His comments, his frankest on the subject yet, came as the World Bank cut its growth forecast for Russia next year by more than half because of the country’s acute dependence on oil prices. The bank said it expects the ruble to keep softening as it tracks oil prices lower.

“It’s not a question of if; it’s a question of how it will happen,” Zeljko Bogetic, the World Bank’s chief economist in Russia, said of the ruble’s decline. Russian officials have ruled out a sharp devaluation, but have increasingly hinted that the currency could be allowed to weaken slowly.

Earlier this year, government officials were touting a strong ruble as a symbol of Russia’s economic resurgence. But the currency has fallen by 5% against a dollar/euro basket since August, and Russia’s central bank allowed it to weaken by 1% last week, triggering speculation that it will be allowed to slowly shed value.

The global financial crisis hit Russia later than it hit the West, gaining real momentum only when global oil prices crumbled. Since May, the country’s two leading stock indexes have plunged by around 70%. Some of the country’s wealthiest individuals have lost billions of dollars of wealth on paper.

The construction, real-estate, and financial-services sectors were the first to suffer, but until now the government has insisted that large parts of the real economy were insulated. Mr. Medvedev said that is no longer the case.

“Today it is clear that the crisis is spreading, unfortunately, from the financial sector into sectors of the real economy,” he told reporters in the town of Izhevsk, an arms-manufacturing center. “Every industry is affected in its own way. It is impossible to say that one among them is sitting pretty.”

Mr. Medvedev said the government is willing to keep using its reserves, the third-largest in the world, to boost liquidity and bail out troubled industries. He said the Kremlin has yet to decide on a final figure for its bailout package. So far, it has pledged more than $200 billion in loans, tax cuts, and other measures.

“We understand perfectly well that the scale of the problem is such that it is possible further measures will need to be undertaken,” Russian news agencies cited Mr. Medvedev as saying.

The central bank’s reserves stood at $475.4 billion on Nov. 7 but have shed $122.1 billion since their peak in early August as the government has spent heavily to support the ruble.

At the same time, capital flight has been increasing as investors have continued to pull back, a retreat that began last summer. Central-bank statistics show $83 billion in net outflows in the past three months while October saw a record monthly outflow of $50 billion.

The World Bank praised the Kremlin for its swift and thorough response to the crisis even as it said more efforts are needed. It forecast that falling oil prices would more than halve Russia’s current-account surplus to around $40 billion in 2009 from $100 billion this year.

But it said Russia is much better placed to weather the crisis than many emerging economies because of its carefully husbanded oil and gas wealth.

Ukraine, for example, had to appeal to the International Monetary Fund for a $16.4 billion aid package to help honor foreign payments after plunging metals prices deepened its current-account deficit.

The World Bank said it expects Russia’s economy to grow 6% in gross domestic product terms this year and 3% in 2009, down from its previous forecasts of 6.8% and 6.5% respectively. Its estimates are based on an annual average crude-oil price of $101.5 a barrel in 2008 and $74.5 a barrel in 2009. On Tuesday, oil prices were hovering at just over $50 a barrel.

http://online.wsj.com/

Underlining the extent to which the global financial and economic crisis is hurting Russia’s economy, its biggest steelmaker Severstal cut its 2008 earnings forecast and said it would defer its $8 billion 2009-2011 investment programme because market conditions have worsened.

President Dmitry Medvedev said the country would need to spend more of its wealth, amassed when global demand for its commodity exports was booming, on helping the economy.

‘About 5 trillion roubles ($182.3 billion) will be spent on stabilisation measures. But this is not the final number. We understand that the scale of the problem is such that additional decisions will be needed,’ Medvedev said in a speech.

For the first time Russia’s top leadership acknowledged the crisis that it has previously described as global and financial is spreading fast into the heart of the Russian economy.

‘Today it is clear that the crisis is spreading, unfortunately, from the financial sector into the sectors of the real economy… Every industry is affected in its own way,’ Medvedev told reporters.

Russia’s reserves have already shrunk by a sixth in the last three months to $475 billion, largely due to official efforts to defend the rouble through three months of capital flight.

The World Bank praised Moscow’s response to the global crisis but halved its forecast for 2009 Russian economic growth to 3 percent due in part to the collapse of world oil prices.

