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Russia has no more oligarchs Western sanctions are based on a miscalculation

The age of oligarchs is over. Credit: Triangle of Sadness/Amazon Prime

The age of oligarchs is over. Credit: Triangle of Sadness/Amazon Prime


March 9, 2023   4 mins

Like the dozens of sanctioned superyachts lying abandoned in European harbours, the empty mansions gathering dust in Chelsea stand as mementoes to the West’s love affair with the Russian super-rich. This romance has soured with Western sanctions, which are based on a wildly naïve assumption: that Russia still has a powerful business elite that can influence President Putin and even change his handling of the war. The truth is, there are no powerful Russian oligarchs left.

The term “oligarchy” perfectly characterises Boris Yeltsin’s presidency in the Nineties, during which a small number of extremely wealthy men yielded massive influence. These men acquired key state assets, including major parts of the energy, telecommunications, and precious metal sectors, at a fraction of their real value after the Soviet Union fell. In return, these “businessmen” backed the ailing president and helped to ensure his re-election in 1996.

When Putin came to power, he set about dismantling this oligarchy and removing any threat business elites posed to his own political leadership. The deal was that oligarchs could keep their money if they stayed out of politics. Those that didn’t, risked everything — their wealth, their freedom, and their lives. Mikhail Khodorkovsky, once Russia’s richest man, spent 10 years in prison on tax charges after setting up a political organisation — Open Russia — to “build and strengthen civil society”. Rather than risk a similar fate, most of the other oligarchs stayed away from politics.

Of course, Putin reduced the Russian people’s political power as well as that of the oligarchs. But people were willing to accept a social contract of economic stability and growth in return for staying out of politics because they were so traumatised by the economic conditions and exploitations to which the oligarchs (and Western advisors and businessmen) contributed so substantially during the transition to capitalism and depredations of the wild Nineties.

In an oligarchy, great wealth guarantees political influence, but in Putin’s Russia, the opposite is true: business elites must suffer the tyranny of officials. State corruption winds its way through all Russian businesses, which require krysha — or protection — from powerful bureaucrats to ensure their company is not expropriated, subject to a hostile takeover, or slandered around the world via “black PR”. The bureaucrats can then exploit their powers of patronage to arrange business opportunities for their friends or family. No wonder so many young Russian professionals want to become bureaucrats, not businessmen.

In this system, wealthy Russians depend on political approval, not vice versa, which is where the UK’s misunderstanding lies. The business elites have close to zero political influence.

There are two types of super-rich Russians: both powerless to change the course of the war. The first are Putin’s men, for example, Igor Sechin, who derive their wealth exclusively from their proximity to Putin. If they were to abandon or criticise Putin, they would lose everything. The second group is made up of tamed erstwhile oligarchs, many of whom emit coded signals that they do not agree with the war. The sanctioned businessman Mikhail Fridman — who lives in London — is one such. He called the invasion of Ukraine a tragedy, but stopped short at outright condemnation of the war.

In some ways, the UK is to blame for the Russian elites’ lack of leverage. For decades, well-connected Russians kept their money and families safe in the UK, while maintaining their high positions in Russia. British accountants helped to stash their dubious incomes, lawyers settled their divorces and prosecuted libel trials, consultants lobbied politicians for their business associates’ interests, estate agents procured their mansions, private schools educated their children, and museums laundered their reputations.

Given the Russian super-rich had rights and the means to assert them in the UK, they never felt the need to promote — or defend — the rule of law at home. This double life often worked in their favour: if they wanted to bring down an enemy, they could hire a corrupt judge in Russia to ensure an unfair hearing. But when they needed real justice, they could fly to London.

This “Get out of Russia Free” card couldn’t last forever. In allowing Russians to live the high life away from home, the UK emboldened Putinism in its current form. With the UK offering a safe haven, rich Russians never felt the need to build or maintain strong legal institutions after the fall of the Soviet Union. As a result, there is now no realistic channel of non-centralised power, such as a strong judiciary or small and medium business constituency, that the business elites could use to influence the Kremlin — presuming they even wanted to.

