

Austria has taken some steps to prepare for a gas emergency, notably by enabling the physical reversibility of a large number of its gas pipelines with neighboring countries (Germany to Austria and Italy to Austria) in 2011. But that would be of little or no help if these countries themselves were affected by massive gas shortages.

Most of the Russian gas that serves Europe comes from the Urengoy and Bovanovenskoe reservoirs. Urengoy has been one of the world’s most productive fields for four decades, but the gas closer to its surface is running out. Gazprom has decided to hire international partners for the expensive, more complicated drilling needed to remove gas from Urengoy’s depths. Thus, on 7 June 2019, OMV signing an Amendment Agreement to a Basic Sale Agreement from 3 October 2018, with which it will acquire a quarter of the Urengoy gas field on Yamal Peninsula. The agreement for 905 million euro will give OMV 24.98% ownership of Blocks 4A and 5A at Urengoy. Gazprom will retain majority control of this gas field—50.01%.[23] This, as an Austrian daily called it, “Siberian adventure”[24] shows once again that OMV is not thinking of easing its already very close ties with Gazprom in the foreseeable future.

Gazprom’s, OMV’s and other natural gas lobbyists’ presentation of the “environmental friendliness” of burning natural gas is contradicted by practically all serious experts. They also try to create the impression that natural gas is the lesser evil compared to coal or oil, why Nord Stream 2 must be built at any costs and why the connection with Gazprom (i.e. Putin’s Kremlin) must not only be maintained, but even expanded. But all this is wrong. Although natural gas really produces comparatively few greenhouse gases when burned, leaks occur frequently in gas production plants and pipelines. Large quantities of unburned methane gas escape from these leaks. And methane is a particularly dangerous greenhouse gas: it has a much greater greenhouse effect than carbon dioxide. Ralf Sussmann from the Karlsruhe Institute of Technology (Germany) has proven by measurements on the Zugspitze mountain (on the German-Austrian border) that the methane concentration in the atmosphere is rising sharply and that natural gas leaks are mainly responsible for this (leaks from gas wells and pipelines, for example). If these leaks are taken into account, it is doubtful whether natural gas still has any advantage over coal.

Environmental associations used to see natural gas as a “bridging technology,” i.e. as a transitional solution on the way to a much more climate-friendly economy. However, this has changed since. The German Association for the Environment and Nature Conservation, for example, draws a clear conclusion: “Natural gas is not an answer to the climate crisis. […] It makes no sense to invest in new gas infrastructure projects that are expected to be in operation for more than half a century.”[25]

4. The Nord Stream Gas Pipelines and Austria

The entire Austrian political and business elite—including the current (since January 2020) Government under Federal Chancellor Sebastian Kurz, consisting of the People’s Party and the Greens—promote the Nord Stream 2 gas pipeline between Russia and Germany. This is a Russian geopolitical project that is harmful to the energy security of the entire EU and, therefore, also of Austria. It is intended to drive a “wedge” into the EU—namely between those countries that support it (Austria, Germany, etc.) and those that reject it (Poland, Baltic States). The Kremlin hopes that this will weaken the EU as a “geopolitical competitor” for power and influence in the world. But nevertheless, OMV is expected to account for about 10% of the total cost of 9.5 billion euro (according to the operators; “project-unrelated” observers expect much more) for Nord Stream 2. Its head since 2015, when Austria was governed by a coalition of Social Democrats and People’s Party, is the German national Rainer Seele. His pro-Russian (and anti-Ukrainian) views, which appear in every interview he gives,[26] were, of course, already known then and posed no obstacle, and were possibly even a prerequisite for his appointment as OMV’s General Director. The company believes that there is a chance that a part of the natural gas that will land in the East German coastal town of Lubmin could be forwarded to the Baumgarten transmission facility on the Austrian-Slovak border. Between a quarter and a third of the export volume from Russia destined for Western Europe is handled via Baumgarten: The gas is transported from this hub via large transit pipelines to Germany, Italy, France, Slovenia, Croatia, and Hungary and via the primary distribution system to the Austrian provinces.

It is noteworthy that former (2014–2017) Austrian Finance Minister Hansjörg Schelling (a confidant of Seele) from the People’s Party is an official lobbyist for Nord Stream 2 since 2018. Matthias Warnig, who clearly enjoys Putin’s trust (which is evident from the very jobs he got in Russia),[27] was the Managing Director of the Nord Stream AG (formally in Zug, Switzerland) from 2006 to 2016 and is Chief Executive Officer of the Nord Stream 2 AG since September 2015. None of the (former and active) politicians and businessmen in Austria, Germany or other project participating countries who promote this pipeline were ever bothered by the fact that Warnig was an employee of the Ministry for State Security of the GDR.

At a meeting with Putin in Sochi in mid-May 2019, Austria’s Federal President Alexander Van der Bellen spoke out strongly in favor of Nord Stream 2. According to Van der Bellen, the gas from Siberia is significantly cheaper for European consumers than the imported liquid gas from the US. According to him, OMV “does not intend to withdraw from the ‘Nord Stream 2’ project.” Putin accepted this with visible satisfaction.[28] The EU sanctions against Russia, imposed for the annexation of Ukraine’s Crimea in 2014, obviously, never affected this project.

For many years, the US, EU, and Austria did nothing at all to disrupt or block Nord Stream (which became operational in November 2011) and/or Nord Stream 2. It was not until December 2019, when only about 300 kilometers were left to complete Nord Stream 2, that the US imposed sanctions on the companies involved. In Germany and Russia, there was great indignation, and in Austria (apart from OMV, of course), the tabloid press and (in its own understanding) the quality press demonstratively and loudly sided with the Russian project initiators, blasting Washington for its “unilateral action,” attempts to “sell their own expensive shale gas” to Europe.[29] On this occasion, many Austrian politicians and managers also reiterated their long-standing opinion that Nord Stream represents a “diversification of energy supply”—without explaining how this would be achieved if the supplier of natural gas, namely Russia, remains the same.

Rather unbiased analysts and observers of energy policy gave other reasons for the Kremlin’s stubbornness in sticking with Nord Stream 2. Thus, Korchemkin referred to the billion-dollar contracts for the companies of Putin-friendly oligarchs Arkadiy Rotenberg and Gennadiy Timchenko. The second main reason, according to Korchemkin, is Putin’s desire to “punish” Ukraine, which will lose transit fees (about USD 2 billion annually) because of Nord Stream 2. Indeed, long before the 2013–2014 Maidan protests in Kyiv, Putin expressly told Faymann that Nord Stream 2 will offer the possibility of “disciplining unruly transit countries” such as Ukraine.[30] Faymann did not object, although he could have asked why Austria (and other EU member countries) should assist Russia in its attempts to “discipline” other countries.

It is, of course, economically absurd to spend billions to construct pipelines on the bottom of the Baltic Sea in order to transport roughly the same amount of natural gas to Central and Eastern Europe as that which can be (and has been) pumped through Ukraine’s pipeline network (which is nevertheless in need of modernization), but Nord Stream is not about economics, but Russian geopolitics. As the vast majority of politicians, officials, and managers in Vienna, Berlin, and Brussels failed to understand this, they took nothing but wrong decisions about Nord Stream—and this will affect the EU’s energy security over the decades to come when all politicians active today will be long out of office.

