Where There's Smoke... There's Wilbur

It's like dragging up a bucket of seawater and looking at all the tiny little critters swimming around inside. You're only getting the smallest of looks, a bare peep, into what's in the sea. A microcosm if you will.

The bucket of seawater in this case is being called the Paradise Papers, a massive media investigation into just two "offshore service providers and 19 tax haven's company registries." There are a bunch of critters, some of them tax cheats, who are being identified including Justin Trudeau's confidante and chief fundraiser, Stephen Bronfman.  Lorne has the rundown on Bronfman, here.

There's another, perhaps more interesting name, being splashed onto the pages of The Guardian, Wilbur Ross, Trump's commerce secretary, and it touches on the secretary's active business dealings with Vlad Putin's son-in-law, Kirill Shamalov, the husband of Putin’s daughter Katerina Tikhonova.

Leaked documents and public filings show Ross holds a stake in a shipping company, Navigator, through a chain of offshore investments. Navigator operates a lucrative partnership with Sibur, a Russian gas company part-owned by Kirill Shamalov.

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Analysts said the arrangement was troubling. Daniel Fried, an assistant secretary of state for European and Eurasian affairs under George W Bush, said Ross’s connection to “cronies of Putin” threatened to undermine US sanctions.

“I don’t understand why anybody would decide to maintain this kind of relationship going into a senior government position,” he said. “What is he thinking?”

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The disclosures come as inquiries intensify into Russian interference with the 2016 US election. Congress and Robert Mueller, the special counsel, are investigating possible collusion between Trump’s presidential campaign and Moscow. Ross has dismissed claims of collusion as “rumour and innuendo”.

The involvement of Ross and Shamalov in the shipping venture dates back to 2011. That year, Ross’s investment firm, WL Ross, began buying into Navigator with an investment that gave him two seats on the company’s board. Meanwhile, in Moscow, Shamalov began investing in Sibur, which was formerly state owned.

By January 2012, having built up his holding in the Russian company, Shamalov, then 29, was made its deputy chairman. That summer, WL Ross took control of Navigator by buying a further $110m stake from the collapsed Lehman Brothers bank.

Shamalov is the son of Nikolai Shamalov, one of Putin’s oldest friends from St Petersburg, where Putin worked in the mayor’s office. He married Katerina in a secret ceremony in February 2013.

Later that year, two ships from Ross’s company began transporting liquefied gas out of Russia for Putin’s son-in-law’s firm under a decade-long contract initially worth $226m.

Of greater interest is Wilbur's relationship to the Kremlin through his ownership interest in the major Cypriot bank, the Bank of Cyprus, where he served as vice-chairman. Cyprus is considered the first stop in the laundering of dirty money from Russia. It's alleged Paul Manafort laundered tens of millions of dollars in rubles through Cyprus before transiting through Deutsche Bank en route to a new life as real estate and other investments in the US.

Back in March, The Guardian took a look at Wilbur's dealings with Moscow while at the Bank of Cyprus. 

In 2015, while [Ross] served as vice-chairman of the Bank of Cyprus, the bank’s Russia-based businesses were sold to a Russian banker and consultant, Artem Avetisyan, who had ties to both the Russian president and Russia’s largest bank, Sberbank. At the time, Sberbank was under US and EU sanctions following Russia’s annexation of Crimea. Avetisyan had earlier been selected by Putin to head a new business branch of the Russian president’s strategic initiative agency, which was tasked with improving business and government ties.

Avetisyan’s business partner, Oleg Gref, is the son of Herman Gref, Sberbank’s chief executive officer, and their consultancy has served as a “partner” to Sberbank, according to their website. Ross had described the Russian businesses – including 120 bank branches in Russia – as being worth “hundreds of millions of euros” in 2014 but they were sold with other assets to Avetisyan for €7m (£6m).

Ross has not been accused of wrongdoing and there is no indication the Russian deal violated US or EU sanctions. Ross resigned from the Bank of Cyprus board after he was confirmed as commerce secretary last month.

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In 2014, the Bank of Cyprus was still considered to be in a precarious state following a dramatic €10bn rescue of Cyprus’s banking sector by the ECB and the IMF. Under the terms of the deal, many of the bank’s wealthy Russian deposit holders lost their cash and became shareholders in the bank.

Ross, who had made billions of dollars years earlier by betting on bankrupt steel mills, was known for taking risky bets. But his decision to inject €400m into the bank with other investors encompassed a different kind of risk. It put him at the centre of the biggest financial institution in a country that was widely considered to be a tax haven for Russian oligarchs, even as the US and EU were imposing sanctions on Russia. In 2014, the year he made his investment, the US State Department considered Cyprus an area of “primary concern” for money laundering (pdf), according to its official assessment.

Meanwhile, the Paradise Papers scandal seems to have Ross working overtime to distance himself from the Russians and not very convincingly.

Rockas, Ross’s press secretary, tried to distance Ross from the Sibur deal with a series of statements that were contradicted by other sources. He said the Navigator-Sibur deal was signed in February 2012, before Ross joined the Navigator board. But Sibur’s annual report for that year said the deal was signed in March.

Rockas said Ross did not join Navigator’s board until 31 March 2012. But a press release filed to the Securities and Exchange Commission on 2 March that year said Ross was by then already on the board. In ethics forms filed this year, Ross estimated that his start date had been January 2012.

Rockas said: “No funds managed by WL Ross & Co ever owned a majority of Navigator shares.” But a press release issued by the company in August 2012 was titled “WL Ross Agrees To Acquire Majority Stake In Navigator”.

Navigator vessels also carried out extensive business with the Venezuelan state oil company PDVSA, records show, at a time when Venezuela’s government was cracking down on opposition. Trump imposed sanctions on PDVSA in August.

Rockas said Ross “has been generally supportive of the administration’s sanctions of Russian and Venezuelan entities.” He said Ross had never met Shamalov, Timchenko or Mikhelson.

It raises the question of why so many Trump administration principals have such close financial ties to Russian companies, Russian oligarchs, even Putin himself. Both Paul Manafort and Wilbur Ross were operating in Cyprus during the same period, Cyprus the first link in the money laundering trail leading out of Russia. Ross who was the vice-chairman of the Bank of Cyprus resigning only once he was confirmed to his appointment as Trump's commerce secretary.

What I want to know now is what does Robert Mueller know.