[R-G] McCain's Kremlin Ties

[Anthony Fenton]

McCain's Kremlin Ties
By Mark Ames & Ari Berman

This article appeared in the October 20, 2008 edition of The Nation.
October 1, 2008
http://www.thenation.com/doc/20081020/ames_berman/print

Research support was provided by the Puffin Foundation Investigative  
Fund at The Nation Institute.

DMITRY ASTAKHOV/AP
Russian President Vladimir Putin and metals oligarch Oleg Deripaska,  
2006

Over the course of the presidential campaign, John McCain has  
repeatedly emphasized his willingness to stand up to Russian Prime  
Minister Vladimir Putin as proof that only he possesses the fortitude  
and judgment to become the next leader of the free world. In his  
acceptance speech at the Republican convention, McCain lashed out at  
Putin and the Russian oligarchs, who, "rich with oil wealth and  
corrupt with power...[are] reassembling the old Russian Empire."  
McCain rushed to publicly support the Georgian republic during its  
recent conflict with Russia and amplified his threat to expel Moscow  
from the G-8 club of major powers. His running mate, Sarah Palin,  
suggested in her first major interview that the United States might  
have to go to war with Russia one day in order to protect Georgia--the  
kind of apocalyptic scenario the United States avoided during the cold  
war.

Yet despite McCain's tough talk, behind the scenes his top advisers  
have cultivated deep ties with Russia's oligarchy--indeed, they have  
promoted the Kremlin's geopolitical and economic interests, as well as  
some of its most unsavory business figures, through greedy cynicism  
and geopolitical stupor. The most notable example is the tale of how  
McCain and his campaign manager, Rick Davis, advanced what became a  
key victory for the Kremlin: gaining control over the small but  
strategically important country of Montenegro.

According to two former senior US diplomats who served in the Balkans,  
Davis and his lobbying firm, Davis Manafort, received several million  
dollars to help run Montenegro's independence referendum campaign of  
2006. The terms of the agreement were never disclosed to the public,  
but top Montenegrin officials told the US diplomats that Davis's work  
was underwritten by powerful Russian business interests connected to  
the Kremlin and operating in Montenegro. Neither Davis nor the McCain  
campaign responded to repeated requests for comment. (Davis's  
extensive lobbying work, especially on behalf of collapsed mortgage  
giants Fannie Mae and Freddie Mac, has already attracted critical  
media scrutiny.)

At the time, Putin wanted to establish a Russian outpost in the  
Mediterranean, and Montenegro--a coastal republic across the Adriatic  
from Italy--was seen as his best hope. McCain also lobbied for  
Montenegro's independence from Serbia, calling it "the greatest  
European democracy project since the end of the cold war." For McCain,  
the simplistic notion of "independence" from a country America had  
gone to war with in the late 1990s was all that mattered. What  
Montenegro looked like after independence seemed not to interest him.  
This suited Putin just fine. Russia had generally sided with Serbia  
against the West during the Balkan wars of the 1990s, but for the  
Kremlin, cutting Montenegro free from Serbia meant dealing with a  
Montenegro that could be more easily controlled. Indeed, today, after  
its "independence," Montenegro is nicknamed "Moscow by the  
Mediterranean." Russian oligarchs control huge chunks of the country's  
industry and prized coastline--and Russians exert a powerful influence  
over the country's political culture. "Montenegro is almost a new  
Russian colony, as rubles flow in to buy property and business in the  
tiny state," Denis MacShane, Tony Blair's former Europe minister,  
wrote in Newsweek in June. The takeover of Montenegro has been a  
Russian geostrategic victory--quietly accomplished, paradoxically  
enough, with the help of McCain and his top aides.

In mid-September The Nation's website published a photo of McCain  
celebrating his seventieth birthday in Montenegro in August 2006 at a  
yacht party hosted by convicted Italian felon Raffaello Follieri and  
his movie-star girlfriend Anne Hathaway. On the same day one of the  
largest mega-yachts in the world, the Queen K, was moored in the same  
bay of Kotor. This was where the real party was. The owner of the  
Queen K was known as "Putin's oligarch": Oleg Deripaska, controlling  
shareholder of the Russian aluminum giant RusAl, currently listed as  
the ninth-richest man in the world, with a rap sheet as abundant as  
his wealth. By mid-2005 Deripaska had already virtually taken control  
of Montenegro's economy by snapping up its aluminum plant, KAP--which  
accounts for up to 40 percent of the country's GDP and some 80 percent  
of its export earnings--in a nontransparent privatization tender  
strongly criticized by NGO watchdogs, Montenegrin politicians and  
journalists. The Nation has learned that Deripaska told one of his  
closest associates that he bought the plant "because Putin encouraged  
him to do it." The reason: "the Kremlin wanted an area of influence in  
the Mediterranean."