‘The weakness of the oil market, the capital outflows, the weakening current account situation — obviously those forces are going to continue in the short term,’ Zeljko Bogetic, the bank’s lead economist for Russia, told journalists.

‘It’s not a question of if (the rouble weakens), it’s more a question of how it will be managed in the short term given the fundamental factors and also the need to maintain … reserves.’

HARD DATA

Tuesday’s data, together with releases on unemployment, producer prices and capital investment later this week, will enable economic planners to provide advice on the scale of the rouble’s depreciation and the bailout package.

‘This figure (industrial output) is the first hard data point on the impact on the real economy of the freezing of the financial system last month,’ said Rory MacFarquhar, managing director at Goldman Sachs (nyse: GS - news - people ) in Moscow.

Russia’s MICEX index recovered after a trading suspension prompted by falling prices and ended the day up 3.3 percent on Tuesday, tracking Wall Street gains and the oil price recovery. The index is still down 70 percent this year, hit by capital flight and a bleak outlook for Russian exports.

Earlier this month, Raspadskaya, Russia’s second-largest producer of coal for the steel industry, said fourth-quarter 2008 sales would reach only one-third of planned volumes after steel makers slashed orders.

Depositary receipts of construction firm PIK Group plummeted by 57 percent this week on debt worries. The World Bank estimates total corporate debt due in the fourth quarter 2008 at up to $65 billion including margin calls.

Prices for Urals, the country’s main export blend of oil, stood at $47 per barrel, the level last seen at the start of 2007. Russia’s energy minister Sergei Shmatko said companies could cut output and exports should they become ‘unprofitable’.

The rouble remained stable at 30.68 against the central bank’s policy basket made of 0.55 dollars and 0.45 euros after last week’s 1 percent devaluation.

Both Medvedev and Prime Minister Vladimir Putin, the country’s most influential politician, have engaged in a verbal attack against currency speculators, but more signs emerged that firms and ordinary Russians are no longer convinced the authorities can avoid more substantial devaluation.

Electricity producer OGK-3 said it had converted more than $560 million worth of roubles into dollars to hedge against a devaluation of the rouble and now had so much cash that the banks were asking the company for loans.

‘We are not speculators. We are not trying to get an extra profit, but are simply counting on avoiding the devaluation of the assets we have,’ the company’s financial director said.

http://www.forbes.com

“I believe this regime will not see 2012. It is probable it will not see out 2010. Things are unfolding too fast,” Garry Kasparov, a former world chess champion who has led a crusade against Kremlin policies, told Reuters in an interview.

“This structure will collapse.”

Shortly after Kasparov spoke, Medvedev said the global financial crisis had spread to Russia’s real economy and “every industry is affected in its own way.” He said the many sectors that needed state aid would receive it.

Kasparov, who has just co-founded a new opposition movement called Solidarity, predicted big street protests when the crisis hits jobs, particularly those of military officers whom the government plans to sack as part of an army shake-up.

“In America and the U.K., governments are trying to solve the problems of the poor at the expense of the rich,” Kasparov said in the interview in his Soviet-era Moscow flat.

“In Russia it is the other way round. So in Russia, the oligarchs are being saved … and the businesses of Putin’s friends are being saved, at the expense of Russian taxpayers.”

Putin’s spokesman, Dmitry Peskov, declined comment but noted that Kasparov had never won elected office and “unfortunately he has been unable to take any place at all in politics or on the margins of politics.”

Medvedev has told police to stamp out any social unrest or crime arising from the financial crisis.

He has also proposed extending the presidential term by two years and a constitutional change is being rushed through parliament which some political analysts say could help Putin return for a third term as president.

EARLY ELECTIONS?

Kasparov said he anticipated early elections as Putin “is scared by the crisis and wants to go back to the Kremlin.”

“Now … it’s about saving your skin. That’s why I believe they will soon move into a new election phase,” he said.

After eight years as president, Putin last year picked Medvedev as his preferred successor. Medvedev was elected for a four-year term as president in March.

A collapse in the prices of Russia’s main exports, oil and metals, has put the rouble under pressure since then and created holes in state budgets. A five-day war with Georgia in August scared off foreign investors and Russian banks are not passing on government rescue cash to borrowers.

Official figures put unemployment at 5.3 percent but economists say it will rise as the effect of lay-offs spread.

