Amid sanctions imposed by the United States and its European allies, Russian oligarchs have succeeded in hiding hundreds of billions of dollars in a number of countries including the United Kingdom, Switzerland, Cyprus, British Virgin Islands, Bahamas, Panama, the United Arab Emirates, Dominica and few other countries. It is also alleged that some of these ultra-rich have made secret investments in Iran, Lebanon and even North Korea.
Some oligarchs have also obtained dual citizenship in Britain and other Western countries and Caribbean nations, adding legal complications to attempts to unilaterally seize their assets.
According to a 2017 study of Russian oligarchs published by the US-based National Economic Bureau estimated that as much as US$800 billion is held by wealthy Russians in the United Kingdom, Switzerland, Cyprus, and similar offshore banking centers. That vast fortune, held by a few hundred ultra-rich individuals, is roughly equal to the wealth of the entire rest of the Russian population of 144 million people.
Many of the sanctions the United States and the European Union have imposed on Russia are meant to target some of the country’s wealthiest individuals who have reportedly ties to Russian President Vladimir Putin.
Yachts, sports teams, newspapers and luxury real estate are just some of the assets owned by these billionaires. Those assets and more will be the focus of President Biden’s new KleptoCapture task force that he announced during his State of the Union speech.
“I say to the Russian oligarchs and corrupt leaders who have bilked billions of dollars off this violent regime, ‘no more'”, Biden said.
“We are joining with our European allies to find and seize your yachts, your luxury apartments, your private jets. We are coming for your ill-begotten gains.”
But what’s the difference between a “normal” billionaire and a Russian “oligarch”?
In Russia, the oligarch title goes back to the early 1990s when the Soviet Union dissolved. Because the USSR was founded on communist principles, all means of production from oil to electricity to farming was state-owned.
When the Soviet Union fell, a corrupt, sometimes violent scramble ensued to take ownership of the country’s industrial infrastructure. Some of those who were vying for control took it by any means necessary.
As a result of their new business ownership, these individuals amassed significant wealth and ended up with the power necessary to manipulate the government alongside Boris Yeltsin, who became Russia’s president in 1991.
They constituted an oligarchy, a system of government in which a small group of people is in charge — oligarchs.
By the time Putin began his presidency in 2000, the government — run in part by the oligarchs — was highly dysfunctional. Putin went to work centralizing his authority and moving the oligarchs out of politics.
Some of them fled the country. Others were exiled, imprisoned or had their property seized. Those who remained largely agreed to stay out of politics and leave that to Putin. Others acquired citizenship in other countries and invested their wealth in the West.
When the US announced sanctions in response to Russia’s operations in Ukraine, the Treasury Department released a list of the companies and individuals who are being targeted. Today’s Russian oligarchs — at home and abroad — may no longer be in charge of the government, and “oligarch” is now something of a misnomer. But they certainly have benefited from the state’s largesse.
According to media reports, much of the wealth of Russia’s richest isn’t held in the sanctioned Russian banks. Putin and the oligarchs aligned with him have had decades to stash assets overseas, much of it hidden in ways specifically designed to avoid sanctions.
Though the Kremlin officially reports Putin’s income at US$131,900 annually, the Russian president is believed to benefit from many billions in cash and overseas assets held by trusted friends and relatives, many of whom are from his home city of St. Petersburg.
Some oligarchs have also obtained dual citizenship in Britain and other Western countries, adding legal complications to attempts to unilaterally seize their assets.
An example is Roman Abramovich, a former Russian provincial governor and Putin ally who became a steel and metals magnate. Now a dual Israeli citizen with a net worth estimated at more than US$13 billion, Abramovich has used his fortune to buy the British soccer club Chelsea and homes in London and New York.
Abramovich also owns what is purported to be the world’s most expensive superyacht, the 455-foot-long Solaris, which features a helicopter hanger, tennis court, pool and berths for about 100 guests and crew.
Also, not on the sanctions list is Alisher Usmanov, another Russian metals tycoon who was an early investor in Facebook. His fortune is estimated at more than US$14 billion.
Usmanov recently sold his stake in the British soccer club Arsenal for a reported US$700 million and, according to Forbes, owns two sprawling estates in London – the Beechwood House and Sutton Place –worth a combined US$300 million. Usmanov’s superyacht, Dilbar, measures 512 feet from bow to stern, even longer than Abramovich’s.
