How a complex web of Russian money could be compromising the EU’s youngest member

Dr Stephen Blank investigates the dark web of money flowing into Europe from Moscow.
Kupari beach resort | Source: Isak Wiklund/dreamstime.com

By Dr Stephen Blank

Dr Stephen Blank is a Senior Fellow at the Foreign Policy Research Institute

10 Jun 2021

Europe should pay closer attention: Russian oligarchs are making inroads into Croatia, the EU’s bridge to the Balkans. As the EU’s newest member, with strategic geography, it’s unsurprising its being infiltrated by Russian money. What is surprising is Europe’s apparent disinterest in bourgeoning Russian influence within the young Eastern European country.

Since the breakup of Yugoslavia,  Russia has invested more than €400 million into Croatia. Much of this has come from businessmen like Viktor Vekselberg, a controversial figure who, according to the New York Times, was questioned by US authorities in relation to Moscow’s recent interference in American elections.

Vekselberg is a major investor in Croatian tourism. As the industry contributes some 20 percent of Croatia’s GDP, it makes sense that Russian resources would target the sector. However, their influence does not stop there.

One of Croatia’s major parties, the Christian Democratic Union (HDZ), has a history of corruption. Only recently, Croatia’s Nacional magazine reported that one of HDZ’s major donors was an endowment with non-transparent Russian money behind it. The specifics of the scandal are complex, with connections reaching as far as Finland.

Sometimes complexity hides what could be criminality - and in the cases above, and below, that suspect behaviour has formed a web stretching across much of Europe.

The most concerning examples of Russian interference are the most difficult to untangle. Consider, for example, the case study of Sergei Glyadelkin, a major Russian businessman whose Austria-based Avenue Group enjoys annual revenues of some $500 million and has also been said to have made corrupt donations to the HDZ, according to Total News Croatia.

“Despite numerous valid concerns, Russian businessmen continue to expand interests in Croatia. That means Russian dark money is likely to flow to Croatia unless Europe takes actions to protect, what is becoming, its soft underbelly”

Glyadelkin’s dealings, like Vekselberg’s and the HDZ scandal, suggest worrisome implications for Croatia and, by extension, Europe. The highly regarded investigative news platform Meduza reported that Avenue Group realised its wealth through high-level political connections and according to Nasha Versia - an independent Russian publication - as far back as 2011, Russia’s FSB extended its protection to Glyadelkin and forgave his debts.

According to the think tank Atlantic Council, Glyadelkin’s connections further extend to Igor Chaika, a son of the former Russian Prosecutor General. As business partners, RusLetter reports Chaika’s and Glyadelkin’s projects may well have overlapped with the FSB - successor to the KGB.

The investigative platform Cheka-OGPU claims that Igor Tkach - Glyadelkin’s cousin and business partner- is a former high-level official in Moscow city government, who is also on personal terms with Ivan Tkachev, a top FSB general who, as The Economist reports, is known for interrogating and imprisoning Russia’s elite.

Considering Europe’s stance towards Russia’s illegal occupation of Crimea, it surely deserves greater attention that, until last year, Tkach was active in Roskapstroy, a Russian governmental body that, as published by the state-run Russian Gazette, now oversees construction projects in Crimea. Today, Tkach is a minority shareholder in the primary Avenue holding company.

And what about Avenue’s activities? According to Croatian outlet, The Daily, in 2014 Glyadelkin acquired a majority share in Hidroelektra, a financially struggling construction company listed on Croatia’s stock exchange. From that year, Hidroelektra was responsible for several construction projects which were delayed if not cancelled as it declared bankruptcy.

Though Hidroelektra did not complete these projects, according to Total Croatia News, they received non-refundable EU funds and public funding. Lider, a reputable Croatian business magazine, reported Glyadelkin’s shares in Hidroelektra, which had been held through his Austrian company Avenue Osteuropa, were subsequently transferred to a Russian entity, Gloriya-Vintex LLC.

The resulting muddled legal structure made uncovering the company’s financial dealings incredibly difficult, if not impossible. Despite the bankruptcy proceedings having begun in 2019, the full nature of Hidroelektra’s finances and operations, as well as its relationship to other entities owned by or affiliated with Glyadelkin, remain unclear.

The bankruptcy process has also resulted in questions being raised about unfair employment practices, unpaid suppliers and irregular accounting according to reports by Croatian news magazine Nacional. Despite that bankruptcy, Glyadelkin continues to do business in Croatia. According to the same report, his aspirations include taking a slice of the Croatian tourism industry through a controversial and much delayed holiday development on the island of Kupari. 

This unchecked behaviour is likely to spread. The EU’s lack of interest in these, and similar, business practices has done nothing to curb Glyadelkin’s influence and relationships from extending deeper into the continent. In Austria, for example, Europe’s largest credit agency states Glyadelkin and Tkach share ownership of Austria-based Avenue Holdings GmbH.

“This should not only raise questions but make all Europeans wonder what exactly is transpiring in Croatia and Austria and what these kinds of activities mean for the independence of vulnerable nation-states”

This is the same Tkach who, as a high-ranking Moscow government official, granted lucrative state construction contracts, including for Glyadelkin’s benefit. As shared by the Russian Legal Information Agency, after departing public office, Tkach, through another representative of Glyadelkin, acquired his 27 percent direct stake in Avenue Holdings GmbH (Glyadelkin’s company) for a curiously profitable transaction of €50,000 - though the company is worth at least €100 million.

This should not only raise questions but make all Europeans wonder what exactly is transpiring in Croatia and Austria and what these kinds of activities mean for the independence of vulnerable nation-states, or established EU Member States, and their vulnerability to Russian interference.

It is no secret there are companies too big to fail as the fallout would be too damaging. But when those companies leave a trail of questionable practices and unanswered questions and have ties to the governments and elites of countries hostile to the EU, Brussels should consider these peculiar characters a potential threat to geopolitical stability.

For instance, it does not seem unbelievable to assume that when Croatia indicated its preference for Russian vaccines, rather than wait for the EU’s, it was due to cumulative impact of such influence.

Despite numerous valid concerns, Russian businessmen continue to expand interests in Croatia. That means Russian dark money is likely to flow to Croatia unless Europe takes actions to protect, what is becoming, its soft underbelly.

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