It’s a touching family photo. In the centre is Vladimir Putin, holding his new baby daughter, Maria. Next to him is Lyudmila, his wife, with a bouquet of flowers. She has threaded her arm through his. On either side are Maria’s godparents, Ira and Sergei Roldugin.

Maria, also known as Masha, was born on 28 April 1985 and the photo was taken soon after. The city was Leningrad, the country – though not for much longer – the USSR. Father’s occupation: KGB officer.

Roldugin was the obvious choice as godfather: he had known Putin for eight years and was his best friend. Putin was at KGB training school with Roldugin’s brother Yevgeny.

“He was like a brother to me,” Sergei Roldugin later recalled of his friend, known by the family as Volodya. They had youthful adventures: cruising the city at night, singing songs, and – as Roldugin tells it – getting into the odd street fight. They played football: “He was tenacious, like a bulldog.”

One day Roldugin took his friend on an excursion. He wanted to show off the first car he had ever owned – a Zhiguli – to a flight attendant he had met from Kaliningrad. She had accepted his offer to take her to the city’s Lensoviet theatre. Another Aeroflot attendant, Lyudmila, was coming along and Roldugin gallantly fixed for Putin to sit with her. In 1983, after a slow-moving courtship, the blue-eyed Lyudmila became Mrs Putina.

Both men went on to enjoy success. Soon after the picture was taken Putin was posted as an undercover agent to communist East Germany. The next year a second daughter, Katerina (or Katya), was born in Dresden.

After the collapse of the Soviet Union Putin enjoyed a spectacular ascent: aide to St Petersburg mayor Anatoly Sobchak; deputy mayor; head of the FSB spy agency; prime minister. And then, in 2000, president. Meanwhile Roldugin, a professional cellist, had risen to became lead soloist at the Mariinsky theatre and rector of St Petersburg’s conservatory.

One had chosen art, the other politics and the pursuit of power.

Facebook Twitter Pinterest Sergei Roldugin at a meeting of the Mariinsky theatre’s board of trustees last year. Photograph: Mikhail Metzel/Itar-Tass/Corbis

In the numerous profiles and biographies of Russia’s president, it is Roldugin who gives approving quotes and anecdotes about the young Putin. Now 64 and 63 respectively, they have known each other since their mid-20s. Roldugin still enjoys the president’s trust. The modern Putin myth is sustained in part by his friend’s potent storytelling.

With time, other members of Putin’s inner circle grew rich. But Roldugin? He told the New York Times in September 2014 that he wasn’t one of them. In the wake of the US-imposed sanctions on many of the Putin group, he said he was no businessman: “I’ve got an apartment, a car and a dacha. I don’t have millions,” he added.

But the Panama Papers reveal that in April of that year, those managing Roldugin’s affairs were suggesting the opposite. They maintained in documents for a Swiss bank that Roldugin was personally making £6.5m a year, and had almost £19m in cash from his secret stake in one of Russia’s most lucrative advertising agencies, Video International.

This was one of a string of heavyweight investments attributed to Roldugin. Another, to buy shares in the truck manufacturers Kamaz, could have netted him at least £100m (the secret option, agreed in 2008 as Putin stepped down as president, was eventually never exercised).

This all raises intriguing questions. Was the cellist just being modest about his investments? Was it possible he was unaware of the enormous sums being amassed in his name? Or could he be acting as a proxy? Last week he said: “Guys, I am not ready to give comments now. These are delicate issues.”

The evidence from Panama points in one direction – towards the close circle surrounding Roldugin’s old St Petersburg friend, the president of Russia.

The Panama Papers show at least five secretly owned offshore entities in the Mossack Fonseca files linked to the Roldugin operation. They have largely meaningless names – Sonnette Overseas, International Media Overseas, Sunbarn, Raytar, Sandalwood Continental Ltd.

But one connection brings them all together. The firms are all linked to a company of Swiss lawyers. And they in turn act for a single organisation: Bank Rossiya, which is no ordinary bank.