In mid-2005 Ambassador Richard Sklar, the former lead US official in  
the Balkans, ceased advising the Montenegrin government (he'd worked  
as a pro bono adviser after leaving the US diplomatic service) when it  
became clear the plant was being handed to Deripaska under heavy  
Russian pressure. "I quit because it was a bad deal, not for any  
political reasons. The Russians scared all the other buyers off. They  
offered far too little money and got themselves a sweetheart deal."

Russia's virtual takeover of Montenegro was well under way by January  
2006, when Rick Davis introduced Deripaska to McCain at a villa in  
Davos, Switzerland. They met again seven months later, at a reception  
in Montenegro celebrating McCain's birthday, as reported in the  
Washington Post.

The story of how Oleg Deripaska, 40, rose from a Cossack village to  
become a Putin-blessed aluminum tycoon with an estimated $40 billion  
fortune does not begin with a lemonade stand and old-fashioned elbow  
grease. Like most post-Soviet success stories, Deripaska's rise began  
abruptly and violently, during the chaotic reign of Boris Yeltsin.  
Among all the battles for control of valuable state assets in the  
1990s, none were as bloody as the "aluminum wars," in which organized- 
crime gangs hired by competing interests assassinated dozens of  
executives, shareholders and bankers. During a visit to the United  
States in 1995, Deripaska threatened the lives of two aluminum rivals,  
Yuri and Mikhail Zhivilo, according to a RICO lawsuit filed against  
Deripaska in New York district court in 2000. The RICO case is just  
one of many lawsuits, including one filed in Israel by a former  
business partner claiming that Deripaska illegally wiretapped an  
Israeli cabinet minister. In addition, German prosecutors have begun a  
criminal money-laundering investigation in Stuttgart. (Deripaska did  
not respond to requests for comment.)

Deripaska understands that success in Russia today comes from a  
mixture of brute force, political influence and personal connections.  
In 2001, about a year after Putin signed a decree granting legal  
immunity to Yeltsin's family, Deripaska married Yeltsin's  
granddaughter, thereby cementing his own immunity and power.  
Throughout Putin's reign, Deripaska has adhered to an unwritten  
understanding between Putin and the oligarchs: as long as they support  
the Kremlin, they can operate with impunity. Deripaska has thus taken  
on numerous projects dear to Putin, such as building a new airport in  
Sochi for the 2014 Olympics and buying out Tajikistan's aluminum plant  
to help Putin reassert control over that key ex-Soviet republic.  
Deripaska openly admits that his RusAl holdings are subservient to the  
Kremlin's wishes, telling the Financial Times last year, "If the state  
says we need to give it up, we'll give it up."

Yet Deripaska faced a serious obstacle to his business ambitions,  
hampering his duties as a Putin surrogate. Because of numerous  
accusations of involvement in death threats, extortion, racketeering  
and money laundering, he had been barred from entering America since  
1998. Putin has lobbied for Deripaska's US visa. In an interview with  
Le Monde earlier this year, Putin complained, "I have asked my  
American colleagues why. If you have reasons for not delivering him a  
visa, if you have documents on illegal activities, give us them....  
They give us nothing, explain to us nothing, and forbid him from entry."

The visa ban was costing Deripaska billions: for years he and fellow  
RusAl shareholders had sought to cash in their wealth by launching an  
IPO in London, which could have netted up to $10 billion for RusAl's  
owners. However, finding institutional buyers would be difficult if  
not impossible as long as RusAl's primary owner was barred from  
entering the United States.

Despite rampant Russophobia among Republicans, Deripaska turned to  
powerful GOP figures to solve his problem--especially to Republicans  
connected with McCain. In 2003 Deripaska hired former presidential  
candidate Bob Dole, who had nearly picked McCain as his running mate,  
and Dole's lobbying partner Bruce Jackson (also a McCain aide) to  
lobby the State Department to overturn the visa ban, according to  
Glenn Simpson and Mary Jacoby of the Wall Street Journal. Over the  
next few years Dole's firm, Alston & Bird, was paid more than $500,000  
to push for Deripaska's visa.