“Even in the center of Moscow you already have a lot of troubling signs of the credit crunch,” Kasparov said, citing slowing construction activity and half-empty restaurants.

“… what we are hearing from rural areas, from outside Moscow, the news is even more troubling.”

State-controlled television, the main source of news for most Russians, has focused on the impact of the financial crisis on the United States, which Medvedev blames for the turmoil.

Kasparov criticized the Kremlin’s failure to invest the vast wealth generated by a 10-year economic boom in Russia.

Instead, he said, money was skimmed off by corrupt officials and spent overseas. Fights would break out among the ruling elite for scarce resources as state coffers emptied, he said.

http://www.reuters.com/

According to Interfax news agency, the report issued September 2007 says bribery represents 1.7 percent of crimes committed nation wide.

The source also mentions an increasing level of disguise and mask of white collar corruption crimes that reach the judiciary and state security.

Illegal income stand for one third the national budget while some businessmen allocated $33 billion to bribe public servants, says INDEM Fund.

At the end of the first quarter of 2008 the Attorney General’s Office reported over 14,000 corruption cases that represent an additional ten percent compared to similar period in 2007.

The above led President elect Dmitri Medvedev to set up a special council to fight the scourge and the Duma established a permanent commission to secure laws and anti-corruption actions.

Outgoing President Vladimir Putin admitted that corruption has been the worst problem to deal with along eight years in office.

www.plenglish.com

The committee’s chairman, Alexander Bestrykin, revealed that in the first quarter of this year, the committee opened 1,020 criminal probes into bribe-taking, compared to only 2,067 for the whole of 2006.

“Half of the cases are against regional authorities, judges, prosecutors, and even State Duma and Federation Council members,” Bestrykin was quoted by news agencies as saying.

Sixteen thousand corruption-related crimes have been reported so far this year, he said. The number of reported incidents was up 9.4 percent for the first three months of this year compared to 2007.

President Dmitry Medvedev has repeatedly pledged to take serious steps in eradicating corruption, including in his last address at the St. Petersburg International Economic Forum.

One of the measures that the Kremlin has taken to fight corruption is the setting up of an anti-corruption council. Medvedev, who will chair the council, has said that its paramount task is “to establish an independent judicial system that corresponds to the level of economic development.”

Another governmental measure is the implementation of a database of property details to help to prevent tax evasion.

There are varying views on the causes of the high level of corruption in Russia.

Several years ago the general opinion was that officials took bribes out of the need to supplement their meager state wages. During the last two years the government has significantly increased the salaries of officials at various levels.

Last month the government announced that 20 million Russians still live in poverty with a monthly income that is lower than the minimal wage, which currently stands at 4,300 rubles ($183).

Vladimir Zhirinovsky, the leader of the Liberal Democratic party once said that officials in Russia even take bribes from their wives and children.

Sixty-eight percent of leading Russian businessmen and CEOs of large companies see corruption as a major problem, according to a recent survey conducted by the Russian School of Economics and Vedomosti newspaper.

The survey, supported by the Ministry of Economic Development, examines how leading businessmen see the country developing by 2020. After corruption, the main problem cited was an inefficient judicial system. The most serious danger in Russia cited by top businessmen was however stagnant demography rates and low educational standards.

No serious external threats to the country were perceived by the respondents. According to the survey, growing protectionism in developed Western countries, decreasing oil prices and global inflation do not represent a serious threat to Russia — only 17 to 24 percent of Russian businessmen expressed concern over these problems.

Some Russian businessmen believe that citizens who offer money to officials should be immune from criminal prosecution on the condition that they report the case to the police.

“The whole hierarchy of the bureaucracy needs to be changed,” said one businessman on condition of anonymity when asked about the problem of corruption.

Nevertheless, not many Russian oligarchs are as honest as Boris Berezovsky. The London-based exile once admitted that many prospered in Russia because officials sold them public assets for a fraction of their value, considering the property they were selling to be “no man’s land.”

Neil Cooper of the Russo-British Chamber of Commerce in Moscow indicated corruption and bureaucracy as two of the main concerns for investors in an interview with the Moscow News weekly, adding that, “At the moment, the positives of investing in Russia far outweigh the negatives.”

The fight against corruption is an ongoing battle in many countries around the world.

