Despite enduring 18 cycles of Western sanctions and nurturing aspirations of fomenting a Kremlin overthrow, Russia’s oligarchs persist in their affluence and unwavering fidelity to President Vladimir Putin. These magnates have ingeniously adapted to the sanctions, ingeniously upholding their wealth and continuing their extravagant lifestyles.
Andrey Melnichenko, crowned Russia’s wealthiest by Forbes in April, has predominantly taken up residence in Dubai since being sanctioned in March 2022 following his participation in a colloquy hosted by Russian President Vladimir Putin. He is among a select few exiled from Western nations that had served as a secondary domicile to Russia’s affluent elite.
Sanctions were unleashed upon Russia’s plutocrats as part of a broader spectrum of economic constraints, with hopes of catalyzing insurrection within the nation. Russia’s most affluent individuals have wielded unconventional political and economic clout. Most ascended to prominence after acquiring assets in industries such as natural gas, petroleum, fertilizers, and steel during the “perestroika” reforms of the late 1980s, as communism crumbled in the Soviet Union.
This “kleptocratic” model offered Western leaders a glimmer of hope in obstructing Putin’s campaign by inflicting pain on a few magnates. However, with only a couple of exceptions, there has been no inkling of an escalating “palatial coup” against Putin – for various reasons.
Russia’s oligarchs owe their ongoing prosperity to Putin. The authoritarian president clamped down on the oligarchy as part of an anti-corruption crusade after assuming power in 2000. While some were deposed, those who pledged allegiance to Putin witnessed their riches and sway burgeon.
Yet, while loyalty endures, the concept of a kleptocracy has dissipated. Oligarchs who once influenced Putin’s governance have seen that influence dissipate since the commencement of the invasion, as noted by Ivan Fomin, a fellow in democracy at the Center for European Policy Analysis. Fomin wrote in April, “If anything, assets have become encumbrances, rendering their proprietors more susceptible as control over Russian enterprises is contingent upon their loyalty to Putin and, specifically, their endorsement of the conflict.”
In February, scholars at the Center for Strategic and International Studies remarked, “If any discontent, dissatisfaction, or scheming is occurring among disenchanted oligarchs, it is happening in private and far from the public eye.” While their waning political sway has handicapped them, the continuing prosperity of oligarchs may be a more compelling rationale for their silence during the conflict.
Forbes divulged that Russia’s billionaires had experienced a downturn – though not a substantial one. As of April, the 39 Russians on Forbes’ roster of the world’s billionaires collectively suffered a $45 billion diminution in their net worth since the commencement of the invasion. This, while not inconsequential, only equates to a 13% contraction in their total assets.
A depreciating ruble, the exodus of foreign corporations, the collapse in the stock prices of public enterprises, and the seizure of lavish properties, including colossal estates and opulent vessels, have all corroded their affluence.
Nevertheless, according to Peter Rutland, a professor of government at Wesleyan University, oligarchs were willing to forsake their overseas holdings to sustain their presence in Russia. “You would instantly forfeit all your assets within Russia. Your allies and kin would be susceptible to arrest. There is no ambiguity concerning the drawbacks,” he asserted. “And the upside is you can continue to amass substantial wealth in Russia.”
For numerous oligarchs, their wealth garnered within Russia has remained robust despite a tumultuous economy. Forbes reported that Melnichenko’s net worth had doubled since the invasion, primarily owing to the astronomical escalation in fertilizer prices, his primary source of income. He is presently valued at $15.6 billion, according to the Bloomberg Billionaires Index.
Concurrently, Vladimir Potanin witnessed a surge in his fortune, amassing more than $6 billion after repurchasing Rosbank from the French bank Société Générale in April 2022, as disclosed by Forbes. Potanin, the wealthiest Russian on the Bloomberg Billionaires Index at rank 50, is now worth $28.8 billion, an augmentation of $238 million this year.
His acquisition of Rosbank was one of several transactions that witnessed Russian business magnates securing $40 billion worth of Western assets at discounted prices, reminiscent of the initial scramble for assets by oligarchs in the 1980s.
Western policymakers entertained the fanciful notion that oligarchs might withdraw their support for Putin out of a longing to regain their former luxuries. Instead, they have adeptly adapted to the new paradigm. Some oligarchs have proven adept at relocating assets beyond the grasp of Western constraints or uncovering loopholes in sanctions.
In the United Kingdom, post-Brexit financial regulations undermine the perceived effectiveness of closing oligarchs’ bank accounts. A New York Times investigation unearthed that specific exemptions granted by the UK government allowed oligarchs to continue paying for amenities such as personal chefs, chauffeurs, and domestic staff.
For those unable to revisit their preferred locales, Rutland observed a shift in lifestyle. “You can no longer expend wealth in the same manner as in France and London – but you can lavish it in Thailand or elsewhere,” he noted. Rutland added that the pragmatism of oligarchs should come as no surprise: “Throughout most of the 1990s, there was considerable political tumult. These individuals are seasoned in adapting to abrupt shifts in the rules of engagement, thus prepared for such pivots.”
Abramovich is among those who have rooted themselves beyond the Western sphere. Despite encountering several humbling experiences, including the compelled sale of his cherished soccer team, Chelsea FC, and the sale of the telecommunications firm Truphone for a mere $1, he has not completely faded from the limelight.
Abramovich managed to transfer many of his assets, including superlative yachts and private aircraft, to his unsanctioned offspring, according to The Guardian’s January report. He has also spent time in Turkey and the United Arab Emirates, akin to Melnichenko. In April of the previous year, The Wall Street Journal reported that wealthy Russians and oligarchs were acquiring up to four residences in Turkey in the aftermath of sanctions.
It appears that Russia’s oligarchs have adjusted to a novel status quo in which they lack political clout but retain a steady stream of financial resources. Nevertheless, there are signs that patience is dwindling. Arkady Volozh, founder of Yandex, finally denounced the conflict 18 months after the invasion, just days before requesting the EU to lift sanctions imposed on him, as reported by the Financial Times.
Nonetheless, according to Rutland, any inklings of sanctions inciting a palace overthrow should be regarded with skepticism. “The prospect of an oligarchic uprising is not implausible, but it presently appears unlikely,” Rutland remarked. Furthermore, with Putin exhibiting newfound assertiveness, oligarchs may be content to preserve their remaining billions.