Russia might have been better off following the lead of Poland or Ukraine. In Poland, which also underwent neoliberal “shock therapy” market reforms during the Nineties, measures were taken to guard against oligarchy and build up the SME sector. The Poles built millions of new businesses and gave a group of funds stakes in privatised state firms to prevent the asset-stripping characteristic of Russian oligarchs. Meanwhile, in Ukraine, the rivalries between different oligarchs created obstacles for any autocrats, allowing citizens more political freedom. In many ways, Russia has the worst of both worlds: the destructive economic legacy of oligarchy without any of the elite infighting.

None of this is to say that the UK shouldn’t seize the assets of Kremlin-linked officials and businessmen. It’s just that the purpose of doing so should not be to encourage business elites to abandon or persuade or topple Putin — but to stop Russian money from corrupting our national interests and security.

Ironically, sanctions on oligarchs have given the UK some of its best PR in Russia for decades. Ordinary Russians hate the business elite and have celebrated the West’s sanctions on them. On Russian Telegram channels, announcements of new sanctions on bankers, Putin’s mistress Alina Kabaeva, and other wealthy individuals, are greeted with thousands of likes and jokey comments celebrating the UK: “Thanks London”, “More please!”, and “London is doing us a favour”. As Putin gloated during his State of the Nation speech last month: the West has seized rich Russians’ assets because it views them as “second-class strangers”, but “not a single ordinary citizen in our country feels sorry” for them.

When it comes to sanctions, the British establishment must be careful not to project its outdated historical conceptions onto Russia. The UK is no longer dealing with the influential oligarchs of the Nineties — but with powerless present-day business elites. And while the Kremlin could no doubt use Western business elites to influence our governments, the same is no longer true in reverse. The power of the Russian business elites is a phantom. The oligarchs are long dead. And we helped kill them.


Jade McGlynn is a Russia analyst. Her book Russia’s War will be published by Polity on 17 March.

DrJadeMcGlynn

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Martin Bollis
Martin Bollis
1 year ago

Who else expanded the photo?

Steve Murray
LL
Steve Murray
1 year ago
Reply to  Martin Bollis

Too right. That fat oligarch is a huge turn-on!

Linda Hutchinson
LH
Linda Hutchinson
1 year ago
Reply to  Martin Bollis

Were you disappointed?

Martin Bollis
MB
Martin Bollis
1 year ago

Just checking:)

Martin Bollis
Martin Bollis
1 year ago

Just checking:)

Steve Murray
LL
Steve Murray
1 year ago
Reply to  Martin Bollis

Too right. That fat oligarch is a huge turn-on!

Linda Hutchinson
LH
Linda Hutchinson
1 year ago
Reply to  Martin Bollis

Were you disappointed?

Martin Bollis
MB
Martin Bollis
1 year ago

Who else expanded the photo?

Jonny Stud
JS
Jonny Stud
1 year ago

If we replace ‘Oligarch’ with ‘Serco, Shell, Pfizer’ etc then Oligarchy perfectly sums up the UK these days :

The term “oligarchy” perfectly characterises Blair-Sunak in the Noughties until present day, during which a small number of extremely wealthy companies yield massive influence. These companies acquired key state assets, including major parts of the energy, telecommunications, and precious metal sectors…..

Jonny Stud
JS
Jonny Stud
1 year ago

If we replace ‘Oligarch’ with ‘Serco, Shell, Pfizer’ etc then Oligarchy perfectly sums up the UK these days :

The term “oligarchy” perfectly characterises Blair-Sunak in the Noughties until present day, during which a small number of extremely wealthy companies yield massive influence. These companies acquired key state assets, including major parts of the energy, telecommunications, and precious metal sectors…..

J Bryant
J Bryant
1 year ago

My only minor disagreement with this article is I don’t believe our politicians, security services, etc, didn’t understand, long before the Ukraine war, that the Russian oligarchs were Putin’s pets entirely dependent on him to maintain their wealth and status. Sanctioning them is mostly for show, imo, and perhaps their frozen assets can be used to reconstruct Ukraine.
As an aside, I wonder if other Unherd readers have noticed that the Ukraine war no longer commands the intense level of coverage it did even a couple of months ago? The focus seems to have shifted to how the world is changing in large part due to the war, such as the West vs. The Rest divide. It’s almost as if the war itself is becoming a side show.