In 2007, Russia was ranked 143rd out of 179 countries on the Corruption Perceptions Index by Transparency International, a global NGO that campaigns against corruption. According to the survey, 17 percent of respondents said they had paid bribes in Russia in order to procure a service.

Some experts believe the key cause of the growth of corruption in Russia is a lack of control over the bureaucracy. Sociologist Georgy Satarov, director of the INDEM research group, said there is a lack of external control mechanisms over the government, political opposition and independent press in Russia.

The St. Petersburg Times

For 10 years Alexei Kurkov worked at a small factory in Moscow making fire-safety equipment. One morning in November 2004 he turned up to work as usual. The doors were locked.

Overnight, his company, Specialist Electrical Equipment, had been taken over. Its new owner was a mysterious firm registered in the British Virgin Islands. The owner promptly sacked all staff. The company’s valuable property in Moscow was sold off.

“It was as if we had never existed,” Kurkov said. “We took the case to court. But the judge said there was no proof we had worked there.

“Fictional employees had taken our place. We had been replaced by Dead Souls,” he said - referring to the Nikolai Gogol novel where dead serfs are included in landowners’ accounts.

Kurkov and his co-workers had fallen victim to raiders - criminal gangs who with the assistance of corrupt bureaucrats, policemen and judges have seized assets worth billions of pounds.

In the west, corporate raiders legally take over weak or struggling firms. In Russia, raiders target healthy or successful businesses - bankrupting them artificially and transferring ownership to dubious offshore shell companies.

Last week even BP’s chairman Peter Sutherland used the word raiding. BP’s Russian partners were trying to seize control of TNK-BP, their troubled joint venture, using dubious 1990s “corporate raiding” practices, he said.

The problem is most acute in Moscow. Raiders working with the connivance of local officials have recently bankrupted Moscow’s planetarium - and are threatening two historic houses belonging to artists and sculptors.

Other acquisitions have a surreal flavour. In Kazan, raiders have attacked a firm making orthopaedic legs. And in the Siberian town of Omsk a criminal gang has tried to take over the tank factory. Victims have included river ports and nuclear science institutes.

Rule of law

Dmitry Medvedev - Russia’s president - has pledged to wipe out raiding, known by Russians as reiderstvo. Medvedev, a former St Petersburg lawyer, has made it clear he wants to end bureaucratic corruption and what he calls Russia’s “legal nihilism”. In a speech this month, he suggested that establishing the rule of law was his most urgent task as president. “Our job is to create absolutely independent modern courts,” he declared.

Questions remain about whether Medvedev can deliver judicial reform - assuming, that is, he wants to. In the Putin era, the Kremlin famously used the courts to punish its political enemies. Judges unfailingly gave the verdict the state wanted. Individuals who displeased the Kremlin found the law applied to them with pedantic vigour. Favoured defendants didn’t need to turn up. What counted wasn’t the law but the person it was applied to.

Analysts are sceptical that Medvedev can curb the Kremlin’s meddling in judicial affairs. “Russian leaders have been talking about legal reform since the time of Ivan the Terrible,” Mikhail Delyagin, the head of Moscow’s Institute for Global Problems, told the Guardian. “Putin also talked repeatedly about reform, but the results were the opposite of what he declared. Maybe Medvedev will succeed. But I doubt that Putin’s loyal apprentice would wish to correct his master’s actions.

“We shouldn’t forget that Medvedev was Putin’s main lawyer. It was Medvedev who wrote the laws ramping up pressure on the opposition and who ruled out the possibility of legal opposition activity in Russia.”

Experts estimate that there are 70,000 cases of raiding in Russia a year - most of them instigated by corrupt senior officials. The standard method is for a company to be hit by a large invented tax bill. The owner is then arrested. While the owner is in prison, raiders using forged documents and shareholder protocols sell the bankrupted company to another firm. By the time the owner emerges the business has been re-sold numerous times.

Yesterday one raider, speaking anonymously, said the profits from raiding were enormous. “It costs around $120,000-$170,000 [£60,000-£85,000] to bankrupt an average company. But you can then make $3-4m profit.”

Typically, raiders bribe officials in Russia’s equivalent of Companies’ House as well as bureaucrats in the agency for property registration and the bureau of land management, he said.

