Sergei is on the way up. He is our man in Russia, responsible for running oilfield operations in the countries that once formed the Soviet Union. The business operates by means of a complex network of ‘country managers’, ‘product line chiefs’ and ‘division heads’, but in this part of the world, all reporting lines ultimately lead to Sergei, who sits at the apex of the hierarchy. Because of sanctions against Russia – which mean that US citizens can have only extremely limited involvement with Sergei’s domain – he has much more autonomy and power than his peers in other regions. And this level of responsibility seems to agree with him. He is big and broad and handsome, with a square jaw and cornflower blue eyes, like a Red Army hero; and he has a reputation for ruthlessness, for aggressive business practices and for driving his troops to the limit in pursuit of a profit.
These qualities have endeared him to the boys in the boardroom back in Texas. Despite being a Russki, he embodies the frontier spirit so beloved of oilmen. He reminds them of their younger selves, and of why they entered the business in the first place: the purity of his commitment to getting the deal done, the evident childlike delight he has in collecting the cash. But they also love him because he is a corporate magician and such men (in my company they are all men) are valued highly. Sergei has the ability to turn the vague, highfalutin language of the C-suite into the brutal vernacular of the oilfield. Men like Sergei are the means by which CEOs insulate themselves from the shit that has to happen if they are to deliver a dividend to shareholders.
Sergei calls me and demands that I conduct an internal investigation immediately. There has been a serious incident with our most important customer in the region. I am to fly to Moscow to speak to him before travelling on to Kazakhstan to carry out the investigation.
The company’s Moscow offices are new and almost prestigious. They occupy a number of floors in a plate-glass building a little way from the centre of the city, next to some dilapidated Soviet-era government buildings. When I arrive one of a number of young and beautiful receptionists leads me to the floor on which Sergei and his leadership team sit. She hands me over to Sergei’s equally young and beautiful PA, who takes me straight to his office.
‘The problem,’ Sergei tells me in his rumbling Boris Godunov voice, ‘is that the whole of my chemical division has conspired in a fraud against XCorp.’ XCorp is a massive state-owned energy conglomerate whose interests span the whole region; it is Sergei’s most important customer. ‘They have already fired thirty employees with more to come. We are the guilty party and we have not yet taken any action.’ This is serious indeed. Because of sanctions and the low price of oil, we are only just hanging on in Russia and Central Asia, and the fact that we have not yet had to withdraw from any countries in the region is in no small part owed to Sergei’s ability to keep this extremely demanding megacorporation happy. Sergei tells me what he knows.
The company that Sergei and I work for, an oilfield services provider, has won a lucrative contract with XCorp for a large range of drilling services. As part of that contract we have agreed to supply XCorp with the highest quality branded drilling chemicals. These chemicals are vital to getting oil out of the ground. They lubricate and insulate the borehole, maintain the stability of the well and contain the pressure within it. XCorp has discovered that, instead, we have been supplying low-grade versions that do not remotely match the specifications of the contracted substances. It gets worse, though, because it looks like we have also been using fake labels in an attempt to disguise the misconduct. And it is made heinous in Sergei’s eyes because he found out about the fraud only when a senior manager in XCorp told him about it. ‘To carry this off, the whole of the chemical division must have been involved and this is how I fucking find out.’ The personal offence that Sergei has taken is palpable. He shows me a photo on his phone of one of the fake labels next to a genuine one and then another of the interior of a warehouse with rows of pallets stacked high with bags of chemicals. The photos were sent by XCorp. ‘I have to do something. Our potential liability is huge.’ And he is right. Not only is there the prospect of losing the business of this notoriously vindictive customer (we hold multiple high-value contracts with them), but even if this were avoided there is the possibility of large claims for damages from XCorp and intellectual property suits from the makers of the branded chemicals.
My meeting with Sergei is over. Now Ivan, Sergei’s HR manager, who has been hovering just outside, ushers me into his own, smaller office, a couple of doors down the thickly carpeted corridor. He has attached himself to Sergei’s coat-tails and enjoys the reflected glory. But he is also painfully exposed to the whims of his master. He is facing the classic predicament of the middle manager: he holds a position of some power but is at the same time under a lot of pressure from the immeasurably more powerful corporate being above him. As a result he is aggressive, ingratiating, pushy, apologetic. I face a barrage of questions: What do I think? How long will the investigation last? When can I leave for Kazakhstan? I explain to Ivan that the investigation may be complex and that we will need to follow all the relevant protocols. ‘Yes, yes, yes.’ He stares down at his phone, scrolling for emails and messages.
