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Viktor Vekselberg, in Saint Petersburg in May. Negative reports about him may have ended NSO’s talks about buying Fifth Dimension, but some say closure was tied to departure of political hopefuls.Chris Ratcliffe/Bloomberg

How Putin's Blacklisted Oligarch Friend Is Linked to Key Israeli Political Players

One of the inauguration balls held on January 20, 2017, to mark Donald Trump’s ascent to power, was labeled a “candlelight dinner.” As befit the occasion, it was held in a fancy hall, with a host of exquisite delicacies served to the assembled guests, including donors and individuals with close ties to the Republican Party who had paid hundreds of thousands of dollars to take part in the event. One of those present was Russian oligarch Viktor Vekselberg, owner of Renova Holding, whose assets are estimated at $13 billion. He is said to be one of the 10 richest men in Russia.

Vekselberg attended the event with his American cousin Andrew Intrater, who had bought the dinner tickets for $250,000. The two, according to local media reports, sat next to attorney Michael Cohen, who until a few months ago was one of Trump's most trusted confidants, but is now (after signing a plea bargain) cooperating with special counsel Robert Mueller in the investigation of Russian involvement in the last U.S. presidential election.

Vekselberg’s presence at that dinner was only made public a year and a half after the fact, when his name appeared on a list of people on whom the U.S. Treasury was imposing sanctions, along with other oligarchs, on the backdrop of deteriorating relations between Russia and the West. Vekselberg, incidentally, is considered to be close to Russian President Vladimir Putin, which is one of the reasons he is now subject to sanctions.

“I knew he was going to that party, it wasn’t a secret,” Israeli high-tech entrepreneur Yaron Eitan told Haaretz last week. Eitan lives in New Jersey and is the managing director of CNTP, the technology arm of the Columbus Nova investment company, which is controlled by Vekselberg.

According to Eitan, “the ball was blown out of all proportion by American media. By coincidence, Vekselberg was in the United States that week so he was invited. It was as innocent as could be. He was there for two hours. I remember that afterward he told me he was disappointed that he didn’t meet anyone interesting there.”

In Israel, Vekselberg’s name made headlines recently after the closure of Fifth Dimension, a defense-related high-tech company he’d invested in. Two former, senior officials from the defense establishment had joined the venture: Former Israel Defense Forces Chief-of-Staff Benny Gantz, currently the hottest item in local politics, was chairman of the board, and ex-deputy Mossad director Ram Ben-Barak was president. Ben-Barak is expected to find a place among the top spots on the Yesh Atid ticket in the upcoming election.

When their company collapsed about two weeks ago, sources said one of the main reasons was the inclusion of Vekselberg on the U.S. government's blacklist, which means that U.S. companies are forbidden from doing business with him and his entities.

“Some unclear and unilateral decisions were made overseas,” said Doron Cohen, CEO of Fifth Dimension and a former Mossad member. “When you set up a company, no scenario includes a major investor being put on a sanctions list four years down the line. That is something that cannot be predicted. Vekselberg is a warm-hearted Jew, a good and generous man.”

Were the sanctions only an excuse for the failure of Fifth Dimension? The company was established in 2014, and received an influx of $10 million from CNTP during a second round of fund-raising a year later. Overall, the company raised $40 million, with Vekselberg as the main investor. The company’s product was geared to police forces and civilian law enforcement agencies, using artificial intelligence technology to assist in crime prevention.

“It’s not a matter of technology," according to senior officials at the company. "Our product is top-notch. The problem is that our main investor was put on a U.S. sanctions list, which not only precluded him from transferring funds he had promised us but, by being one of our shareholders at the time his assets were frozen by the U.S. Treasury – no venture capital fund could invest in us.” The sources add that Vekselberg’s shady activities also scared away other potential investors who could have saved Fifth Dimension.

“This was a game for big players that was way over our heads – interference in elections, campaign financing, escort services – what does that have to do with us? When you’re on an American blacklist, economies can fall. So why does strangling one company matter?” said one high-ranking figure at Fifth Dimension the day before it closed.