“Basically raiding is robbing. The people who do it are educated and well dressed. They drive good cars. Most importantly, they have a calm head. They already have money but want more.” Asked whether he felt guilty, he said: “I feel sorry for the victims.”

Cops as robbers

The primary target of the raiders is property. Office rental space in central Moscow costs £1,250 a square metre a year - the second most expensive in the world after the West End of London. In extreme cases, police have been known to arrest owners and release them only after they have signed over property to raiders.

According to researchers, only a handful of cases ever make it to court - a fact that suggests the widespread complicity of law-enforcement agencies and the FSB, Russia’s post-Soviet spy agency. The agency is supposed to battle economic crime.

Asked why officials did not intervene, Valeria Filimonova of Moscow’s centre for political technologies said: “They are the ones who order the raiders’ attacks.” They included senior members of the administration, she admitted.

In a recent report, the head of the centre, Igor Bunin, went further. Illegal raids had become “the main problem afflicting the country’s economy”, he said. His report lists several other recent victims of raiding: Arbat Prestige - Russia’s biggest cosmetics chain; an ammonia factory; and Moscow’s Domodedovo airport.

Kurkov’s woes did not end when his company in the south Moscow suburb of Yasenevo was taken over. The white square building surrounded by 1960s apartment blocks and children’s playgrounds now belongs to an internet firm.

Kurkov joined the company in 1995, when it employed about 2,000 people. By 2004 the workforce had shrunk to 100. Its chief accountant then seized the firm with help from a gang of professional raiders, Kurkov says. She refused to pay employees their wages and failed to return their workbooks, necessary to obtain a full pension.

Kurkov and 14 colleagues went to court. But the accountant produced documents showing he had never worked there. The judge mysteriously agreed. “I don’t want to say the judge was bribed,” Kurkov said. “But what other conclusion could I come to?”

Kurkov said that he had approached unions for help and complained to various ministries. In March, just before the presidential election, he even wrote to Medvedev. His quest for justice got nowhere. Medvedev’s office wrote back telling him to get in touch with prosecutors. But prosecutors weren’t interested, he said. “Nobody wanted to know. I believe Medvedev is doing his best. But I personify legal nihilism.”

Now 68 and retired, Kurkov survives on 5,000 roubles (£110) a month. This is despite the fact that in Soviet times he received a hero of labour medal, for his productivity.

He estimates the shadowy raiders made off with around £15m. “This kind of injustice would have been impossible in the Soviet Union,” he said. “In the Soviet Union I was somebody. Now I’m nobody.”

The Guardian

Whether or not he acts on it, Medvedev’s plans for tackling corruption are a lot more concrete than those of his predecessors. He’s setting up an inter-governmental task force to tackle corruption, and has promised to overhaul the court system to tackle so-called “telephone sentences”–the practice by which judges are told what the sentence should be through a phone call.

Perhaps that’s why a senior Russian prosecutor has felt comfortable finally putting a figure on what corruption is costing the government, even if it’s understating the scale of the problem. Vasily Piskayrov, a senior official at the Investigative Committee of the Prosecutor General’s office has said that corrupt officials siphon off close to a third of the government’s annual budget, the Interfax news agency reported on Friday. That’s almost $120 billion, using the $376 billion set aside for 2008.

A large figure maybe, but hardly surprising according to Carlo Gallo, senior Russia analyst at business risk consultancy, Control Risks. “Russia’s corruption problem is well known and it is present on such a scale that for business it’s the No. 1 concern,” he told Forbes.com, adding that the figure was probably an underestimate.

Russia ranks 143 out of 179 on the 2007 Corruption Perceptions Index of Transparency International, which ranks countries from the least to the most corrupt.

According to Transparency International’s Global Corruption Barometer 17% of respondents said they had paid bribes to get a service in Russia, and most thought that corruption was on the increase.

It’s a major problem for Russia’s attractiveness as a place to do business.

“Generally speaking, the business environment is complex and one challenge that companies are facing up to is the demand for bribes,” said Gallo. According to Gallo, corruption manifests itself in a huge number of inefficiencies for business, whether it’s the cost of paying a bribe, or the delays and obstacles than can arise from a failure to cough up the money.

