Sanctions on individuals, organizations, even yachts have been imposed by the West on Russia in retaliation for the invasion of Ukraine, in a war of urban destruction and civilian deaths that has been raging for more than a month.
From the outset, so-called Russian oligarchs , including the notorious Roman Abramovich, have been targeted[/B] by Western countries who have seen their personal assets seized in an attempt to put suffocating pressure on Vladimir Putin's entourage. After all, many of them are in the close circle of advisers and associates of the Russian president himself. In total, tycoons worth at least $200 billion before the war began have been hit by sanctions.
Informative is the research of the Bloomberg news agency and journalists Stephanie Baker and Tom Maloney who in an extensive article reveal how, why and who are the oligarchs who are currently still doing business globally despite Putin's aggressive war.
Despite the barrage of sanctions imposed, however, half of Russia's 20 most powerful oligarchs appear to have avoided having measures imposed on them, and the reasons are many. An attempt to isolate Russia from international finance and put pressure on President Vladimir Putin - while minimising the impact on the global economy - has led the UK to sanction 10 of the richest billionaires and the European Union nine. In contrast, the US has only sanctioned four.
By contrast, only three of the 20 richest oligarchs appear on all three lists, with four of the five not sanctioned by either the EU, the US or the UK.
"Leading the pack" is Russia's richest man, Vladimir Potanin, a metals tycoon whose fortune on 18 February stood at $30 billion. Currently, the richest of the sanctioned oligarchs is Alexey Mordashov, the main shareholder of Severstal PJSC, Russia's fourth largest steel company, who saw the EU freeze his assets on 28 February and the UK two weeks later.
Energy tycoon Leonid Mikhelson, steel tycoon Vladimir Lisin and Vagit Alekperov, chairman of oil giant Lukoil PJSC, are among the other wealthiest Russians who have not been sanctioned. As Bloomberg points out, monitoring the sanctions imposed remains difficult, as Washington, Brussels and London issue sanctions at will and without necessarily consulting each other. Similarly, Australia, Canada and Japan have imposed their own restrictions.
Why have not all of them been sanctioned
The question of why not all Russian oligarchs are on a sanctions list has no single answer. According to Bloomberg, which cites analyses by sanctions experts, imposing sanctions on specific individuals is not a simple process, as to a certain extent not only the person is affected, nor his or her home country where he or she is mainly active, but there is a high probability that the sanctioning country will also be negatively affected if his or her activities expand there. After all, Russian oligarchs in particular are very active both inside and outside Russia, with significant stakes in huge energy, metals and fertiliser companies in many countries around the world.
"There are reasons to go after some oligarchs and there are reasons to keep some pending," John Smith, who was head of the U.S. Treasury Department's sanctions unit, the Office of Foreign Assets Control (OFAC), tells Bloomberg until May 2018, and is now a partner at the law firm Morrison & Foerster in Washington, D.C. "It may be either because they are not believed to be at the heart of the Kremlin's decisions, or any sanctions may be difficult to design to have the least impact on the countries that impose them."
Besides, the US learned from the 2018 experience when it imposed sanctions on billionaire Oleg Deripaska, who controlled United Co. Rusal International PJSC, the world's largest aluminum company outside of China. That caused global prices to skyrocket, only returning to stability after Deripaska agreed to relinquish control of Rusal in 2019.
How have the sanctions affected Russian billionaires?
Some Russians have been targeted because of their clear ties to state-owned companies, regardless of their net worth: Igor Shuvalov, a former deputy prime minister, is now chairman of state-owned bank VEB, while Sergey Ivanov is CEO of state-controlled diamond company Alrosa PJSC and a board member of Gazprombank.
The unprecedented sanctions may have extended across much of the globe, but wealthy Russians moved assets as fast as they could, leading many countries, including Italy, France and Spain, to seize even yachts and private aircraft. Roman Abramovich, the largest shareholder in Russia's second largest steel producer, Evraz Plc, is selling his Chelsea football club after sanctions from the UK and EU.
Alisher Usmanov, who owns 49% of USM, which controls steel and iron ore producer Metalloinvest, has been sanctioned by the US, UK and EU. He had already transferred most of his real estate and other assets to irrevocable trusts of which he is no longer a beneficiary.