The fact that Vekselberg’s name was tied to Fifth Dimension apparently scared off one potential buyer – Israeli cyber intelligence firm NSO, which had been in talks about such a move in November. Sources in the local high-tech world say NSO was looking to expand its basket of products, and also had another goal: to exploit the battery of ex-IDF generals and former defense officials employed by Fifth Dimension to burnish its reputation, which was tarnished due to sales of NSO's flagship product – Pegasus software, which operates by intercepting data from cellphones. The technology turned out to have been used for tracking human rights activists, and is thought to have been associated with the murder of Saudi journalist Jamal Khashoggi.

Assessments are that negative reports about Vekselberg put paid to NSO's negotiations regarding the purchase of Fifth Dimension.

However, there are those who've had dealings with Fifth Dimension who say the sanctions are unrelated to closure of the company: It was simply a commercial failure and the sanctions issue was a convenient excuse. One source told TheMarker that some 18 months ago, before Vekselberg was put on the U.S. Treasury blacklist, he stopped working with the firm since it had become insolvent. Other high-tech sources note that an additional reason for its closure was that Gantz and Ben-Barak lost interest in it due to their decision to enter politics.

Vekselberg invested in other Israeli start-up ventures through CNTP, but none of those have been impacted by the sanctions.

Privatization wealth

Viktor Vekselberg, 61, was born in Ukraine; his father was Jewish. In 1979, he finished his studies at the Moscow Institute of Transport Engineering, and during the next decade, with the country still under communist rule, he worked as a researcher in government labs. Like other oligarchs, he made his money in the great privatization wave of the '90s, exploiting it to set up the Renova metals and mining conglomerate, now based in Switzerland.

In 1997, Vekselberg became a partner in TNK-BP, a huge oil concern, together with British Petroleum and with oligarchs Len Blavatnik and Mikhail Fridman. In 2012, TNK-BP was sold to Rosneft, a Russian government-controlled company, in a deal approved by Putin himself. The transaction put $7 billion in Vekselberg’s pocket, making him one of the country's 10 wealthiest men. Vekselberg is also a partner in Rusal, the aluminium giant, together with Blavatnik and oligarch Oleg Deripaska – who has also been put on the U.S. sanctions list.

Vekselberg is obviously not the first oligarch to launch business ventures in Israel. He was preceded by many others, among them Arkady Gaidamak, Abraham Nanikashvili, Mikhael Mirilashvili and Mikhail Chernoy, who made their fortunes in mysterious ways and succeeding in making it to the top of Israel’s business world, while cementing ties with local political leaders.

Vekselberg’s case is a bit different. He wanted to become a U.S. citizen, and was possibly on the way to fulfilling his dream. His wife is an American citizen, as are his children. In that sense, Israel was of secondary interest. He regarded his dealings there as a business opportunity, or a philanthropic one, but not as part of a major financial venture.

Although most of his businesses are registered in Switzerland, the measures that have been imposed on him are a serious blow. It was last April when the U.S. Treasury published its list of 23 Russian oligarchs whose assets would be confiscated, including Vekselberg. The significance of this was not just that his assets in America, of which there are many, would be frozen but that any dealings he had with Western companies would be discontinued.

Yaron Eitan and the other former defense people and IDF officers at Fifth Dimension are not the only links Vekselberg has with Israel. Another tie is with former Prime Minister and Defense Minister Ehud Barak, who may also emerge as a key player in the upcoming election in April.

In January 2014, months after leaving his post as defense minister, Vekselberg appointed Barak to be a member of the board at CIFC – a consulting firm that analyzes financial debts for institutional clients around the world, which was then traded on Nasdaq. This happened right after Columbus Nova took over control of CIFC.

Barak was one of five directors appointed by the oligarch, who included the latter's cousin Intrater and other senior managers at Renova, Vekselberg’s major business arm. From 2014-15 the ex-Israeli minister received a salary of $190,000 as director, as well as company shares worth $50,000, according to CIFC reports to Nasdaq. In mid-2016, when CIFC was sold to a Qatari company, Barak’s stint on the board was terminated.

