Kremlin house: Ukrainian empire of top Putin ally

Something is rotten in the heart of Ukraine’s capital, festering in one of the city’s most beautiful, up-market hotels. A secretly kept crown atop a Russian-owned, Ukrainian business empire that appears to belong to one of President Vladimir Putin’s most important henchmen.

Russian-owned businesses with links to the Kremlin continue to operate throughout Ukraine, despite its years of war against the country. Commercial real estate and electricity supply monopolies are siphoning profits into the obscured, offshore accounts of the Moscow elite while also posing a security threat to Ukraine.

Many such assets, including a group of 19 hotels, a pair of shopping malls and an alarming amount of regional electricity supply networks, appear to be tied up in the shadily structured holdings of the powerful Russian senator and Putin proxy, Alexander Babakov.

Babakov, also an intelligence officer according to Russian sources who spoke to the Kyiv Post, is sanctioned by the European Union, United States and the United Kingdom, who note his tight connections to the Kremlin and support for the Russian invasion of Crimea. He and his businesses are not under any Ukrainian sanctions.

Babakov’s secret hotels

Kyiv’s centrally-located Premier Palace hotel is a popular lodge and recreation retreat for weary politicians, diplomats and corporate executives who are in town on official business — few of them seem to know who owns this hotel.

Some allege that the hotel is a nest of Russian spies in the very center of Kyiv and could have some of its high-powered guests under surveillance, although this claim is difficult to verify. During the 2014 EuroMaidan Revolution, 100 activists surrounded the hotel, alleging that gangs of so-called “titushki” and Russian agents were using it as a base of operations.

In a brief telephone conversation with the Kyiv Post, a senior spokesperson for the Premier Palace denied any knowledge of Babakov before declining to answer any further questions about who owned the hotel. A subsequent email response to the Kyiv Post also denied that Babakov is connected to the company in any way. Alexander Babakov could not be reached for comment.

But finding connections between Babakov, an alleged Russian intelligence officer, and the Premier Palace hotel chain, as well as his other alleged holdings in Ukraine, was not too difficult.

Documents leaked during the so-called Panama Papers scandal in 2016 indicate that Babakov’s company in the British Virgin Islands, AED International, has been managed since 2010 by two Latvian nationals: Villis Dambinis and Valts Vigants. Neither could be reached for comment and both appear to be mid-level businessmen that act on behalf of Babakov. At the time, Babakov admitted to reporters that AED International was registered to himself, but said it was managed by his partners.

Both Dambinis and Vigants appear again and again throughout Ukrainian state registries and company records seen by the Kyiv Post. They are named as the beneficiary owners of the energy company VS Energy International Ukraine. Dambinis is also the official, on-paper owner of the Premier Palace, along with other individuals whose names can be linked to Babakov.

On its website, VS Energy says it is located on 4 A Hospitalna Street in Kyiv. But state records show the firm is officially registered to an address on the corner of Pushkinska Street and Tarasa Shevchenka Boulevard — the exact location of the Premier Palace.

The companies Premier Hotel Rus — also a hotel in Kyiv — and East European Hotel, are also registered to 4 A Hospitalna Street and have Villis Dambinis as the named, beneficiary owner.

“It’s quite simple,” said Ilya Ponomarev, a former Russian member of parliament who lives a life of exile in Ukraine after opposing Russia’s illegal annexation of Ukrainian Crimea.

“He owns the Premier Palace… It’s controlled by Babakov and other shareholders. I have heard they are trying to sell it, but nobody wants to do a deal directly with him… because he is the main political actor on behalf of (advisor to Russian President Vladimir Putin) Vladislav Surkov.”

Babakov and his associates are allegedly in the process of using obscure holdings and shady loans to arrange the sale of the hotel chain, where a new owner would take over the shares in holding companies, according to Ponomarev.

At the center of the spider’s web of holding companies and assets is the Cyprus-registered company Pumori Enterprises Investments, which, while seeming to have considerable interests throughout the whole of Russia, appears to also tie together Babakov’s interests in Ukraine.

Ultimately, it becomes clear that Babakov very likely owns — with his partners or through his proxies — not only the Premier Palace, Premier Rus and Premier Lybid in Kyiv, but a string of 19 hotels throughout Ukraine, including the Oreanda in Yalta (Crimea), the Dnister in western Lviv, the Cosmopolite, Premier Palace and Aurora in eastern Kharkiv.

Companies connected to Babakov through VS Energy also, ultimately, are alleged to own the underground shopping mall in Kyiv — Metrograd — and a 50 percent stake in Metropolis, another Kyiv shopping center, according to Ukrainian media.

Putin proxy, FSB agent

That Babakov seems to own a chain of hotels in Ukraine might not be a problem, were it not for his other, alleged roles. Those with knowledge of the man say that Babakov is one of Putin’s most important foot soldiers and most probably a highly-active, state intelligence operative.

“For me, it’s obvious that Babakov was an FSB officer executing tasks given by the Kremlin,” said Igor Eidman, the cousin of murdered Russian politician and former Deputy Prime Minister Boris Nemtsov. Eidman is also a distinguished sociologist and one of the world’s most published authorities on the social and political phenomenon of “Putinism.”