The banks – and the money-go-round

Rastrelli Square, close to the looping Neva river, is one of St Petersburg’s most beautiful public spaces. It is home to the baroque Smolny cathedral. Next door is a yellow building in forbidding Soviet neoclassical style: the HQ of Bank Rossiya. It’s here that the Roldugin companies are controlled, and money funnelled into them. Big money.



Founded in 1990 in what was then Leningrad, Bank Rossiya has long been associated with Putin.

It was set up with Communist party funds amid the collapse of the USSR. Putin helped the fledgling bank, from his position as boss of the city’s new foreign liaison committee. In 1992, the bank funded a flattering TV documentary about him. The first allegations of personal corruption against Putin date from this period.

Leading members of Putin’s own Ozero cooperative – a lakeside community 60 miles north of St Petersburg where Putin had a dacha – are shareholders. So, at least in the past, was a gangster, Gennady Petrov, who was later arrested in Spain.

The group struck an unusual arrangement. They would keep their money in common, in a shared bank account – a deal some suggest continues. Putin’s friend Yuri Kovalchuk is Bank Rossiya’s biggest shareholder. And chairman of its board. Now worth many millions each, the Ozero group control most of the country’s assets: oil, gas, railways as well as construction, TV and the media.

Six years ago, Roldugin owned 3.9% of the bank’s shares, an incredible investment for a man whose profession pays six-figure salaries to just a very few. He told the New York Times he got his stake “a very long time ago” “when Putin was here [in St Petersburg]”.

Kovalchuk remains the linchpin of a bank that now has assets of almost $11bn. A White House official described him as “essentially the personal banker for many senior officials in the Russian Federation, including Putin”. In Moscow, Bank Rossiya is known as “Putin’s wallet”.

Facebook Twitter Pinterest Yuri Kovalchuk, Bank Rossiya’s biggest shareholder and chairman. Photograph: Alexander Nikolayev/AFP/Getty Images

Another bank that features prominently in the Panama Papers is RCB – the Russian Commercial Bank in Cyprus, a subsidiary of the Russian state-owned bank VTB. One well-placed source in Moscow described RCB as the “private pocket” for top government people – the “golden jackals around Shere Khan [Putin]”, as he put it.

RCB was obliged to provide them with the “infrastructure of luxury living”. “It could be a yacht, a private jet, a good time,” he said. Its balance sheet was of secondary concern, he added.

He said that when Cyprus imposed a haircut on bank deposits in 2013, RCB was exempt – because of pressure from Moscow. “If RCB had been touched you wouldn’t have found Cyprus on the map the next day,” he said.

RCB denies being a “pocket” and says it has referred money-laundering allegations to the Cyprus authorities.

The Panama Papers show how cash flowed from these banks to Putin’s friends – and how RCB made loans to the offshore entities secretly controlled by Bank Rossiya and the Putin circle. Between 2009 and 2011 it extended $800m in credit lines to Sandalwood Continental. One unsecured loan from RCB of $103m in September 2009 appears to have made Mossack Fonseca nervous.

Emails in the database record the company co-founder Jürgen Mossack’s unease at a situation described as “delicado”. He wrote: “We could be in the presence of money payments of dubious origin and doubtful destination.”

The firm eventually decided to accept Bank Rossiya’s assurance that the money was going to be invested in a Russian leasing firm buying a fleet of “gas cars” – presumably LPG tankers. Still, Mossack Fonseca asked Bank Rossiya for a letter of indemnity, which was unusual. It meant that in the event of any legal action, it could not be sued for negligence.

As soon as the cash came in from RCB, Sandalwood lent it on to a Cyprus-registered entity, Horwich Trading, at a hefty 7.8% interest. Sandalwood had borrowed it from RCB at 4.7%.

The files show how the simple movement of the money made Sandalwood a profit of $4m. Unusually this loan was paid back.

Another example makes the mechanics even clearer. In December 2010, the RCB lent 5bn roubles (then about £100m) offshore to Sandalwood at 4% interest. Sandalwood promptly passed it on to another offshore entity with obscure ownership, Eurofert Trading Ltd, as a loan at 5%. Eurofert then lent the money on to a Gazprom subsidiary trying to run power stations in Russia. It charged Gazprom 8.4% – more than double the original interest rate.