Sergei’s PA has booked me into a hotel that has only recently opened. She tells me it will be good because it belongs to a Western chain. It is even further out of town and stands next to an enormous strip club. Several of my fellow guests are wearing T-shirts with a picture of a Kalashnikov and the slogan ‘Remember Bataclan’ printed on them. In my room, along with the Do Not Disturb notice, is a leaflet that forbids me to have sex with children in the hotel. The next day I set off for Kazakhstan. The facility at which the incident occurred is difficult to reach by air. There is no commercial airport anywhere near it and the internal flights the oil companies organise are fully booked for months in advance. So to get to the facility I will fly to Samara and then be driven south to enter Kazakhstan near Oral.
When we reach the border, I am questioned by both sets of guards. On the Russian side a young man in a large ushanka and greatcoat seizes my passport and takes me into an interview room. He instructs me to list every country I have ever visited. ‘Holidays as well?’ I ask. He nods. As I begin to name the countries, starting with family holidays in France, he slowly thumbs through my passport, finding something on every page to fascinate. When he has heard enough, he snaps the passport down on the table, thanks me and lets me go. On the other side of the border, the Kazakh guards are simply puzzled as to why an Englishman should be entering their country through this remote checkpoint. We drive and drive and drive, at first through villages of bungalows with corrugated iron roofs and small herds of farm animals and then out onto the steppe, with nothing but sky and the barren ground, dark purple, dark brown. It comes as a shock when towards the end of the day we see a road sign telling us we are approaching our destination. Soon we are driving past long stretches of security fence marking the perimeter of the huge area in which the base sits and where the employees from my company’s chemical division work and live alongside thousands of workers from many other oil companies.
The barrier lifts and we drive into the facility. It is bitingly cold and getting dark. A company employee, unconnected with the investigation, comes to meet me. He is swathed in a long, quilted coat with the hood pulled low over his face. We enter the main building, pass through various security checks and into a large hall that is used as a canteen and recreation area. Corridors lead off this central atrium at regular intervals like the spokes of a wheel. My escort takes off his coat to reveal his fluorescent orange overalls. Looking round, I see that all the other workers dotted around the canteen are also wearing this Guantánamo chic. He explains that some of the corridors lead to workshops and laboratories, others to sleeping quarters. The site is so remote that everyone there does a continuous tour of duty lasting several weeks before going on home leave, just as they would if they were stationed on an oil rig in the North Sea. I look outside. The sodium lamps around the perimeter are fizzing into life. It isn’t just the panopticon-style design of the building, the orange jumpsuits and the extremely tight security that convey the sense of having entered a penal colony. I realise that the sour-sweet odour of disinfectant mixed with the product of hundreds of men living and working in close proximity – a combination of food, sweat and farts – is identical to the whiff of a British category B dispersal prison.
I am given a small office off the canteen area to work in, and the next day I begin to call the various members of the chemical division for interview. The head of the division, Sasha, is a slight, young man with wire-framed glasses, who has been entrusted with much responsibility by Sergei. Once a favourite, he is now being weighed in the balance. He tells me what happened.
‘Because XCorp is such an important customer we agreed to supply them with only premium-grade, branded chemicals. We can only buy these from manufacturers in Europe and the United States.’
‘Was Sergei aware of this?’
‘Yes, he was. He signed the contract with XCorp.’ And this arrangement was fine as long as profits remained insanely high and spending on procurement by the big companies was lavish. But then disaster struck the Russian oil industry. Malaysia Airlines Flight 17 was shot down over Ukraine and sanctions were imposed. At the same time, the price of oil continued to collapse across the globe. Service companies like mine are multi-million-dollar multinationals in their own right but they are entirely dependent on the fortunes of the even larger global and state-owned oil companies. When these behemoths decide to tighten their belts, it spells trouble for everyone further down the food chain, and my company, like all the others, found itself struggling to avoid imploding completely. Radical cost-cutting – the more brutal, the better – became the order of the day. Thousands of employees across the world lost their jobs and senior managers searched desperately for ways to cut any expense. It was in this context that Sergei issued a command that it was now forbidden, under any circumstance, to use foreign branded chemicals.
‘Now we could only use domestically produced generics.’ So they were stuck. How could they both fulfil the terms of the contract with their most important customer and comply with Sergei’s order? The answer was, of course, that they could not.