Last edited 1 year ago by J Bryant
Jeremy Bray
JB
Jeremy Bray
1 year ago
Reply to  J Bryant

Yes, we have seen through reading the WhatsApp exchanges revealed by Oakshott and the Telegraph how much of policy is driven by political showmanship- to look good rather than do good.

Chris Wheatley
CW
Chris Wheatley
1 year ago
Reply to  Jeremy Bray

We need a statement from Gary Lineker.

Martin Bollis
MB
Martin Bollis
1 year ago
Reply to  Chris Wheatley

Marvellous

Last edited 1 year ago by Martin Bollis
Peter B
PB
Peter B
1 year ago
Reply to  Chris Wheatley

Said no one, ever.

Steve Murray
LL
Steve Murray
1 year ago
Reply to  Peter B

The first to do so might be the Met Police, for the use of hate speech.

Nicky Samengo-Turner
NS
Nicky Samengo-Turner
1 year ago
Reply to  Steve Murray

not the Metropolitanazi Police surely?

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago
Reply to  Steve Murray

not the Metropolitanazi Police surely?

Steve Murray
Steve Murray
1 year ago
Reply to  Peter B

The first to do so might be the Met Police, for the use of hate speech.

Jeff Butcher
Jeff Butcher
1 year ago
Reply to  Chris Wheatley

Heh

Martin Bollis
Martin Bollis
1 year ago
Reply to  Chris Wheatley

Marvellous

Last edited 1 year ago by Martin Bollis
Peter B
Peter B
1 year ago
Reply to  Chris Wheatley

Said no one, ever.

Jeff Butcher
JB
Jeff Butcher
1 year ago
Reply to  Chris Wheatley

Heh

Chris Wheatley
Chris Wheatley
1 year ago
Reply to  Jeremy Bray

We need a statement from Gary Lineker.

Rocky Martiano
Rocky Martiano
1 year ago
Reply to  J Bryant

The shift in media coverage is also looks like the first step in preparing the public for a change in the official narrative. We are moving away from ‘giving the Zelensky government whatever it wants for as long as it takes’ towards ‘it’s time to start thinking about ending the war as we can no longer afford to keep sending them arms and treasure that are in short supply and besides, look at what those crazy Ukrainians are doing, we can’t control them any longer’.
Hence the proliferation of stories in recent weeks about how Ukraine did not consult the West about various secret operations – blowing up the Kursk bridge, the assassination of Daria Dughina, encroachments into Russian territory – and now the ludicrous story that the Nordstream pipelines were destroyed by a pro-Ukrainian group of six divers in a rented yacht! This has all the hallmarks of state propaganda attempting to justify the coming U-turn.

Jeremy Bray
JB
Jeremy Bray
1 year ago
Reply to  J Bryant

Yes, we have seen through reading the WhatsApp exchanges revealed by Oakshott and the Telegraph how much of policy is driven by political showmanship- to look good rather than do good.

Rocky Martiano
RM
Rocky Martiano
1 year ago
Reply to  J Bryant

The shift in media coverage is also looks like the first step in preparing the public for a change in the official narrative. We are moving away from ‘giving the Zelensky government whatever it wants for as long as it takes’ towards ‘it’s time to start thinking about ending the war as we can no longer afford to keep sending them arms and treasure that are in short supply and besides, look at what those crazy Ukrainians are doing, we can’t control them any longer’.
Hence the proliferation of stories in recent weeks about how Ukraine did not consult the West about various secret operations – blowing up the Kursk bridge, the assassination of Daria Dughina, encroachments into Russian territory – and now the ludicrous story that the Nordstream pipelines were destroyed by a pro-Ukrainian group of six divers in a rented yacht! This has all the hallmarks of state propaganda attempting to justify the coming U-turn.

J Bryant
J Bryant
1 year ago

My only minor disagreement with this article is I don’t believe our politicians, security services, etc, didn’t understand, long before the Ukraine war, that the Russian oligarchs were Putin’s pets entirely dependent on him to maintain their wealth and status. Sanctioning them is mostly for show, imo, and perhaps their frozen assets can be used to reconstruct Ukraine.
As an aside, I wonder if other Unherd readers have noticed that the Ukraine war no longer commands the intense level of coverage it did even a couple of months ago? The focus seems to have shifted to how the world is changing in large part due to the war, such as the West vs. The Rest divide. It’s almost as if the war itself is becoming a side show.

