LONDON – Oleg Deripaska, the 38-year-old owner of Russian Aluminium and Russia’s youngest billionaire, is considered to be the oligarch closest to the Kremlin. Related to the political family of former President Boris Yeltsin – he is married to the daughter of Yeltsin’s press secretary – he occupies a position at the heart of the Russian power elite.

An indication of Deripaska’s influence was clearly evident half a year ago when President Vladimir Putin gave his blessing to the merger between Russian Aluminium (RusAl), SUAL (another key Russian aluminium producer) and Glencore, creating the world’s largest aluminum producer. Deripaska emerged as the majority shareholder.

Yet some of Deripaska’s recent steps suggest he is hedging his bets. Not only has he purchased a luxury villa in London and a number of prestigious British businesses, including the Jaguar car manufacturer, but he has also secretly met in London with a well-known exiled Russian oligarch, who is openly working to depose the Putin’s regime.

Deripaska’s motives combine a closely interwoven mix of financial interests, personal political ambitions and family interests. For now, his only announced political interest might be to become the Governor of Russia’s Krasnodar region. However, as far back as the late ‘90s, Deripaska’s business patron, oligarch Michael Cherney – who is now suing his former protégé for a 20% stake of RusAl – claimed that Deripaska could become Russia’s Prime Minister. Since then, the young billionaire reportedly not only has maintained this ambition but took it to the new level – the rumors are that Yeltsin’s family sees him as Putin’s successor.

In order to safeguard his power from oligarch-sponsored coups or the spectre of an “Orange Revolution,” Putin has taken drastic steps. He has jailed the former owner of the giant Yukos oil company, Mikhail Khordorkovsky, and forced several oligarchs, including Khordorkovsky’s partner, Leonid Nevzlin, and Berezovsky himself to flee the country. Others are kept on a short leash, courtesy of a thick pile of compromising files that the KGB and its successor, the FSB, has accumulated. Despite his young age, Deripaska’s file is among the thickest.

The heaviest shadow hanging over him is billions of dollars in allegedly unpaid taxes. According to experts, the Kremlin can exercise its option to use this card against Deripaska just as it used tax evasion to secure a long jail sentence for Khodorkovsky.

According to investigations conducted by Mineweb www.mineweb.net , Deripaska’s cash-flow managers have for years encumbered Deripaska’s Russian assets with debt, passing RusAl’s cash through to a holding company for asset purchases in other sectors. This has secured profits abroad – in part, through the creation of a parallel bauxite-to-metal production chain that could not be taken over in a crunch by the Kremlin.

Deripaska produces aluminium metal in Russian smelters, but his former spokesman, Yevgenia Harrison, once publicly conceded that most of the RusAl’s profit is earned offshore. "To a very large extent,” she said, “we are processors of imported raw materials. Thus, a relatively large portion of RusAl's value added is created outside of the Russian Federation."

This tactic, known as tolling, involves a chain of contracts according to which raw materials, such as alumina, are supplied to a smelter, which electrolyses it into metal. This is then returned to the owner of the alumina and the trading chain.

In Russia, this approach has the advantage of dodging the 18 per cent value-added tax, as well as other taxes that are payable when the alumina enters the country, and the metal leaves it. But if the scheme is owned and secretly controlled by a single Russian individual with the objective of avoiding tax, then, according to the letter of the law, it is deemed to be illegal. The perpetrator of such a scheme could thus be vulnerable to heavy back-tax claims, penalties and interest.

Other tax avoidance schemes associated by some with RusAl have been investigated by Russian government agencies as well as by the independent Accounting Chamber. Conclusions allegedly indicate that registration of trading companies handling the metal in Russia’s Chukotka region, which offered tax relief in return for local investments, was never made.

It would not take much a great leap of the imagination for Putin to summon the head of the Accounting Chamber, Sergei Stepashin, or one of the newly appointed federal prosecutors who specialise in tax, to request an estimate of how much RusAl might have paid in taxes had it not benefited from these schemes.

There has been only one known instance of a Tax Ministry investigation of RusAl’s domestic tax payments. According to a report dated September 6, 2004, tax payment rates of several major Russian metals companies were compared. RusAl was disclosed to have paid tax amounting to just 2 per cent of its revenues. This was well below comparable rates reported by the Tax Ministry for other metal-exporting companies that were examined, and even further behind the rates disclosed by Russian oil exporters.

Rough estimates can be made of RusAl’s potential tax duty to the Kremlin, either by applying a percentage of tax approximating the Russian metals industry norm or based on the difference between the value of a ton of RusAl aluminum declared for export as it leaves Russia, and the value of the same metal entering a western market for import.

One very rough estimate of the tax avoided in this way would be between $800 million and $1 billion each year. If this is multiplied by the number of years that Putin has been in office – years of boom in aluminum prices – RusAl’s potential tax liability under Russia’s transfer pricing and related tax rules could be around $5 billion.

Beyond fiscal red flags, Deripaska is also vulnerable to charges of even more serious crimes. Russia quite readily placed Nevzlin, who now resides in Israel, on its most-wanted list for oil-related murders, allegedly committed in early ‘90s. Similar allegations could be leveled against Deripaska. The Russian media is already awash with tales of unsolved contract murders of directors of various factories from 1996 to 2002. Curiously, much of the victims’ stock ended up under Deripaska’s control. Besides that, it was frequently reported that articles of incorporation of early Deripaska’s companies carried the names of the so-called leaders of Izmailovskaya and Podolskaya Groups, the infamous Russian organized crime syndicates.

Deripaska knows he is on a short leash. If Putin’s hand tugs at that leash, deliberately or not, the young oligarch has prepared a soft-landing in London, and has reportedly entered into secret negotiations with active Kremlin foes.

“Kremlin politics,” as Winston Churchill once observed, “resemble a bulldog fight under the carpet.” Not much has changed. There is still plenty of conspiratorial activity in those dark and menacing corridors. The outlook is always murky, the outcomes always unknown.