‘Couldn’t you have told Sergei about the problem?’ After all, the contract contained a clause allowing us to request the customer’s approval for a change in the type of chemical that we were using. The answer was no. Sergei knew his people well. He had ensured that, at some visceral level, they understood they were not to burden him with difficulties of this kind. Sasha knew that if the issue were brought to Sergei’s attention he would be in an even deeper pickle. And even if, stretching the realms of possibility, he did go to Sergei, and if, even more unbelievably, Sergei went to XCorp, then XCorp would refuse to accept the cheaper chemicals. And then there would be no way out.
‘So what did you do?’
‘We …’ (Throughout our discussions Sasha always spoke of ‘we’ when describing the decisions and actions that he and the rest of the group took. At first I took this to be a way of trying to avoid responsibility for what had happened. After all, he was head of the division. But as I spent more time talking to him and the rest of his team, it really did seem as if they were all in it together – not so much a conspiracy as a collective faced with satisfying the Leader’s impossible demands.) ‘We – that is the head of sales, the laboratory chief, the business development manager …’ He reels off a list of the people who decided to solve this unsolvable industrial-scale problem in the only way they felt left to them, namely by perpetrating an industrial-scale scam.
Interview by interview, the story emerges in all its risky and reckless detail. The collective decided to mix their own versions of the chemicals in the company laboratories. They tested the formulae to make sure they worked and then they found a Russian company to produce the chemicals at a fraction of the price of the foreign products. The problem now was that although they did the job, the chemicals didn’t look anything like the branded ones. So the team took the deception a step further and went to a Russian printing firm, which replicated the labelling of the branded products. And this is where it went wrong. One of the more junior plotters was given the task of taking the original Cyrillic labels off and sticking the faux-foreign ones on. Faced with the tedious task of doing this a million and one times – and apparently disregarding the fact that discovery would mean instant ruin – the junior plotter told his staff to slap the fake labels on top of the original ones. The bags were then transported to Kazakhstan. In the freezing conditions of the steppe winter, in the mouldering warehouse, the dodgy labels began to peel off, revealing the true provenance of the chemicals. And in the spring, XCorp’s auditors decided to do a stock check of chemicals at the facility.
In interview, the conspirators seem to speak almost fondly of their brief chance to thumb a nose at The Man, but now the time of reckoning has arrived and they are scared. It is extremely unpleasant to see people so intimidated. They are afraid of Sergei, of XCorp, and, at this moment as I sit across a desk from them in a dingy room, they are afraid of me. For Russians and Kazakhs (the team is made up of both) the concept of an investigation has a much deeper significance than it can ever have for someone from a Western democratic state. It is difficult to persuade them that it will be conducted in accordance with due process and its results considered impartially. For the citizens of these countries there is a deeply held presumption that any process involving an official asking questions is inherently weighted against them, that the information will somehow end up with one of the numerous domestic intelligence agencies, and that in the case of a foreign interlocutor such as me, it is being gathered on behalf of MI6 or the CIA.
Although an acute awareness of past political terror certainly informs this attitude, these are not purely atavistic fears. One of the reasons I am handling this investigation is that the senior company investigator for this region, an ex-FSB officer called Pavel, has recently been relieved of his duties. It has been discovered that Pavel’s investigative technique does not stretch to gathering any actual evidence or interviewing witnesses or making a finding based on the available facts. Instead, Pavel has been deciding an individual’s guilt intuitively, thus dispensing with the need for lengthy inquiries. This MO has resulted in an extraordinary success rate: so astronomically high, in fact, that the head of investigations in the US, more used to seeing most cases unsubstantiated, became suspicious and looked into Pavel’s conduct.
I met Pavel in Moscow before I travelled out to Kazakhstan. We sat in a conference room one of whose walls was entirely covered by a map of the territories of the former USSR. Pavel looked every inch the ex-secret policeman – crew cut, black leather jacket – and when I ask him about his suspension he does not admit the problem. On the contrary, the fact that he has been sanctioned for having too high a clean-up rate irks him. He is sulky and truculent, but one thing leads to another and soon we are discussing the Great Patriotic War. Using the map, Pavel gives me his view on where Operation Barbarossa went wrong and segues neatly from the strategic to the tactical, providing a detailed account of the Battle of Kursk. When our meeting ends, Pavel, slightly mollified but completely unrepentant, wishes me luck.