Nord Stream (and especially Nord Stream 2) is also a major problem for Kyiv because Russia would become completely “independent” of the pipelines across Ukrainian territory and thus, according to some observers (for example, Andreas Umland)[31] could more easily wage a “large-scale” war (i.e. far beyond the Donbass) against Ukraine, which would undoubtedly trigger another huge wave of refugees (parallel to Syria), affecting not “only” Ukraine itself but also the EU. The responsible officials and authorities in Vienna, Berlin, and Brussels do not want to deal with such a possibility nor with information that Russian prisoners were being forced to work on Nord Stream 2 (which should at least have been checked).

To be continued in the next issue of the Kremlin’s Influence Quarterly.


[1]. Quoted after: Simone Brunner, Alexej Nawalny: “Alle lieben Österreich – Gauner und Diebe besonders.” [Aleksey Navalny: “Everyone loves Austria – especially the crooks and thieves.”] [interview]. Profil, July 25, 2019, https://www.profil.at/ausland/alexej-nawalny-kreml-kritiker-putin-10877723 (accessed March 26, 2020). Hereinafter, all translations from German and Russian are made by the author.

[2]. Wirtschaftskammer Österreich, “WKO Statistik Österreich. Österreichs Außenhandelsergebnisse. Jänner bis Dezember 2018. Endgültige Ergebnisse” [Austrian Federal Economic Chamber, “AFEC Statistics Austria. Austria’s foreign trade results. January to December 2018. Final results”]. Juli 2019, pp. 1, 10, http://wko.at/statistik/Extranet/AHstat/AH_12_2018e_Bericht.pdf (accessed 10 March 2020)

[3]. Andrew S. Weiss, “With Friends Like These: The Kremlin’s Far-Right and Populist Connections in Italy and Austria.” Carnegie Endowment for International Peace, February 27, 2020, https://carnegieendowment.org/2020/02/27/with-friends-like-these-kremlin-s-far-right-and-populist-connections-in-italy-and-austria-pub-81100?fbclid=IwAR3ydNVxJR6voQAsBvAR7quAEZEVjZdMDz4wMh3IEMxGk6MQOXfJkToiz_8 (accessed March 26, 2020).

[4]. Österreichische Botschaft Moskau, “Wirtschaftsbeziehungen zwischen Österreich und Russland“ [Austrian Embassy Moscow, “Economic relations between Austria and Russia“], https://www.bmeia.gv.at/oeb-moskau/bilaterale-beziehungen/russische-foederation/wirtschaft/ (accessed March 25, 2020).

[5]. Eurostat, “Natural gas supply statistics,” p. 4, https://ec.europa.eu/eurostat/statistics-explained/pdfscache/10590.pdf (accessed March 25, 2020).

[6]. Eurostat, “EU imports of energy products – recent developments. Statistics Explained,” November 2019, p. 5, https://ec.europa.eu/eurostat/statistics-explained/pdfscache/46126.pdf (accessed March 16, 2020).

[7]. Eurostat, “Energy production and imports. Statistics Explained,” June 2019, https://ec.europa.eu/eurostat/statistics-explained/index.php/Energy_production_and_imports#The_EU_and_its_Member_States_are_all_net_importers_of_energy (accessed March 25, 2020).

[8] Eurostat, “Natural gas supply,” p.4.

[9] Quoted after: Christian Ultsch, “Putin drängt Wien zu Beteiligung an ‘South Stream’” [“Putin urges Vienna to participate in “South Stream’”]. Die Presse, November 12, 2009, p. 7.

[10]. OMV, Annual Report 2018. “7 reasons why we‘re are excited about tomorrow,” Vienna, 2019, p. 66.

[11]. Quoted after: Günther Strobl and André Ballin, “Sibirien-Abenteuer kostet OMV 905 Millionen” [“Siberia adventure costs OMV 905 million”]. Der Standard, June 8–10, 2019, p. 28.

[12]. Raja Korinek, “OMV-Deal ist politisch interessante Lösung” [“OMV deal is politically interesting solution”] [interview with Karl-Heinz Kopf]. Die Presse, April 13, 2016, p. 16. At the time of this interview Kopf was Deputy Speaker of the National Council, which added weight to these words.

[13]. Wolfgang Schollnberger, “Sicheres Gas aus Russland? Um welchen Preis?” [“Reliable gas from Russia? At what price?”]. Die Presse, January 19, 2016, p. 22.

[14] Statistik Austria (ed.), Österreich: Zahlen, Daten, Fakten [Austrian statistics authority (ed.), Austria: figures, data, facts]. Wien 2020, p. 82.

[15] Wirtschaftskammer Österreich, “Die österreichische Mineralölindustrie 2018“ [Austrian Economic Chamber, “The Austrian Mineral Oil Industry 2018“]. July 23, 2019, https://www.wko.at/branchen/industrie/mineraloelindustrie/die-oesterreichische-mineraloelindustrie.html (accessed 11 March 2020).

[16] Dmitrii Malyshko, “Kreml v lyubuyu minutu gotov perekryt tranzit gaza v Evropu – Mikhail Korchemkin” [“The Kremlin is ready to stop gas transit to Europe at any minute – Mikhail Korchemkin”] [interview]. Apostrof, October 13, 2019, https://apostrophe.ua/article/politics/2019-10-13/kreml-v-lyubuyu-minutu-gotov-perekryit-tranzit-gaza-v-evropu—mihail-korchemkin/28415?fbclid=IwAR1CeDXrt4-HtqI7VwWQIfE7iD4QJDIrVQ6RrkhZxF_Q97GfMjxyqhWrE-8 (accessed 25 March 2020).

[17] It was re-named the Social Democratic Party in 1991.

[18] Thomas Schlesinger etc. (eds.), Außenpolitischer Bericht 2007. Jahrbuch der Österreichischen Außenpolitik [Foreign Policy Report 2007, Yearbook of Austrian Foreign Policy]. Wien 2007, p. 44.

[19] “Russische Investoren willkommen“ [“Russian investors welcome“] [interview with Martin Bartenstein]. Die Presse, May 23, 2007, p. 16.

[20] Reinhard Göweil, “Die Lösung liegt bei Russland“ [“Russia is the solution“] [interview with Herbert Stepic]. Wiener Zeitung, February 1–2, 2014, p. 5.

[21] Quoted after: Abgedreht, “Gas-Lieferung nach Österreich komplett eingestellt“ [“Turned off: Gas supply to Austria stopped completely“]. Die Presse, January 7, 2009, https://www.diepresse.com/441904/abgedreht-gas-lieferung-nach-osterreich-komplett-eingestellt (accessed 11 March 2020). Italics by the author, M.M.

[22] Rainer Nikowitz, “Gasreizung” [“Gas Irritation”]. Profil, no. 3, 2009, p. 102.