Deripaska also reached out to a Washington-based intelligence firm,  
Diligence, chaired by GOP foreign policy hand Richard Burt, McCain's  
top foreign policy adviser in 2000 and an adviser in '08 (Burt left  
Diligence in 2007 to join Henry Kissinger's consulting firm).  
Deripaska's business partner in London, Nathaniel Rothschild, an heir  
to the English Rothschild fortune, bought a stake in Diligence,  
according to the New York Times and confirmed by a Rothschild  
spokesman. The firm offered Deripaska many useful services: corporate  
intelligence gathering, visa lobbying through considerable GOP  
connections and, crucially, help in obtaining a $150 million World  
Bank/European Bank for Reconstruction and Development loan for a  
Deripaska subsidiary, the Komi Aluminum Project. Getting the loan was  
useful in providing a layer of comfort to Western investors skittish  
about RusAl. So Diligence, now partly owned by Rothschild, provided a  
"due diligence" report to the World Bank, which the Bank then used to  
approve its loan to Deripaska.

Not surprisingly, the lobbying worked: in December 2005 Deripaska was  
issued a multientry US visa, according to the State Department. During  
his brief stay he signed his World Bank loan, spoke at a Carnegie  
Endowment meeting and attended a dinner for Harvard University's  
Belfer Center, where, thanks to a generous donation, he became a  
member of its international council.

However, Deripaska's trip did not end well. Under the visa's terms, he  
was forced to endure lengthy FBI questioning. According to the mining- 
industry newsletter Mineweb, the list of his enemies had grown from  
jilted former business partners to the heads of powerful US metals  
companies and government officials unhappy with RusAl's control of key  
Third World bauxite mines, which threatened beleaguered US aluminum  
giants. The interview went badly--according to people who know him,  
Deripaska had little patience for prying bureaucrats. When he left the  
country, the visa ban was reinstated. Once again Deripaska turned to  
powerful Republicans--this time, to McCain and campaign manager Davis,  
who arranged the January 2006 Davos introduction. The McCain campaign  
later claimed that "any contact between Mr. Deripaska and the senator  
was social and incidental," but afterward Deripaska thanked Davis for  
arranging "such an intimate setting." The Washington Post reported  
that Davis was "seeking to do business with the billionaire." Indeed,  
Deripaska's subsequent thank-you letter mentioned his possible  
investment in a metals company Davis represented through a hedge-fund  
client.

If you're wondering how Deripaska came to know Davis & Co., the answer  
lies in Russia's next-door neighbor Ukraine.

In December 2004 Ukrainians poured into the streets of Kiev and other  
cities in the peaceful "Orange Revolution," which overthrew a Putin- 
backed corrupt leader, Viktor Yanukovich, who had tried to steal the  
country's presidential election that year (during which the pro- 
Western opposition candidate, Viktor Yushchenko, was poisoned and  
almost died). It was a serious blow to Russia's geopolitical standing.

Putin's Ukrainian proxies were also in trouble. Shortly after the  
Orange Revolution, a murder investigation was launched against the  
country's richest oligarch, Rinat Akhmetov, Yanukovich's main backer.  
Akhmetov fled the country. In exile in Monaco, he turned to Davis's  
business partner, Paul Manafort--the second name in the lobbying firm  
Davis Manafort. An old GOP hand, Manafort, like Davis, had played a  
key role in Dole's failed 1996 presidential run and had worked for  
dictators like Ferdinand Marcos of the Philippines and Mobutu Sese  
Seko of Zaire. Akhmetov initially hired Manafort to improve the image  
of his beleaguered conglomerate, SCM, but soon Manafort's role shifted  
to helping Yanukovich.

Manafort assembled a skilled team of political operatives in Ukraine  
and set about raising the popularity of Yanukovich's pro-Russian Party  
of Regions, which Akhmetov financed. It was a very lucrative deal for  
Davis Manafort--and successful (according to Ukrainian investigative  
journalist Mustafa Nayem, Akhmetov paid Manafort upward of $3  
million). Yanukovich's disgraced party won a resounding victory in the  
March 2006 elections--and Akhmetov returned as the top Ukrainian  
oligarch. Thanks in part to the work of Davis Manafort, the Orange  
Revolution was essentially undone, putting Putin back in the chess  
match over Ukraine's future.