Corruption is a pervasive problem in Russia, permeating through all levels of government, and even into the regulatory bodies themselves. Rather ironically a senior official at Russia’s financial watchdog Rosfinadzor was detained for taking a 13,600 euro ($21,230) bribe on Thursday, according to the state-owned Rossiiskaya Gazeta

A large part of the problem is size of the government machinery, which means that has a disproportionately large say over business and economic decisions. “The bigger the remit of a bureaucracy, the bigger the opportunities to make decisions on the basis of bribes,” according to Gallo.

The court system, nontransparent and closely linked to the executive, is another major problem, as is the clampdown on any media sources that don’t tow the government line.

Will things change now that Medvedev is in power?

It’s far from clear, says Gallo, who added that he was likely to come up against a lot of opposition from within the government.

What is clear is that it’s a problem Russia can’t really afford to ignore.

Direct foreign investment into the country fell by 42.8% to $5.6 billion in the first quarter of 2008, according to Russia’s Federal State Statistics Service, Rosstat. The IMF has warned that a major challenge for Russian growth is its business climate which ranks “poorly” in international comparisons.

Forbes.com

REUTERS/RIA Novosti/Kremlin/Sergei Subbotin/Pool Incoming Russian Prime Minister Vladimir Putin (L) listens to explanations of film director Nikita Mikhalkov at a shooting area of the movie “Burnt by the Sun” Part Two at settlement Shushary outside …

Dmitry Medvedev was sworn in as Russia’s new president this past week, in a stately event at the Kremlin that should make no one feel at ease. Medvedev, 42, is the hand-picked successor of former president (and former KGB colonel) Vladimir Putin.

Since assuming office from Boris Yeltsin at the dawn of this decade, Putin has presided over what the Financial Times quaintly calls, “a closely managed democracy.” Put another way, Putin has crushed dissent, jailed businessmen and journalists and, prior to Medvedev’s installation, altered the Russian political system such that he will retain power even as he shifts to the role of prime minister. When Putin’s domestic heavy-handedness is combined with Russia’s increasing international agitation — including forays into North American airspace — there is little reason to believe that danger died with the Soviet Union.

“The Russian Bear is back.” So said General Rick Hillier, Canadian Chief of Defence Staff, to a gathering of North American business leaders earlier this year. Hillier advised that Canada has had to increase patrols of its northern region as Russia routinely transgresses territorial boundaries, both in the air and beneath the seas. In February, Russian bombers were intercepted by U. S. fighter jets after violating Japanese airspace and buzzing an American aircraft carrier in the Pacific. Such Russian flights over the Pacific have been routine since at least 2007. In 2005, Russia and China conducted their first-ever joint military exercises, activating thousands of troops on land, air and sea, presumably for the edification of Western powers.

American leaders have diverged in their opinions of Putin’s Russia. President George W. Bush, early in his administration, famously claimed that he looked into Putin’s eyes and saw a man with a good heart. One could argue, however, that for all their long looks, Bush has taken a hard line with Putin, negotiating to expand missile defence and NATO in eastern Europe, right up until this year. Republican presidential hopeful John McCain, meanwhile, has taken a harsher public stand on Putin: “I looked into his eyes and I saw three letters– K-G-B.”

At home, Putin has shown no hesitation to imprison people who oppose or criticize him, from Yukos CEO Mikhail Khodorkovsky to chess champion Garry Kasparov, who was arrested in November, 2007, and denied access to lawyers and visitors. Arrests and crackdowns have been accompanied by a heavy dose of re-centralization. Before reverting to the role of prime minister, Putin arranged for the governors of Russia’s 85 regions to report to him personally, rather than the Kremlin. It would seem that, through Medvedev, Putin’s personal and punitive reign will go on.

It must be terrifically tempting, in such a society, to keep one’s head down to stay out of trouble. As Aleksandr Solzhenitsyn observed in his seminal chronicle of the Soviet Terror, The Gulag Archipelago: “Every man always has handy a dozen glib little reasons why he is right not to sacrifice himself.”

One of the graces of Russia’s new repression is that many of its excesses remain public, for those who care to look. Among Solzhenistyn’s laments as the Terror progressed was that, after a few well-known and public trials, the courts and tribunals became closed-door operations, while society trudged along in tragic ignorance. That is, until their turn came.