[23] OMV und Gazprom unterzeichnen “Amendment Agreement” zum “Basic Sale Agreement” betreffend den möglichen Erwerb einer 24,98% Beteiligung an den Blöcken 4A/5A der Achimov-Formation durch OMV [OMV and Gazprom sign “Amendment Agreement” to the “Basic Sale Agreement” concerning the possible acquisition by OMV of a 24.98% stake in blocks 4A/5A of the Achimov Formation]. OMV Newsroom, June 7, 2019, https://www.omv.com/de/news/190607-omv-und-gazprom-unterzeichnen-amendment-agreement (accessed March 24, 2020).

[24] Strobl and Ballin, p.28.

[25] “Erdgas ist keine Antwort auf die Klimakrise. EU muss Investitionen in fossile Energien beenden” [“Natural gas is not an answer to the climate crisis. EU must stop investment in fossil fuels”]. Bund – Friends of the Earth Germany. November 7, 2017, https://www.bund.net/service/presse/pressemitteilungen/detail/news/erdgas-ist-keine-antwort-auf-die-klimakrise-eu-muss-investitionen-in-fossile-energien-beenden/ (accessed March 25, 2020).

[26] Cf. Heike Göbel and Niklas Záboji, “Kritik von Polen und Ukrainern ist vorgeschoben,“ Frankfurter Allgemeine Zeitung, February 18, 2019, https://www.faz.net/aktuell/wirtschaft/unternehmen/nord-stream-2-omv-chef-rainer-seele-im-gespraech-16046206.html (accessed April 10, 2020).

[27] Cf. Nordstream-Boss Matthias Warnig: “Herr Putin hat kein Handy” [“Mister Putin has no cellular phone”] [interview]. Die Presse, Februar 8, 2018, https://www.diepresse.com/5368277/nordstream-boss-matthias-warnig-herr-putin-hat-kein-handy (accessed April 10, 2020).

[28] Quoted after: Jutta Sommerbauer, “Durchs Reden sollen Österreich und Russland näher zusammenkommen,“ Die Presse, May 16, 2019, p. 5.

[29] Cf. Christian Ultsch, “Europa braucht keine US-Zwangsnachhilfe,“ [“Europe does not need US forced tutoring“] Die Presse, December 21, 2019, https://www.diepresse.com/5742444/europa-braucht-keine-us-zwangsnachhilfe (accessed April 10, 2020); “US-Sanktionen gegen Nord Stream 2 sind in Kraft,“ [“US sanctions against Nord Stream 2 are in force“]. Kronen Zeitung, December 21, 2019, https://www.krone.at/2066127 (accessed April 10, 2020).

[30] Quoted after: Christian Ultsch and Eduard Steiner, “Faymann im Kreml: Zwischen Kalaschnikow und Erdgas,“ [“Faymann in the Kremlin: Between Kalashnikov and natural gas“] Die Presse, November 10, 2009, http://diepresse.com/home/politik/aussenpolitik/520903/index.do?_vl_backlink=/home/politik/aussenpolitik/index.do (accessed March 25, 2020).

[31] “The Geopolitical Impact of Nord Stream 2.0 on European Energy Security,” (panel discussion, Diplomatic Academy of Vienna, February 26, 2020).

Russian Malign Influence Operations in Coronavirus-hit Italy

This article is a part of the first issue of the Kremlin’s Influence Quarterly.

You can also download this piece as a PDF.

Introduction

Pandemics always provided fertile soil for conspiracy theories, as facing global disasters often disempowers people and makes them susceptible to conspiratorial explanations of the sources of calamities. Global disasters are also often used by world powers to advance political objectives either domestically or vis-à-vis other nations.

In the 1980s, when AIDS started to spread across the globe and became the “the first postmodern pandemic,”[1] the Soviet Union ran a covert international campaign to convince the world that AIDS was a result of the Pentagon’s experiments aimed at creating new biological weapons.[2] At that time, while the Soviet leadership was convinced that the US was preparing a nuclear strike against the country, the Soviets realized that they could not compete with the West in the technological and military spheres. However, political warfare was a much cheaper means of competition with the West, and the Soviet Union became especially active in this particular area.

Today, observing the confrontation between Russia and the West, one can see similarities and dissimilarities with the Cold War, but one analogy with the later period of the Cold War is obvious: due to its economic weakness, Russia is unable to match Western technological advances and increasingly relies on various instruments of political warfare in order to damage the West by subverting transatlantic relations, undermining trust in the EU and NATO, and sowing discord between Western nations.

As COVID-19 spread from China to the rest of the world and became a pandemic, Moscow used the disaster to intensify its political war against the West. Despite the fact that the pandemic hit Russia too, Vladimir Putin’s regime seems to have refused an opportunity to scale down political confrontation with the West by ending aggression against Ukraine and discontinuing attempts to destabilize Europe. On the contrary, the Kremlin decided to exploit the pandemic and target European countries that suffered the most from the deadly virus. Italy became one of these countries.

From Russia with love

On March 21, 2020, Putin spoke with Italian Prime Minister Giuseppe Conte,[3] and the same day Putin ordered the Russian Ministry of Defence to form “an air grouping for a prompt delivery to Italy of help for fighting Coronavirus.”[4] The help, as the press release of the Ministry of Defence read, would consist of “eight mobile brigades of expert virologists and military medics, automobile systems for aerosol disinfection of transport and territories, as well as medical equipment.”[5]

At that time, there were over 42 thousand active cases of COVID-19 in Italy and almost 5 thousand people had died of the virus.[6] Of all European states, Italy was hit the hardest, and, already on 10 March, Maurizio Massari, Italy’s permanent representative to the EU, made an appeal for help and European solidarity.[7] According to Massari, in February Italy asked the European Commission to activate the EU Mechanism of Civil Protection “for the supply of medical equipment for individual protection”; the Commission forwarded the request to the EU Member States but by the time Massari wrote his article, no EU nation had responded to the Commission’s call.[8]

At the same time, China had responded bilaterally and on 12 March, a Chinese aircraft brought to Italy nine medical experts and unloaded “31 tons of medical supplies including intensive care unit equipment, medical protective equipment, and antiviral drugs”—they were sent by the Chinese Red Cross.[9] For the Chinese Communist Party (CCP), which had been accused by some Western experts, journalists and politicians, for mishandling of the COVID-19 outbreak,[10] the help to Italy was clearly an attempt to shift the international focus from blame to humanitarian response.