Publicly McCain and his campaign chief's lobbying firm were on  
opposite sides. In 2005 McCain had nominated Orange Revolution hero  
Yushchenko for the Nobel Prize, and that spring he'd honored  
Yushchenko in the headquarters of the International Republican  
Institute, whose board McCain has chaired since 1993. But behind the  
scenes the former head of IRI's Moscow office, Philip Griffin, was  
recruited by Manafort to work on Yanukovich's campaign against  
Yushchenko. Davis Manafort's work was considered so detrimental to US  
interests that a National Security Council official called McCain's  
office to complain, according to the New York Times. The McCain  
campaign denies receiving the NSC complaint.

But the firm's work was only just beginning. The same month Davis  
Manafort helped deliver this victory to Putin's proxies, it started  
work on another key Kremlin success story: an independent and Russia- 
dominated Montenegro.

First, a little history. Montenegro was the smallest of the former  
Yugoslavia's six republics. When Slobodan Milosevic was overthrown in  
October 2000, Montenegro's longtime strongman, Milo Djukanovic,  
figured the West would reward him by supporting his push for  
independence. But the European Union and the United States opposed  
Montenegro's secession, which they feared would undermine the new, pro- 
Western leaders in Serbia and bring more war. So under heavy pressure  
from the EU, an agreement was struck in 2002 putting off an  
independence referendum for at least three years.

Djukanovic then looked beyond the West for support. That same year his  
closest ally and mentor, Milan Rocen, was dispatched to Moscow as  
ambassador of the Serbia-Montenegro confederation. Rocen nurtured ties  
to Putin's Russia, and by 2005 the biggest Montenegrin industrial  
asset, the KAP aluminum plant, was snatched up by Deripaska at Putin's  
request. After that, Russia surprised everyone by dropping its  
objections to Montenegrin independence, which Russia's historic ally  
Serbia vigorously opposed. "There seemed to be a belief that Deripaska  
and the Russians wanted to gain control of the aluminum plant as part  
of a Russian move for greater influence throughout Montenegro," says  
former ambassador Sklar.

Meanwhile, Rick Davis was also eager for a piece of Montenegro's  
independence, lobbying hard for Davis Manafort to run the referendum  
campaign. Bob Dole, who has been paid $1.38 million by the Montenegrin  
government since 2001 to lobby for it in Washington, urged his  
Montenegrin friends to hire Davis. Whether it was because of Dole or,  
as some speculate, the Russians, Davis got his deal.

Though Davis has claimed no connection to his partner Manafort's  
controversial activities in Ukraine, he nevertheless hired at least  
three specialists recommended by Manafort, from the same team Manafort  
used for Yanukovich's victory, to work on Montenegro's independence  
referendum. They included Russian political operative Andrei Ryabchuk,  
an elections specialist who had previously worked on pro-Putin  
campaigns in Russia. Ryabchuk told The Nation that he was "recruited  
by Manafort's people" out of Moscow to the Ukraine operation and then  
on to Montenegro.

Davis's team was vetted by Montenegro's Russian ambassador Rocen, who  
was returning from Moscow to oversee the independence campaign. Why  
was Davis hired? The top McCain aide was as much a political symbol as  
a campaign consultant. "I think the Montenegrins hired Rick to have  
political cover--it was important to show they had support from the  
United States," said an American democracy expert who's worked in  
Montenegro. Though disclosure is required by Montenegrin law, Davis  
Manafort's contract with the ruling Montenegrin party was never  
publicly released. In addition, Djukanovic's party never listed  
payments to Davis Manafort on its election filings, lending credence  
to private claims by top Montenegrin officials that Russian business  
interests paid for Davis's work through hired third parties, an oft- 
used though illegal tactic in Eastern Europe to disguise money trails.

At key points in the campaign, Davis reached out to Deripaska's allies  
for help. With the referendum too close to call, the Serbs tried to  
sway public opinion by threatening to revoke scholarships and other  
education privileges of Montenegrin students if the country should  
secede. This caused a panic--so to counter the Serbs, Davis turned to  
Deripaska emissary Nathaniel Rothschild (Rothschild has reportedly  
become the richest of all the Rothschilds, thanks to his privileged  
role as a Deripaska adviser).

Three weeks before the independence referendum, Davis asked Rothschild  
to come to Montenegro. After arriving in his private Gulfstream jet,  
Rothschild was trotted out before the cameras with the Montenegrin  
prime minister, where he pledged $1 million to support students who  
might be hurt by Serbia's scholarship threat. Another Deripaska ally  
brought in to secure the student vote was Canadian billionaire Peter  
Munk, CEO of Barrick Gold, the world's largest gold-mining corporation  
(it was Munk who had hosted the Davos meeting between McCain and  
Deripaska a few months earlier). Munk, who serves on the advisory  
board of RusAl, delivered pledges of support from Canadian universities.

