Panama Papers: Putin Cries Conspiracy

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The Panama Papers have caused a stir all over the world, in particular in Russia and Ukraine, where Presidents Petro Poroshenko and Vladimir Putin were both implicated in large scale offshore investments and tax avoidance. According to CNN, the Panamanian law firm Mossack Fonseca was left struggling when over 11 million documents were leaked on April 3. The firm specializes in creating tax avoidance vehicles via trust funds and shell corporations. Among their clients are numerous heads of state and government officials, including the Prime Minister of Iceland, Sigmundur Davíð Gunnlaugsson, who resigned on April 5.

Although Vladimir Putin was not mentioned by name in the leaked documents, several of his close associates were included. The first is Sergei Roldugin, a childhood friend of Putin and a famous cellist and conductor. The second is Yuri Kovalchuk, another close friend and the chairman and major shareholder of Rossiyabank.

Putin’s offshore system explained in the leaked documents shows that Rossiyabank creates shell companies using Roldugin’s name. All seven of these companies are registered by Mossack Fonseca in the tax havens of the Belize, Panama, and the Virgin Islands. Mossack Fonseca then agrees to loans from the Russian Commercial Bank in Cyprus, which is owned and controlled by Russian state-owned bank VTB. Sandalwood Corporation’s loan of $10 million to the Igora ski resort where Putin’s daughter held her wedding party in 2013 is just one example of such transactions.

Putin’s spokesman, Dmitry Peskov, dismissed the leaks as a plot “to destabilize the situation in Russia.”

“Putin, Russia, our country, our stability, our upcoming election — the fundamental aim is to destabilize all of it,” Peskov said.

The President himself responded to the allegations at a journalists’ forum in Saint Petersburg on April 7. Putin cited a tweet by Wikileaks as evidence that “official people and official organs of the U.S. are behind this.”

While Putin has not been directly implicated by the leak, Ukrainian President Petro Poroshenko faced serious criticism for his explicit mention in the papers. Poroshenko sought to move his Ukrainian confectionary business, Roshun, the tax haven of the British Virgin Islands in 2014.

“I plan to introduce the significant reform which can make impossible…using offshore companies and offshore accounts in Ukraine. And this is the significant part of my next step of my reform program,” Poroshenko said.

The Panama Papers have undermined Poroshenko’s attempt to present himself as a reforming, Western-oriented leader. The resignation of Prime Minister Arseniy Yatsenyuk on April 12 was another hit to Poroshenko’s claims of tackling corruption at all levels. Poroshenko’s attempts to move closer to the European Union were also hindered by the Dutch rejection of the EU-Ukraine association agreement. Putin, on the other hand, seems unfazed by the release of the papers. It is unclear what long-term effects the release of the Panama Papers might have on the Russian President’s domestic image.