With Putin’s offer of help, the Kremlin apparently did not want to miss out on demonstrating its seeming goodwill against the background of the allegedly selfish EU countries. In the period between 23 and 25 March, fifteen Russian aircrafts landed on the Pratica di Mare military airbase delivering military experts and special equipment.[11] At the same time, Russian Defence Ministry “made an extraordinary effort to communicate the mission”: it sent 18 press releases on the subject between 21 and 24 March.[12] On 25 March, the Russian military formed a convoy consisting of 22 military vehicles—carrying stickers saying “From Russia with love” in Russian, English, and Italian—as well as buses with military experts.[13] The convoy travelled 600 kilometers to the Orio al Serio airport in Bergamo, “where the joint Italian-Russian headquarters for the fight against coronavirus infection will be stationed.”[14]

For Russian state-controlled international media such as RT and Sputnik, Moscow’s help to Rome was the beginning of a long anti-EU campaign. With headlines saying “Italians praise Russia, deride EU after Vladimir Putin sends in coronavirus aid,”[15] or “EU left Italy ‘practically alone’ to fight coronavirus, so Rome looked for help elsewhere, incl Russia,”[16] “With united Europe MIA in its Covid-19 response, worst-hit nations turn to ‘evil’ Russia & China for help,”[17] the message was clear: the EU showed no solidarity with Italy, while Putin’s Russia demonstrated its goodwill despite the fact that Italy—along with the other EU nations—imposed economic and political sanctions on Russia. In the eyes of the Western audience, videos and pictures showing Russian military vehicles flying Russian flags and driving through Italy apparently had to project an image of Russia as a self-avowed savior of Italy and a mighty military force rushing to the rescue where NATO was feeble. And there were other Russian specialists who were in charge of promoting such an image: Russian journalists from the Zvezda TV network run by the Russian Defence Ministry who arrived in Italy together with the Russian military.[18]

The entire operation appeared to be a successful publicity coup for the Kremlin. Italy’s Foreign Minister Luigi Di Maio personally welcomed the Russian aid at the Pratica di Mare airbase. Italian Chief of the Defence Staff General Enzo Vecciarelli was present at the airbase too and “thanked the Russian people for lending a helping hand.”[19] Former Prime Minister Silvio Berlusconi sent a letter to his personal friend Vladimir Putin saying that the Russian aid was “a real sacrifice made for friendship and love for Italy and the Italians,” adding that Italians would “not forget it.”[20]

The visuals were important too. Russia’s Ministry of Defence published a photo, which was later republished by dozens of media outlets across the world, in which Russian General Sergey Kikot, who led the Italian operation, showed something on the map of Italy to the representatives of the Italian military thus creating an impression that Russians had command power in a NATO member state.[21] Russian media resources also talked about ordinary Italians replacing EU flags with Russian ones and showed a video of an Italian engineer who did this while showing a piece of paper thanking Putin and Russia.[22]

However, soon after the arrival of the Russian aid, details started to emerge suggesting that the operation “From Russia with love” had much more to do with political theatrics rather than with Moscow’s philanthropy.

The darker side of Russian gifts

The logistics of the delivery of the Russian aid alone pointed to a hidden agenda of the operation: why had the aid been delivered first to the Pratica di Mare airbase and then driven 600 kilometers to the Orio al Serio airport if the Russian airplanes could have delivered the aid directly to any of the four airports around Bergamo capable of receiving Russian military cargo airplanes? There are two possible explanations for this. First, the Russian military wanted to impress the public and the media with a long convoy of over 20 military vehicles symbolically conquering a NATO member state. Moscow would not have achieved such an effect had the aid been delivered straight to the destination point. Alexander Sladkov, a Russian military journalist working for the All-Russia State Television and Radio Broadcasting Company, called the operation “‘a humanitarian axe’ run into NATO’s chest.”[23] He also likened the Russian operation in Italy with the forced march of Russian forces to the Pristina International Airport in the aftermath of the Kosovo War in June 1999: the Russian military arrived in the airport ahead of the NATO forces and occupied it.[24] Yet another possible explanation for the apparently unreasonable 600 kilometer drive from the Pratica di Mare airbase to Bergamo is that the Russian mission to Italy was “a front for intelligence gathering,” so the trip could, indeed, be used by the Russian military to collect intelligence “at the heart of NATO.”[25] Of course, one can argue that it was cheaper for the Russian military to deliver the aid to the Pratica di Mare airbase than all the way to the Orio al Serio airport. However, the distance between the two airports is insignificant in comparison to the distance between Russia and Italy, and, furthermore, the Russian military anyway charged the Italians for the fuel and the flights of their cargo airplanes.[26]

Furthermore, Italian expert Massimiliano Di Pasquale argued—with a reference to Italian specialists—that “there was no need at all in the disinfection of the streets” in Bergamo.[27] Andrea Armaro, a former spokesperson for Italy’s Defence Ministry, also “questioned the need for Russian military medics to disinfect areas when there were already nuclear, biological and chemical military teams in Italy capable of doing the job.”[28]

According to the investigation by Italian investigative journalist Jacopo Iacoboni, high-level political sources told La Stampa that 80% of the Russian aid was either useless or of little use to Italy, as the Russian delivery mostly consisted of disinfection and sterilization equipment. The same sources argued that Putin was pursuing “geopolitical and diplomatic” interests, while Conte had to play along as he needed any help in the situation of the severe crisis.[29]

Moscow immediately and angrily responded to Iacoboni’s article. Russia’s Ambassador to Italy Sergey Razov called the Russian aid “a selfless desire to help a friendly people in trouble” and slammed the assertions made in the article as “the product of a perverse mind.”[30] The Russian Defence Ministry joined the campaign too. Its spokesman Major General Igor Konashenkov called Iacoboni’s article in La Stampa an attempt “to discredit the Russian mission” and added, in awkward English:

Hiding behind the ideals of freedom of speech and pluralism of opinions, La Stampa manipulates in its materials the most low-grade Russophobic fakes of the Cold War, referring to so called certain “opinions” of anonymous “high-ranking sources. At the same time, ‘La Stampa’ does not disdain to use literally everything that the authors manage to invent on the basis of recommendations from apparently not decayed textbooks on anti-Soviet propaganda. […] As for the attitude to the real customers of the Russophobian media campaign in La Stampa, which we know—we recommend that you learn the ancient wisdom—Qui fodit foveam, incidet in eam (He that diggeth a pit, shall fall into it). And to make it clearer: Bad penny always comes back.[31]

Reacting to Konashenkov’s “ancient wisdom,” Iacoboni said: “It is a threatening and intimidating phrase […] not only towards me but also towards my newspaper. In Italy we do not let ourselves be intimidated; freedom of criticism exists here. We are not Chechnya.”[32] In their turn, the editorial board of La Stampa expressed its “outrage upon the serious attack” of the Russian Defence Ministry on the newspaper and Iacoboni.[33]

What Moscow did not realize was that its vicious attacks against Italian journalism ruined much of the positive effect of the Russian mission in Italy. In their joint notice, Italy’s Defence Ministry and Foreign Ministry declared that Italy was grateful for the Russian aid, but, at the same time, they could not “help but blame the inappropriate tone of certain expressions used by the spokesman of the Ministry of Russian Defence against some articles published the Italian press. Freedom of speech and the right to criticize are fundamental values for Italy, as well as the right to reply, both characterised by formality and substantial fairness. In this moment of global emergency, the control and analysis task of the free press is more essential than ever.”[34] Mayor of Bergamo Giorgio Gori tweeted: “Solidarity with @jacopo_iacoboni and La Stampa subjected to the intimidation from a Russian defence spokesman. We are grateful to have Russian doctors and nurses in #Bergamo who help us treat our patients, but no threat to free information is acceptable.”[35] Many other politicians and journalists expressed their solidarity with Iacoboni too.[36]

However, Russian officials and state-controlled international media continued their attack on La Stampa and Iacoboni.

