The Russia Conundrum

Deripaska’s public pronouncements suggest quite strongly that targeted sanctions can work. In late 2020, he complained that the measures against him were part of a ‘war’ against Russia, ‘no better than a bombing raid on our cities or direct attacks on our borders’. Deripaska’s words reflect the extent of the disconnect between the ruling elite and the people of Russia. ‘Those who directly or indirectly provoke sanctions against [us],’ he added, ‘should logically be considered to have betrayed the country and suffer the corresponding judicial consequences.’ I responded to Deripaska at the time: ‘So, [the West] preventing people from spending millions abroad while they are nominally employed as civil servants in Russia, or refusing to allow into their countries those people who go unpunished for torture and murder in Russia, amounts to a hybrid war? To me this is actually just basic morality.’

Alongside Deripaska, the US Treasury Department in 2018 targeted a number of people close to Putin: oil, gas and mineral tycoons Vladimir Bogdanov, Suleiman Kerimov, Viktor Vekselberg and Igor Rotenberg; Putin’s former son-in-law Kirill Shamalov; former prime minister Mikhail Fradkov; head of the Security Council Nikolai Patrushev; Gazprom CEO Alexey Miller; and Viktor Zolotov, head of Putin’s Praetorian Guard, the Rosgvardiya. It was a warning to the corrupt officials of the Kremlin and a signal to the Russian business community that has for so long propped up this authoritarian junta that they are not safe, and Putin cannot protect them forever.

Paradoxically, the Kremlin criminals who accuse their critics of being ‘Russophobes’ and ‘foreign agents’ have nearly all stashed their cash in Western countries, via shell companies or under the names of family and friends who live abroad. They do so because they know that keeping their money in Russia exposes it to the ravages of a predatory state, renowned for its arbitrary confiscation of private property. The existential paradox of any kleptocratic system is that those who have stolen money do not trust the regime that has let them steal it. They seek to hide this dirty money where it cannot be taken from them. It is estimated that well over $1 trillion of private Russian money is in foreign banks, and, while some of it is perfectly legitimate, a very large amount of it is not. Capital outflows have increased markedly in recent times, much to Putin’s displeasure.

These thieves must not be allowed to continue hiding their money in the West, using the financial centres of London and New York to launder cash stolen from the Russian people. If the West wishes to combat the criminals in the Kremlin, it must agree to be more transparent and more decisive in its actions. During the election campaign of 2020, then President-elect Biden pledged that he would ‘issue a presidential policy directive that establishes combating corruption as a core national security interest and democratic responsibility’. He undertook to ‘lead efforts internationally to bring transparency to the global financial system, go after illicit tax havens, seize stolen assets, and make it more difficult for leaders who steal from their people to hide behind anonymous front companies’. The strengthened sanctions announced by Washington, Brussels and London in March 2022 suggest that the West is finally getting serious about ending the old practices of financial secrecy for Putin and his criminal associates. While the war in Ukraine continues to rage, while the Putin regime is killing people en masse, no sanctions can be considered too harsh. Western governments might even be criticised for leaving obvious loopholes and opportunities for circumventing them. What I am talking about is the medium-term and the longer-term future.

The Magnitsky Act is another proven tool to push back against Russian human rights abusers, and it is right to extend its application to those people involved in persecuting, poisoning and arresting Alexei Navalny. It is not a question of new laws, but of enforcing existing legislation, as the United States did when it designated the GRU and two of its specific officers, the FSB, three research institutes and five Russian government officials linked to the use of a chemical weapon in contravention of international law for the nerve agent attacks on Navalny and the Skripals. These attacks have brought home to some Western leaders that they, too, are under threat. One German politician told me plainly, that ‘it’s only the door of my house that separates me from Putin’s assassins. No one is protecting me.’