However, the President Joe Biden’s raft of sanctions against oligarchs that he announced this week as a response to the invasion in Ukraine might not be enough to dampen the jet-setting lifestyles and fame of Russia’s super-rich and famous – and less force the withdrawal of tanks or troops.
U.S. sanctions have been placed on Russian President Vladmir Putin, and a few individuals thought to be close security advisors to him, including Foreign Minister Sergey Lavrov. The list also has a notable distinction for who it doesn’t include — many of the most prominent names on Forbes’ list of Russia’s richest Russians, whose multi-billion dollar fortunes are now intertwined in the West. This includes investments in Silicon Valley start ups and British Premier League soccer teams.
The U.S. didn’t punish Russia with the harshest punishment possible, but it did ban Russia from SWIFT, an international financial system used by banks to move money around the globe.
Biden stated Thursday that the new U.S. sanctions would still cripple Russia’s financial sector and stymie Russia’s economic growth. He targeted Russia’s largest banks, which according to the Treasury Department hold nearly 80% of the country’s banking assets.
Putin is the aggressor. Putin chose to wage war. He and his country now will pay the consequences,” Biden stated, listing measures that would “impose severe costs on the Russian economy both immediately and over the long-term.”
However, much of Russia’s wealth isn’t in sanctioned Russian banks. Putin and his oligarchs have been able to hide assets abroad for decades, many of which were hidden in ways that avoid sanctions.
Although Putin’s annual income is reported by the Kremlin at $131,900, it is believed that Putin has many billions of dollars and other assets in the hands of trusted friends and family, many of whom live in his hometown of St. Petersburg.
The U.S.-based National Economic Bureau published a 2017 study on Russian oligarchs and estimated that up to $800 billion was held by wealthy Russians living in the United Kingdom, Switzerland or Cyprus. This vast fortune is held by just a few hundred wealthy individuals and roughly equals the wealth of the whole Russian population of 144 millions.
Many oligarchs also have dual citizenship in Britain or other Western countries. This adds legal complexity to any attempt to seize assets unilaterally.
Roman Abramovich is an example. He was a former Russian governor and Putin ally and became a steel- and metals magnate. Abramovich, a dual Israeli citizen who has a net worth of more than $13billion, used his wealth to purchase the British soccer team Chelsea as well as homes in London and New York. His ex-wife, Ivanka Trump, and Jared Kushner (the daughter and son-in law of former President Donald Trump), were frequent socializers.
Abramovich also has what is believed to be the most expensive superyacht in the world, the Solaris (455 feet long), which boasts a helicopter hanger and tennis court, pool, and berths for around 100 guests and crew.
Alisher Usmanov is another Russian metals tycoon and early investor in Facebook. He is not on the sanction list. His fortune is estimated to be more than $14 billion.
According to Forbes, Usmanov has sold his stake in Arsenal, a British soccer team, for $700 million. He also owns two large estates in London, the Beechwood House (worth $300 million) and Sutton Place (worth $300 million). Dilbar, Usmanov’s superyacht measures 512 feet bow to stern. It is longer than Abramovich’s.
Former U.S. official in both Democratic and Republican administrations, Daniel Fried said that he was surprised that Usmanov and Abramovich weren’t included on the U.S. sanctions list Thursday. This is despite their close ties with Putin and other visible assets in West.
Fried cautioned that sanctions on Russian oligarchs will likely have little impact on convincing Putin to change his mind about Ukraine.
They are his. Fried said that he crushed them, and they are only possible because of his suffering.” Fried said that he could either jail or kill them and that Putin can be influenced by the oligarchs.
He said that the opinions of educated, wealthy elites carry some weight, which Putin must ignore at his own peril. Although sanctions won’t drive Putin away, they can raise the cost for their continued support.
They can’t stop him or vote him out. Fried, who is now a fellow with the Washington-based Atlantic Council, said that he has no control over his actions until he loses it.
Many of Russia’s billionaires have their fortunes back to the 1990s. This was the turbulent decade following the collapse of the Soviet Union. Boris Yeltsin’s corrupt presidency saw key state assets like oil refineries, steel smelters, and tractor factories being seized by the politically powerful, often with the help of loans from the government.
In 1999, Yeltsin abruptly resigned. The then-relatively unknown Putin was elected acting president. Yeltsin had previously appointed Putin, a former KGB agent as head of Russia’s FSB. This is one of the most powerful spying and security organizations in Russia.
Putin has ruled Russia over the past 22 years, crushing all those who dare challenge him.
Mikhail Khodorkovsky was once an oil baron and believed to be Russia’s richest man. However, he became more open to the free market and started criticizing Soviet central planning. In 2003, Russian authorities arrested Khodorkovsky and charged him with fraud, money laundering, and embezzlement. After a decade in prison, Khodorkovsky was released by Russian authorities in 2003. He fled to London in 2013, where he leads the Dossier Center foundation dedicated to uncovering criminal activity committed by Kremlin officials.
Boris Berezovsky was a mathematician and Mercedes dealer who made a fortune buying the country’s main TV channel after the Soviet collapse. He fled to London in 2000, but was later charged with fraud and embezzlement.
In 2013, he was found dead in his bathroom in south England. After losing a significant court battle against Abramovich (his former business partner), his daughter claimed that he believed he was poisoned. Although initially believed to have been a suicide, the coroner ruled that it was not conclusive.
Max Bergmann, a Senior Fellow at the Center for American Progress and a former State Department employee during the Obama administration, stated that every oligarch owes their wealth preservation to the Kremlin. “The Putin regime’s oligarchs are a key pillar and their assets in the West, such as condos in Trump properties and villas in South France, make them vulnerable.
Maria Shagina, a Finnish Institute of International Affairs sanctions expert, stated that European countries seek to protect their economic interests from the consequences of sanctions. This could be natural gas being piped to Germany or diamonds from Siberian mines. It also includes luxury cars imported from Italy and designer handbags selling in Moscow or St. Petersburg.
Shagina stated, “We see that Europeans do not want to bear any sanctions costs.” It is difficult for all.
Experts say that the sanctions, which were announced this week, will cause some pain and force the Kremlin into difficult budgetary decisions by weakening Russia’s economy.
The majority of Russians are much poorer than their Western counterparts. According to 2020 data from The World Bank, the Russian Federation is ranked 83rd in per-capita gross domestic product. This means that it costs just $11,000 per person. This is less than one-third of the European Union average and approximately one-sixth per-capita GDP in the United States.
Bergmann stated that Putin will need to make a choice between paying pensioners or putting money in his military. “So sanctions serve only to weaken Putin’s power over the long-term.”
Wealthy Russians are now investing in cryptocurrency and other emerging strategies to protect themselves, much as they did to adapt to earlier rounds of U.S. sanctions after Putin’s 2014 Crimean invasion.
Marhsall Billingslea said that sanctions enforcement is “inherently a cat and mouse game.” He also helped to establish the Trump administration’s sanctions policy. “They’ve had eight year, ever since Crimea to set up alternate mechanisms to keep hard currency flowing towards the regime.
Edward Fishman, an ex-State Department official under the Obama administration, stated that the decision to sanction Putin is a strong signal to support the Ukrainians currently under attack. However, the sanctions will not have any real impact on Putin.
Fishman stated that “No sanctions can dramatically reduce Putin’s quality life… Putin treats Russia’s economy as his personal piggy bank.” “President Putin’s wealth comes from the hard-earned wages and oil exports of Russian taxpayers.”