Russian Foreign Ministry Spokeswoman Maria Zakharova declared that a company registered in London was behind Iacoboni’s article in La Stampa. She did not provide either the name of the company or any other details, but vaguely noted: “When we began to study it [the article], it turned out that this is a purely commercial operation that some foreign structures attempted to stage using non-transparent methods.”[37] While it is unclear what British “commercial operation” Zakharova had in mind, a fringe Russian-language website, Foundation for Strategic Culture, ran a story that claimed that “Anglo-Saxons” were behind La Stampa’s “provocative attack” referring to the incorrect information that the newspaper was owned by Chrysler whose chairman John Elkann was from New York and CEO Michael Manley was from Britain.[38]

The Italian edition of Sputnik published an article written by now late Giulietto Chiesa, a long-time pro-Kremlin activist and associate of Russian fascist Alexander Dugin,[39] who claimed that La Stampa was a “notoriously Russophobic newspaper” (ironically, Chiesa wrote for La Stampa in 1991-2000), while Iacoboni allegedly “specialized in spreading the germs of an apparently very infectious disease of Russophobia.”[40]

Chiesa was not the only Italian “friend of Russia” who was directly or indirectly mobilised by the Russian state and non-state actors in Moscow’s attempts to generate “hype” around the Russian aid to Italy. On April 14, 2020, the Russian Defence Ministry issued a press release stating that Professor Maria Chiara Pesenti from the University of Bergamo sent a letter of appreciation to the Russian military. Pesenti, due to her specialization in Russian language and literature, is a frequent visitor of Russia, and, in November 2019, Putin awarded her with a Medal of Pushkin.[41] And already in March 2020, Italian far-right activist Gian Luigi Ferretti, who was part of the politically biased election observation mission[42] at the Russian 2018 presidential election,[43] uploaded a video on YouTube on which a recording of the Russian anthem was played from the headquarters of the Italian fascist organization CasaPound.[44] (Uninitiated viewers would, however, hardly recognize the headquarters of CasaPound and just see Italian flags and hear the Russian anthem).

Furthermore, Italian newspaper La Repubblica reported that Russian citizens were sending requests to their Italian friends and acquaintances offering €200 (approximately $217) for thank-you videos on Facebook, Instagram or Twitter. The requests allegedly came from the Russian media, but no name was given. In order to earn money, Italians were supposed “to say something good” about the Russian aid offered to Italy: “better videos or texts with photos, but for videos they pay 200 euros, for text they give less.”[45] However, La Repubblica was cautious about linking these practices to the activities of the Russian state actors.

Far-right freeloading

The Russian aid to Italy offered an opportunity to a number of pro-Kremlin actors to pursue their own political and personal interests. On 23 March, Alexey Pushkov, a Russian senator who is prone to self-promotion through provocative tweets related to foreign policy, tweeted that Poland had “not let Russian aircraft carrying aid to Italy pass through its airspace.”[46] Pushkov is also one of the most cited politicians in the Russian media space, and several Russian media outlets—including various editions of Sputnik—quickly picked up Pushkov’s message that generally fed into the Kremlin’s animosity towards Poland.[47] However, Poland’s Foreign Ministry promptly refuted Pushkov’s claim, and Sputnik had to amend its reports on the issue,[48] while Pushkov deleted his tweet. Nevertheless, his claim permeated into the milieu of Italian conspiracy theorists and anti-EU activists.[49]

While Pushkov’s tweet was hardly underpinned by any other reason apart from the Russian senator’s proclivity for provocative political utterances, some other developments around the Russian aid to Italy had complex agendas behind them.

On 20 March, Ulrich Oehme, a member of the German parliament from the far-right party Alternative for Germany (Alternative für Deutschland, AfD), sent letters to two Russian contacts. One letter was addressed to the Chairman of the State Duma Committee on International Affairs Leonid Slutsky and the other—to a member of the Moscow City Duma, Roman Babayan. The letters seem to be practically identical and, in particular, read: “Today, Mr. Paolo Grimoldi, a member of the Council of Europe from the Northern League (Lombardy), turned to us with a desperate cry for help via the WhatsApp group of European Conservatives. The situation with the hospitals in Lombardy is extremely critical. They urgently need doctors. For this reason, I ask you to see whether the Russian Federation can help people of Lombardy with doctors and ventilators. I have just talked with Mr. Grimoldi on the phone and he is excited about my idea to talk to you about help.”[50] When the media reported about Putin’s decision to provide aid to Italy, the AfD claimed that “the Russian leadership responded to a request from the Bundestag member Ulrich Oehme concerning Northern Italy severely affected by the coronavirus.”[51]

The background of the above-mentioned figures suggests that Oehme’s letters were most likely part of an elaborate influence operation.

The AfD’s foreign policy positions very often coincide with those of the Kremlin, and this far-right party is extremely critical of the EU’s sanctions imposed on Putin’s Russia. The AfD’s members often pay visits to Moscow to meet Russian officials, and, in February 2017, the AfD’s leadership discussed cross-party cooperation with a number of Russian politicians including Leonid Slutsky—one of the two Russian politicians to whom Oehme addressed his letters. Oehme himself was involved in pro-Kremlin activities. In March 2018, he illegally visited Russia-annexed Crimea where he “observed” the illegitimate Russian presidential election.[52] Furthermore, he tried to promote the interests of the Russia-controlled “Donetsk People’s Republic” and “Lugansk People’s Republic” in the Council of Europe in 2019.[53]

Paolo Grimoldi’s party Northern League (Lega Nord, LN) is known for its pro-Kremlin foreign policy positions too, and signed, in March 2017, a coordination and cooperation agreement with the ruling United Russia party. Grimoldi himself contributed to the development of the relations between his party and Russian state and non-state actors. In October 2014, he announced the creation of the cross-party group, Friends of Putin, in the Italian parliament.[54] Although there is no evidence that this group eventually took off or was successful in promoting rapprochement between Italy and Russia, the Russian media widely reported on this initiative attempting to show—against the backdrop of the Western sanctions against Putin’s Russia—the alleged growth of pro-Kremlin sentiments in the West.

In his turn, Slutsky—as chairman of the parliamentary committee on international affairs—coordinated several important contacts between the European far right and Russian state actors. For example, it was Slutsky who officially invited Marine Le Pen, the leader of the French far-right National Front (later renamed into National Rally) to meet Putin in March 2017, a month before the first round of the French presidential election.[55] Slutsky also supervised several politically biased international election observation missions that included many European far-right politicians.[56]

According to the German media outlet Bild, in parallel to Oehme’s efforts, the LN essentially forced a difficult choice on Conte: either accept aid from Moscow and grant Russia a publicity stunt, or reject it and suffer an outrage from the suffering Italian population.[57] From this perspective, Oehme’s letters to Russian politicians seem to be not only an attempt to advance political interests of the AfD and LN, but also an endeavour to put additional pressure on Conte.

