The sprawling palace and property on the coast of the Black Sea are seen in this image from a video by Alexey Navalny's Anti-Corruption Foundation.
(CNN)The sprawling billion-dollar palace that sits on a hilltop overlooking the Black Sea is seen by some Kremlin critics as the ultimate emblem of Russian President Vladimir Putin’s legacy of corruption.
Dubbed “Putin’s Palace,” the 190,000 square-foot mega-mansion was purportedly built for his personal use with funds from billionaire oligarchs, whom he allegedly allowed to flourish in Russia’s notoriously corrupt economy so long as they shared the wealth — with him.
The property has its own amphitheater, underground hockey rink and private seaport, according to a documentary produced by jailed Russian opposition leader Alexey Navalny’s anti-corruption group. There is a no-fly zone in the skies above and a no-boating zone in the surrounding waters.
The magnificent fortress stands in stark contrast to the tiny 800-square-foot apartment Putin claims in his official 2020 financial disclosure.
Yet, despite the opulence of the hilltop retreat, “I would be very surprised if Putin ever sets foot in there again,” Nate Sibley, an expert on Russian corruption who advises members of Congress, told CNN.
Sibley said the palace symbolizes what he sees as a bygone era of Putin pursuing, through the wealth of oligarchs, a luxurious lifestyle that he could never afford on his government salary. While Putin is believed to have amassed a hidden fortune by such means earlier in his career, Sibley said, he has since become less reliant on his wealthy benefactors over the years and has surrounded himself instead with government and military loyalists who share his hardline nationalist views.
On average, 10% of world GDP is held offshore. However, in Russia, offshore wealth accounted for as much as 60% of GDP in 2015, according to a 2018 Journal of Public Economics research paper, the most recent estimate available.
Experts say about a quarter of this dark money is indirectly controlled by Putin and his tight-knit circle of oligarchs and poses a “serious national security threat” to the United States. The Mueller report illustrated how Russian offshore accounts were used to interfere in the 2016 elections.
Earlier this month, the Justice Department announced the formation of a task force devoted to enforcing sanctions and other economic restrictions designed to isolate Russia from global markets. The KleptoCapture task force will target not only Russian officials and oligarchs, but “those who aid or conceal their unlawful conduct.”
Gary Kalman, the director of the US office of Transparency International, an anti-corruption advocacy group, said enforcing sanctions will not be easy.
“It is extraordinarily difficult for law enforcement to try and ‘follow the money’ because at some point you are going to literally hit a brick wall,” Kalman said. “There is literally no paper trail.”
The United States and the United Kingdom are ideal places to stash large amounts of money, they are among the deepest financial markets in the world, and both accept anonymous shell companies, according to the Atlantic Council.
A group of international researchers found that shell companies in the US can be set up in under an hour for as little as $200, without having to legally disclose who owns or controls it. For decades, Western companies — banks and law firms — have profited from helping Russian oligarchs hide their money, setting up complicated corporate structures that make it nearly impossible to link assets or bank accounts to individuals.
In the eyes of some longtime Putin observers, the enigmatic Russian leader has shifted his focus from pursuit of wealth to consolidation of power.
“It’s difficult to understand precisely what’s happening inside the Kremlin and inside the mind of Vladimir Putin. But he is more and more in a tight relationship with a very small group of people, and they tend to be more on the military and intelligence side rather than business people,” said Jill Dougherty, former Moscow bureau chief for CNN, “because, obviously, if Putin cared about business, he would not be prosecuting this war in Ukraine.”
“Right now it is not up to the oligarchs,” said Stanislav Markus, an associate professor of international business at the University of South Carolina. “It is the guns, not the money that speak loudest in the Kremlin today.”
Regardless of whether priorities have shifted inside the Kremlin, Maria Pevchikh, head of investigations Navalny’s Anti-Corruption Foundation, argues both the palace near the Black Sea and Russia’s invasion of Ukraine demonstrate the way Putin sees himself as much more than a government official.
“He sees himself as a czar, as king of some sort,” Pevchikh told CNN. “He has huge plans. He has the vision of him being a historical figure, being so powerful, so mighty, so important, and they invest a lot of money into this narrative.”
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