The unknown owners of Eurofert would collect £1.7m a year offshore, and the Putin circle a more modest £500,000 a year, all tax-free, for doing exactly nothing.

Igora, Putin’s home from home

Not far from the Ozero dacha community is the ski resort of Igora. The resort is home to 13 runs, a state-of-the-art spa, and an ice arena. There is an avenue of cottages where guests can stay, and a lake. The name Igora combines two Russian nouns – igra, play, and gora, mountain.

Facebook Twitter Pinterest The Igora ski resort. Photograph: Anatoly Maltsev/EPA

One of the resort’s fans is Putin. A keen skier, the president attended its 2006 launch, where he was filmed scooting along the snow. He returned in 2011 for a private visit, his bodyguards trailing down the mountains behind him in dark glasses. Then in February 2013 Igora was the venue for a very special – and private – wedding. The bride was Putin’s daughter Katya. The groom was Kirill, the son of Putin’s old Ozero friend Nikolai Shamalov. Shamalov is a Bank Rossiya shareholder.

According to Reuters, the couple rode in an old-fashioned sleigh drawn by three white horses. There was tight security, with the 100 VIP guests sworn to secrecy and mobile phones banned.

Formally, the Igora resort belongs to a company called Ozon LLC. Ozon is part-owned by Bank Rossiya’s boss, Kovalchuk, and his son Boris. They have a 25% stake in the company. The other 75% is owned by Lowbrook Trading, which is registered in Cyprus.

The owner of Lowbrook is unknown. Putin’s association with Igora, however, is not in doubt. According to locals, he has his own well-protected compound at Igora, called Zagorodnaya Sreda. It is concealed behind a tall fence, and known as “Putin’s residence”. Officially, of course, it’s not his. The plot is registered to the Kovalchuks.

Facebook Twitter Pinterest Kirill Shamalov, who married Putin’s daughter Katya in 2013. Photograph: Kommersant Photo/Kommersant via Getty Images

The Panama Papers show that in 2009-2011 the Igora resort was handed three unsecured loans worth £8m, at a remarkably generous 1% interest. It is unclear if the money given to Ozon was ever returned. Further payments went to a Kovalchuk-linked yacht club.

The cash came from Sandalwood, the offshore company linked to Putin’s other close friend, Roldugin.

The complexities of these arrangements are probably designed to hide what is really going on here. But stripped back, it’s simple enough.

Thanks to the Panama Papers, it is now possible to see how vast amounts of money flowed to Putin’s circle – and in turn, how some of that money has been used to invest in places Putin holds dear.

Swerving sanctions … and Swiss lawyers

The Panama Papers help explain how people close to Putin became enriched. This can only have happened with his patronage. They also show the efforts that were made to cover these tracks.



The Roldugin-Sandalwood schemes were organised by the Swiss lawyers Dietrich, Baumgartner & Partner, whose offices are in the heart of Zurich’s banking district. The firm specialises in rich Russians, marked down in the files under code names. Andres Baumgartner, one of its lawyers, made no secret of his top-level connections in Moscow, telling colleagues: “I have relationships with people from the KGB. Right up to Vladimir Putin.”

He would travel to Moscow five or six times a year. When he shot wild boar with a client, the boar did not stand much of a chance: the two men blasted at them from the door of a helicopter. On another occasion Baumgartner said he was collected from the airport in Moscow in a Mercedes with blue flashing lights – something only accorded to VIPs.

There was a party at Baumgartner’s villa in the affluent Zurich suburb of Zollikon, where he lives with his French wife, Anne, and their three children. A Russian couple came along; Baumgartner’s business partner, Fabio Delcò, swam in the pool; on the table was a kilo of black caviar, which the guests ate with creme fraiche using ivory spoons.

According to the Panama files, Baumgartner’s instructions from the Putin circle generally arrived in emails to his Zurich office from Bank Rossiya in St Petersburg, often from one investment manager there, Vladimir Khotimsky.

Facebook Twitter Pinterest Igora ski resort.

The Swiss lawyer would pass on Khotimsky’s orders – to enact loans or make share deals – to Mossack Fonseca’s branch office in the same town. The Panamanian firm then used its own network of offices in far-flung secrecy jurisdictions to operate anonymous shell companies, in the BVI, Panama itself, or Belize.

