From yachts, private jets and mansions to football clubs, Russian oligarchs have been facing the heat of sanctions from various countries, especially the US, in the wake of the Russian invasion. While the list grows longer each day and the war on Ukraine continues, there are plenty of questions as to who gets sanctioned and why.
Amid a broad suite of economic sanctions targeting the Russian financial system, which has driven the Ruble’s value to record lows, Western powers are also increasing their efforts to identify and freeze the assets of Putin’s business allies. We take a look at who these Russian oligarchs are and how they have been hit following Moscow’s decision to invade Ukraine.
Who are oligarchs?
In an attempt to understand the nature of these sanctions, one must first know about where the money comes from so as to make these people not only rich, but also powerful. The term has its origins in theories of political science according to which an oligarchy describes a power system led by a small group of people. In recent years, the word “oligarch” has taken on a more specific meaning when it relates to Russia, referring to the group of businesspeople and officials who gained wealth and power in two distinct ways following the collapse of the Soviet Union.
The first group emerged out of the privatisation of the 1990s, particularly the all-cash sales of the largest state-owned enterprises after 1995. This process was marred by significant corruption, culminating in the infamous “loans for shares” scheme, which transferred stakes in 12 large natural resource companies from the government to select tycoons in exchange for loans intended to shore up the federal budget.
After Vladimir Putin became the President in 2000, he facilitated the second wave of oligarchs via state contracts. Private suppliers in many sectors like infrastructure, defence and healthcare would overcharge the government by charging prices many times the market rate and offering kickbacks to the state officials involved. Thus, Putin enriched a new legion of oligarchs who owed their enormous fortunes to him.
How is the West trying to freeze out these oligarchs?
In response to Russia’s invasion of Ukraine, the US, the European Union, the UK, Australia and others have said that they will be moving to scrutinise the assets of a handful of rich and powerful Russians.
Recently, the Boris Johnson-led government put several oligarchs, including billionaire and Chelsea FC owner Roman Abramovich and aluminium magnate Oleg Deripaska, on its sanctions list. Chelsea is high-profile collateral damage from sanctions, after Britain froze all of Abramovich’s assets in the country. Besides the sanctions in the UK, a US lawmaker has also written to the Biden administration requesting a freeze on Abramovich’s funds at Concord Management, a financial-advisory company in New York.
Over the weekend, Italian authorities swooped in and seized a number of yachts and villas owned by some of Russia’s sanctioned billionaires. A few days before, French customs officers got a tip that another super yacht belonging to an oligarch was getting ready to set sail, and seized it. The Justice Department joined other countries in setting up special task forces to hunt down assets. The US named its team Task Force KleptoCapture. Investors are reportedly asking questions of Eisler Capital, a London-based hedge fund founded with money from Mikhail Fridman, a Russian billionaire recently sanctioned by the EU.
The US has targeted individuals including Russian billionaire financier Alisher Usmanov, Nikolai Tokarev, the chief executive of energy company Transneft, and Dmitry Peskov, the Kremlin spokesman. Speaking before meeting with his cabinet at the White House on Thursday, President Joe Biden had said the move was part of the “severe economic sanctions” being levied on Moscow, which were already having a “profound impact”. The Biden administration has said the oligarchs provide resources to support Putin’s Ukraine military campaign and must pay the price. Putin is “looking at the impact on his own economy, on his rich and wealthy oligarch friends, and on the people of Russia,” White House press secretary Jen Psaki said in February about the US and allied sanction effort.
Other individuals sanctioned by the US included Boris Rotenberg, Arkady Rotenberg, Sergei Chemezov, Igor Shuvalov, and Yevgeniy Prigozhin. The measures were extended to some of the family members of the Russian oligarchs. The White House also announced the state department would implement visa restrictions on 19 Russian oligarchs and 47 of their relatives.
The US Treasury has said that Usmanov’s Kremlin ties “enrich him and enable his luxurious lifestyle”, noting that he owns one of the world’s largest superyachts, worth between $600 million and $735 million, and a private Airbus a340 jet, registered in the Isle of Man, worth between $350 million and $500 million.
A former caterer turned warlord, Prigozhin has been sanctioned repeatedly for running a “troll farm” that meddled in the 2016 US election as well as his Wagner mercenary group’s alleged war crimes in Africa. Chemezov, who served alongside Putin in the KGB in Dresden in the late 1980s, heads up Rostec, Russia’s enormous state defence and technology conglomerate.
According to the US, Tokarev also served with Putin in the KGB in East Germany, and had since built “a business and real estate empire extending throughout Russia and into Europe”.
How have some of the oligarchs reacted?
Oleg Deripaska wrote on social media that peace “is very important”. Deripaska had sued the Treasury Department in 2019 challenging his inclusion in an agency report on Russian oligarchs as well as the sanctions against him, alleging that the US made false accusations based on rumours and innuendo to support the sanctions.
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Fridman, who is the founder of Russia’s largest private bank, the Alfa Bank, said that he would contest the designation and that he isn’t politically or financially connected to Putin. “It seems to me that we have done a lot of good things, invested in companies, created a lot of jobs,” Fridman said at his office in London. “We will litigate to protect our reputation.”
Is there an escape route for these oligarchs?
Allies of Putin, arriving on private jets and yachts, are still welcome in the United Arab Emirates, which has yet to condemn the Ukraine invasion or enforce sanctions. At least 38 businessmen or officials linked to Putin own dozens of properties in Dubai, collectively valued at more than $314 million, according to previously unreported data compiled by the nonprofit Center for Advanced Defense Studies. Six of those owners are under sanctions by the US or the EU, and another oligarch facing sanctions has a yacht moored there.
Speaking about how effective these sanctions might be, Adam Smith, a lawyer and former adviser to the US Treasury Department office that administers such measures, had told the New York Times: “Sanctions are only as strong as the weakest link. Any financial centre that is willing to do business when others are not could provide a leak in the dike and undermine the overall measures.”