Putin’s power over the oligarchs should not be underestimated
Daniel Fried, a former US official under both Democratic and Republican administrations who helped craft US sanctions against Moscow in the wake of Putin’s 2014 invasion of the Crimean Peninsula, said he was surprised Abramovich and Usmanov weren’t on the sanctions list, given their long ties to Putin and visible assets in the West.
But, Fried warned, sanctioning Russian oligarchs would likely have limited impact on persuading Putin to change course in Ukraine.
“He owns them absolutely. He crushed them and they exist only by his sufferance”, said Fried. “He can jail them, or kill them, and the notion that the oligarchs can assert influence over Putin is foolish”.
Still, he said the opinion of wealthy, educated elites carries some intangible weight that Putin defies at his own risk. While sanctions are unlikely to drive the oligarchs away from Putin, they do raise for them the cost of their continued support.
“They can’t stop or vote him out of office. But he’s only in total control until he isn’t”, said Fried, who is now a fellow at the Washington-based Atlantic Council.
The family fortunes of many in Russia’s billionaires date back to the 1990s, the turbulent decade after the fall of the Soviet Union. Under the notoriously corrupt presidency of Boris Yeltsin, such key state-controlled assets as oil refineries, steel mills, aluminum smelters and tractor factories were gobbled up by the politically influential, often purchased with the aid of government-backed loans.
Then in 1999 Yeltsin unexpectedly resigned and the then-relatively unknown Putin was appointed as acting president. A former KGB agent, Putin had earlier been appointed by Yeltsin as the head of Russia’s FSB, among the country’s most powerful spying and security agencies.
Putin has ruled Russia for the last 22 years, crushing those who have dared challenge him.
Mikhail Khodorkovsky, an oil baron once believed to be the wealthiest man in Russia, ran afoul of Putin when he more fully embraced the free market and began criticizing the vestiges of Soviet central planning. Khodorkovsky was arrested by Russian authorities in 2003 and charged with fraud, money laundering and embezzlement. After spending a decade in jail, he was released in 2013 and fled to London, where he now leads a foundation, the Dossier Center, dedicated to exposing criminal activity by Kremlin insiders.
Boris Berezovsky, a mathematician turned Mercedes dealer who amassed a fortune by acquiring the country’s main television channel at the end of the Soviet era, was tried in absentia on charged of fraud and embezzlement after fleeing to London in 2000.
He was found dead on the bathroom floor of his home in southern England in 2013. His daughter said he feared he had been poisoned after losing a major court battle against Abramovich, his former business partner. Originally believed to be a suicide, a coroner recorded the cause of death as inconclusive.
“Every oligarch owes the preservation of their wealth to the Kremlin”, said Max Bergmann, a senior fellow at the Center for American Progress who also served at the State Department during the Obama administration. “The oligarch class is an important pillar of the Putin regime and is heavily exposed because their assets are held in the West – in villas in the South of France, condos in Trump properties, and in sports teams”.
The sanctions could force the Kremlin to make changes that would weaken Russia’s economy
Maria Shagina, a sanctions expert at the Helsinki-based Finnish Institute of International Affairs, said European countries are seeking to insulate their own economic interests from the effects of sanctions, whether that’s natural gas piped to Germany, diamonds imported from Siberian mines or Italian luxury cars and designer handbags sold in Moscow or St. Petersburg.
“We see that Europeans don’t want to bear any sanctions cost”, Shagina said. “It is painful for everyone”.
But, the experts said, the sanctions announced recently will cause pain and eventually force the Kremlin to make hard budgetary choices by weakening the Russian economy.
Russian billionaire’s bad investment in media
Despite the fact that a number of Russian ultra-rich or oligarch have invested significant amount in media – both in print and electronic, none of these media outlets are showing support towards President Vladimir Putin, Kremlin and those investors. Instead, these media outlets also are competing in demonizing Vladimir Putin and policymakers in Kremlin. The outlets are also enthusiastically serving the purpose of propaganda machine for neo-Nazis in Ukraine.
At home, though some of the billionaires have invested heavily in media, these outlets are not been able to play any role in countering anti-Moscow propaganda worldwide, mostly because, those are in vernacular language. Russia being one of the mightiest nations in the world with military and nuclear power is yet to have any media outlet – either at home or abroad, which can play important role in their favor – particularly during crucial periods.