On the final day at the facility in Kazakhstan, Ivan, the HR manager in Moscow, calls and asks me to interview someone who isn’t on my list and who doesn’t seem to have had any connection with the incident at all. The man, whose name is Aleksei, used to work in the chemical division but left it long before the conspirators formulated their plan. None of the other interviewees have mentioned him and I haven’t seen his name in any of the many documents in the investigation bundle.
‘Nevertheless,’ Ivan says, ‘you should interview him.’ When he shows up at my office, Aleksei confirms that he knows nothing about the scam. He left the chemical division long ago. But he doesn’t seem surprised at being dragged into this affair and is as jumpy as any of the actual conspirators. ‘Now you have told me what has happened,’ he says, ‘ I see that they have done the wrong thing.’ Aleksei is the last person I speak with. The interviews have gone on for longer than expected and Ivan is getting nervous. Sergei needs a report. He needs to be seen to be taking action. I tell him that I will return to Moscow and give Sergei my preliminary findings but that the final report will have to be submitted to head office in Texas and dealt with there, given the scale and seriousness of the issue. ‘Yes, yes, yes,’ Ivan says, irritably, and hangs up.
On the drive back, as we approach the border, a freezing fog falls. The driver cranes forward, trying to gain a few extra inches of visibility. Ours has been the only car on the road for long stretches of the journey but as we get near the frontier the amount of traffic has increased. Suddenly a BMW, coming from behind us, flashes past. Its rear lights glow, blink, disappear. We catch up with it two minutes later. The car has crashed into a number of other vehicles, one of which has been shunted into a roadside ditch and turned over. The BMW itself has spun round and is facing towards us. It has sustained significant damage; bits of bodywork and shards of glass are scattered on the road. A distressed young woman struggles out of the back seat. The driver gets out – he doesn’t seem to be injured – while another passenger, a man, stays in the front seat. The driver walks calmly around the car and rips off its number plates.
He helps the woman back into the car, and gets back in himself. Carefully, the driver edges the car around the accident scene and then accelerates away. The police arrive quite quickly afterwards and set up a cordon. My driver goes to speak to them and reports back. The policemen say that the passenger must have been a politician, an intelligence officer or a gangster. ‘Or all three,’ he jokes.
‘Kazakh or Russian?’ I ask and he shrugs. Presently an ambulance arrives, the detritus is cleared and we carry on.
Back in my Moscow hotel room I write up a crude summary of the investigation in order to brief Sergei. I take a sheet of paper and write some headings on it: Name / Action taken / Culpability / Mitigation. There are a large number of names. In the ‘Action’ column I write a sentence describing what each interviewee has done. In the ‘Culpability’ column, the level of knowledge of and responsibility for the scam; in the ‘Mitigation’ column, anything that might go towards excusing, explaining or justifying their actions. The scale of involvement ranges from total immersion in all aspects of the conspiracy at one end to having been told to stick labels on sacks by senior management at the other. Because I have interviewed him, I add Aleksei to the bottom of the list. His entry states that he took no action in furtherance of the conspiracy, had no knowledge of it and bears no culpability whatsoever.
The next day I go to see Sergei and give him my interim findings. At one point he interrupts. ‘Why didn’t they come and speak to me?’ he asks. We both know why. And then without my having to raise it, he talks about the escape clause in the contract they could have used. ‘It wouldn’t have worked, mind you,’ he says with a twinkle. ‘But they could have tried.’ Finally we work our way through to Aleksei. I explain to Sergei that he had nothing to do with the fraud and was not aware of it. Sergei holds up an index finger: ‘Ah, but he should have been.’ Our conversation is over.
The next day everyone on the list is fired, including Aleksei. No goodbyes, no payoffs, no nothing. But Sergei’s autonomy does have certain limits. Because he needs these dead souls to be taken off the payroll, HR in the US needs to be informed. In fact there is such a large number – and to a cynic the number might look like an attempt to match the number of firings at XCorp almost exactly – that the global head of HR is told about it. He is apparently furious at the failure to follow procedures. Sergei’s boardroom mentors, on the other hand, are more sanguine about what has happened: it is an excess of enthusiasm, merely Sergei doing the right thing at the double, thinking faster than anyone else. And besides, thanks to his prompt response the doomsday scenario of losing XCorp’s business has been avoided. The rest is mere detail. To make sure that everyone gets the idea that HR policies must be followed to the letter and that he will not tolerate any procedural laxity, Sergei fires his lapdog, Ivan, with immediate effect.