Like Slutsky, Grimoldi and Oehme are members of the Council of Europe, and—given this fact, as well as Grimoldi’s engagement with the pro-Kremlin activities—he did not really need Oehme to be an intermediary between him and Slutsky. The involvement of Oehme can be simply explained by his desire to secure Russian favors not only for the LN, but also for the AfD—by displaying servility before Russia. Slutsky was an obvious choice as the first addressee of the letter coordinated by Grimoldi and Oehme, due to his membership in the Council of Europe and coordination of the relations between European politicians and Russian state actors. Unlike Slutsky, however, Roman Babayan has little in common with European politicians or Russian malign influence operations in Europe, but he seemed to be a good choice as a second addressee of the letter because of his connections with the Russian media. Babayan is a chief editor of the Govorit Moskva radio station and cooperates with the functionally state-controlled NTV television channel, so his task was to spread the word about Italy’s “cry for Russian help” in the media, and so he did.[58] The outcome of the operation was obvious: Oehme and Grimoldi strengthened pro-Kremlin foreign policy positions of their parties in order to seek further favors from Moscow, while contributing to the domestic pressure on Conte and consolidating the international image of Putin’s Russia as the true friend of Italian people.

Conclusion

It would be wrong to argue that the Russian aid delivered to Italy was completely useless. However, it would be equally wrong to assume that this aid was primarily driven by humanitarian considerations, because the main objective of the “From Russia with love” operation was to demonstrate to the Italian people that it was Russia, rather than the EU or NATO, that was the true friend of Italy.

The relevance of such an operation could only become possible due to the initial confusion in European capitals in the face of the unfolding crisis. As President of the European Commission Ursula von der Leyen said in the middle of April 2020, “too many were not there on time when Italy needed a helping hand at the very beginning.”[59] Von der Leyen offered “a heartfelt apology” for the lack of European solidarity with Italy at the start of the crisis,[60] but neither her apology nor the fact that EU states eventually rendered much greater assistance to Italy than China or Russia could undo what had been done: the erosion of Italians’ trust towards the EU.

The Kremlin readily helped to erode this trust as Italy was “perceived by Moscow as the weak link in the EU.”[61] By launching its malign influence operation, Putin’s regime hoped that—by undermining Italy’s trust in the EU—the Kremlin contributed to strengthening Italy’s opposition to the EU’s sanctions policy on Russia. At the end of April 2020, Moscow decided to covertly test the efficiency of its tactics in Italy. On 27 April, Russian Ambassador Sergey Razov forwarded to Vito Rosario Petrocelli, chairman of the Italian Senate’s Foreign Affairs Committee, an appeal by Slutsky, and asked his addressee to inform Italian senators of its contents.[62] In his appeal, Slutsky called upon the international community—without singling out any particular nation—to support Russia’s resolution at the United Nations that would make it easier to lift sanctions imposed on Russia.[63] Razov forwarded Slutsky’s appeal in two versions: an original Russian version and a translation into Italian. Curiously, Razov specified in his cover letter that the Italian version was an unofficial translation which implies that his efforts took place behind closed doors and was yet another malign influence operation.

Russia was not the only beneficiary of its influence operations in Italy: representatives of German and Italian far-right parties, known for their pro-Kremlin foreign policy attitudes, had an opportunity to showcase their allegiance to Russia by reinforcing its self-imposed image of a well-meaning global power, and, therefore, seek support from Moscow in the future.


[1] Lars O. Kallings, “The First Postmodern Pandemic: 25 Years of HIV/ AIDS,” Journal of Internal Medicine, 263, no. 3 (2008): 218-243.

[2] Thomas Boghardt, “Operation INFEKTION: Soviet Bloc Intelligence and Its AIDS Disinformation Campaign,” Studies in Intelligence, 53, no. 4 (2009): 1-24.

[3] “Telephone Conversation with Italian Prime Minister Giuseppe Conte,” Events. President of Russia (website), March 21, 2020, http://en.kremlin.ru/events/president/news/63048.

[4] “Minoborony Rossii sozdaet aviatsionnuyu gruppirovku dlya operativnoy dostavki pomoshchi Ital’yanskoy respiblike v bor’be s koronavirusom,” Ministerstvo oborony Rossiyskoy Federatsii (website), March 22, 2020, https://function.mil.ru/news_page/country/more.htm?id=12283218@egNews.

[5] “Minoborony Rossii sozdaet…”.

[6] “Italy,” Worldometer (website), https://www.worldometers.info/coronavirus/country/italy/

[7] Maurizio Massari, “Italian Ambassador to the EU: Italy Needs Europe’s Help,” Politico, March 10, 2020, https://www.politico.eu/article/coronavirus-italy-needs-europe-help/.

[8] Elisabeth Braw, “The EU is Abandoning Italy in its Hour of Need,” Foreign Policy, March 14, 2020, https://foreignpolicy.com/2020/03/14/coronavirus-eu-abandoning-italy-china-aid/. Following Massari’s criticism, Germany suspended the controversial decree that had prohibited the export of masks, protective suits, etc. abroad, and declared that it would supply one million masks to Italy, see Tonia Mastrobuoni, “Coronavirus, la Germania invierà un milione di mascherine all’Italia,” La Repubblica, March 13, 2020, https://www.repubblica.it/esteri/2020/03/13/news/coronavirus_la_germania_invia_un_milione_di_mascherine_all_italia-251219227/. Later, Germany was joined by France in providing one million masks to Italy, see Michel Rose, “Europe Failing to Communicate Its Response to Coronavirus Crisis, France Says,” Reuters, March 25, 2020, https://www.reuters.com/article/us-health-coronavirus-europe-france/europe-failing-to-communicate-its-response-to-coronavirus-crisis-france-says-idUSKBN21C3DT. On the European solidarity in action see Coronavirus: “European Solidarity in Action,” European Commission, https://ec.europa.eu/info/live-work-travel-eu/health/coronavirus-response/coronavirus-european-solidarity-action_en.

[9] Braw, “EU is Abandoning Italy”; “Coronavirus, Di Maio: ‘Se sei solidale, ricevi solidarietà,’” ANSA, March 13, 2020, https://www.ansa.it/lazio/notizie/2020/03/12/coronavirus-arrivati-gli-aiuti-dalla-cina-anche-9-medici-specializzati_1a56ddbc-7bae-4f5a-8353-f0d15ba3a465.html.

[10] Paul D. Miller, “Yes, Blame China for the Virus,” Foreign Policy, March 25, 2020, https://foreignpolicy.com/2020/03/25/blame-china-and-xi-jinping-for-coronavirus-pandemic/; David Gitter, Sandy Lu, and Brock Erdahl, “China Will Do Anything to Deflect Coronavirus Blame,” Foreign Policy, March 30, 2020, https://foreignpolicy.com/2020/03/30/beijing-coronavirus-response-see-what-sticks-propaganda-blame-ccp-xi-jinping/.

[11] “Pyatnadtsaty Il-76 VKS RF dostavil v Italiyu sredstva dlya bor’by s koronavirusom,” Ministerstvo oborony RossiyskoyFederatsii (website), March 25, 2020, https://function.mil.ru/news_page/country/more.htm?id=12283692@egNews.

[12] “Coronavirus – Russische Hilfsoperation in Italien bisher vor allem PR,” Austria Presse Agentur, March 24, 2020.

[13] “Spetsialisty Minoborony Rossii pristupili k soversheniyu marsha s aviabazy VVS Italii v g. Bergamo dlya okazaniya pomoshchi v bor‘be s rasprostraneniem koronavirusnoy infektsii,” Ministerstvo oborony Rossiyskoy Federatsii(website), March 25, 2020, https://function.mil.ru/news_page/country/more.htm?id=12283714@egNews.

