Behind the charade of “patriotic” zeal of Vardanyan’s move to Karabakh Political ambitions, "Troika Laundromat" and saving one's bacon

Armenia, due to being a member of the Russian-led Eurasian Economic Union (EEU) and also being a signatory of the Comprehensive and Enhanced Partnership Agreement (CEPA) with the EU, is in a uniquely advantageous position to provide a loophole to escape the Western sanctions directed at the Kremlin. It is in this context that billionaire Ruben Vardanyan’s renunciation of his Russian citizenship and decision to move to the Azerbaijani region of Karabakh, temporarily controlled by Russian "peacekeepers", as an Armenian citizen, appears to be worthy of further investigation, without forgetting the subject of his aspirations involving the pinnacles of Yerevan's political landscape.

Above nondescript origins

For those who did not keep a beady eye on Moscow’s high business circles before September 2020, Vardanyan was a mere tycoon of non-native origin, with strong ties to his ancestral homeland, who amassed a fortune during the age of grave risks and massive opportunities in 90s Russia. Regarded as the face of a Western-style bank in a country where entrepreneurial practices lacked civil propensities, he transformed the Troika Dialog investment fund into a reputable venture, the credentials of which earned him the Businessman of the Year award from the American Chamber of Russia in 1999 and many subsequent accolades.

Having excellent relations with former Presidents Robert Kocharyan and Serzh Sargsyan, he extended his business interests to Armenia, in addition to assisting Karabakh separatism by funnelling money into a series of pseudo-philanthropic projects, the list of which is too long to be subjected to scrutiny here, but one point is unmistakably clear: he has taken due care to create a self-portrait of a successful and ethically-conscious tycoon with a patriotic reputation. This is something one should not begrudge him.

His name was, however, besmirched, and one may say beyond repair, when the 2019 report of the Organised Crime and Corruption Reporting Project (OCCRP) revealed the shocking details of the offshore network arm of Troika Dialog which was engaged in cutting-edge money laundering schemes from 2006-2013. It transpired that, behind a contrived image of a responsible entrepreneur, there was concealed a man of crafty roguishness.

It was during the Second Karabakh War, when Ruben Vardanyan made a passionate plea to Russian President Vladimir Putin to intervene to stop the imminent defeat of Armenia, that he emerged as a man of substantial political aspirations, which he had long-cultivated.

Later, he has spoken extensively about the need to 'save' Armenia and the Armenians of Karabakh, going as far as to suggest that his nation is badly sick and requires reshaping and spiritual uplift. He even once, whilst addressing students, hinted at Armenia’s inherent incapacity to grow demographically, arguing that if a five-million population bar was to be reached, non-Armenian immigration would be required and that would mean hearing Azan and seeing mosques, which his monoethnic, mono-religious compatriots may find hard to swallow.

On 1 September, near the Skihh Dur River in the Red Bazar administrative unit of the Khojavend district of the Karabakh region of Azerbaijan, he declared his decision to renounce his Russian passport and reside illegally in the region, presently under the control of the Russian peacekeepers, as an Armenian citizen. His move is more of a definable nature. Vardanyan has set up the Foundation on the Security and Economic Development of "Artsakh”, which will aim to attract investment for the benefit of Karabakh Armenians. It has also been rumoured that he is a candidate for the position of a “state minister” or “prime minister” of the illegal and unrecognised “NKR”, whose remaining days of de facto existence are numbered, this entity being destined for conflagration in the dustbin of history.

For the sake of argument, one should give the benefit of a doubt to Vardanyan so as to avoid infantile prejudice to which, in principle, no one is immune, including the author of this humble submission. The man has always given an impression of an enlightened entrepreneur who thinks or, at least, appears to contemplate the world beyond mere financial gain, focusing on the sustainability of growth and translation of material resources to something loftier and lasting. A social entrepreneur, impact investor and venture philanthropist with corporate responsibility awareness are the appellations he finds befitting his credo.