Nominee directors with Panamanian addresses signed the papers, doing just what they were told. They were the only names that appeared on the public registers. The layers of secrecy and misdirection were thus almost impenetrable.

Only when the US slapped sanctions on Bank Rossiya and Kovalchuk in March 2014 did a chink appear in the armour of secrecy. Because Roldugin’s name was one of the few from Putin’s inner circle to escape the sanctions list, he was under the radar. The Bank Rossiya group apparently sought to exploit this loophole. Using Baumgartner, their Swiss lawyer, they opened a fresh secret Swiss bank account, using the name of Roldugin as the owner.

Gazprombank Switzerland is down the road from Baumgartner’s Zurich law firm – an anonymous box in a chic suburb where splendid villas with mature beeches and pines overlook the city’s lake.

Like Bank Rossiya, Gazprombank has immaculate Kremlin connections. Immediately after graduating, Kirill Shamalov – later to be Putin’s son-in-law – got a job there as legal adviser. His older brother, Yuri, is deputy manager. The president’s other son-in-law – the Dutch businessman Jorrit Joost Faassen, married to Roldugin’s goddaughter Masha – is said to be a former employee.

According to one Swiss banking source, Gazprombank is known for its high “risk appetite”.

But even secretive Swiss banks are obliged to clean up their act these days, following scandals and pressure from US authorities. Boxes have to be ticked.

Checks are even tougher if the customer is deemed to be a “politically exposed person” (PEP). Gazprombank’s own brochure defines a PEP as a head of state, high-ranking person, or “someone close to the above”. One question on the application form for Roldugin’s new account asked: “Is the beneficial owner a PEP or VIP?” Another: “Does he have any relations to PEPs or VIPs?” In both cases, the word “no” had been typed as an answer, a violation of Swiss law.

Not everything in the paperwork for Roldugin’s account was untrue. By 2003, with his friend in the Kremlin, Roldugin was tipped as a possible future culture minister. This did not happen, but instead Roldugin asked Putin to endow a new House of Music in St Petersburg. The president agreed. A 19th-century royal palace was made available and refurbished at a cost of about £15m. In 2009, Roldugin gave Putin and Dmitry Medvedev, Russia’s temporary president, a tour. The bank forms describe Roldugin as the house’s artistic director and the recipient of state medals – People’s Artist of Russia (2005), and Laureate of the Order of Honour (2011).

They also list him as living on Nalichnaya Street, St Petersburg. In Russian, nalichnye means cash. Given what we now know, Roldugin’s address looks ironic. His passport was included. Its photo reveals a grand figure, unsmiling, with dark eyebrows and swept-back hair.

These documents were sent on to Panama and included assurances that only one of Roldugin’s offshore entities, International Media Overseas – in whose name the bank account was to be opened – had lots of money: assets of almost £19m and annual dividends of £6.5m.

Yet a few weeks later Roldugin told a New York Times reporter that he “didn’t have millions”. This may have been modesty. Or it may be that he is unaware of what is being done in his name. It was certainly untrue. The documents suggest, however, Roldugin may have been playing a passive role – he did not even have personal control of the account.

It was another shadowy figure from St Petersburg, Oleg Gordin, who was to be given sole signing rights. He was described as having a background in “law enforcement”.

As soon as the first tranche of cash, more than £3m, arrived in the new Swiss account, it was moved back onshore, as a loan at a generous 3% to an opaque entity with a St Petersburg bank account, called Forstis Overseas SA.

Many other secret deals are revealed in the Panama Papers. There seemed to be no end of ways to make money. In 2010, for example, Bank Rossiya’s BVI entity Sunbarn received a total of $30m for supposedly giving “advice” about “investing and trading” in Russia.

Sunbarn also got $231m in loans from companies linked to Arkady Rotenburg, Putin’s childhood friend. Shortly before the loans were made, Rotenburg’s companies received a lucrative state contract to work on the $40bn South Stream gas project linking Russia and Europe. Rotenburg declined to comment.