At the same time Deripaska's allies were employed by Davis, Dole was  
lobbying McCain to promote Montenegro's independence. Dole's aides  
held a teleconference with McCain's Senate office when Montenegro's  
foreign minister visited Washington; shortly thereafter, the  
referendum passed by a razor-thin 0.5 percent. In April 2006 McCain  
announced that Montenegro's independence was the "greatest European  
democracy project since the end of the cold war." Despite opposition  
cries of vote rigging, the United States and other major powers  
accepted the results--and Putin's Russia recognized newly independent  
Montenegro before the EU did.

A few months after the vote, McCain and a contingent of GOP senators  
visited Montenegro. The day before they arrived, Djukanovic had flown  
to Putin's dacha on the Black Sea. "Your government made it possible  
for large-scale Russian investments," Putin told the Montenegrin  
leader. Djukanovic then returned to Montenegro and warmly received  
McCain, who also met with the Montenegrin president, speaker of  
Parliament and opposition leader Predrag Bulatovic. Bulatovic told  
McCain about how Russian capital was taking over the country and of  
his concern that "this investment can have a negative impact on the  
democratic process." McCain listened but kept criticism of Russia to  
himself. Meanwhile, Davis was still in the country, helping  
Djukanovic's Russia-allied party win the upcoming parliamentary  
elections. (At the time, Djukanovic was under investigation by Italian  
prosecutors for cigarette smuggling and "Mafia-type activities.")

Soon after the referendum, the powerful figures behind Montenegro's  
independence were carving up the country. That summer Rothschild  
started discussions with top Montenegrin officials about gaining  
control of the valuable shoreline, including the half-billion-dollar  
Porto Montenegro project, which aims to become the world's top mega- 
yacht marina, complete with luxury hotels, shopping and the country's  
first eighteen-hole golf course. The property was handed to the Munk- 
Rothschild-fronted offshore consortium for a pittance, according to  
MANS, the local NGO partner of Transparency International, in yet  
another backroom deal. Eventually, Deripaska's role in Porto  
Montenegro, which was initially secret, was formally acknowledged,  
although the full list of owners is still a mystery. Deripaska is also  
developing an 8 billion-euro resort in southern Montenegro and seeking  
control of a coal mine and a thermal power plant.

Roughly two years later, in March of this year, Rothschild hosted a  
high-dollar fundraiser for McCain at London's posh eighteenth-century  
Spencer House, which Rothschild donated for the occasion. Given the  
close relationship between Rothschild and Deripaska, some speculated  
that Deripaska was the hidden hand behind the event. The conservative  
watchdog group Judicial Watch filed a complaint with the Federal  
Election Commission, alleging that the fundraiser amounted to an  
illegal contribution by foreign nationals to McCain's campaign.

Aside from a little campaign dough, what has McCain gotten out of all  
this? It's hard to tell--either he was utterly clueless while his top  
advisers and political allies ran around the former Soviet domain  
promoting the Kremlin's interests for cash, or he was aware of it and  
didn't care. McCain was reportedly so angry about Davis Manafort's  
role in stifling Ukraine's Orange Revolution that he almost removed  
Davis as campaign manager. But in the case of Montenegro, he should  
have known what Davis & Co. were up to. After all, McCain lent a  
helping hand. And by the time he visited the country, the Russian  
takeover was plain to see.

The story of how McCain's closest aides and employees have been  
undermining his vociferously expressed opposition to Putin and  
Russia's oligarchs offers a highly disturbing preview of what a McCain  
administration might look like. When McCain's campaign proclaims  
"country first," one has to wonder, Which country? The one with the  
highest bidder?

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About Mark Ames
Mark Ames is the author of Going Postal: Rage, Murder and Rebellion  
 From Reagan's Workplaces to Clinton's Columbine and Beyond (Soft  
Skull) and The eXile: Sex, Drugs and Libel in the New Russia (Grove).  
He is a regular contributor to eXiled Online. more...
About Ari Berman
Ari Berman is a contributing writer for The Nation, covering national  
politics and the 2008 election, and an Investigative Journalism Fellow  
at The Nation Institute. more...