A Global Hunt for Russian Oligarchs’ Assets Has Begun
Welcome everyone to the
Martiak Market Update with your host Mark Martiak. Mark is a Managing Director
of Investments with AGP/Alliance Global Partners, a
registered investment adviser and broker-dealer, member of FINRA/SIPC. This show will explore topics
ranging from market updates to the global economy and personal finance. Money
is knowledge, and Mark wants to help you navigate your relationship with money
by offering timely guidance and his unique perspective. Here's Mark Martiak.
Mark speaking: Welcome.
Thank you for joining me as we discuss key trends shaping our industries and
markets.
It’s been a humanitarian crisis for the
people of Ukraine, many of whom have faced devastation as the Russian invasion
and war entered a third week.
You hear a lot about economic sanctions that
have been put in place by countries including the U.S..
During this program, I want to look at sanctions
placed on Russia’s Oligarchs who are on the move amid a global dragnet that
Western governments have cast to ensnare their yachts, villas, jets, and bank
accounts.
You May Have
Wondered: What is a Russian Oligarch?
Oligarchs — or extremely wealthy business leaders who are
politically connected — became
more prominent in Russia in the 1990s, but they are not unique to
Russia.
Many Russian oligarchs are heavily involved in and benefit from
Russian President Vladimir
Putin's regime, with some serving in political positions.
For example, when Putin opened a new bridge to
Crimea in 2018 — a region Russia had annexed from Ukraine in 2014 —
the bridge was built by his friend Arkady Rotenberg's company and the truck he
drove across it was made by Sergei Chemezov's state corporation Rostec,
according to The
Carnegie Moscow Center, a think-tank that focuses on domestic and
foreign policy.
There is often a line of succession for oligarchs
in politics. For example, Dmitry Patrushev, the son of Russian Security Council
Secretary Nikolai Patrushev, was appointed as Russia's minister of agriculture,
according to The Carnegie Moscow Center.
Numerous Russian oligarchs and government officials were
sanctioned by the U.S. in 2018, in part for the regime's occupation of Crimea
and for continuing to instigate violence in Ukraine, according to the U.S.
Treasury Department, which announced the sanctions. Rotenberg’s son and Patruskev
were included in that round of sanctions for their involvement with the regime.
"Russian oligarchs and elites who profit from this corrupt
system will no longer be insulated from the consequences of their government's
destabilizing activities," Treasury Secretary Steve Mnuchin said in a
press release about those sanctions. (1)
The Biden administration announced it
would expand its sanctions on Russian oligarchs, further taking aim at Putin’s
close-knit, elite network. The Biden administration blames the oligarchs for providing the
resources critical to supporting Putin's invasion.
"Treasury
is committed to holding Russian elites to account for their support of President
Putin's war of choice," said Treasury Secretary Janet Yellen. "Today,
across the U.S. government and in coordination with partners and allies, we are
demonstrating our commitment to impose massive costs on Putin's closest
confidants and their family members and freeze their assets in response to the
brutal attack on Ukraine." (2)
The new sanctions
targeted the likes of Alisher Usmanov, the owner of an iron and steel
conglomerate, who Forbes has estimated to be worth more than $15 billion. The
White House said that Usmanov’s property will be blocked from use in the United
States, including his superyacht and his private jet, which is one of Russia’s
largest privately owned aircraft. His
superyacht, one of the world’s largest, was just seized by Germany.
Billionaire Oleg Deripaska already
got a jump on things. His yacht, Clio, reportedly
departed Sri Lanka two weeks ago and is headed for the Maldives, where it is
expected to dock soon. (Deripaska is no stranger to sanctions, having
personally been sanctioned by the U.S. in 2018.)
A Russian oligarch’s yacht was damaged in Spain’s Balaeric Islands
over the last weekend in February, reportedly by a Ukrainian sailor seeking
revenge for Russia’s invasion of his home country…. The luxury yacht, the
155-foot-long Lady Anastasia, with an estimated value of nearly $8
million, reportedly belongs to Alexander Mikheev, CEO of
Russian arms company Rosoboronexport.