It is doubtful that Putin and Medvedev will lead Russia back down the sorry road of Soviet communism. But tyranny goes by many names and aggression advances under flags of convenience. As always, it is the duty of free people to keep a watchful eye.

National Post

There was blood on the carpet. Lots of it. The room was in disarray, but nobody had seen a fight. The villa was secluded in its own private pine wood, yards from a beautiful white beach on the coast of Latvia. The owner was gone.

Leonid Rozhetskin – a super-rich Russian-American lawyer with a taste for danger and connections in the highest places – disappeared exactly two months ago. The 41-year-old was beginning to finance movies, trying to break into Hollywood. Now he is starring – in his absence – in a real thriller, still unfolding at locations across the world.

It began on 16 March, when his holiday villa on the Gulf of Riga was found empty. His car was discovered abandoned the next day. His private jet had left Latvia without him, and has since hopped mysteriously from airport to airport for no apparent reason.

Exactly two months later, FBI agents are trying to unravel fiction from fact as they follow the hugely complicated trail of businesses, associates and lovers he left behind. Where did Rozhetskin go? Did he choose to vanish? Was he murdered? If so, who did it? Was it a crime of passion? Did the Russian mafia take revenge for a deal? Has another critic of Putin’s regime been silenced?

That is what his partner is said to fear. She is under close protection with their son in London, where Rozhetskin co-owns the business paper City AM. An investigation by The Independent on Sunday has found no evidence to support her fears. But we have uncovered new details of his life that show Leonid Rozhetskin to be a man of many passions, thrilled by taking risks. No stranger to cocaine or rent boys, he was so deeply mired in the cut-throat world of Moscow business that he had previously been forced to flee Russia. The IoS has also learned of FBI evidence hinting at how he may have been killed and the body disposed of.

Just before Rozhetskin disappeared he was with his partner, the model Natalya Belova, in London. He had bought an apartment there for £3m and was telling people he planned to stay for good. But that weekend he flew to Latvia, apparently spontaneously, after a phone call that a source close to Rozhetskin said he described as “important”.

Rozhetskin bought the villa near Riga airport five years ago, paying £900,000 for the holiday home in Kapu Iela, a development described as Latvia’s Millionaires’ Row. He visited only two or three times a year but was known for giving parties. He played an enthusiastic part in the area’s small gay community and is said to have been the lover of an ambassador’s son. His local nickname was Malvina, which may relate to a Belarusian soft toy company of the same name.

Fun may not have been his only reason for being there, however. Washington had put two Latvian banks on its list of suspected money launderers. One of them was the VEF Bank, whose chairman and largest shareholder until recently (along with his ex-KGB partner Yuris Savitskis) was a man called Alexey Durandin. He is said to own the largest hotel and casino in Jurmala, the seaside town near Rozhetskin’s villa. The two men knew each other. Rozhetskin gambled at the casino – and some sources suggest he may have offered to use his influence to try to get Durandin’s bank removed from the US blacklist. This has not happened.

Rozhetskin knew many wealthy men like Durandin. He first started to associate with them in 1996 when he moved back to Moscow. Born in Leningrad, he had been educated at Harvard Law School but returned from the US to make a fortune after the fall of Communism. This involved masterminding the first placement of Russian stock on Wall Street since the revolution. Working with George Soros and others, establishing the pioneering company Renaissance Capital, he played the markets to become a key figure in the new economy. But he also took chances in his private life. Rozhetskin had a reputation for hosting wild revelries, where cocaine and male prostitutes were available.

But money was all that really counted, and soon Rozhetskin was caught up in a huge business battle. Part of his considerable portfolio was a quarter stake in Megafon, the giant mobile phone company. When he attempted to sell up, his actions provoked legal battles across the world.

First, a Bermuda-based corporation called Ipoc claimed he had sold it the option to purchase his stake. The company is nominally controlled by a Danish lawyer called Jeffrey Galmond, but a Swiss arbitration court ruled the real owner to be the current Telecoms Minister in Russia, Leonid Reiman.

However, Rozhetskin actually sold his shares for £128m to Altimo, a subsidiary of a huge Russian banking and industrial group called Alfa. It has links to the British Establishment at a very high level: the international advisory panel includes the former foreign secretary Lord Hurd, and the one-time head of GCHQ, Sir Francis Richards. Neither man has a seat on the board, however, or any fiduciary responsibility.