This move has complicated efforts by the US government to block his property, including his 156-metre-long yacht, Dilbar, which is now in Hamburg, Germany. Concerns about potential market impact quickly became clear, although Usmanov is believed to own a little less than 50%, the threshold at which sanctions are imposed on his companies. After the US imposed sanctions on Usmanov on 3 March, blocking his personal assets, the US Treasury Department did a U-turn the same day and issued permits allowing any majority-owned companies, directly or indirectly, to continue operating.
The richest Russians who have been sanctioned
Mordashov
is the largest shareholder in Severstal, Russia's fourth-largest steelmaker. He also owns stakes in power equipment manufacturer Power Machines and TUI, a European tour operator. He has investments in National Media Group, Bank Rossiya and the telecommunications operator Rostelecom. On the same day he was sanctioned, he transferred control of a stake of about $1.1 billion in Nordgold to his wife, Marina Mordasova, who has not been sanctioned.
Usmanov[/B] owns 49% of USM, a Russia-based investment group that controls Metalloinvest, Russia's largest iron ore producer, and MegaFon, a telecommunications company. He also has stakes in AliExpress Russia Holding and Akkermann Cement, and controls Kommersant, a Russian newspaper.
Melnichenko[/B] is the founder of EuroChem, a producer of mineral fertilizers and agricultural products. He also owns most of Suek, Russia's largest thermal coal supplier. Melnichenko's other investments include real estate holdings and a stake in Rosseti Siberia, a listed electricity distributor in Russia.
Vekselberg[/B] is chairman of Renova, the investment group that has a stake in United Co. Rusal, Russia's largest aluminum producer. The Bahamas-based company also owns shares in equipment makers Sulzer and Oerlikon. It owns regional airports in Russia and sold 12.5 percent of a Russian oil company for $7 billion in 2013.
Timchenko[/B] controls Volga Group, a Russia-based company with interests in energy, transportation and construction. His largest holdings include 23.5% of listed gas producer Novatek and 14.5% of chemical manufacturer Sibur. Novatek is responsible for about 10% of Russia's natural gas production.
Abramovich[/B] is the largest shareholder in Evraz, Russia's second largest steelmaker. He holds stakes in Norilsk Nickel, the world's largest producer of refined nickel, and in London's Chelsea. He built his fortune from dividends and sales of privatized assets acquired from the former Soviet Union, including Sibneft and Aeroflot.
Kerimov's family controls most of Polyus, Russia's largest gold producer. The Moscow-based mining and exploration company-unfettered by sanctions-produced 2.8 million ounces of gold in 2020 and controls the rights to more than 61 million ounces in proven reserves. Kerimov has also made investments in Moscow's real estate sector.
Rashnikov[/B] is the chairman of Magnitogorsk Iron & Steel Works, a Russian steel and pipe producer. The listed company had revenues of $11.9 billion in 2021. Rashnikov acquired most of its shares in the 1990s by buying shares distributed by the Russian government to factory workers after the fall of the Soviet Union.
Fridman[/B] is the largest shareholder of Alfa Group, an investment company that owns stakes in Alfa Bank, Russia's fifth largest bank, and X5, a Russian food retailer. Through Luxembourg-based LetterOne, he holds stakes in German oil and gas producer Wintershall DEA and international mobile phone company Veon. His shares in LetterOne have been frozen as a result of the sanctions and he has resigned from the board.
Khan[/B] is a partner in Alfa Group, an investment firm that holds stakes in Alfa Bank, Russia's fifth largest bank, and X5, a Russian food retailer. Through Luxembourg-based LetterOne, the billionaire also owns stakes in European oil and gas producer Wintershall DEA and international mobile phone company Veon.
Are the sanctions effective?
A month after the invasion, Russia is now the most sanctioned country in the world. The freezing of central bank reserves and the removal of some banks from the international payment system have hit the ruble and brought the country to the brink of bankruptcy.
However, Bloomberg's analysis of thousands of sanctions records shows that there are striking differences between sanctions imposed by the US, UK and EU.
In total, the US has frozen the assets of 852 people, the European Union 775 and the UK 982. However, many of these sanctions do not overlap. While nearly 550 individuals have been sanctioned by both the UK and the EU, common ground with the US is harder to achieve.
Even experts are struggling to untangle the threads, saying the discrepancies could undermine the effectiveness of the sanctions. "I certainly don't see any pattern anywhere," says George Voloshin, a sanctions expert who follows Russia as director of Paris-based Aperio Intelligence. "I still don't believe policymakers are on the same page in terms of strategy, although they claim to have some coordination."
