How The West Has Enabled Putin And His Oligarchs To Safeguard Their Billions
If you’re reading about what Vladimir Putin is doing to Ukraine and the many comparisons to Adolf Hitler’s invasion of Poland in 1939, you might think there’s nothing we can do but watch in horror, or risk nuclear war. But that’s not right. Putin is not a 20th-century-style dictator. The violence and oppression may be old-fashioned, but the way in which he and his oligarchs run Russia is very new, and it’s as much the West’s fault as theirs.
Until 1991, Russia was ruled by communists; there was almost no private property and everything valuable belonged to the state. When the new post-Soviet government sold all its most valuable assets – oil fields, aluminium smelters, factories, etc – they went to a tiny group of people, who became billionaires, while ordinary Russians struggled along with very little. Just 500 Russians own more wealth than 99.8% of the population, which is about 144 million people. This tiny group supports Putin, because he has made them rich and lets them operate without scrutiny.
The problem for Putin’s oligarchs, however, is that there’s not much to buy in Russia. If you want bling, yachts, fancy houses and sunny islands, you need to spend your money elsewhere: Europe, the United States and other Western countries. Moreover, these oligarchs don’t trust each other – they worry that if they fall out of favour with Putin, the others will pounce on them like jackals on an injured rival. All the more reason to get their cash out of reach of the Russian legal system.
So, although their wealth comes from Russia, they keep it in major Western countries. They only pretend to hate the West. In reality, they use Western cities like giant piggy banks, places to store money that once belonged to the Russian people. They register their yachts in our tax havens and employ our accountants, PR consultants and more to manage their fortunes. The place they have loved most is London. Russian oligarchs have property in London, as well as lawyers there to stop journalists writing about them, and members of the UK’s House of Lords employed in their companies.
The wealth is hidden well. It is owned by shell companies, trusts, foundations, limited partnerships and all the other paraphernalia of the offshore world. It is hidden in the vaults of tax-friendly ‘freeports’. It is nominally owned by oligarchs’ children, wives, friends and others. It is buried deep in the fabric of our economies.
Sadly, for decades, the British government has welcomed this wealth. It has underfunded the police agencies that might once have checked its origins. It has sold visas to oligarchs so they can live in London and has tolerated their legal campaigns against journalists who write about them. If we hadn’t let them keep the money made from assets taken from the Russian people, they wouldn’t have taken so much of it. That is on us.
But the war in Ukraine is changing everything. Suddenly oligarchs are being sanctioned around the world. US President Joe Biden has promised to pursue them and seize their yachts and villas. The question is: do enfeebled police forces have the ability to find their more well-hidden assets? And can politicians, more accustomed to partying with oligarchs than pursuing them, find the political will to drive this money out of Western cities? If they can, perhaps one day that ill-gotten cash can help to rebuild the shattered cities of Ukraine.
Oliver Bullough is a Welsh journalist who covers financial crime and the former Soviet Union. He is the author of Butler To The World: How Britain Became The Servant Of Tycoons, Tax Dodgers, Kleptocrats And Criminals