In recent months, the Western political establishment has reached an unprecedented consensus regarding the Putin regime. Another round of sanctions against its malign activities seems inevitable. However, to make sanctions truly effective, the West should target the corrupt Russian oligarchs who support this regime. Such measures will help clear the Western financial systems of criminal Russian assets and weaken the regime, all the while enjoying the overwhelming support of the Russian people.
Оn March 18, 2014, Vladimir Putin delivered a solemn speech in the Kremlin on what was de facto Russia’s annexation of Crimea. In it, the Russian president, perhaps unwittingly, borrowed arguments and rhetorical figures from Adolf Hitler’s infamous Sudeten speech. “Danzig was and is a German city. The Corridor was and is German. Both these territories owe their cultural development exclusively to the German people,” Hitler said in his 1939 address to the Reichstag. “In people’s hearts and minds, Crimea has always been an inseparable part of Russia,” Putin echoed 75 years later.
Until this shocking moment, the Putin regime was limited to plundering inside Russia, which allowed the West, when needed, to turn a blind eye to what was happening. Putin’s kleptocratic elite—the special services, legalized criminal groups, and the loyal oligarchs—were stealing from the Russian people, but preferred to keep the loot in the civilized West, where their property rights and luxurious lifestyle were protected by the rule of law. By opening the doors of their financial systems to a generous inflow of Russian money laundered through numerous offshores, Western elites essentially acted as the beneficiaries of the methodical siphoning of enormous capitals from Russia—up to one trillion dollars, estimates the National Bureau of Economic Research.
By 2014, having accumulated sufficient capital and influence in the West, the Putin elite went further and demanded for themselves a special status in the international arena, proposing a new Yalta deal that would again divide the world into zones of influence.
The Crimean precedent seemed to have a sobering effect in the West. The European Union and the United States have taken turns imposing economic and personal sanctions against Russia and the Putin elite, but their effectiveness remains a subject of heated debate. It took a massive Kremlin-sanctioned campaign to interfere in the 2016 U.S. presidential election to fully awaken the Western establishment, forcing it to reckon with the threats posed by the Putin regime.
In January 2017, the US Congress introduced the Countering America’s Adversaries Through Sanctions Act (CAATSA), which was passed almost unanimously seven months later. Both in Washington and in Moscow, the law was perceived as an irreversible mechanism for the American financial system to clean up its act, ridding it of criminal Russian assets. According to the law, within 180 days the executive branch’s financial intelligence had to submit to Congress a report on the assets of political actors closely linked to Russia’s ruling regime. All the key persons of the Putin regime, as well as their assets in the United States, had been undoubtedly identified a long time ago. All that the US government had to do was make their names public and then subject them to American laws on illicit money-laundering.
In mid-November 2017, the Atlantic Council, a DC-based think tank, released a policy report titled “How to Identify the Kremlin Ruling Elite and its Agents” for the US Congress and the Trump administration. Its authors highlighted the key effect of the sanctions design proposed by CAATSA: “This process could in turn lead to future actions to freeze the assets of corrupt individuals and legal processes to return ill-gotten assets to the Russian people.”
Unfortunately, this never happened. As it later transpired, a day before the deadline imposed on the US Treasury to release the names of corrupt Russian individuals, three top Russian spies—director of the Foreign Intelligence Service Sergei Naryshkin, FSB head Alexander Bortnikov, and head of the Main Directorate of the Russian General Staff (GRU) Igor Korobov—came to Washington on a secret visit (the latter two at that time were under personal sanctions). They held a closed meeting with Mike Pompeo, then head of the CIA, allegedly discussing the ISIS problem.
By that time, the so-called “Kremlin Report” had already been prepared for submission to Congress. On the morning of January 30, barely meeting the deadline, the report was finally made public, but the released version appeared to have been significantly and hastily altered at the very last moment. The decision could only have been made at the highest level of the Trump administration.
Most observers sarcastically described the report as a “telephone directory” of Russia’s presidential administration. The problem was that CAATSA’s Article 241 required the executive branch not only to provide a list of people close to the Putin regime and involved in its malign activities, but also to disclose detailed financial information, including their fortunes, sources of income, property owned through family members, and—crucially—a complete list of all their assets under US jurisdiction. Instead of being made public, all this information was transferred to the classified part of the report, preventing it from being used for legal purposes. On January 30, Moscow breathed a deep sigh of relief. But it was hard not to link these developments with the mysterious visit of top Russian spies to Washington, D.C.
Each addition of a corrupt oligarch’s name to the “Kremlin blacklist” will be met with unanimous approval by the majority of Russians. Washington should take advantage of this opportunity to sanction those oligarchs close to Putin and put tremendous psychological and political pressure on his regime, simultaneously generating mass public approval in Russia.
And yet, under pressure from Congress, on April 6, 2018, the US Treasury designated 24 Russian persons—7 oligarchs and 17 high-ranking officials—“in response to worldwide malign activity.” All of their US financial assets were frozen, any financial dealings with them prohibited. However, nine months later, one of the individuals on this list, Oleg Deripaska, successfully lobbied for a partial lifting of the sanctions imposed on En+, an energy and metallurgical group that includes Eurosibenergo and UC Rusal. To achieve this, he gave up control over his assets. Since UC Rusal is one of the world’s largest manufacturers of low-carbon aluminum and deeply integrated into international business, its sanctioning hit the global aluminum industry hard, which in turn affected the US economy and, consequently, politics. Deripaska’s US businesses have created jobs in states that were key to Trump’s re-election. Some influential American politicians were En+ stakeholders. Following this precedent, the US sanctioning of Russian criminal assets has gone into a lull.
However, last August, the Putin regime shocked the world yet again by trying to poison—with chemical weapons—the leader of the Russian opposition, Alexei Navalny. While the Kremlin propaganda continues to deny any wrongdoing, inciting inside Russia an unparalleled hate campaign against the West, Navalny’s own investigation into the attempt on his life leaves no doubt about the regime’s deeply criminal nature.
In recent months, the Western political establishment seems to have reached an unprecedented consensus regarding the Putin regime. This opportunity should be used wisely. Speaking recently in the European Parliament, Alexei Navalny called on Western leaders to focus sanctions on Russia’s most prominent oligarchs who serve as one of the key pillars of the Putin regime. Earlier, Navalny quite rightly noted that for “a normal person, Deripaska, Vekselberg, the Rotenbergs, and the Shamalovs are enemies of Russia and its people.”
This opinion is shared, probably, by 99 percent of Russian people. Each addition of a corrupt oligarch’s name to the “Kremlin blacklist” will be met with unanimous approval by the majority of Russians. Washington should take advantage of this opportunity to sanction those oligarchs close to Putin and put tremendous psychological and political pressure on his regime, simultaneously generating mass public approval in Russia.
The Putin regime has been waging a full-fledged hybrid war against the West. The Western elites were slow and reluctant to respond, which allowed Putin to achieve a number of tactical victories. Still, the West can win this war by clearly showing that it does not oppose Russia or Russians, but the Kremlin’s kleptocratic elite, which has robbed and humiliated its own people. It is not too late for the West to radically change the situation and, in strict adherence with its own laws, seize the ill-gotten assets of the Putin elite until they can be safely transferred back to their rightful owner—Russia’s first post-criminal government.
* Dr. Andrei Piontkovsky is a well-known Russian scientist and political commentator currently based in Washington, D.C. He is a co-author of the Atlantic Council's 2017 report “How to Identify the Kremlin Ruling Elite and its Agents.”