The former owner of the Troika Dialog investment fund may have been implicated in offshore dealing between 2006-13 to funnel overseas monies to influential Russians, including Putin’s close friend Sergei Roldugin, which was revealed by the OCCRP and then debated in the European Parliament, yet he has also established the ‘Skolkovo’ business school, which is a philanthropic venture, not denuded from money laundering though, with a political capital concomitant, and has invested in enterprises with no evidently discernible immediate financial gain incentives, presumably as 'shell' companies for nefarious dealings.

Back to the watershed moment of Vardanyan's fateful decision on 1 September, one has to move away from the ‘benefit of doubt’ position so as not to wallow in the quagmire of an obsessively excessive objectivity drive bordering on the danger of missing the point. What needs to be done is to take a reasoned look at what might have motivated him as a successful entrepreneur, with openly declared political ambitions in Yerevan and with a natural desire to preserve what he has amassed over the years. Here, the journey ahead for Vardanyan seems to acquire some clarity in the light of which one is primed to cogitate cogently.

High office aspirations

Let us start from the political component of the story, which is inextricably interwoven with the economic aspect. Vardanyan claims he is in Karabakh, for he wants to stop the exodus of co-ethnics from the region and to preserve the ancient Christian and Armenian heritage. He describes what he calls “Artsakh” as more than a piece of land, but an embodiment of ancient spirituality that is there and cannot be erased, as it has indestructible permanence. He argues that the degree of tension between Azerbaijan and Armenia should decrease incrementally, leading to a point where a new war or escalation is unthinkable.

These all sound good and let us leave aside for a moment the inescapable fact of the illegality of his presence on sovereign Azerbaijani territory. His renunciation of Russian citizenship and decision to relocate to the area under the responsibility of the Russian contingent could not, with any good-faith-imbued stretch of the imagination, have happened without the Kremlin’s plausible nod, or indeed, without its actively regurgitated and spawned design.

The element of Russian acquiescence, far away from being a mere approval, appears to be an inexorable necessity. When flamboyant Russian entrepreneur German Sterligov declared his move to Karabakh in 2015, that was perceived to be a short-lived publicity-induced escapade and this transpired to be the case. Here, we deal with a man of considerable ambition, with no desire to entertain himself with fleeting sensationalist amusements. Even if his 1 September decision on its own is a bit of a nuisance, it is still indicative of a stride towards a serious goal somewhere else.

This appears to be Vardanyan’s recent move. His foundation may attract some grey money and undertake some projects and he may even become an official gang member of the illegal regime based in Khankendi, yet such an aspiration lacks that finality that would fit the bill of the tycoon’s intended order.

It has long been suggested, prior to Russia’s invasion of Ukraine, that the Kremlin wants a trustworthy man at the helm in Yerevan, and someone infinitely more suitable than current PM Pashinyan. Vardanyan has never hidden his ambitions but talked about them with reserve and discretion, focusing not on the intention of getting an official leading role, but on influencing the process through investments and subtle political persuasion.

That was of course both understandable and praiseworthy, nicely complementing the shrewd adage that when a man of ambition with no desire to appear unduly ambitious is asked about his high office prospect, he should always come up with a magnanimous phrase along the lines of “I have no ambition in that direction, but if the circumstances require me to do so, I won’t shrink from the duty of serving my nation and falling on my sword”.

His speech in the Khojavend region praised the Russian peacekeepers and advocated for their stay in the region until the “security” of Karabakh Armenians is beyond doubt and for the explicit determination of their mandate. This sounds like the words of a well-briefed Russian mouthpiece. Naturally, he is also in favour of the maintenance of the beleaguered OSCE Minsk Group and for the regeneration of the Co-chair format involving Russia, the US and France. Vardanyan has also been thankful to the French and US Ambassadors for not visiting Shusha, thereby not physically endorsing the return to Azerbaijani control.

In the grand scheme of things, the political element of Vardanyan’s motive appears to cultivate an image of him as the saviour and protector of Karabakh Armenians, his illegal presence and activities capitalising on the safety provided by the Russian peacekeepers, his ambition being far greater – to become the Armenian Prime Minister. After all, his involvement in the misbegotten and illegal non-entity occupying a few decrepit buildings, albeit refurbished before being fully razed to the ground, with terminal prospects in Khankendi, would not become a man of his wit. A bigger call must have beckoned him from the outset, and that he is likely to follow.

