A Global Hunt for Russian Oligarchs’ Assets Has Begun
Welcome everyone to theMartiak Market Update with your host Mark Martiak. Mark is a Managing Directorof Investments with AGP/Alliance Global Partners, aregistered investment adviser and broker-dealer, member of FINRA/SIPC. This show will explore topicsranging from market updates to the global economy and personal finance. Moneyis knowledge, and Mark wants to help you navigate your relationship with moneyby offering timely guidance and his unique perspective. Here's Mark Martiak.Mark speaking: Welcome.Thank you for joining me as we discuss key trends shaping our industries andmarkets. It’s been a humanitarian crisis for thepeople of Ukraine, many of whom have faced devastation as the Russian invasionand war entered a third week. You hear a lot about economic sanctions thathave been put in place by countries including the U.S.. During this program, I want to look at sanctionsplaced on Russia’s Oligarchs who are on the move amid a global dragnet thatWestern governments have cast to ensnare their yachts, villas, jets, and bankaccounts.You May HaveWondered: What is a Russian Oligarch?Oligarchs — or extremely wealthy business leaders who arepolitically connected — becamemore prominent in Russia in the 1990s, but they are not unique toRussia. Many Russian oligarchs are heavily involved in and benefit fromRussian President VladimirPutin's regime, with some serving in political positions. For example, when Putin opened a new bridge toCrimea in 2018 — a region Russia had annexed from Ukraine in 2014 —the bridge was built by his friend Arkady Rotenberg's company and the truck hedrove across it was made by Sergei Chemezov's state corporation Rostec,according to TheCarnegie Moscow Center, a think-tank that focuses on domestic andforeign policy.There is often a line of succession for oligarchsin politics. For example, Dmitry Patrushev, the son of Russian Security CouncilSecretary Nikolai Patrushev, was appointed as Russia's minister of agriculture,according to The Carnegie Moscow Center. Numerous Russian oligarchs and government officials weresanctioned by the U.S. in 2018, in part for the regime's occupation of Crimeaand for continuing to instigate violence in Ukraine, according to the U.S.Treasury Department, which announced the sanctions. Rotenberg’s son and Patruskevwere included in that round of sanctions for their involvement with the regime. "Russian oligarchs and elites who profit from this corruptsystem will no longer be insulated from the consequences of their government'sdestabilizing activities," Treasury Secretary Steve Mnuchin said in apress release about those sanctions. (1)The Biden administration announced itwould expand its sanctions on Russian oligarchs, further taking aim at Putin’sclose-knit, elite network. The Biden administration blames the oligarchs for providing theresources critical to supporting Putin's invasion."Treasuryis committed to holding Russian elites to account for their support of PresidentPutin's war of choice," said Treasury Secretary Janet Yellen. "Today,across the U.S. government and in coordination with partners and allies, we aredemonstrating our commitment to impose massive costs on Putin's closestconfidants and their family members and freeze their assets in response to thebrutal attack on Ukraine." (2) The new sanctionstargeted the likes of Alisher Usmanov, the owner of an iron and steelconglomerate, who Forbes has estimated to be worth more than $15 billion. TheWhite House said that Usmanov’s property will be blocked from use in the UnitedStates, including his superyacht and his private jet, which is one of Russia’slargest privately owned aircraft. Hissuperyacht, one of the world’s largest, was just seized by Germany. Billionaire Oleg Deripaska alreadygot a jump on things. His yacht, Clio, reportedlydeparted Sri Lanka two weeks ago and is headed for the Maldives, where it isexpected to dock soon. (Deripaska is no stranger to sanctions, havingpersonally been sanctioned by the U.S. in 2018.) A Russian oligarch’s yacht was damaged in Spain’s Balaeric Islandsover the last weekend in February, reportedly by a Ukrainian sailor seekingrevenge for Russia’s invasion of his home country…. The luxury yacht, the155-foot-long Lady Anastasia, with an estimated value of nearly $8million, reportedly belongs to Alexander Mikheev, CEO ofRussian arms company Rosoboronexport.According to the reports, he was outraged after seeing videoof a Ukrainian apartment block that was hit by a Russian missile. Appearingbefore a judge Sunday, the