Last edited 1 year ago by J Bryant
Anna Bramwell
Anna Bramwell
1 year ago

Many good points here and anyone interested should read Richard Sakwa’s book on Putin and the oligarchs. But the comparison with Ukraine jars. Unkaine is far more corrupt than Russia, as anyone who has worked with both countries. or just driven through both, will testify, helping to explain why Ukraine is so very poor, and why before the war some milliins had left for Poland ; and even Russia to find work. Poland was totally different from Ukraine, which still had state controlled industry until well into the 2000s. It is telling that Ukraine was the fourth largest arms exporter in the world, renationalised its arms industry, and suddenly needs the West to send it all its arms. I feel very sorry for Ukrainians, as whoever they voted for they got unreforned oligarchs.

Colin Goodfellow
Colin Goodfellow
1 year ago
Reply to  Anna Bramwell

When Puitn had a puppet in power in Kieve it was crooked. The new guy was working on purging the local corruption so Putin was loosing his take and control.And ethnic Russians in semi atonomous started seeing the west as viable for better life. Invade.

Colin Goodfellow
CG
Colin Goodfellow
1 year ago
Reply to  Anna Bramwell

When Puitn had a puppet in power in Kieve it was crooked. The new guy was working on purging the local corruption so Putin was loosing his take and control.And ethnic Russians in semi atonomous started seeing the west as viable for better life. Invade.

Anna Bramwell
Anna Bramwell
1 year ago

Many good points here and anyone interested should read Richard Sakwa’s book on Putin and the oligarchs. But the comparison with Ukraine jars. Unkaine is far more corrupt than Russia, as anyone who has worked with both countries. or just driven through both, will testify, helping to explain why Ukraine is so very poor, and why before the war some milliins had left for Poland ; and even Russia to find work. Poland was totally different from Ukraine, which still had state controlled industry until well into the 2000s. It is telling that Ukraine was the fourth largest arms exporter in the world, renationalised its arms industry, and suddenly needs the West to send it all its arms. I feel very sorry for Ukrainians, as whoever they voted for they got unreforned oligarchs.

David McKee
DM
David McKee
1 year ago

This is another superb contribution from Dr. McGlynn. It is logical, consistent and explains the known facts. She certainly seems to know her stuff. I hope MI6 and the Foreign Office are reading her contributions.
And yes, I will certainly buy her book.

David McKee
DM
David McKee
1 year ago

This is another superb contribution from Dr. McGlynn. It is logical, consistent and explains the known facts. She certainly seems to know her stuff. I hope MI6 and the Foreign Office are reading her contributions.
And yes, I will certainly buy her book.

D Walsh
DW
D Walsh
1 year ago

Neo. What are you trying to tell me ? I can check the early life section on their Wikipedia page
Morpheus. No, Neo. What I’m trying to tell you is, that when you’re ready, you won’t have to

D Walsh
DW
D Walsh
1 year ago

Neo. What are you trying to tell me ? I can check the early life section on their Wikipedia page
Morpheus. No, Neo. What I’m trying to tell you is, that when you’re ready, you won’t have to

Peter B
Peter B
1 year ago

“The oligarchs are long dead. And we helped kill them.”
And this is a problem because ?
I’m just ashamed it took us so long and that we tolerated these “Russian businessmen” (a misnomer if ever there was one) in London for so long.
Let the Russians sort their own mess and corruption out. Just stop it spreading outside Russia’s borders. The author appears to be saying that this is all the sanctions can do – but that this is somehow “bad” or insufficient.
Western policy with Russia is quite correctly one of containment and not regime change.

Linda Hutchinson
LH
Linda Hutchinson
1 year ago
Reply to  Peter B

Insufficient maybe, but not bad.

Anna Bramwell
AB
Anna Bramwell
1 year ago
Reply to  Peter B

A remarkably large number of then in London committed suicide……

Simon Diggins
SD
Simon Diggins
1 year ago
Reply to  Anna Bramwell

Dodgy windows’ catches are a particular problem; especially from the 3rd floor up.