According to the reports, he was outraged after seeing video
of a Ukrainian apartment block that was hit by a Russian missile. Appearing
before a judge Sunday, the man reportedly said: “The armaments used are
produced by the yacht owner’s company. They were attacking innocents.” (3)
In recent
days, French authorities have detained a handful of ships subject to new
sanctions, including a 280-foot yacht, the Amore Vero, “True Love” in Italian.
They say it is owned by Igor Sechin, the sanctioned chief executive of Russian
oil producer Rosneft and
close ally of Russian President Vladimir Putin. They
swooped in during the night as the vessel was making what they described as
preparations to leave port in a hurry. (4)
On March 1st,
in his State of the Union speech, President Biden said (quote) “We are joining
with our European allies to find and seize your yachts, your luxury apartments,
your private jets,” referring to the new entity, called Task Force
KleptoCapture. “We are coming for your ill-begotten gains.” The
movement of the luxury yachts comes as the White House and Treasury Department
are expanding the number of Russian oligarchs subject to U.S.
sanctions, aiming to punish the financial elite close to Putin.
Biden said in his State of the Union address Tuesday night that the United
States would join Europe in efforts to punish Russian oligarchs and “seize their
yachts, their luxury apartments, their private jets.”
The U.S. and U.K. on Thursday, March 3rd,
unveiled still more sanctions and travel restrictions on a range of Russian
elites because of Russia’s invasion in Ukraine. As part of the American round,
the U.S. will impose visa restrictions on 19 Russian oligarchs and 47 of their
family members and close associates. The U.K. sanctioned two more oligarchs
including the former Russian deputy prime minister.
According to a White
House Fact Sheet, Full blocking sanctions on an expansive new list of Russian
elites and their family members who enable Putin and include imposing Visa Restrictions on 19 Russian Oligarchs, their 47 Family
Members and Close Associates: The Department of State is announcing a new
visa restriction policy to restrict the issuance of visas to certain Russian
oligarchs, their family members, and close associates. These oligarchs are
known to direct, authorize, fund, significantly support, or carry out malign
activities in support of Russia’s destabilizing foreign policy. (5)
Mark Wrap-Up: To what extent will
governments pursue Russian Oligarchs and separate them from their assets? How
much economic pain will it cause Putin’s inner circle? While the task
force aims to hold the sanctioned Russian elites accountable following the
country's invasion of Ukraine, tracking down and seizing their assets will not
be easy. These extraordinarily wealthy and powerful individuals —
including Vladimir Putin himself — have taken elaborate steps to protect their wealth around the globe.
Some oligarchs are trying to dodge penalties by moving
assets —
like their mega-yachts — into territories where sanctions don't apply and where
their property cannot be seized or their assets frozen. Geopolitical
risk is hard to price into the financial markets. In a flash, Russian Oligarchs
are paying attention to the headline risks and volatility that come with that
risk.
My thoughts are with the
people of Ukraine and everyone who is impacted by the war, whether in Ukraine,
in Russia or in neighboring countries. The international community has largely
come together, and I am heartened by the degree of global coordination by
governments, business, and regulators in the pursuit of peace for the region.
This is a complex and
fluid situation. As a fiduciary, I take very seriously my responsibilities to
my clients, and I will continue to assess the environment on your behalf.
Thank you for joining my program. I’ll
see you next time.
Outro (Female British Voiceover): Thank
you for listening to Martiak Market Update. Mark Martiak is the executive
producer. Sean Dooley is the producer. We also want to thank Libby Grant. If
you enjoyed this episode, subscribe, and leave us a review on Apple, Spotify,
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coming soon.
Sources: (1) https://www.cbsnews.com/news/what-is-a-russian-oligarch/
(2) https://www.cbsnews.com/news/ukraine-russia-oligarchs-sanctions-justice-department/
(3) https://www.vanityfair.com/news/2022/02/russian-oligarchs-vladimir-putin-ukraine-sactions
(5) https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/03/fact-sheet-the-united-states-continues-to-target-russian-oligarchs-enabling-putins-war-of-choice/
