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The End of the Oligarch Era Nears With Putin’s Miscalculation in Ukraine
Stephanie Baker
8-10 minutes
On the day
Russia’s invasion began, Ukrainian President Volodymyr Zelenskiy asked in a video
address: “What do we hear today? It’s not just rocket explosions, fighting, and the roar of aircraft. This is the sound of a new Iron Curtain lowering and closing Russia off from the civilized world.”
It’s the defining quote of our abrupt new world order. Many Kremlin watchers never thought Vladimir Putin would go this far—never thought a man known for winning calculated bets would invade and attempt to hold a country of more than 44 million people. But after 22 years in power, the Russian president may have finally overreached. His gamble has isolated his nation and could, some seasoned diplomats believe, eventually bring about the end of his regime.
I witnessed the collapse of the Soviet Union in 1991. I was in Prague, where I’d moved as a bright-eyed recent college graduate. The mood then was giddy with a belief that once-oppressed societies and economies were now free, with all the hope and promise of what political reforms could deliver.
At the time, Ukraine had the world’s third-largest nuclear stockpile, making its declaration of independence from Moscow a geopolitical security issue from Day 1. In 1994, Ukraine gave up its nukes in exchange for assurances from the U.S., the U.K., and Russia that its territorial integrity would be preserved, a guarantee that Russia violated.
The debate about whether Ukraine should join the North Atlantic Treaty Organization or the European Union—whether it should tilt East or West—has formed a central fault line in its politics and led to two revolutions since 2004. Putin exploited those divisions, annexing Crimea in 2014 and backing Russian separatists in the east.
His moves left Ukraine united in its yearning to be part of Europe, but the Western response to Putin’s land grabs was feeble. And the actions of Paul Manafort and Rudy Giuliani in Ukraine, as I reported on from 2017 to 2019, did immeasurable harm. Manafort, Donald Trump’s former campaign manager, earned millions of dollars over a decade
advising pro-Russian political parties. In 2019, Trump dispatched Giuliani, his lawyer, to
pressure Zelenskiy’s advisers into investigating the Bidens during the presidential campaign. This put the country in an impossible situation when it needed U.S. support to ward off the threat from its neighbor.
Russia’s actions outside Ukraine set off alarm bells long ago, but few listened. In 2006 former KGB officer Alexander Litvinenko, a fierce Putin critic,
died after being poisoned with radioactive polonium in London. In 2018 former Russian military intelligence officer Sergei Skripal and his daughter, Yulia, were poisoned with the nerve agent Novichok in the English city of Salisbury; they lived, but a British woman who was exposed died. (The West says agents acting on behalf of the Kremlin were behind the poisonings; Russia has
denied involvement.)
Bill Browder, who was once the largest foreign portfolio investor in Russia, has warned about Putin for years. In 2009 his Russian lawyer, Sergei Magnitsky, died after being
deprived of medical care in a Moscow prison; he’d
uncovered tax fraud linked to Russian officials. The best way to punish Putin is to target the Russian oligarchs who hold his money, as the U.S., the EU, and other allies are doing now, says Browder, who was banned from Russia in 2005 and labeled a “threat to national security.”
Browder in London on March 2.
Photographer: Tolga Akmen/AFP/Getty Images
Tougher sanctions could have been put in place long ago but weren’t, because tainted Russian money is so
entrenched in Western economies—in penthouses in New York, town houses in London’s Mayfair, and seaside mansions in the south of France. Sanctioning oligarchs who made their fortunes with the Kremlin’s blessing has rattled Putin; he branded the West an “empire of lies” and raised Russia’s
nuclear alert level. “We found his Achilles’ heel,” Browder says. “We sanctioned the oligarchs, he threatens nuclear war.”
U.K. Foreign Secretary Liz Truss said she’s drawing up a “
hit list” of additional oligarchs to sanction, but she’s told members of Parliament that lawyers working for Russian billionaires have sent letters warning that they’d challenge the measures.
Londongrad, the nickname given to the British capital for being a Russian wealth magnet since the 1990s, may soldier on without wider U.K. sanctions.
Currently the U.K. hasn’t gone as far as the EU, which penalized a handful of the wealthiest oligarchs with assets outside Russia. They include metals tyc00n
Alisher Usmanov, banking billionaires
Mikhail Fridman and
Petr Aven, and steel magnate
Alexei Mordashov.
In a statement to Bloomberg News, Fridman and Aven called on Russia to end the war immediately but stopped short of criticizing Putin directly. Billionaire Oleg Deripaska, the founder of aluminum giant
United Co. Rusal International PJSC, who’s been
under U.S. sanctions since 2018,
called for peace talks on Telegram without mentioning Putin. On March 2,
Roman Abramovich said he’s
selling the Chelsea Football Club, which he’s owned for almost two decades. It’s expected to go for as much as £3 billion ($4 billion), and he said he’ll set up a
charitable foundation with the net proceeds from the sale to benefit victims of the war. He’s also selling his London properties, according to British MP Chris Bryant. Abramovich, who hasn’t been sanctioned, is trying to
broker peace talks between Moscow and Kyiv after being contacted by Ukrainian officials, his spokesman said.
The West’s strategy will be to further isolate Russia through widening penalties. Monaco, long a haven for Russian money, announced that it’s
freezing Russian assets and abiding by EU sanctions. Switzerland abandoned its historic neutrality to
do the same. Europe has
shut down its airspace to Russian planes and is discussing excluding seven Russian banks, including
VTB—the country’s second-largest lender—from SWIFT, the messaging system that
underpins global finance.
BP,
Exxon,
Shell, and other Western energy companies are
quitting decades-long investments in Russia. Car and truck manufacturers such as
Daimler Truck Holding AG and
Volvo Car AB are also cutting ties. The list of companies leaving Russia is getting longer by the day, a reversal of 30 years of investment.
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In one of the most consequential moves, the EU and the U.S. have
banned transactions with Russia’s central bank, hampering its ability to use $643 billion in reserves to defend its currency. The ruble is in
free fall, with capital controls in place limiting how much foreign currency can be exported. I was a reporter in Moscow covering the central bank the last time the ruble suffered such a dramatic fall, in 1998, when Russia defaulted on its debt. Some analysts think that could happen again. On Thursday, Russia’s credit rating was
cut to junk by Moody’s Investors Service and Fitch Ratings.
The fear is that Putin, having backed himself into a corner, might resort to more drastic military action. “Putin doesn’t do humiliation well,” Browder says. “His response is scorched-earth carpet-bombing with massive civilian casualties as a way of showing everybody he’s not a guy to be messed with.”
With missiles falling on Kharkiv’s Freedom Square and
striking Kyiv’s TV tower, that response appears under way. Zelenskiy made an
emotional plea to the European Parliament on March 1 for Ukraine to be admitted into the EU and got a standing ovation. “Prove that you are with us,” he said. “Do prove that you will not let us go.”
(Adds cut to Russia’s credit rating in 14th paragraph.)