“Around 2008… I visited his office in the center of Moscow, next to the Lenin library. It looked like a feudal fortress and was crowded with bodyguards — very much FSB-style,” added Eidman, who now lives in exile in Germany.

According to Ponomarev, who says Babakov is close to the Putin adviser Surkov, it’s more likely that Babakov is associated not with the FSB, but with the GRU, Russia’s Main Intelligence Directorate. Either way, it is strongly alleged that Babakov is a Russian intelligence officer or asset.

Anastasia Kirilenko, a Paris-based, Russian investigative journalist with The Insider, says that Russian oligarchs like Babakov use their resources and influence abroad to subvert countries, and Ukraine is a case in point.

“In France, we have an oligarch with criminal connections whose business is linked to major French enterprises — but the French call him a friend… like shady Babakov in Ukraine, he’s acting beautifully in the shadows, behind the scenes.”

“Babakov’s position… and role is pretty simple,” said Ponomarev. “He is loyal to the Kremlin and to Kremlin objectives, and he has a lot of economic interests in Ukraine… so he clearly wants some of his old friends like (former Ukrainian President Viktor) Yanukovych back in power.”

Now an official presidential envoy and senator, Babakov is officially tasked with defending Russian-linked interests and organizations abroad. In France, he seems to have been highly active.

According to French newspaper investigations, the well-connected Babakov played a significant role in securing a 9.4-million-euro loan for the French National Front, the far-right, Kremlin-friendly political party in France headed by Marine Le Pen.

The lender, First Czech-Russian Bank, is said to be ultimately owned by Putin ally Gennady Timchenko and is widely believed to have strong ties to Russian intelligence. Babakov is also said to have helped arrange meetings between Le Pen and Putin as she eyed the French presidency.

As for the 9.4 million euro loan itself: that was arranged by the alleged Babakov employee or proxy Vilis Dambinis — the on-paper owner of Premier Palace in Ukraine — according to an exposé published in French and Latvian newspapers that named him.

“Without the pressure of public opinion, every oligarch can do what he wants — in Ukraine or in Europe,” said Kirilenko.

Ties to Yanukovych

To understand Babakov’s shady activities and extensive business empire in Ukraine, one has to understand his close connection to ousted Ukrainian President Yanukovych.

According to Ponomarev, who was a Russian member of parliament between 2011 and 2016 and personally watched Babakov’s meteoric rise within the Moscow hierarchy, Yanukovych was sponsored and supported by Babakov. The Kremlin-backed Yanukovych fled to Russia in 2014 after Ukraine’s EuroMaidan Revolution forced him from power, but Babakov’s influence and money in Kyiv remain.

And if Babakov was already rich, it seems likely that Yanukovych made him much richer.

He was, on paper, throughout his 13-year tenure as a Russian member of parliament, one of the country’s poorest lawmakers, declaring annual income no higher than about $60,000. That changed when he took a seat in the country’s unelected upper house, becoming a powerful senator in the Federation Council. Only then, his true status as a wealthy oligarch was revealed.

His more recent declarations, from 2017, show sudden, annual incomes of about $5 million. His assets are estimated by investigative journalists at well over $350 million in Ukraine alone. Focus magazine, a Russian-language news weekly in Ukraine, reports that Babakov is regularly ranked somewhere in the middle of Ukraine’s richest 100 people. His true assets in Russia are unknown.

Much of Babakov’s wealth seems to be concealed in offshore company holdings, according to the Organized Crime and Corruption Reporting Project, or OCCRP, and invested into properties in France (he owns a castle with adjoined servant’s quarters, situated on a ten-hectare estate just outside Versailles) and England (a luxury penthouse in up-market Knightsbridge, London).

Much of this wealth was allegedly acquired through mafia-style organized crime.

“He is a mobster, who gained much of his wealth dealing with dirty money generated by the ‘free-market’ in Moscow,” said Ponomarev, who added that the lawmaker, who he likened to a mafia boss, became well-acquainted with Putin and his top adviser and fixer Surkov around 2003, through the oligarch and mutual friend Roman Abramovich.

Incidentally, when Roman Abramovich’s English football club Chelsea FC has been in Kyiv to play, they have stayed at the allegedly Babakov-owned Premier Palace hotel.

The process of how Babakov quickly acquired his lucrative assets in Ukraine, is tied to his close, professional relationship and support for Yanukovych. Around 2003, the Kremlin was looking to consolidate and strengthen its political hold over Ukraine and looked to Viktor Yanukovych to help accomplish this. To support him, they sent Babakov into battle.

“Babakov has extensive connections to Yanukovych,” said Ponomarev.

“It is very likely he was a sponsor of Yanukovych,” added Eidman.

“These connections to Yanukovych could be seen everywhere,” said Ponomarev. “And for his sponsorship and support of Yanukovych in 2004 (the Ukrainian presidential election) Babakov was rewarded with ownership of energy companies in Ukraine.”

Danger: Electricity

Babakov doesn’t only own hotels — and that’s a problem. If Putin decided to escalate his war against Ukraine, his ally Babakov could, theoretically, simply switch off the power.

