What the Russian oligarchs think about the U.S. "Kremlin Report"

The Bell

The long anticipated Russian sanctions list has sparked instant controversy both in Washington and Moscow. We have spoken to the business people included

Vladimir Putin meets top business executives in the Kremlin, December 2017. Photo: Kremlin.ru

On January 29, the U.S. Treasury Department published the list of influential Russian officials and billionaires who could face further U.S. sanctions. Since last August, Russia’s political and business elite have been waiting for the day the new sanctions list would be released with tension and dismay. But the long-awaited report showed no evidence that the nominees had been selected based  on their proximity to the Kremlin, and this instantly made it highly controversial both in the U.S. and Russia.

  1. What were the expectations about the list in Russia

The prospect of a new sanctions list, which would not only refer to Vladimir Putin’s friends and government officials, but also to entrepreneurs not associated with the regime so closely, caused unprecedented anxiety among Russian business people soon after the Countering America’s Adversaries Through Sanctions Act, which was signed by Donald Trump in August 2017.

  • The Bell was the first to report (Russian, here’s an English translation) on these worries last October. “We can’t understand anything: who’s working on the list, who’s going to decide who is listed, what are the conditions, what are the sources of information,” said one of the top business executives.
  • Like many others, he hired serious Washington lobbyists and pulled all the strings he could to find out whether he and his partners were going to be on the list, but had virtually no success.
  • “I consider the message is the following: figure it out with your Putin yorselves, and stay out of the U.S.,” another businessman said.
  • Trying to find out their fate, the oligarchs took steps to shield their foreign assets in case they were listed. They tried to avoid conferences which had a panel with Putin, stress-tested the potential impact of new sanctions on their investments and some started liquidating foreign holdings. However, there are few ways to protect one’s assets in the West in case of the U.S. sanctions. “It’s a thing impossible to prepare to,” one of the oligarchs told The Bell.
  • The latest expectations (Russian) were for a list of around 50 people closest to the government.
  • Another report by the Treasury Department, due to be submitted to the Congress by January 29, had to estimate consequences of the extension of the sanctions on the Russian government debt. If implemented, the debt sanctions could have become a “black swan” for the Russian economy in 2018, Bank of America Merrill Lynch said in December 2017.  Only late on Friday Bloomberg acquired the report and found out that the Treasury Department warned that the sanctions could destabilize financial markets worldwide.
  1. What the publication looked like from Moscow

The Treasury list was the most anticipated news in Russia in months. The date of its publication was known since August, and Moscow expected it to come on Monday evening local time (morning in Washington DC). Most editorial offices, and at least some of the people who feared being listed, were on high alert for the whole night. The report was, however, published almost at midnight EST (8 AM January 30 in Moscow).

  • The whole intrigue was about the list of the “oligarchs,” which were expected to be selected depending on their proximity to the government. After the publication, it took seconds to understand that the list is the whole Russian Forbes billionaire list, copied without any critical analysis.
  • The time of the publication suggested that the contents of the list may have been disputed until the last minute. A day later, a former Russian government advisor, an economist from Sweden, Anders Aslund, who consulted for the report, stated that the final “all-inclusive” list was a last-minute replacement for the initial one, which listed the oligarchs who made their money corruptly from their ties with Putin. Aslund’s list may have been just one of several propositions, but his account still makes sense.
  • Given the formal criteria (if you’re worth $1bn you’re in), the inclusion of some of the 96 entrepreneurs on the final list looked weird. The best examples are Yuri Shefler, the owner of the Stolichnaya vodka brand, who was under criminal investigation and in constant court battles with the Russian government since 2002; Yuri Milner, a Silicon Valley venture capitalist who has had little connection to Russia for about 10 years; and, most notably and clearly, Valentin Gapontsev, a physicist who left Russia as early as 1995, and made a fortune on fiber-optic lasers in the U.S.
  1. What the listed oligarchs said

The Bell polled (Russian) the billionaires who made it to the final list in the first hours after its publication. Most agreed to speak only off the record. Here’s what they said:

  • “They copied a list of everybody who owns something, everybody who’s more than one [billion]. Now they can sanction anyone on the list without any justice, arrest any assets! The one good thing is that we’re all on the same boat now, all in the same situation”.
  • “This is surely not the end of the story. I’m sure that several people on the list will be sanctioned quickly. They couldn’t do it right away — lots of information, everybody is framing others.The most rational way was to form a long list, to include all the wealthy. But the pressure will continue, nobody is satisfied with the list itself. Real sanctions will follow, but only on those who are evidenced by the U.S. to be corrupt.”
  • “They have just formally included all Russian citizens on Forbes’ list and named us all oligarchs, although many of us aren’t, we aren’t making business with the government.”
  • “It is a smoke screen, the compilers of the list were not technically ready and just did a formal job. The real list is in the classified part, and those included in it will only find it out when they apply for a visa or for a loan. I wonder who will be the first to run to report on those who are not listed”.
  1. What was the official reaction

Russian government oficials formally commented the list following an accustomed pattern, with a mix of strain irony and flatulent patriotism. “There are ordinary Russians behind everyone on this document, which means they’ve effectively listed the country’s entire population,” said Vladimir Putin.

  • Others either said that being on the list has to be considered as yet another nomination for an award from the “American partners”, or criticized the list for its “generalized approach”. A selection of the reactions in English can be read here.
  • The only legislative retaliatory inatiative yet was a proposition by the upper house of the Russian parliament to enact a new law regarding the “violation of Russian sovereignty”. The bill was proposed by the parliamentary committee, which in 2017 initiated the law requiring foreign media outlets in Russia to register as “foreign agents”. Who will be considered “sovereignity violators” and which punishment they may face, is still unclear, but the “foreign agent” law eventually allowed to add Russian individuals to the foreign agent media list.

This newsletter is made with the support of the Investigative Reporting Program at UC Berkeley.

Peter Mironenko, The Bell editor

Support The Bell!

The Bell's Newsletter

An inside look at the Russian economy and politics. Exclusively in your inbox every week.