Simon Diggins
SD
Simon Diggins
1 year ago
Reply to  Anna Bramwell

Dodgy windows’ catches are a particular problem; especially from the 3rd floor up.

Rick Hart
RH
Rick Hart
1 year ago
Reply to  Peter B

They’re not dead. They’re holidaying in Sri Lanka. I’ve seen them.

Linda Hutchinson
Linda Hutchinson
1 year ago
Reply to  Peter B

Insufficient maybe, but not bad.

Anna Bramwell
Anna Bramwell
1 year ago
Reply to  Peter B

A remarkably large number of then in London committed suicide……

Rick Hart
Rick Hart
1 year ago
Reply to  Peter B

They’re not dead. They’re holidaying in Sri Lanka. I’ve seen them.

Peter B
PB
Peter B
1 year ago

“The oligarchs are long dead. And we helped kill them.”
And this is a problem because ?
I’m just ashamed it took us so long and that we tolerated these “Russian businessmen” (a misnomer if ever there was one) in London for so long.
Let the Russians sort their own mess and corruption out. Just stop it spreading outside Russia’s borders. The author appears to be saying that this is all the sanctions can do – but that this is somehow “bad” or insufficient.
Western policy with Russia is quite correctly one of containment and not regime change.

Nicky Samengo-Turner
NS
Nicky Samengo-Turner
1 year ago

It is, frankly, beyond stupidity that any British government cannot see that Russians, and for that matter any other UHNW people bring cash, spend and investment into Britain that amongst other precious benefits lend to the Government via bond investment.

They can take their spend and capital anywhere, but they love Britain ( even, amazingly National Socialist nu britn)…. It as akin to a street beggar turning down coins in his hat on the basis that it might be ” ill gotten gain”….

Peter B
PB
Peter B
1 year ago

Ah yes. If only we didn’t have those silly laws about money laundering and handling stolen goods getting in the way of “business” …

Nicky Samengo-Turner
NS
Nicky Samengo-Turner
1 year ago
Reply to  Peter B

define money laundering please?

Peter B
PB
Peter B
1 year ago

Read the laws if you don’t know. Ignorance of the law is never any defence.

Peter B
PB
Peter B
1 year ago

Read the laws if you don’t know. Ignorance of the law is never any defence.

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago
Reply to  Peter B

define money laundering please?

Peter B
Peter B
1 year ago

Ah yes. If only we didn’t have those silly laws about money laundering and handling stolen goods getting in the way of “business” …

Nicky Samengo-Turner
NS
Nicky Samengo-Turner
1 year ago

It is, frankly, beyond stupidity that any British government cannot see that Russians, and for that matter any other UHNW people bring cash, spend and investment into Britain that amongst other precious benefits lend to the Government via bond investment.

They can take their spend and capital anywhere, but they love Britain ( even, amazingly National Socialist nu britn)…. It as akin to a street beggar turning down coins in his hat on the basis that it might be ” ill gotten gain”….

Steve Houseman
Steve Houseman
1 year ago

To get the ‘Other’ side of the story I would definitely suggest; Putin’s Kleptocracy by Karen Dawisha, Ukraine and the Empire of Capital by Yuliya Yurchenko and finally Dirty Entanglements by Louise I. Shelly. Always good to look at all sides before hitting the road I say.

Steve Houseman
Steve Houseman
1 year ago

To get the ‘Other’ side of the story I would definitely suggest; Putin’s Kleptocracy by Karen Dawisha, Ukraine and the Empire of Capital by Yuliya Yurchenko and finally Dirty Entanglements by Louise I. Shelly. Always good to look at all sides before hitting the road I say.

Colin Goodfellow
Colin Goodfellow
1 year ago

I think you misread why the ollies are targetted. Its not because the influence him. Though Putin costing them billions might have some effect. Its because they are part of a clepto state apparatis.

Colin Goodfellow
CG
Colin Goodfellow
1 year ago

I think you misread why the ollies are targetted. Its not because the influence him. Though Putin costing them billions might have some effect. Its because they are part of a clepto state apparatis.