man reportedly said: “The armaments used areproduced by the yacht owner’s company. They were attacking innocents.” (3)In recentdays, French authorities have detained a handful of ships subject to newsanctions, including a 280-foot yacht, the Amore Vero, “True Love” in Italian.They say it is owned by Igor Sechin, the sanctioned chief executive of Russianoil producer Rosneft andclose ally of Russian President Vladimir Putin. Theyswooped in during the night as the vessel was making what they described aspreparations to leave port in a hurry. (4) On March 1st,in his State of the Union speech, President Biden said (quote) “We are joiningwith our European allies to find and seize your yachts, your luxury apartments,your private jets,” referring to the new entity, called Task ForceKleptoCapture. “We are coming for your ill-begotten gains.” Themovement of the luxury yachts comes as the White House and Treasury Departmentare expanding the number of Russian oligarchs subject to U.S.sanctions, aiming to punish the financial elite close to Putin.Biden said in his State of the Union address Tuesday night that the UnitedStates would join Europe in efforts to punish Russian oligarchs and “seize theiryachts, their luxury apartments, their private jets.” The U.S. and U.K. on Thursday, March 3rd,unveiled still more sanctions and travel restrictions on a range of Russianelites because of Russia’s invasion in Ukraine. As part of the American round,the U.S. will impose visa restrictions on 19 Russian oligarchs and 47 of theirfamily members and close associates. The U.K. sanctioned two more oligarchsincluding the former Russian deputy prime minister.According to a WhiteHouse Fact Sheet, Full blocking sanctions on an expansive new list of Russianelites and their family members who enable Putin and include imposing Visa Restrictions on 19 Russian Oligarchs, their 47 FamilyMembers and Close Associates: The Department of State is announcing a newvisa restriction policy to restrict the issuance of visas to certain Russianoligarchs, their family members, and close associates. These oligarchs areknown to direct, authorize, fund, significantly support, or carry out malignactivities in support of Russia’s destabilizing foreign policy. (5)Mark Wrap-Up: To what extent willgovernments pursue Russian Oligarchs and separate them from their assets? Howmuch economic pain will it cause Putin’s inner circle? While the taskforce aims to hold the sanctioned Russian elites accountable following thecountry's invasion of Ukraine, tracking down and seizing their assets will notbe easy. These extraordinarily wealthy and powerful individuals —including Vladimir Putin himself — have taken elaborate steps to protect their wealth around the globe.Some oligarchs are trying to dodge penalties by movingassets —like their mega-yachts — into territories where sanctions don't apply and wheretheir property cannot be seized or their assets frozen. Geopoliticalrisk is hard to price into the financial markets. In a flash, Russian Oligarchsare paying attention to the headline risks and volatility that come with thatrisk.My thoughts are with thepeople of Ukraine and everyone who is impacted by the war, whether in Ukraine,in Russia or in neighboring countries. The international community has largelycome together, and I am heartened by the degree of global coordination bygovernments, business, and regulators in the pursuit of peace for the region.This is a complex andfluid situation. As a fiduciary, I take very seriously my responsibilities tomy clients, and I will continue to assess the environment on your behalf.Thank you for joining my program. I’llsee you next time. Outro (Female British Voiceover): Thankyou for listening to Martiak Market Update. Mark Martiak is the executiveproducer. Sean Dooley is the producer. We also want to thank Libby Grant. Ifyou enjoyed this episode, subscribe, and leave us a review on Apple, Spotify,or wherever you listen to your podcasts. Stay tuned for Mark’s next episodecoming soon.Sources: (1) https://www.cbsnews.com/news/what-is-a-russian-oligarch/(2) https://www.cbsnews.com/news/ukraine-russia-oligarchs-sanctions-justice-department/(3) https://www.vanityfair.com/news/2022/02/russian-oligarchs-vladimir-putin-ukraine-sactionsBess Levin 2/28/22(4) https://www.wsj.com/articles/russian-oligarch-igor-sechins-yacht-is-seized-in-france-as-it-prepares-to-depart-11646313685(5) https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/03/fact-sheet-the-united-states-continues-to-target-russian-oligarchs-enabling-putins-war-of-choice/
