Invasion of Ukraine: sanctions against Russia are unlikely to affect the floating assets bought by the oligarchs’ secret billions

The Russian President summoned her to Moscow to discuss the business and economic implications of his invasion of Ukraine.

Essentially, Mr Putin’s message was that he felt he had to do it. The sheer distance between him and the clique of multi-billionaires meant that most of the real conversations were between themselves before or after.

The number of oligarchs hit by international sanctions is growing. Yachts, stocks and belongings are being confiscated from a growing list of Russia’s most successful businessmen.

They have been labeled oligarchs for some time, and according to a study by the Boston Consulting Group, the 500 richest Russians collectively control 40 percent of the country’s household wealth.

In truth, nobody really knows how much they are worth. They’ve had years to move, pool, redirect, invest and restructure their wealth around the world.

EU sanctions apply to assets they hold in the EU if they can be shown to be the beneficiaries of those assets.

They have assets held through corporations in the world’s most opaque places. International trusts can be used to disguise beneficial ownership of assets.

But you can bet few of them will be seriously impoverished by the seizures now taking place. Since Mr Putin took over Crimea, they have had eight years to shield and protect billions from potential Western government sanctions.

They fall roughly into two groups. One group consists of those who made money in the late 1980s and early 1990s after the collapse of the Soviet Union, when their political or personal ties to the likes of Boris Yeltsin enabled them to buy state assets at very low prices.

The other group represents a younger business type who has supported Mr. Putin for the past 20 years.

The Big Daddy of them all is Mikhail Fridman, who has now been sanctioned by the EU. Mr. Fridman is the founder of Alfa Financial Group, which was once hired by the liquidators of Anglo Irish Bank to reclaim ownership of Sean Quinn’s former properties in Moscow and Kyiv.

When Mikhail Gorbachev began to open up the economy in the late 1980s, Mr. Fridman started a window cleaning business, an apartment rental agency for foreigners, and a company that imported cigarettes and perfumes.

Born in Ukraine, he got his big break in 1997 when he worked with two other oligarchs to buy Siberia’s state-owned oil company TNK for $800 million.

They sold their 50 percent stake to state-owned Rosneft in 2013 for USD 14 billion (EUR 13 billion).

Mr Fridman and his business partner Petr Aven have frozen their stakes in $22 billion conglomerate LetterOne – which owns healthcare retailers Holland & Barrett – days after they were hit with EU sanctions following the invasion.

Mr. Fridman lives in London and resides primarily at Athlone House, which he bought for $90 million in 2016.

Perhaps the best-known oligarch in this part of the world is Roman Abramovich, who at least now owns Chelsea Football Club. Mr Abramovich was not sanctioned but was named a person of interest in the UK House of Commons.

Like Mr. Fridman, he made his money early on in the collapse of the Soviet Union. From northern Russia, he acquired a majority stake in the former state oil company Sibneft through a controversial stock loan scheme under Mr Yeltsin, with whom he was close. Mr. Abramovich, along with his business partner Boris Berezovsky, acquired a 50 percent stake in Sibneft in 1995 for $100 million (€92 million).

This was an incredibly cheap price since state assets were being whipped out in the 1990s. By 2000, Sibneft was producing $3 billion (€2.7 billion) worth of oil annually. Mr. Abramovich is believed to be worth around $13 billion (€12bn) and is currently in the process of selling Chelsea Football Club and a $100m mansion in London.

He is reportedly looking for over £2.5bn (€3bn) for the club who owe him around £2bn through shareholder loans. He owns several yachts including the £430m Solaris and the £1bn Eclipse.

Two oligarch yachts have been in the public eye in recent days.

Rosneft CEO Igor Sechin was placed on an EU sanctions list and his yacht, the 88-metre Amore Vero (‘True Love’), was confiscated by French customs in Marseille.

The UK and EU have imposed sanctions on Alisher Usmanov, who is linked to a yacht that caught the attention of Hamburg authorities when she was moored there for repairs.

None of these assets can be confiscated unless proven to belong to the oligarch in question.

It might take some time to find out if that’s true, but in the meantime, the 512-foot-long Dilbar, valued at nearly $600 million (€550 million), remains in Hamburg.

Mr. Usmanov’s company, USM Holdings, owns enormous iron, steel and copper interests. He also owns telecommunications interests and is a former 30 per cent shareholder of Arsenal football club. A sponsorship deal with Everton was finalized last week.

Other oligarchs belong
Arkady Rotenberg, Putin’s former judo instructor who has made billions from government construction contracts, particularly for the Sochi Winter Olympics.

One thing missing from the whole narrative of oligarch asset hunting is how Western governments operate attracted so much Russian money through opaque business structures without seriously questioning and regulating the ownership, origin and destination of the funds.

The sanctions will hit oligarchs to varying degrees. None of them will go hungry.

Their real influence on Mr. Putin is questionable, apart from the fact that they could harm the Russian economy. But passing on their wealth, or simply taking it with them, is long overdue.