WHEN THE OLIGARCHS SAIL AWAY

The sanctions imposed on Russia are hardly having any visible effect on Putin’s belligerent decisions, and the war is costing tens of billions of euros. In part, these are cynical investments, because Europe and the United States, if (as we all hope) Ukraine wins, will get significant slices of the reconstruction contracts. The fact is that as the invasion continues, its costs continue to rise, and the West is seriously considering recovering some of the costs by seizing the assets of Russians who have been hiding from the Russian tax authorities for years and enjoying the benefits of disproportionate wealth.

Putin knew this would happen. A few hours after the invasion began, on 24 February 2022, he summoned 37 of the country’s most important business executives to the Kremlin, including at least 12 billionaires. Two of them, Mikhail Gutseriev and Suleiman Kerimov, are already the subject of US and EU sanctions. The purpose of the meeting is to inform them of the attack, with Putin stating that he had no choice but to invade and that he was aware that Russia was likely to be hit by new sanctions. After speaking, Putin leaves the room without allowing the businessmen to comment[1], leaving the oligarchs frustrated and alone.

Since the day of the invasion, Europe has been hunting down Putin supporters, trying to prevent their economic support for the Kremlin. Today, a year later, EU governments are working on a tenth sanctions package for the end of February[2]. Who ends up on the Black List is something that is decided by lawyers and former Treasury Department officials, who assess the weight of the sanctions according to the political and economic influence of the individuals, since some oligarchs ‘are more important than others for political reasons’[3].

In the past year, 45 billionaires have come under judicial scrutiny. The EU imposed travel bans, froze assets and went after yachts (61 luxury yachts worldwide, worth at least $6.3 billion[4]), private jets and luxury homes located in Europe – especially Switzerland, a traditionally neutral country often used as a haven for offshore assets, which surprisingly announced the freezing of assets of all individuals sanctioned by the EU[5]. No exceptions, not even for tycoons residing in the Commonwealth: Bermuda, the British Virgin Islands, the Cayman Islands and the Isle of Man (the tax havens where rich men around the world like to hide their money), as even these jurisdictions have started to apply sanctions[6].

The billionaires disagree and are contesting the sanctions (as they successfully did in 2014 after the annexation of Crimea[7]). Among the most famous are:

– Roman Abramovich[8] with his $8.7 billion fortune had to sell Chelsea, losing a lot of money, and today only owns shares in steel giant Evraz and nickel producer, Norilsk Nickel[9], the rest has been sold or headed to his children[10]; Abramovich, of Jewish descent, also has Israeli[11], Portuguese[12] and Lithuanian citizenship[13]. In May 2022 he tried to ask for the sanctions to be lifted and for damages of one million euros to be paid to the charitable foundation set up after the sale of Chelsea[14];

To identify their properties, the social media of the relatives and girlfriends of the oligarchs are analysed[15]

– Alisher Usmanov, the Uzbek-Russian owner of the USM Group and the steel giant Metalloinvest, as well as Dilbar, the world’s largest yacht (ownership of which he transferred to his sister Gulbakhor Ismailova[16]), valued at USD 600 million and under seizure in Hamburg on the orders of the Uzbek authorities[17], who have asked for the sanctions against him to be lifted in April 2022[18];

– Alexey Mordashov, owner of the controlling stake in metallurgical giant Severstal[19], who is trying to ‘unfreeze’ its assets by transferring ownership to a trust and an investment fund[20]. In May he challenged before an EU court the decision to impose sanctions against him – the same attempt made by Mikhail Fridman (founder and majority shareholder of Alfa Group) and Pyotr Aven (friend of Vladimir Putin and shareholder of Alfa Group)[21])[22].

The dispute in court could take years to resolve. So, some oligarchs are in a hurry and are trying to resolve the situation in their own way. Some have converted their yachts into houseboats and registered them in ‘friendly’ jurisdictions such as Malaysia, Sierra Leone or Palau[23]. Others transfer the properties to a relative or close associate, although this has so far not prevented those assets from being listed as seized[24].

Dmitriy Mazepin, the owner of one of the world’s largest suppliers of mineral fertilisers (Uralchem, on which we have already written[25]), already furious that Formula One has excluded his son from the drivers’ race, has now worsened his situation by moving, with the help of intermediaries, two of his yachts, confiscated on the coast of Sardinia, thus ending up in the sights of the Italian authorities: Mazepin’s properties in Italy have been definitively confiscated and he is facing a 500,000 euro fine to be paid to the municipality of Olbia[26].

Meanwhile, in Ukraine, people continue to die, on both sides. The Russian economy proves to have been well prepared, the army less so. Putin is probably making the same mistakes as Adolf Hitler, and it is to be feared that he will have the same perseverance: if he realises, he has lost, he will drag the whole world into catastrophe.

[1] https://www.forbes.com/sites/giacomotognini/2022/03/01/tracker-in-depth-look-at-45-russian-billionaires-hit-by-sanctions/

[2] https://www.borsaitaliana.it/borsa/notizie/radiocor/economia/dettaglio/ucraina-ue-sul-tavolo-decimo-pacchetto-di-sanzioni-contro-russia-nRC_20012023_1753_443364207.html

[3] https://forbes.it/2022/03/16/oligarchi-russi-perche-alcuni-non-sanzionati/

[4] https://www.forbes.com/sites/giacomotognini/2022/03/01/biden-and-allies-are-coming-for-russian-billionaires-yachts-forbes-tracked-down-61-heres-where-to-find-them/?sh=3d0c826f6120

[5] https://it.euronews.com/2022/11/15/svizzera-sanzionato-partner-in-affari-degli-oligarchi-russi

[6] https://www.forbes.com/sites/giacomotognini/2022/03/01/tracker-in-depth-look-at-45-russian-billionaires-hit-by-sanctions/

[7] https://www.ilpost.it/2022/06/07/oligarchi-causa-sanzioni/

[8] https://www.rainews.it/articoli/2022/05/roman-abramovich-fa-causa-al-consiglio-ue-per-le-sanzioni-a0785f8d-241e-47c6-8f70-66c2054535fb.html

[9] https://www.forbes.com/profile/roman-abramovich/?sh=7da357d7134a

[10] https://it.euronews.com/2023/01/06/abramovich-evasore-ha-dribblato-le-sanzioni-agli-oligarchi-russi-intestando-beni-ai-figli

[11] https://www.repubblica.it/esteri/2018/05/28/news/abramovich_cittadinanaza_israeliana-197592451/?ref=RHRS-BH-I0-C6-P11-S1.6-T1

[12] https://www.australianjewishnews.com/portugal-launches-investigation-into-magnates-jewishness-claim/