Barak had already had an earlier connection to Eitan, who in the 1990s founded a company that develops defense-related products called Geotec. They were partners in SCP, an American venture capital fund, when Barak first left politics, between 2001 and 2007. Asked if he had helped put Barak in contact with Vekselberg, Eitan said the former minister didn't need any help from him in such matters.

For his part, Barak has refused to reveal any details about his ties with the oligarch, saying that his “business relations as a private citizen are of no public interest. As far as the public needs to know, my activities are within the law and were reported to all the authorities, with all due taxes paid. I won’t say anything else in this matter.”

Stormy Daniels and the Clintons

While Vekselberg’s name is hardly known in Israel, in recent months, on the backdrop of his inclusion on the Treasury blacklist and various scandals involving President Donald Trump, he’s received substantial media coverage in the U.S. The New York Times reported that in 2017, during one of his visits to New York, Vekselberg was questioned by investigators working for special counsel Mueller.

According to other media reports, Vekselberg met at least twice with attorney Michael Cohen, transferring $500,000 through his own companies to Cohen’s shell company, which then allegedly paid hush money to American porn star Stormy Daniels so that she would not reveal her affair with Trump before the election. Vekselberg’s people have denied these allegations. Local sources have also revealed that Columbus Nova signed a $1 million contract with Cohen for counseling services. Officially, Columbus Nova is a U.S. investment company headed by Intrater, but the only investor is Vekselberg’s Renova.

In 2011-2012, Vekselberg began to become closer to Putin, after he began his second term as president. Vekselberg’s role as head of the Skolkovo Innovation Center, a high-tech business venture in Moscow, is evidence of his ties with Putin, but there are other examples. He also gained favor in the president’s eyes due to his efforts to return to Russia some important cultural assets – including a collection of Fabergé eggs from the czarist era, which he purchased for $90 million from the Forbes family.

Vekselberg has two U.S. residences, in New York and Connecticut; his two children, Irena and Alexander, are Yale graduates. Although he has only recently received attention due to the sanctions and Trump scandals, the oligarch is familiar with America's political leaders and has been involved in the country for many years. He’s met former Presidents Barack Obama, George Bush, Jr., and Bill Clinton. In the past he donated $100,000 to the Clinton Foundation and $2,000 to Chuck Schumer, the Jewish senator from New York. Between 2000 and 2004, Columbus Nova paid $1.6 million to a lobby group in Washington, to encourage cultural and economic ties between the U.S. and Russia. As part of his philanthropic efforts, Vekselberg paid for rehabilitation of a state park in California, on land that once belonged to Russia, with the help of former California Governor Arnold Schwarzenegger and then-Secretary of State Hillary Clinton.

Even before news surfaced regarding the Trump affairs and the Mueller investigation, there were people in the U.S. who warned of Vekselberg’s activities. In 2014, shortly after the Russian invasion of Ukraine, an FBI agent in Boston wrote in a local business journal that “the Skolkovo Foundation (headed by Vekselberg) may be a means for the Russian government to access our nation's most sensitive or classified research, development facilities and dual-use technologies.”

Now that Vekselberg is on the Treasury's sanctions list, people in the U.S. are wondering just how deep his roots are in the country and whether the government will succeed to freeze all his assets.

"It is entirely possible," a former U.S. State Department official and sanctions expert told the Associated Press in July, "that Vekselberg has a majority stake in businesses that are still functioning in the United States that the government doesn't even know about."

Vekselberg intends to appeal the decision to sanction him, arguing that the decision is mistaken and illegal. His spokesman has argued in the American media that claims against his boss are “illegal and unfair.”

Says Yaron Eitan, “Vekselberg is a super-serious and decent guy, very pro-American in his approach. Thus, people in the U.S. who know him were very surprised that he was on the sanctions list. I also think that it’s not true that he’s close to Putin. He may be close, since in Russia there is some dependence of businessmen on government, but I don’t think they are drinking buddies.”

As for the oligarch's Israeli interests, Eitan says Vekselberg is pleased with his technological investments in the country and elsewhere around the world. “I’ve had specific conversations with him about expanding his technological activities," says Eitan. "But this won’t happen now.”

Shuki Sadeh and Refaella Goichman

Haaretz