Despite U. S., UK and EU warnings that Babakov’s properties should be subject to asset freezes or seizures (he is sanctioned by all), VS Energy in Ukraine still has control of considerable, strategically important holdings.

State registries seen by the Kyiv Post show that VS Energy owns sizeable stakes in eleven oblenergos, or regional electricity supply networks. On the VS Energy website, the company boasts that it owns seven outright.

More broadly, most electricity supply companies in Ukraine, despite the ongoing war, are still owned by Russian oligarchs — 21 out of 27. The others are owned by controversial Ukrainian oligarchs like Kolomoisky, Hryhoriy Surkis and Akhmetov.

Records show that VS Energy has a majority stake in seven oblenergos and a minority holding in four others.

In its largest stakes, the Babakov-linked company appears to own 89.1 percent of the electricity supplier for Kyiv region, 90 percent for Kherson and 93.4 percent for Kropyvnytskyi (formerly known as Kirovograd). Even in far-western Zakarpattya, bordering Hungary, he owns 50 percent of the electricity supply.

“It is unfathomable that eleven of Ukraine’s 24 regional electric distributors are to a large extent owned by a Russian group led by the Russian nationalist Aleksander Babakov, who is sanctioned by all relevant countries for his role in Russia’s occupation and annexation of Crimea,” wrote Anders Åslund, a senior fellow at the Atlantic Council.

“Here we worry about Russian cyberattacks on the Ukrainian grid, when a large part of it is owned, controlled, and operated by the enemy,” Åslund writes.

Ilya Ponomarev knows Babakov, and indicates he should be seen as a clear and present danger to Ukraine — for all intents and purposes Ponomarev’s adopted home. According to his observations, Babakov is the right hand and main political actor of the expansionist, neo-colonial ideologist and Putin strategist, Vladislav Surkov, a so-called “grey cardinal” of Moscow.

For the most part, Igor Eidman seems to agree, but Babakov’s threat could still be understated, Eidman says.

“Babakov is more important than Surkov, who is only a hired manager. Babakov is a rich oligarch who existed even before Putin. Now he’s a devoted soldier for the president, obeying only him — executing delicate tasks given to him,” Eidman said.

“People like Babakov, known for their ties with Putin and Russian intelligence, officially own businesses in Ukraine — where is the resistance?”

Premier Palace & assassinations

For Denis Voronenkov, an outspoken former member of Russian parliament, a meeting at the Premier Palace hotel exactly two years ago was to be his last.

The former Russian lawmaker who became a fierce critic of Russian President Vladimir Putin, was murdered, in broad daylight, outside the hotel, which has strongly denied that the killing or killer has anything to do with the hotel.

He was understood to be under surveillance by the Kremlin or its proxies in Kyiv. It had been threatened that he would pay dearly for his betrayal of Moscow. The 45-year-old former lawmaker was walking to meet his friend Ilya Ponomarev when he was shot dead on March 23, 2017.

Voronenkov’s killing is not the only assassination with a connection to the Premier Palace. In May 2007, its alleged owner at the time, a shady Russian businessman named Maksim Kurochkin, was also shot dead, by a sniper, as police escorted him from the Kyiv courthouse where he was on trial for extortion. The shooting took place before Babakov or his proxies allegedly began a Premier Palace takeover.

Ponomarev says he would never consider staying at the hotel, and it wasn’t his choice as a meeting place. “Lots of Russians are staying there… and there’s no doubt that the SBU (Ukrainian State Security Service) have it under surveillance. It should be supervised by the SBU,” Ponomarev said.

“I would never stay there because I’m not sure that the rooms are not under surveillance… Audio bugs and video cameras — it’s common practice that hotel owners in Russia would record, and many times I have heard from my friends about this happening. This happens a lot.”

But Ponomarev says he doesn’t think the hotel, its management or guests had any connection to the killing of his friend. “I think it was a coincidence that it was this hotel,” he said.

Action on Russian oligarchs

Property and assets that are allegedly owned by Russian oligarchs with ties to the Kremlin, FSB or the GRU could threaten state security, but seizing them is not easy and requires a lot of political will.

Many argue that assets gifted to alleged Russian agents by the Yanukovych regime should be investigated more thoroughly and possibly seized, on the basis of national security concerns or anti-corruption actions. But it seems unlikely to happen to a significant degree.

Oleksii Boiko, a legal expert and lawyer with the Anti-Corruption Action Center, says that such individuals could be deserving of having their assets seized, but the authorities should proceed with caution.

“Private property must be sacred,” he said. “We can’t just seize property like a witch hunt… potential investors could be put off, if they fear they could just have their assets and investments seized by the state.”

But Boiko also says that agreements entered into with foreign investors, especially when it comes to vital state assets, should be kept under constant review and taken back if necessary.

“Ukrainian elites are perfectly aware of who owns what. But they are extremely reluctant to fix the problem because they could open Pandora’s Box and see retaliation… against their investments in Russia,” said exiled Russian lawmaker Ilya Ponomarev.

Editor’s note: This story was produced with support from the Organized Crime and Corruption Reporting Project, a Kyiv Post partner.