Wealthiest Russians without sanctions
As Bloomberg reports, many billionaires operate in vital global commodity sectors and hold significant stakes in large companies that supply Western nations. "A primary goal of sanctions should be to hurt the target of the sanctions more than to hurt ourselves," Smith says. "When you're talking about natural gas, Europe still needs Russia. The U.S. and its allies will look very carefully to see what products from Russia might be almost essential to us and third-country companies and try to avoid those impacts."
For example, Potanin, who made his fortune in the 1990s, is one of Russia's key oligarchs and still remains unsanctioned. He is one of the many tycoons who played hockey with Putin and helped the Kremlin stage the 2014 Sochi Olympics. In the aftermath of the invasion, he lost coveted positions at U.S. cultural institutions and surprised many by criticizing the Kremlin's plans to seize assets of foreign companies that left Russia.
Potanin
owns 36% of MMC Norilsk Nickel PJSC, making him the largest shareholder in a company that accounts for about 10% of refined nickel and 40% of global production of palladium vital to semiconductor manufacturing, already in short supply before the war.
Potanin is the chairman of Norilsk Nickel, the world's largest producer of high-quality nickel. He owns about a third of the Dudinka, Russia-based company, which had revenues of $17.9 billion in 2021. Potanin's other investments include a controlling stake in Petrovax Pharm, a Russian pharmaceutical company.
Mikhelson[/B] is the CEO of Novatek, the largest non-state-owned gas provider in Russia. The billionaire owns about a quarter of the listed company, which produces about 10% of the country's natural gas. He also owns a 30.6% stake in petrochemical company Sibur.
Lisin[/B] is the chairman of Novolipetsk Steel, Russia's largest steelmaker. The listed company produced 15.7 million metric tons of crude steel and had revenues of $16.2 billion in 2021. He also owns Freight One, a rail freight company in Russia.
Alekperov[/B] is the chairman of Lukoil, the listed company that produces about 2% of the world's oil. The Moscow-based company employs more than 100,000 people and had revenues of $125.1 billion in 2021. Alekperovs collected more than $5 billion in dividends. He is also co-owner of the Spartak Moscow football team.
Prokhorov[/B] founded Onexim Group, a Moscow-based company with interests in banking, insurance and real estate. He also holds stakes in Renaissance Capital and Renaissance Credit banks. Prokhorov owned the Brooklyn Nets basketball team and its headquarters before selling them to another billionaire, Joe Chai.
Known to Greeks Ribolovlev for his purchase of Onassis Island, Scorpius, he sold two Russian fertilizer companies for more than $7 billion in 2010 and 2011. He also sold nearly $1 billion of Uralkali shares in the company's initial public offering in 2007 and bought a collection of art, jewelry, homes, yachts as well as stakes in Bank of Cyprus and football club AS Monaco. For the last decade he has been a resident of Monaco.
Kantor[/B] is the majority shareholder of Acron, a Russian mineral fertilizer producer. The Velikiy Novgorod-based company had a production of over 7 million tonnes and revenues of $1.7 billion in 2020. The billionaire also owns the world's largest collection of 20th century avant-garde art.
Fedun[/B] is a vice chairman and board member of Lukoil, a Russian oil company. He led the privatization of the Moscow-based company and he and his family own about 12% of it. Fedun has amassed more than $1.5 billion in dividends from his stake in Lukoil. He also co-owns the Spartak Moscow football team.
Abramov[/B] is co-founder of Evraz, the second largest steel company in Russia. He owns 19.3% of the company as well as 1.6% of Norilsk Nickel, the world's largest nickel producer. Other interests include 40% of London-based Truphone and 19.3% of Russia's Forest Products Group, a timber and transport business in Siberia.
Guryev[/B] is the founder and largest shareholder of Phosagro, Europe's largest phosphate fertilizer manufacturer. The Moscow-based company produces ammonia, nitrogen-based fertilizers and feed phosphates for agricultural producers in more than 100 countries. It reported revenues of $3.5 billion in 2020.
It is also noted that several steel tycoons have escaped sanctions even after the EU imposed a ban on imports of certain Russian steel products, a move expected to cost Russia 3.3 billion euros ($3.6 billion) in lost export revenues.
Apart from the billionaires, there are other lesser-known but politically connected figures who have not been affected at all.
Source: Proto Thema/ Bloomberg
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