The head of Alfa is Mikhail Fridman, ranked by Forbes magazine as the 50th-richest person in the world. Six years ago, when he was locked in a libel battle with the Centre for Public Integrity in Washington, Fridman ordered an audit of his own company by the corporate sleuths Kroll. Fridman is now believed to be paying the London office of Kroll to supply the bodyguards for Rozhetskin’s partner and son.

Alfa and Ipoc threw themselves into a legal struggle over his shares. To help with this, Fridman hired another firm of investigators. Called Diligence, they are chaired in Europe by the former Conservative leader Michael Howard. But in one highly embarrassing episode, Diligence paid an ex-MI6 operative to impersonate a serving agent in an attempt to get documents from Ipoc’s accountants. Diligence paid $1.7m (£875,000) to the accountants to settle the dispute.

Meanwhile, prosecutors in Moscow had charged Rozhetskin with the theft of $40m from Ipoc. The money is said to have been paid to him under an alleged option-to-buy arrangement. The arrest warrant is still in force.

But nobody knows where Rozhetskin is. As a result, the battle between Alfa and Ipoc appears to be abating. Last week in Bermuda, Ipoc admitted it had attempted to deceive a court about the source of its funds, and it had to forfeit $45m. In New York, where Rozhetskin had been suing Reiman for pressing him to sell, his lawyers said an unnamed person with power of attorney had ordered them to resolve the case.

All of which should pave the way for both sides to sell their shares to the man known as “the Kremlin’s favourite businessman”, Alisher Usmanov. The chairman of Gazprom Investment Holdings owns Dynamo Moscow football club and a 25 per cent stake in Arsenal. He is close to the new President, Dmitry Medvedev, but Gazprom cannot take over Megafon until all court cases relating to it are settled. The disappearance of Rozhetskin may actually now hasten an agreement between Fridman, Reiman and Usmanov – three of the most powerful men in Russia.

Of course, his disappearance may have nothing to do with his business interests at all. Among the last people to see him alive were two men who left the villa in a taxi at 2.30am on 16 March. They were taken to XXL, a gay club in Riga. The lights were on when the driver left, and Rozhetskin’s SUV was in the driveway. The two men, who have not been named, were questioned but ruled out as suspects.

Police arrested the butler, Anatoly Demchenkov, once an employee of that local casino owner Alexey Durandin, but he has been released on bail. Detectives refuse to confirm that the large patches of blood found at the villa belong to the missing man, but the FBI said DNA tests proved it did. The blood came from a serious head wound, which leads agents to believe he is dead.

No valuables were stolen from the villa, the FBI noted. This may rule out a burglary or an assignation gone wrong. His passport was missing, as were two heavy metal toolboxes. One theory is that they were taken to weigh down the body when it was dropped in the sea.

The FBI must investigate the apparent death of a US citizen abroad, but the mysterious case of Leonid Rozhetskin has also given its agents an unprecedented chance to delve into the dealings of Russia’s new movers and shakers. The vanished man was working with Eric Eisner, the son of the former head of Disney, providing finance for a new film about the Russian mafia, to be called Three Wolves. Whatever the plot, it can hardly be as gripping or as far-reaching as the one he left behind.

The Independent

The answer, according to recent archeologist findings, is that Russia is built on an ancient Indian burial site, one which was never supposed to be disturbed.

“When Prince Rurik founded Russia, he foolishly decided to build this state on the sacred bones of dead Lakota Sioux Indians,” explained Dr. Sha Gui, who headed a team of archeologists mapping out Russia. “By violating those bones, the ghosts of these Indians cursed Russia with 1000 years of ‘sovereign democracy.’”

Yuri Trutnev, the Minister of Resources for Russia, agreed with the findings. “It is Russia’s curse, and Russia’s fate. The only way to undo this curse and appease the Indian spirits is, of course, to nationalize the sacred land that is currently held by Shell, BP-TNK, and other foreign companies,” he said. “While it grieves me to have to nationalize these sacred oil and gas deposits currently owned by our Western friends, I’m afraid we must respect the Indian spirits, or pay the price. Because you know, those Indian spirits—really scary stuff. I’m talking pets coming back to life, cars that drive on their own, rigged elections—brrr! It’s really…you know, frightening.”

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