Vacated Mediterranean villas, marooned superyachts in search of accepting ports and billions in assets seized or devalued are just some of the headaches Russia’s kleptocratic elite now face over President Vladimir Putin’s invasion of Ukraine.
The so-called Russian oligarchs who surround the Kremlin – a small cadre of several dozen men who have made their riches thanks to connections to Putin’s government – are seen by U.S. and European officials as key to curbing the Russian invasion of Ukraine and potentially building a post-Putin Russia.
“Part of why I think it’s so important to go after the Russian oligarchs and the rest of the elite is that suddenly a bunch of oligarchs had to get on private jets, flee Monaco and the south of France and other places they have their homes and head back to Moscow,” said Max Bergmann, a senior fellow at the Center for American Progress, a liberal think tank.
“And they’re seeing potentially billions and billions of dollars in assets wiped out and seized. So you’re gonna have a disgruntled class of very rich and very influential businessmen,” Bergmann said.
In response to the Kremlin’s invasion of Ukraine, dozens of countries around the world have levied punishing sanctions on Russia’s financial institutions, including the Russian Central Bank. The backlash to Putin’s invasion has precipitated a financial crisis in Russia that threatens to throw the lives of everyday Russians into chaos.
Russia’s ultra-wealthy have also been targeted by sanctions — often by name — yet tracking down their global wealth and confiscating it is a difficult game for many Western governments. Russia’s elite has now spent decades storing their wealth in Western financial institutions, real estate markets and luxury enclaves, making it painful for some of the West’s own elite to separate themselves from the cash.
“The U.S. Department of Justice is assembling a dedicated task force to go after the crimes of the Russian oligarchs,” President Joe Biden said during his March 1 State of the Union address.
“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,” Biden promised.
The sanctions are “predicated on the idea that the ‘oligarchs’ will be hurt financially and that pain will push them to push Putin to stop the war in some way,” said Matthew Schmidt, a professor of national security at the University of New Haven. This is a dubious line of thinking, he argued, because “Putin came to power, in part, because he took on the actual oligarchs.”
What is an ‘oligarch’?
The term “oligarch” rose to prominence in the 1990s, when cadres of young businessmen came to power in post-communist Russia by taking over the newly privatized state monopolies that had opened up in the late Soviet Union.
That class of oligarchs – who amassed their wealth and dominance of the Russian economy through corruption and coercion – dominated politics and business for years before Putin’s rise.
During Putin’s first term as president from 1999 to 2008, he consolidated power by arresting, exiling and harassing the so-called Russian elites who opposed his strongman rule. Putin billed himself as an anti-corruption advocate, but experts say he was really positioning himself as the centre of all corrupt dealings in the country.
“He offered (the elites) a deal: give up your money or you give up your political power. And he forced out everyone who still wanted political power,” Schmidt said.
The Russian elites’ ties to Putin
The remaining economic elites are now either dependent on Putin’s government for their wealth, and consequently unlikely to oppose him, or otherwise “share his quasi-messianic vision … of reestablishing Russia’s place in history,” by conquering Ukraine and resisting liberal democratic values, Schmidt said.
Intelligence analysts and academics focusing on Russia are in general agreement that Putin also has a strong grip on the security forces, who would be cru to any regime change or a settlement in Ukraine. Those forces have been bolstered in recent years to a crackdown on dissent at home.
The security forces – and Putin’s inner circle – are also filled with hardliners unlikely to be swayed by sanctions.
Will sanctions work?
That said, the Biden administration and its allies are hopeful that Russia’s economic elite will find the prospect of a severely isolated Russia unappealing and can press for a future without Putin or a prolonged war in Ukraine.
“The oligarch class is going to look at this decision now as being totally reckless,” Bergmann said, adding that “the purpose of sanctions in the Western response is to cause some real problems for Putin at home that may mean the rational decision here is to pull back forces to de-escalate the conflict.”
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In the meantime, the most punishing effects of the economic sanctions will be felt by the Russian people. Many Russians remember the economic collapse of the 1990s and how to cope, Schmidt noted, the economic pain will now likely dent Putin’s approval rating. The cost of the war, in both Russian lives and economic toll, has already led to discontent in Russia.
Already, thousands have gathered in cities across the country, including in Moscow and St. Petersburg, to protest the war. While Putin has effectively hamstrung his most vocal opposition in recent years, he’s not immune from public opinion – and is existentially concerned about a popular revolution deposing him.
“This war started in Ukraine but it will end on the streets of Russia. There is no other way,” Schmidt said.