Billions of dollars destroyed
Oligarchs are already paying the price for Kremlin aggression
By Diana Dittmer
2/23/2022, 5:04 p.m
They are a “joke”, “rather thin” or “lukewarm”, critics of Putin complain about the sanctions against only a few Russian billionaires in Great Britain. “Where are the other 50 oligarchs?” one asks. But even without sanctions, the Russian crisis is costing the Russian moneyed nobility dearly.
The sanctions introduced by the West against the Russian state and individual citizens have so far had little effect on President Vladimir Putin. At least in front of the cameras he is cool. His narrative: Russia is only defending its legitimate interests in Ukraine. All previous sanctions – against the country’s financial elite, members of the Duma or banks – could do absolutely nothing to the country, the Kremlin is signaling. Critical observers and Russia experts partly agree, and they too consider the penalties to be too mild. The members of the Russian financial elite are not getting off as easily as is often assumed.
In Great Britain in particular, criticism has been voiced that the measures have so far been unambitious. The British government on Tuesday sanctioned three Russian super-rich and five Russian banks and froze assets because of the escalation in Ukraine. The EU and the USA also took steps similar to Great Britain. The new EU sanctions include putting those 351 members of the Russian parliament on the sanctions list who voted to recognize the self-proclaimed People’s Republics of Luhansk and Donetsk. There are also penalties against 27 other people and organizations.
“Where are the 50 other oligarchs?”
The “First Volley” is “pretty thin,” commented British Labor MP Chris Bryant, who has been calling for stricter money laundering controls in London for a long time. The London-based Putin critic and US investor Bill Browder also criticized the penalties as “lukewarm”. He asked on Twitter: “Where are VTB and Sberbank? Where are the other 50 oligarchs?” VTB and Sberbank are Russia’s largest banks, both second-listed on the London Stock Exchange. “It’s a joke. It signals to the oligarchs here that nothing is happening and that the lobbying of the last few days has been successful,” said Russia expert Elisabeth Schimpfössl, who studies the influence of rich Russians in the United Kingdom at the London School of Economics researched.
Britain’s economy is closely intertwined with Russia: London is also known as “Moscow on the Thames” or “Londongrad” because the city is known for being home to many Russian oligarchs. The activities of the Russian super-rich in London and other parts of Britain have long been a concern of parliamentarians, journalists and pundits. The business relationships of the oligarchs reach into the highest circles of politics and society.
It may be that the sanctions do not meet the high expectations. However, it is not true that the moneyed nobility in particular would get away with it scot-free. However, this is not due to measures taken by the West, but to the reactions of the stock exchanges to the crisis. The dispute that Putin fueled has not only triggered a tremor on the Russian stock market. Moscow’s leading index RTS has lost more than a quarter of its value within four days.
Russia’s billionaires are $32 billion lighter
The Russian super-rich, who have so far been spared from sanctions, have also been hit by this. As Bloomberg calculations show, their assets have shrunk by $32 billion this year alone as a result of the price slump. The country’s 23 billionaires still have total net worth of $343 billion. At the end of last year it was still 375 billion, as from the Billionaire’s Index the US Treasury Agency.
According to the list, the biggest loser among Russian billionaires is Gennady Timchenko. The conflict has already cost him a third of his fortune this year, writes Bloomberg. He still has about $16 billion, most of which comes from a stake in Russian gas producer Novatek. The 69-year-old is the son of a Soviet military officer who met and became friends with Putin in the early 1990s.
Timschenko is also one of the selected oligarchs that London apparently had on its radar and sanctioned the day before. The other two are Boris Rotenberg and his nephew Igor Rotenberg. All three are considered close allies of Putin. The Rotenbergs made their fortune with gas pipeline construction company Stroygazmontazh, also known as SGM Group. Igor’s father, Arkadi, is one of Putin’s former judo sparring partners. He sold the pipeline company for around $1.3 billion in 2019. The Rotenbergs don’t appear on Bloomberg’s list of the 500 super-rich, but they too may have felt the effects of the Russian crisis in their depot.
The price for the crisis instigated by Moscow can be quantified by Novatek’s co-shareholder, Leonid Michelson. His fortune is said to have shrunk by $6.2 billion since the beginning of the year. And Lukoil boss Wagit Alekperow is around $3.5 billion lighter after shares in his energy company plummeted by almost 17 percent. It cannot be ruled out that the destruction of wealth caused by the conflict will continue, writes Bloomberg. The oligarchs will certainly not thank Putin for this. By the way, Putin himself has not yet been included in any sanctions list. But that could also have something to do with the fact that he may not have a lot of assets to freeze.