Western allies are considering allowing Russian oligarchs to buy their way out of sanctions and using the money to rebuild Ukraine, according to government officials familiar with the matter.
Deputy Prime Minister and Finance Minister Chrystia Freeland proposed the idea at a G7 finance ministers’ meeting in Germany last week.
Freeland raised the issue after oligarchs spoke to her about it, one official said. The minister knows some Russian oligarchs from her time as a journalist in Moscow.
The official said the Ukrainians were aware of the discussions. The official said it’s also in the West’s interests to have prominent oligarchs disassociate themselves from Russian President Vladimir Putin, while at the same time providing funding for Ukraine.
“We would not be talking about this if there wasn’t some comfort on the part of the Ukrainians,” the official said. “We need to know that it works for them, too.”
The officials spoke on condition of anonymity as they were not authorized to speak publicly about internal G7 discussions.
Only an idea so far
The proposal was raised in the context of providing additional money to Ukraine, and how the frozen funds and assets of oligarchs could be a source of funding.
At this point, it is just an idea, the official said, but Western allies have expressed interest. European Union officials have talked about the need to look at different and new avenues for confiscating assets and providing money to Ukraine.
The proposal could help remove a legal hurdle for authorities in countries such as Germany, where the bar for confiscating frozen assets is very high. By voluntarily giving up a share of their fortune abroad, oligarchs would save Western governments the potential embarrassment of being rebuffed by their own courts.
Western countries have imposed a raft of sanctions on oligarchs in response to Russia’s invasion of Ukraine. Many of their multibillion-dollar fortunes are intertwined with the West, from investments in Silicon Valley startups to British Premier League soccer teams.
Former Chelsea owner Roman Abramovich, who was sanctioned over his links to Putin, has said that net proceeds from the sale of the soccer team would be donated to victims of the war in Ukraine. A deal to sell the soccer club has dragged on as the British government makes sure that Abramovich does not profit from the enforced sale.
The British government this week approved the sale of Chelsea to a consortium fronted by a part-owner of the Los Angeles Dodgers. Chelsea has been operating under a government licence that expires on May 31 since Abramovich’s assets were frozen in March.
Asset freezes imposed on more than 1,000 people
The EU has imposed asset freezes and travel bans on more than 1,000 people, including more than 30 oligarchs, in response to Russia’s invasion of Ukraine on Feb. 24.
Almost 10 billion euros ($10.7 billion US) in assets have been frozen by EU countries so far, according to the European Commission. It has established a “Freeze and Seize” task force to coordinate the enforcement of what are unprecedented EU penalties against Russia.
A 2017 study of Russian oligarchs published by the U.S.-based National Economic Bureau estimated that as much as $800 billion US is held by wealthy Russians in the United Kingdom, Switzerland, Cyprus and other offshore banking centres.
That vast fortune, held by a few hundred ultra-rich individuals, is roughly equal to the wealth of the rest of Russia’s 144 million people.
Some oligarchs have also obtained dual citizenship in Britain and other Western countries.
The family fortunes of many of Russia’s billionaires date back to the 1990s, the turbulent decade after the fall of the Soviet Union. Under the notoriously corrupt presidency of Boris Yeltsin, state-controlled assets such as oil refineries, steel mills, aluminum smelters and tractor factories were gobbled up by the politically influential, and were often purchased with the aid of government-backed loans.
Freeland is of Ukrainian heritage and wrote a book about it.
Hitting oligarchs financially hits Putin as well — and not just because it might diminish the support of Russia’s financially privileged for Putin, said Alex Finley, a former CIA officer who tracks the impact of sanctions on Russian oligarchs.
Putin is too cagey to keep his considerable wealth in bank accounts or even family bank accounts, Russia experts say.
“A lot of these guys are his wallet,” Finley said of the Russian oligarchs. “They help with laundering his money, laundering their own money, and yachts and other assets are places to hold that money.”