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I had a backchannel to Putin. It means nothing.

May 19, 2017

In elite Russian society, everyone is connected and that’s catnip to American media and politicians.

The American media believes Vlad Putin has the White House wired for sound. My personal opinion, it's just old-fashioned power politics on his end and a confused, hyperventilating American public. For Putin and Trump, it is a case of "keep your friends close and your enemies closer."  Every American President is obligated to find a way to make the relationship work because Russia is too powerful--or too dangerous--to ignore. 

So when I was watching a Senate hearing in which 'backchannel' to Putin was labeled a sign of a conspiracy, I thought, how foolish. Everyone who does business in Russia has a backchannel to Putin. Global business operates by the rules of the world you are in, not where you are from.

If we find cause to call a politician a conspiracist because of a former business relationship, one day our government will go after business executives with relationships in parts of the world deemed unpopular. I can recall a time when driving a Mercedes or a Toyota was considered unpatriotic (because they were our enemies in WWII). 

My story is illustrative.

A friend and occasional investing partner, Dr. Michael Kreizman, a portly Russian emigre medical doctor with a talent for dealmaking, called asking if I could pack my bags for Kaliningrad where he knew someone who knew someone who was a close Putin associate. Kaliningrad is that spit of land on the Baltic in between Poland and Germany that Russia gained after WWII, and let’s say it’s strategically located.

The deal was a privatization play. The Soviet Union owned everything at one time. Under Yeltsin and now Putin, the country was in a deep recession and harvesting all its assets. Their credit rating was looking as bleary eyed as a Russian sailor after a night on the town.

Our host was the governor of the State, a former Russian army general, and his job was the kind that well-placed party comrades in the Soviet days received for loyalty and in the local parlance, he was in “Putin’s inner circle.”

Regions like Kaliningrad across the former Soviet Union were selling off assets to the highest bidder, which was a misnomer since the bids appeared to be rigged. Discussion of valuations and ROI was nonexistent. The formula was simple. You took the asset at less than wholesale prices, secured by promissory notes, and an obligation to share profits down the road. It made Hollywood accounting look positively GAAP compliant.

Then the whole thing unraveled.

Putin came down hard on the privatization plays, largely because Russian billionaires started acting like, well, billionaires, and forgot who was the country’s leader. Some of the oligarchs, like Mikhail Khodorkovsky, considered Russia’s richest person, was sent to prison and forfeited much of his fortune (Putin eventually commuted his sentence).

During this time, the governor’s Putin connection was constantly played back to me as an inducement for believing the deal was safe, legal, and would be consummated. No doubt, the governor did know Putin quite well.

But it didn’t matter.

Putin has many friends and everyone in Russia who was at a senior level in the army or the intelligence agencies probably knows him. It’s one big fraternity, and I do mean that technically speaking, we never met a woman in any of our business dealings. The formula for doing business in Russia is simple, it's not where did you get your MBA, but who do you know? Because you can be sure, whoever that is, they know Putin.

Author’s Bio

Jeff Cunningham is an advocate for enlightened global leadership, which he calls the most valuable natural resource in the world.

He is a Professor at ASU’s Thunderbird School of Global Management and was the former publisher of Forbes Magazine, startup founder, digital content CEO, and ran an internet venture capital fund.

He travels the globe in search of iconic leaders. As an interviewer/host, he created a YouTube interview series, Iconic Voices, now co-produced by @Thunderbird, featuring mega moguls from Warren Buffett to Jeff Immelt. His articles on leadership have been featured in the Arizona Republic, LinkedIn and Medium via JeffCunningham.com.

His career experience includes publisher of Forbes Magazine; founder of Directorship Magazine; CEO of Zip2 (founded by Elon Musk), Myway.com, and CareerTrack.com; venture partner with Schroders. He serves as a trustee of the McCain Institute and previously as a trustee of CSIS and Middle East Institute, and as an advisor to the Nobel Peace Prize Committee.

He has also been a board director of 10 public companies.

The views expressed in this article do not necessarily reflect those of Thunderbird School of Global Management or Arizona State University as a whole.