Another technique involves fictitious backdated share deals. Shares in Russian state companies such as Gazprom, Rosneft and Lukoil are “sold” one day and “bought back” the next, at a large profit for the Bank Rossiya circle. Again, state banks are involved – in this case a subsidiary of Sberbank, Nikitas Brokerage. Sberbank is majority state-owned.

One former Gazprom senior manager confirmed that backdated share trading had been taking place for a long time – not just for Roldugin but for many Kremlin officials.

He said that first a figure would be decided, then share trades would be transacted on paper to show “profits” that corresponded with the figure already agreed.

The Panama Papers also show bank “giveaways” – with shares transferred offshore to Sunbarn in 2009 without payment. A year later they were resold, for $25m. Another technique involves what are called cancelled agreement fines. In one example from July 2010, Sandalwood agreed to buy shares through Starcourt Worldwide Ltd, an offshore company based in Belize. Starcourt failed to “sell” the shares. It then paid Sandalwood nearly $800,000 in “compensation”.

Some deals are eye-popping. In 2011 International Media Overseas bought the rights to a $200m loan for $1. Interest payments alone were worth $8m a year to Roldugin’s company. “There can’t be a commercial basis for transferring $200m and the rights to $8m a year for a dollar,” Andrew Mitchell QC, a leading authority on money-laundering, said.

The loan was originally made to the National Media Group – a subsidiary of Bank Rossiya. The group controls a huge chunk of the Russian media industry, including Channel One, a key outlet for pro-Kremlin propaganda.

Further loans made to media production and TV companies were reassigned to Sandalwood. Sandalwood paid $1 for the rights to a $3m loan.

One banker in Moscow explained: “These are clear signs. The money needs to get from point A to point B. You have to pretend it’s for something else. So you create schematics, a false reason, for the transfer of funds. It looks like a loan. It isn’t one.”

It is not illegal to have money offshore. However, Mark Pieth, president of the Basel Institute on Governance, described these transactions as highly suspicious. He said: “They should raise every red flag possible for a bank. Especially if there are Russian parties involved and even more so if one of them is a close friend of President Putin.”

All these manoeuvres documented in the Panama Papers had the same outcome: the friends of Putin accumulated large stores of secret cash offshore. But it has taken a massive data leak to prove for the first time what has been suspected for so long.

Asked how much cash Russia’s president had after 16 years in power as president and prime minister, Adam Szubin, the US Treasury’s acting under-secretary, said he had seen various estimates. He told the Guardian: “It’s something he [Putin] is keeping intentionally very obscure.”

Less obscure is that many of the sons and daughters of the Ozero group are now tycoons as well, the files suggest, with their own offshore portfolios. They even marry each other. After 16 years in power, Putin has transformed the state into a “friendocracy”, run like a medieval court, and with his friends and KGB neighbours in the role of feudal barons.

Facebook Twitter Pinterest Vladimir Putin gives a speech at the Kamaz vehicle plant in February. Photograph: Alexander Zemlianichenko/AFP/Getty Images

And what of Roldugin, Putin’s old friend? Confronted with a list of his offshore structures, Roldugin seemed to know remarkably little about the operations being carried out in his name. He told reporters from the Organised Crime and Corruption Reporting project: “I understand that these are very important questions. Are you doing business, or not? What is the source of the money? Whose money is it? I do understand it. These are delicate issues.”

Roldugin declined to answer further written questions. It seems he still enjoys the boss’s trust. Back in 2013, Putin asked him for a personal favour: would he mind playing a private concert? The cellist travelled to Novo-Ogaryovo, the president’s dacha, set amid fragrant pine forests west of Moscow. Roldugin took three young musicians with him and they played Mozart, Weber and Tchaikovsky.

Putin liked what he heard. He invited Roldugin to come back the next day. Roldugin said he repeated the recital for a small group of Putin’s friends. These were “of course, very famous, very smart people”, Roldugin told the New York Times, and “all under sanctions”. Unlike Roldugin, inconspicuous until now.

Panama Papers reporting team: Juliette Garside, Luke Harding, Holly Watt, David Pegg, Helena Bengtsson, Simon Bowers, Owen Gibson and Nick Hopkins