Tracking the Oligarchs

Tracking the Oligarchs

The tools the Western nations chose to use against Russia in its war of aggression against Ukraine are intense sanctions levied on the Russian economy, Vladimir Putin, and his inner circle of extremely wealthy cronies. Without getting into how effective economic sanctions are, no one wants the alternative – a direct confrontation between NATO and Russia. President Biden and the head of NATO have reiterated that a direct confrontation will not happen (by choice, at least).

Ever increasing sanctions and the continued arming of Ukraine will be the strategy of the West for the foreseeable future. With revelations that Russia committed human rights violations in Bucha, Europe is also working to sanction Russia’s energy sector, following initial reluctance to do so. 

In an attempt to pressure Putin and the Russian government to come to the negotiation table in earnest, the West has been targeting the assets of Putin’s inner circle, including oligarchs who have made billions in controlling Russia’s natural resources and economy.

The challenge to imposing those sanctions has been in identifying hidden assets. Asset search and identification is one of Interfor’s core services, and something we understand well. To pressure Putin, those around him need to see they cannot access the assets they have accumulated over the years. The fact that the Russian business elite are pariahs on the world stage is also another point of pressure.  

The first step is to understand what an oligarch is, and why have become critical factors in the West’s crushing economic sanctions on Russia 

The Oligarch’s Rise

This class of mega-rich Russian billionaires rose to prominence during the collapse of the Soviet Union.

As this Forbes piece covers: “Russia’s original oligarchs made their fortunes in the 1990s during the chaotic aftermath of the Soviet Union’s collapse, as state assets were offloaded to private bidders, often in corrupt deals.”

The article further elaborates that “during this period of market liberalization, well-to-do businessmen, former officials, and plucky entrepreneurs acquired large stakes in Russian companies in oil and gas, metals, and mining, railway and transportation, agricultural products, and other core industries.”

As it became apparent that Putin was going to stay in power a “second generation” of oligarchs started to build extreme wealth: “The “silovarch.” The term, coined by Treisman, is a portmanteau of oligarch and siloviki, a Russian word for the country’s military and security elite. Many silovarchs know Putin personally from his time in the KGB or from working under him in St. Petersburg during his early post-Soviet political career.”

Today, many of these billionaires have moved beyond just having a Russian identity, as a significant number of the oligarchs have Israeli citizenship (for which they are eligible if they have one Jewish grandparent). The recent scandal involving Roman Abramovich’s (considered Israel’s richest citizen) ability to obtain Portuguese citizenship is a case in how oligarchs use their wealth and influence to do what regular citizens cannot. 

Not all oligarchs have sided with Putin, however. Some are considered neutral, such as Mikhail Prokhorov (former owner of the Brooklyn Nets), while others have been antagonistic towards Putin and the Russian regime, such as exiled oligarch Mikhail Khodorkovsky.  Ultimately, one cannot retain the trappings of Oligarchy status without remaining in Putin’s favor, a condition he made exceedingly clear toward the start of this regime.

Sanctioning the Oligarchs

One of the strategies that the West has used to sanction the oligarchs has been to seize their assets, such as the infamous superyachts the media has been covering.

It has generally been a straightforward affair to seize the yachts, but there are always challenges when coordinating internationally: But that’s if the Justice Department is able to yank the yachts out of foreign waters in the first place. Because European countries have been cooperating with the Americans, several oligarchs’ yachts have sped away from the Mediterranean and over to Turkey or Dubai, which are seen as friendlier to Russia.” 

Seizing assets such as the superyachts is the easier part of this process. Where it gets complicated is who actually “owns” the asset itself. As this Business Insider article notes: “Yachts are assets and can be a source of liability. According to Maltby, the beneficial owner — who is the actual owner – does not necessarily want the world to know that they are the owner.

Per Investopedia, a beneficial owner is a person who enjoys the benefits of ownership, though the property’s title is in another name. Per Maltby, that’s when the owning company comes into play.”

Many of these luxury assets are not actually “owned” by the billionaire themselves, but an arm’s length away through a legal maze of entities set up to hold and manage the asset. When a Western power’s justice arm seizes a yacht, they may not be making any impact on that oligarch’s wealth. Even if ownership is proven, the process of seizing title itself and selling off the asset is even more arduous, lengthy, and uncertain.

The Interfor Edge

Identifying the holder of the assets is a practice we know well. As a result of experience in the field, we are able to identify the assets and who they belong to, in what is often an opaque space.

Interfor has developed the unique capability to locate concealed or undisclosed assets hidden in international “safe havens” and domestic accounts, and we have assisted clients in successfully recovering billions of dollars as a result.

We are also able to identify individuals or entities that can offer direction in the discovery of hidden assets. As a result, we are able to determine how the target meets their current obligations and examine what kind of business they are currently conducting.

Interfor’s asset recovery division is unique, as our resources are as strong abroad as they are in the United States. Oligarchs are not the only ones hiding their assets around the globe. If uncovering the true owner of an asset is something you need, reach out to us directly or click the link here.