The U.S. is shifting tactics to target Russia’s richest. But will it make a difference?

The U.S. is shifting tactics to target Russia’s richest. But will it make a difference?

The Trump administration has changed tact on Russia. For the first time, the United States is sanctioning Russians for being close to President Vladimir Putin. The U.S. is now going after some of Russia’s biggest billionaires.

The new strategy to change Putin’s behavior is to go after Russia’s elite. The apparent hope is that the billionaires will apply the U.S.’s pressure on Putin for them.

That’s a change. In the past, U.S. sanctions have gone after individuals and companies because it believed they played a hand in an event like the annexation of Crimea or fighting in Eastern Ukraine. And in the past, the U.S. has also imposed sanctions on sectors of the Russian economy — like the oil industry and the banks — to put pressure on the overall economy and force President Putin to the table. The U.S. appears to have decided that strategy wasn’t working well enough.

In January, the Trump administration produced an official list of 210 Russians “with close ties” to Putin’s government, and 96 Russian billionaires were on that list. While they weren’t facing any sanctions yet, many of Russia’s richest feared that the list marked the first move in a new kind of war with Putin’s government.

With this week’s sanctions, the U.S. imposed restrictions that go well beyond previous sanctions. Past sanctions might have limited the target’s ability to borrow, while the new sanctions will make it difficult for their targets to do any kind of business with the rest of the world.

Americans are now restricted from doing a lot of different kinds of business with these individuals, and non-Americans are warned not to help. The message to them is simple: if you want to do business with the U.S., you’d best steer clear of doing business with the oligarchs.

Given that the U.S. has the world’s largest economy and a currency that is used in transactions throughout the world, testing the U.S. Treasury’s warning is something few will want to do. The sanctioned are now marked men.

The biggest loser in this week’s sanctions is Russian billionaire Oleg Deripaska, best known in the U.S. for his ties to Paul Manafort. The U.S. Treasury didn’t just sanction Deripaska; it sanctioned eight of his companies as well, one of which lost nearly a fifth of its value after the sanctions were imposed on Friday.

Of the 24 Russians on the sanctions list, Viktor Vekselberg also stands out. A double-digit billionaire who made most of his money in commodities, he is also behind efforts to diversify Russia’s economy away from oil. He’s also an investor in tech start-ups and, in general, is a big fan of the U.S.

Kirill Shamalov is the last I’ll mention. Shamalov was Putin’s son-in-law until he and one of Putin’s daughters divorced. The U.S. says he amassed a significant amount of his wealth both after, and thanks to, that marriage. Since the divorce, though, few believe that he wages much influence over his ex’s father.

But will these measures be effective? Russia’s billionaires may enjoy their wealth at the pleasure of President Vladimir Putin. But they don’t have the ability to exercise influence over him. Before the expected sanctions on Russian oligarchs were announced, Putin’s spokesman Dmitry Peskov quipped there wouldn’t be much to do because Russia doesn’t have any oligarchs. There’s some truth to that. Yes, Russia’s richest have extraordinary power, but not when it comes to the man at the top – there’s little dissension. Russia’s billionaires never publicly criticize Putin.

Vladimir Putin went to war with Russia’s oligarchs in the early years of his reign. Many of them owed their fortunes to the privatization of state assets and were able to use their fortunes to exercise real power over the government. Fresh in office, Putin told Russia’s newly minted: if you stay out of politics, you can keep your money. In 2003, three years into Putin’s first term, Mikhail Khodorkovsky — Russia’s richest man at the time, who also dabbled in politics — went to jail. After 18 years in power and a lock on another 6-year term, the matter of who has power in Russia is ancient history.

The idea that Oleg Deripaska could or would go to Vladimir Putin and tell him, for example, to back off in Ukraine and that Putin would oblige his request is not realistic.

Bill Browder, co-founder of Hermitage Capital Management, is a U.S.-born financier. Once one of the largest portfolio investors in Russia, he has been campaigning for sanctions to be imposed against Russia for much of the last decade. Browder tells me I’m missing the point. He agrees the oligarchs can’t influence Putin, but he argues sanctioning the billionaires will be effective, saying that Putin’s a kleptocrat who has been hiding his fortune from the world by storing it with the billionaires. “Putin can’t keep the money in his own name so he uses the oligarchs as trustees. When you go after the oligarchs, you’re going after Putin’s money,” he said.

This, Browder said, is the first time he’s been satisfied with the U.S. government’s action on Russia.

Russia’s “oligarchs” are taking all of this very seriously, arguing thae U.S. sanctions reflect a double-standard. Several told the NewsHour they feel the U.S. was happy to do business with them until it decided to turn them into pawns in an effort to curb Putin’s aggressive foreign policy.

Dmitri Trenin, director of the Carnegie Moscow Center, said the new sanctions could actually help Putin with one part of his domestic agenda: getting Russia’s richest to invest in their home country. “Even as the Trump administration and the U.S. establishment rejoice in another punishing blow at the Putin regime, Vladimir Putin sees his hand strengthened in his effort to nationalize the Russian elites,” he told the NewsHour.


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Publish date : 2018-04-07 18:57:07
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