[14] “Voennye spetsialisty Minoborony Rossii pribyli na aerodrom Orio-al’-Serio v gorode Bergamo,” Ministerstvo oborony Rossiyskoy Federatsii(website), March 26, 2020, https://function.mil.ru/news_page/country/more.htm?id=12283835@egNews.

[15] “Watch: Italians Praise Russia, Deride EU After Vladimir Putin Sends in Coronavirus Aid,” Sputnik, March 24, 2020, https://sputniknews.com/europe/202003241078693863-watch-italians-praise-russia-deride-eu-after-vladimir-putin-sends-in-coronavirus-aid/.

[16] “EU left Italy ‘practically alone’ to fight coronavirus, so Rome looked for help elsewhere, incl Russia – ex-FM Frattini to RT,” RT, March 24, 2020, https://www.rt.com/news/483897-italy-eu-coronavirus-solidarity-russia/.

[17] Damian Wilson, “With United Europe MIA in Its Covid-19 Response, Worst-hit Nations Turn to ‘Evil’ Russia & China for Help,” RT, March 23, 2020, https://www.rt.com/op-ed/483865-europe-coronavirus-russia-china/.

[18] Konstantin Khudoleyev, “Iz Rossii s lyubov’yu: kak okhvachennaya koronavirusom Italiya vstretila rossiyskikh spetsialistov,” Zvezda, March 23, 2020, https://tvzvezda.ru/news/vstrane_i_mire/content/20203231327-JqrfK.html.

[19] “Russian Military Planes with Medics & Supplies Land in Coronavirus-hit Italy,” RT(VIDEO), March 22, 2020, https://www.rt.com/russia/483796-russian-military-coronavirus-aid-italy/.

[20] Giorgia Baroncini, “Coronavirus, Putin invia aiuti all’Italia. Il Cav: ‘Non lo dimenticheremo,’” Il Giornale, March 23, 2020, https://www.ilgiornale.it/news/politica/coronavirus-putin-invia-aiuti-allitalia-cav-non-1845152.html.

[21] “The Use of Russian Military Specialists in the Fight against the Coronavirus Pandemic Was Discussed in Rome,” Ministry of Defence of the Russian Federation (website), March 24, 2020, https://eng.mil.ru/en/news_page/country/more.htm?id=12283590@egNews.

[22] It later turned out that the person was “personally fond of Russia and of President Putin” and had “done some business with Russian companies,” see “Coronavirus: What Does ‘from Russia with Love’ Really Mean?” BBC, April 3, 2020, https://www.bbc.com/news/world-europe-52137908.

[23] Alexander Sladkov, “Kuzhugetych Zhzhet!” Sladkov + (Telegram channel), March 22, 2020, https://t.me/Sladkov_plus/1916.

[24] Sladkov, “Kuzhugetych Zhzhet!”

[25] Natalia Antelava and Jacopo Iacoboni, “The Influence Operation behind Russia’s Coronavirus Aid to Italy,” Coda, April 2, 2020, https://www.codastory.com/disinformation/soft-power/russia-coronavirus-aid-italy/.

[26] Jacopo Iacoboni and Paolo Mastrolilli, “Nella spedizione dei russi in Italia il generale che negò i gas in Siria,” La Stampa, April 16, 2020, https://www.lastampa.it/topnews/primo-piano/2020/04/16/news/nella-spedizione-dei-russi-in-italia-il-generale-che-nego-i-gas-in-siria-1.38722110.

[27] Natal’ya Kudrik, “Ital’yanskiy obozrevatel’: rossiyskaya ‘pomoshch’ – eto operatsiya propagandy,” Krym.Realii, April 4, 2020, https://ru.krymr.com/a/italianskiy-obozrevtel-rossiyskaya-pomoshch-operaciya-propagandy/30529765.html.

[28] Angela Giuffrida and Andrew Roth, “Moscow’s Motives Questioned over Coronavirus Aid Shipment to Italy,” Guardian (US edition), April 27, 2020, https://www.theguardian.com/world/2020/apr/27/moscow-motives-questioned-over-coronavirus-aid-shipment-to-italy.

[29] Jacopo Iacoboni, “Coronavirus, la telefonata Conte-Putin agita il governo: ‘Più che aiuti arrivano militari russi in Italia,’” La Stampa, March 25, 2020, https://www.lastampa.it/topnews/primo-piano/2020/03/25/news/coronavirus-la-telefonata-conte-putin-agita-il-governo-piu-che-aiuti-arrivano-militari-russi-in-italia-1.38633327.

[30] “Posol v Italii otsenil soobshcheniya o ‘vystavlenii scheta’ za pomoshch,’” RIA Novosti, March 25, 2020, https://ria.ru/20200325/1569157787.html.

[31] “Statement by the Spokesman of the Ministry of Defence of the Russian Federation Major General Igor Konashenkov,” Facebook, April 2 2020, https://www.facebook.com/mod.mil.rus/posts/2608652339377506.

[32] Monica Rubino and Concetto Vecchio, “Russia contro il giornalista de ‘La Stampa’ Jacopo Iacoboni. Esteri e Difesa: ‘Grazie per aiuti ma rispettare libertà di stampa,’” La Repubblica, April 3, 2020, https://www.repubblica.it/politica/2020/04/03/news/iacoboni_la_stampa_russia-253020378/.

[33] “Le accuse di Mosca e la nostra risposta,” La Stampa, April 3, 2020, https://www.lastampa.it/lettere/2020/04/03/news/le-accuse-di-mosca-e-la-nostra-risposta-1.38672825.

[34] “Nota congiunta del Ministero della Difesa e del Ministero degli Affari Esteri e della Cooperazione Internazionale,” Ministero degli Affari Esteri e della Cooperazione Internazionale (website), April 3, 2020, https://www.esteri.it/mae/it/sala_stampa/archivionotizie/comunicati/nota-congiunta-del-ministero-della-difesa-e-del-ministero-degli-affari-esteri-e-della-cooperazione-internazionale.html.

[35] Giorgio Gori, “Solidarietà a @jacopo_iacoboni e alla Stampa per le intimidazioni ricevute da portavoce della Difesa russo,” Twitter, April 3, 2020, https://twitter.com/giorgio_gori/status/1246008841755668480.

[36] Rubino and Vecchio, “Russia contro il giornalista de ‘La Stampa’ Jacopo Iacoboni.”

[37] “UK Company behind La Stampa’s Article Claiming Russian Aid to Italy Useless – Diplomat,” TASS, April 2, 2020, https://tass.com/politics/1139323.

[38] Vladimir Malyshev, “Uchebniki po antisovetskoy propagande eshche ne sgnili”, Fond strategicheskoy kultury, April 9, 2020, https://www.fondsk.ru/news/2020/04/09/uchebniki-po-antisovetskoj-propagande-esche-ne-sgnili-50575.html.