Troika Londramat

Then, of course, we have to deal with the financial aspect of his recent move and that will take us back to the infamous OCCRP report of 2019. The main finding was that the Troika Dialog investment bank, in which Vardanyan was a principal shareholder from 1992-2012, prior to its sale to the Sberbank, was engaged in a complex and wisely choreographed money laundering scheme, albeit insufficiently opaque.

Firstly, the design involved attracting some ill-gotten gains through different channels, called 'pipes' in the field's jargon, into the coffers of the investment bank's extensive network. Here, one should credit the system's ingenuity for mixing clean and dirty money in such a way that blurs the origins of funds from the very outset, making tracing the original source of a given million a complex task. British journalist Neil Watson FRSA commented: "Opaqueness, confusion and asset diversity are the hallmarks of a successful money-laundering enterprise. Mix into the soup some shell companies and the sources are virtually impossible to trace, particularly if the scheme benefits a state."

Secondly, these monies were transferred through circuitous routes within the network of at least 76 Troika-controlled offshore companies with accounts in different EU banks. One of the banks involved was the Lithuanian entity Ukio, the documents leaked from which formed the backbone of the OCCRP investigation. In order to avoid tax evasion suspicions, the accounts were formalised in the names of ordinary Armenian migrant workers linked with Rubenyan's business empire, who were unaware of being holders of huge sums. The bank lost its license in 2013 and its head was granted political asylum in Russia.

Thirdly, the scheme involves funnelling funds to influential Russians through carefully crafted and superficially innocent means or payments for different corporate events, university tuition fees or for other seemingly innocuous client needs. For instance, as the document shows, one of the widely employed tricks was the signing of a purchase agreement between an offshore company and a future recipient, then the former not fulfilling its contractual obligations and paying a large sum as a legal penalty to a final collector. This is, as experts on money laundering attest, a widely practised scheme viewed as safe.

On the whole, during 2006-13, 4.6 billion dollars entered the offshore system and 4.8 billion dollars left the system, ending in the pockets of influential Russians. In some ways, Vardanyan acted as a purse for Russian elites. In his self-defence, he argued that only one document bears his signature, and given the gargantuan proportions of operations, he was unable to control everything.

Vardanyan's Sardarabad

The case, dubbed "Troika Laundromat" by the OCCRP, has delivered a significantly damaging blow to Vardanyan's reputation, but it was the Russian invasion of Ukraine and the introduction of the Putin Accountability Act by the Republicans of the House of Representatives in the US that have been the main cause of perturbation and the motive for a drastic move for the tycoon. Now there is a considerable danger that his European operations will be threatened by anti-Kremlin sanctions.

As an Armenian citizen, who is no longer a Russian national, Vardanyan's prospects appear to be on a better footing. He claimed in a public forum that the new situation created an opportunity for Armenia to become a window for Russian businesses. Pashinyan's government has eased requirements for relocation and published guidelines. Since February 2022, according to Ukraine's military intelligence, 113 Russian IT firms have moved to Armenia, with 1000 private companies being launched.

In his 1 September speech, Vardanyan argued that this is an existential "Sardarabad" moment for Armenia, pandering to the carefully peddled and deeply-entrenched fears of the nation's history that date back to the First World War. It is undeniably true that black clouds are gathering over Yerevan, and the future ahead is riven with challenges that may prove too overwhelming. Vardanyan's involvement in the Armenian economy might help, but his fueling of Karabakh separatism is bound to backfire, in no way assisting the so-called existential challenge to be combatted.

In some ways, Vardanyan is also facing his Sardarabad, or maybe his Waterloo. The new situation means he has to survive and save his bacon. For all his declared love and sense of duty towards Armenia and the Armenian diaspora, which we have no reason to doubt per se as we cannot penetrate into the depths of his inner sanctum, all that "patriotic" zeal appears to be convenient complementary sub-elements nicely woven into a large charade concealing the main point. Indeed, duplicity and self-interest reign supreme.