Russian Tycoon’s Arrest in Cambodian Jungle Highlights Oligarchs’ Fall

An inglorious chase on a tropical island marks the end of Sergei Polonsky's Cambodian sojourn

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Sergei Karpukhin / Reuters

Sergei Polonsky

A few hours before dawn on Monday morning, three speedboats loaded with Cambodian special forces set out from the country’s coast toward a tiny, tropical island to arrest the man who owns it: Russian real estate tycoon Sergei Polonsky. Only a few years removed from ranking among his country’s wealthiest men, Polonsky now had a Russian warrant for his arrest on charges of fraud, while the Cambodian authorities wanted him on suspicion of kidnapping — he had allegedly held the Cambodian crew of his boat at knifepoint last year before forcing them overboard. He has denied both sets of charges, insisting that the boat incident was self-defense. But that did not stop him from making one last dramatic attempt to escape.

According to his Russian lawyer, Alexander Karabanov, Polonsky’s sources in the Cambodian police tipped him off about the imminent raid on his private island, leaving him just enough time to flee — but not enough time to get dressed. “Sergei is now hiding somewhere in the jungle,” the lawyer told Russia’s RIA Novosti news agency on Monday morning. But within several hours, after a few dozen troops had combed through the island’s foliage, Polonsky was taken into custody, reportedly wearing nothing but a towel around his waist.

The news was treated in Russia’s state-run media with something approaching glee, and it’s easy to see why. The story’s cinematic elements reinforced one of the beloved narratives of the Kremlin’s propaganda press: under President Vladimir Putin, they like to insist, no amount of money can help avoid arrest. “For part of the political elite, this arrest is very valuable,” says Sergei Markov, a longtime Kremlin spin doctor who now teaches political science at Moscow’s Plekhanov Russian University of Economics. Especially for the so-called siloviki — the Kremlin clan made up of law enforcement and military brass — Polonsky’s arrest provides a rare chance to claim that “no one is untouchable” in Russia, says Markov, and that those accused of crimes will be brought home to face trial.

Never mind that Polonsky, 40, has long been on the brink of financial ruin. In the eyes of many workaday Russians, he is still rich enough to be associated with the oligarchs, whose wealth allowed them to run the country before Putin came to power in 2000. So the arrest felt in many ways like another nail in the coffin for these moguls, who not only lost their influence under Putin but also turned into national punching bags. During his first term in office, Putin’s immense popularity was rooted in his war against the oligarchs; most of them were either imprisoned during those four years, forced into exile or agreed to pay fealty to the Kremlin in exchange for a sense of security.

(MORE: Ghost of Scandal Past: The Khodorkovsky Case Haunts Putin’s Inner Circle)

“It was back then, in the 1990s, that the oligarchs were more powerful than the state and made their fortunes at the state’s expense,” says Masha Lipman, a political analyst at the Carnegie Endowment in Moscow. “But for more than 10 years now it’s been the exact opposite. The state has come out on top, and it can do with the wealthy as it pleases.”

Polonsky was among those who survived Putin’s purge. In 2008, at the end of Putin’s second term as President, Forbes magazine pegged his fortune at $4.35 billion, putting him in 40th place on the Russian rich list. But with the onset of the global financial crisis, Polonsky’s holding company, Mirax Group, was gutted along with much of the Russian real estate sector, and it began to collapse under the weight of its debts.

While many Russian corporations stood meekly in line for government bailouts, Polonsky’s relations with the state began to fray in 2010, when he publicly confronted a senior Kremlin official over Russia’s dismal business climate. The vast majority of Russian entrepreneurs, Polonsky noted, “are sitting on their suitcases,” ready to flee the country at any moment because of a constant fear of arrest. The official, Vladislav Surkov, was then in charge of modernizing Russia’s economy, and he gave a blistering response. “You’re allowed to walk straight into the Kremlin. You know all the ministers. You go to their country houses to talk shop. And you are still sitting on your suitcases,” Surkov said. “So let me pose a question. What will it take to get our country’s bourgeoisie off of their suitcases?”

Before a room full of television cameras, Surkov then reminded Polonsky of a famous remark the billionaire had made outside of a nightclub two years earlier. According to various press reports, Polonsky had told the people waiting outside the club that they could all “go to hell” if they don’t have a billion dollars. “Well, I don’t have a billion,” Surkov said with a wag of his finger. “And we don’t plan to go where you told us to go.”

(MORE: The Khodorkovsky Verdict: Scaring Off Investment in Russia)

The following year, Polonsky’s Mirax Group went bankrupt, and Russian police soon began investigating him for fraud related to a real estate deal in Moscow; while that investigation was under way, Polonsky decided to spend most of his time in Cambodia. But even there, he could not steer clear of the law. During a boating excursion on New Year’s Eve with two of his Russian friends, he got into an argument with the vessel’s local crew. According to local police and media reports, Polonsky and his friends threatened the crew with a knife, locked them in a cabin and then forced them to jump overboard within view of the shore. Cambodian police arrested him on charges of illegal detention, which Polonsky denied. But after three months in a local prison — where he complained in letters to the Russian Foreign Ministry that his cell lacked an air conditioner — Polonsky was granted bail on the condition he not leave the country.

Meanwhile, the Russian fraud investigation against him was gaining ground, and in August this year, Russian authorities filed an international warrant for Polonsky’s arrest. He continued to deny the charges from his home in Cambodia, which decided to grant him citizenship in September despite the unresolved kidnapping charges against him. But on Nov. 5, Polonsky’s photo appeared on the Interpol wanted list, and Cambodian authorities confirmed on Monday, after his arrest, that they would extradite him back to Moscow.

The Cambodian island of Koh Dek Koul, the last piece of paradise Polonsky owned, thus seems to be a fitting symbol of the options left for Russia’s disobedient tycoons — either a gilded cage in exile, or an iron one in Russia. For the past decade, the latter has been home to Russia’s most famous oligarch, Mikhail Khodorkovsky, who challenged Putin in 2003 and has been in prison ever since. “What happened today reminds me of the old theatrical adage,” says Markov. “Tragedies tend to repeat themselves in the form of farce. Back then, we saw an epic battle between Putin and the oligarchs … Now we just have the comic encore.”

At least in the form of schadenfreude, comedy ran through the reports on Monday that aired on Russian television. One correspondent, from the Kremlin’s leading network, Rossiya 24, was even on hand to film Polonsky in handcuffs on the Cambodian island of Koh Rong, where police reportedly found him in the jungle. “Of course I’m ready to fight,” he told the television crew between a stream of Russian obscenities. “We’ll play this game, folks. This is just the beginning.” But with that red towel flapping in the sun around his waist, it looked a whole lot more like the end.

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