[39] Andreas Umland, “Aleksandr Dugin’s Transformation from a Lunatic Fringe Figure into a Mainstream Political Publicist, 1980–1998: A Case Study in the Rise of Late and Post-Soviet Russian Fascism,” Journal of Eurasian Studies, 1, no. 2 (2010): 144-152.

[40] Giulietto Chiesa, “Quelli che sparano sulla Croce Rossa,” Sputnik, April 7, 2020, https://it.sputniknews.com/opinioni/202004078943748-quelli-che-sparano-sulla-croce-rossa/.

[41] “Putin v Den’ narodnogo edinstva vruchil nagrady v Kremle,” RIA Novosti, November 4, 2019, https://ria.ru/20191104/1560560522.html.

[42] Politically biased international election observation is a form of political activity performed by international actors with the aim of advancing interests of certain politicians and political forces by imitating credible election monitoring during electoral processes.

[43] See Anton Shekhovtsov, “Politically Biased International Election Observation at the 2018 Regional Elections in Russia,” European Platform for Democratic Elections, October 5, 2018, https://www.epde.org/en/documents/details/politically-biased-international-election-observation-at-the-2018-regional-elections-in-russia.html.

[44] Gian Luigi Ferretti, “25 marzo 2020: Inno russo da CasaPound a Roma”, YouTube, March 25, 2020, https://www.youtube.com/watch?v=rIOK4gQKtxc.

[45] Fabio Tonacci, “‘200 euro se ringrazi la Russia per gli aiuti’: quello strano arruolamento su WhatsApp,” La Repubblica, April 12, 2020, https://www.repubblica.it/esteri/2020/04/12/news/russia_propaganda_a_pagamento-253794264/.

[46] Alexey Pushkov, “Pol’sha ne propustila rossiyskie samolety s pomoshch’yu dlya Italii cherez svoe vozdushnoe prostranstvo,” Twitter, March 23, 2020, http://archive.is/fdk6R.

[47] See, for example, “Russian Planes Carrying Aid to Italy Blocked from Using Poland Airspace – Russian Lawmaker,” Sputnik, March 23, 2020, https://web.archive.org/web/20200324003727/https://sputniknews.com/world/202003231078687190-russian-planes-carrying-aid-to-italy-blocked-from-using-poland-airspace—russian-lawmaker/.

[48] See “Poland Says Its Airspace Open for Russian Planes Carrying Aid to Italy,” Sputnik, March 23, 2020, https://sputniknews.com/world/202003231078687190-russian-planes-carrying-aid-to-italy-blocked-from-using-poland-airspace—russian-lawmaker/.

[49] “Russia Exploits Italian Coronavirus Outbreak to Expand Its Influence,” Medium, March 30, 2020, https://medium.com/dfrlab/russia-exploits-italian-coronavirus-outbreak-to-expand-its-influence-6453090d3a98.

[50] “Oehme: Europaratsmitglieder bilden Phalanx zur Bewältigung der Corona-Krise in Italien”, Fraktion der AfD im Deutschen Bundestag, March 23, 2020, https://www.afdbundestag.de/mdb-ulrich-oehme-europaratsmitglieder-bilden-phalanx-zur-bewaeltigung-der-corona-krise-in-italien/; “Deputat Bundestaga obratilsya k Rossii za pomoshch’yu okhvachennoy koronavirusom Italii,” Govorit Moskva, March 21, 2020, https://govoritmoskva.ru/news/228659/.

[51] “Oehme: Europaratsmitglieder bilden Phalanx zur Bewältigung der Corona-Krise in Italien.”

[52] See Anton Shekhovtsov, “Foreign Observation of the Illegitimate Presidential Election in Crimea in March 2018,” European Platform for Democratic Elections, April 3, 2018, https://www.epde.org/en/news/details/foreign-observation-of-the-illegitimate-presidential-election-in-crimea-in-march-2018-1375.html.

[53] “Predstaviteli ORDLO vstretilis’ v Minske s deputatom PASE,” Naviny, December 16, 2019, https://naviny.by/new/20191216/1576476063-predstaviteli-ordlo-vstretilis-v-minske-s-deputatom-pase.

[54] Anton Shekhovtsov, Russia and the Western Far Right: Tango Noir (Abingdon: Routledge, 2018), 185-186.

[55] “France’s Le Pen, on Russia Visit, Heads to Kremlin for Exhibition,” Reuters, March 24, 2017, https://www.reuters.com/article/us-russia-france-lepen-idUSKBN16V12E.

[56] Anton Shekhovtsov, “Politically Biased Foreign Electoral Observation at the Russian 2018 Presidential Election,” European Platform for Democratic Elections, April 16, 2018, https://www.epde.org/en/documents/details/politically-biased-foreign-electoral-observation-at-the-russian-2018-presidential-election-1423.html.

[57] Julian Röpcke, “Wie die AfD Putins Militär in Italien einschleuste,” Bild, March 26, 2020, https://www.bild.de/politik/ausland/politik-ausland/corona-krise-wie-die-afd-putins-militaer-in-italien-einschleuste-69638656.bild.html.

[58] “Deputat Bundestaga obratilsya k Rossii za pomoshch’yu okhvachennoy koronavirusom Italii.”

[59] “Speech by President Von der Leyen at the European Parliament Plenary on the EU Coordinated Action to Combat the Coronavirus Pandemic and Its Consequences,” European Commission, April 16, 2020, https://ec.europa.eu/commission/presscorner/detail/en/speech_20_675.

[60] “Speech by President Von der Leyen.”

[61] Luigi Sergio Germani, “The Coronavirus Pandemic and Russian Information Warfare Activities in Italy,” Centre for Democratic Integrity, April 28, 2020, https://democratic-integrity.eu/the-coronavirus-pandemic-and-russian-information-warfare-activities-in-italy/.

[62] Razov’s cover letter and Slutsky’s appeal can be found here: https://www.linkiesta.it/wp-content/uploads/2020/05/Lettera-nr.1072-del-27.04.2020.pdf.

[63] The appeal appeared on several websites of Russian diplomatic institutions, see, for example: Leonid Slutsky, “An Appeal by Mr L. Slutsky, MP, to Abandon the Sanction Policy in the Face of COVID-19 Pandemia,” The Embassy of the Russian Federation in the Republic of India, April 24, 2020, https://india.mid.ru/en/press-office/news/an_appeal_by_mr_slutsky/.

Conceptualizing Malign Influence of Putin’s Russia in Europe

Today’s expert literature on the Kremlin’s subversive activities in Europe is often confusing in terms of the concepts and definitions used by authors in their reports and analyses. This paper aims to remedy this shortcoming by providing a comprehensive theoretical framework for analyzing the malign influence of Putin’s Russia in Europe in the most efficient way.

We define malign influence in Europe as a specific type of influence that directly or indirectly subverts and undermines European values and democratic institutions. We also put the concept of malign influence in the context of political warfare in order to delineate the meaning of such influence: it does not belong to the areas of cooperation between nations in times of peace.

The paper highlights major areas in which actors of Putin’s Russia exercise malign influence, identify main categories of Russian operators and their European facilitators that conduct or help conduct the Kremlin’s political warfare against the West, and, finally, describes vulnerabilities of European states to malign influence of Putin’s Russia.