Vladimir Putin’s former chief of staff has a secret investment in an American energy company hailed by Donald Trump as creating jobs for American workers.
Alexander Voloshin – who served as Boris Yeltsin’s chief of staff before working for Putin between 2000 and 2003 – has an undisclosed stake in American Ethane, a Houston-based firm that recently signed a multibillion dollar export deal with China.
Voloshin is part of a consortium of Russian investors in American Ethane that at one point included the oligarch and billionaire Roman Abramovich.
In November 2017, Trump presided over a series of trade agreements with his Chinese counterpart, Xi Jinping. One of the biggest was a $26bn (£20bn) deal to supply liquid ethane to China, struck between privately owned American Ethane and a large Chinese conglomerate.
Trump applauded and nodded vigorously as American Ethane’s CEO, John Houghtaling, signed a “historic” memorandum of understanding with his Chinese partner.
The president was promoting “American prosperity and trade” in deals that would generate “thousands of American jobs”, the White House announced.
In fact, the chief beneficiaries of the Trump-endorsed deal live and work in Moscow. One of them is Voloshin, who spent three years at Putin’s side, and headed his first presidential administration.
It is unclear if the Trump White House was aware of this Kremlin connection. Wilbur Ross, the US commerce secretary, who has been accused of not declaring his own business dealings with Moscow, attended the ceremony, together with the then US secretary of state, Rex Tillerson. (Ross denies any wrongdoing.)
Speaking in China Ross hailed “American businesses” as “the most innovative in the world” and said it was a great honour that Trump and Xi had witnessed bilateral trade agreements worth $250bn.
Despite swapping government for business, Voloshin remains an influential figure in Russian politics. His western contacts include bankers, scholars, reporters, and the former US secretary of state Henry Kissinger, who advises the Trump White House on Russia.
An investigation into Voloshin’s US business interests was carried out by Dossier Center, a research unit, together with the Guardian.
It reveals that a group of wealthy Russians sought to invest in America’s shale revolution. They included Mikhail Yuriev, a former state Duma deputy, Andrey Kunatbaev and Konstantin Nikolaev. After two failed drilling attempts, the Russians decided to pivot from shale to ethane, a gas byproduct generated by fracking.
In Moscow, Yuriev approached Voloshin. Voloshin in turn recruited Abramovich, who provided $50m in start-up capital. The four Russians plus Abramovich became co-investors in American Ethane. Houghtaling, a New Orleans lawyer and entrepreneur, became the firm’s CEO. Houghtaling’s wife is Russian.
Voloshin’s initial stake was modest. He invested $1.25m. In return he got 2.5% of the new company and a seat on its board as an “independent director”. His stake is now potentially worth tens of millions of dollars. Voloshin borrowed the money used to buy shares from Nikolaev, via a firm in the Seychelles, it is understood.
The Russians identified a site on the Gulf coast of Texas for a new ethane production and export facility.
In 2014, Voloshin transferred the $1.25m from his account in Moscow to the US. The money went via New York and Deutsche Bank.
In an interview with the Guardian, Houghtaling said American Ethane’s Russian connections had been disclosed to relevant US authorities and to potential investors. Private companies are not obliged to reveal their backers but both Nikolaev and Kunatbaev are named publicly as board members.
The firm, he added, went through major ups and downs before securing last year’s mega-deal with China. It had been a victim, not a beneficiary, of global political tensions, he said.
Abramovich flew in January 2014 to New Orleans on his private jet to discuss his potential investment in ethane. The 767 was so large a special ladder had to be found. Abramovich visited Houghtaling’s home, stayed for dinner and met local politicians.
An agreement was signed but weeks later Putin annexed Crimea. Plans to announce Abramovich’s role were shelved. Abramovich later exited from American Ethane, as the Obama administration imposed sanctions on leading Russian oligarchs and the business climate chilled. There was a dispute over the company’s direction. Nikloaev was forced to put up assets to prevent the firm from going under, it is understood.
According to Houghtaling, the China deal will greatly benefit the US’s balance of trade deficit with Beijing – a key White House goal. He said it was the Chinese side that insisted American Ethane take part in the Trump signing ceremony.
“The [Russian] investors are not on any sanctions list. We view it as positive that Russians are investing in the US. The deal materially reduces China’s dependency on Russian gas.”
Still, Voloshin’s involvement in the project was kept secret. As a former member of Putin’s inner circle, he qualifies as a “PEP” or politically exposed person, meaning his financial transactions are subject to enhanced scrutiny. A special vehicle – the “AV SPV” – was set up to hold his stake. Voloshin declined to comment.
Kunatbaev, one of the Russian partners, said of Voloshin: “He’s an honest arbiter. He doesn’t view the US as the enemy.”
Leonid Nevzlin, a Russian-Israeli businessman whose oil firm Yukos was seized by the Kremlin, said the arrangement was “productive” for the Moscow investors.
“By going through America to China you protect yourself from current and potential sanctions [against Russia],” he said. “Russian investments into China are unprotected. But the Chinese behave themselves in a gentlemanly way towards the Americans. The risks are therefore justified.”
Research by Dossier also reveals Voloshin’s remarkable network of contacts in the west. Kissinger has met regularly with Voloshin, including twice in Moscow in 2013 and 2016, and once in 2014 in New York, typically for lunch.
Thomas Graham – a former adviser to George W Bush, and a senior Kissinger aide – accompanies Kissinger on these trips. Kissinger has urged Trump to pragmatically reset relations with Putin.
Voloshin’s most important connections are inside the corridors of Russian power. He got to know Abramovich in the 1990s. In 2011, he flew to London to give evidence on behalf of Abramovich, who was defending a case brought by Boris Berezovsky, the Yeltsin insider turned exiled Putin critic.
Giving evidence, Voloshin described Abramovich as “my friend”. The judge, Mrs Justice Gloster, ruled in Abramovich’s favour and dismissed Berezovsky’s testimony as unreliable.
Voloshin travels regularly to the US. In 2015, he and his wife, Galina, went on a holiday to the Grand Canyon. One of his children studied for three years in Boston. Voloshin is a board member of the East-West institute thinktank in New York, and counts Toby T Gati, a former US assistant secretary of state, among his professional contacts. His activities for American Ethane include a trip to Japan for investor presentations.
Journalists frequently seek out Voloshin. He is regarded as one of few Moscow experts who offer insight into the Kremlin’s opaque workings, albeit off the record.
American Ethane and Abramovich split in late 2015. The oligarch then took legal action to recoup his investment, made via his Moscow-based asset management company Millhouse. A settlement was reached a year later.
The Houston firm’s 20-year deal will involve ethane gas being delivered from a terminal on the Texas Gulf coast to a new ethylene plant in China to be built by the Nanshan Group. The gas will be delivered via specially built ships.