America’s sanctions are expected to be more complicated than those imposed by the E.U., targeting not just the individuals but also their family members and companies they own, according to a White House official, who also spoke on the condition of anonymity to reflect internal deliberations. President Biden said in his State of the Union address on Tuesday night that the U.S. would join with Europe to “seize their yachts, their luxury apartments, their private jets.”
The Department of Justice on Wednesday also announced the creation of “Task Force KleptoCapture” to coordinate prosecutors and other federal investigators in the effort to prosecute sanctions against “corrupt Russian oligarchs.”
Russia’s billionaires control roughly 30 percent of the nation’s wealth . . . . and have about as much financial wealth stashed in offshore foreign accounts as the entire Russian population has in Russia itself, according to a 2017 paper released by the National Bureau of Economic Research. Many of them have served at high levels of Putin’s government, or played an instrumental role in providing financing either for the Russian president personally or the Kremlin’s efforts abroad . . .
The greed of these oligarchs is mind numbing and, as noted, they are not innocents when it comes to supporting Putin. Already, Forbes is reporting that Russian billionaire Alisher Usmanov's 512-foot yacht Dilbar, valued at nearly $600 million—has been seized by German authorities in the northern city of Hamburg. Hopefully, the mansions, villas and investments of these individuals and their families outside of Russia will likewise be seized.
Will the sanctions stop Russia's destruction of Ukraine? Perhaps not, but they may force Putin to rethink his megomania. Ideally, they could ultimately lead to Putin's overthrow. While Putin is striving to control information from apprasing average Russians of the true nature of his regime's misdeeds, as the number of Russian military dead increases, it will be harder to keep the truth from leaking out. Meanwhile, the growing economic pain will only too obvious on the streets of Moscow, St. Petersburg and other Russian cities as a piece in The Economist describes:
RUSSIA’S INVASION of Ukraine could yet become the biggest military action in Europe since 1945. It also marks a new era of high-risk economic warfare that could further splinter the world economy. The measures the West has imposed on Russia are so potent that they have triggered chaos in its $1.6trn economy and prompted the president, Vladimir Putin, to issue nuclear threats. The instant immiseration of a big economy is unprecedented and will cause alarm around the world, not least in China, which will recalculate the costs of a war over Taiwan. The West’s priority must be to win the economic confrontation with Russia. Then it must create a doctrine to govern these weapons . . .
That Russia did not take the threat of sanctions seriously at first is no surprise. In recent years they have been plentiful but ineffective. Reluctant to use hard power, America and Europe have reached for economic penalties instead. . . . . The deterrent effect has been weak, as malefactors have assumed that America would never apply “maximum pressure” on a big economy.
On February 26th that Rubicon was crossed, when sanctions were imposed on the world’s 11th-biggest economy. By making it illegal for Western firms to deal with big Russian banks, except in the energy trade, and expelling them from the global-payments plumbing, the flow of money across borders is seizing up. Action against Russia’s central bank means it cannot gain access to much of its vast $630bn pile of foreign reserves. Confidence has evaporated. The rouble has fallen by 28% this year as capital flees, threatening soaring inflation. Russian shares have dropped by over 90% in offshore trading, and multinationals are leaving. From Moscow to Murmansk, Russians are queuing outside banks.
The shock could lead to a coup or a cash-crunch that impedes the war machine. But Mr Putin could retaliate with his own economic weapons including strangling the flow of gas. . . . . One principle is clear, though: any Russian economic retaliation must be met by a more damaging response by the West that makes that act of retaliation irrational. Through its ability to stymie tech services and oil exports (from which Russia earns four times more than gas) the West retains the advantage.
If the West faces down Russia, and cements the new weapons’ deterrent power, the long-run implications will be daunting. . . . Autocracies will be most nervous: they own half of the world’s $20trn pile of reserves and sovereign wealth assets. While China can inflict huge economic costs on the West by blocking supply chains, it is now clear that in the event of a war over Taiwan, the West could freeze China’s $3.3trn reserve pile. Even some democracies like India, which has avoided condemning Russia’s invasion, may worry they are more vulnerable to Western pressure.
Today it is hard to park trillions of dollars outside Western markets, but in time more countries may seek to diversify their reserves by investing more elsewhere.
Some of this fragmentation has become inevitable. But by applying sanctions to ever more countries over the past two decades, and now also raising their potential severity, the West risks pushing more countries to delink from the Western-led financial system than is desirable. That is why after the crisis in Ukraine passes, the West should aim to make clear how sanctions will be controlled. . . . And it should be made clear that economy-wide sanctions of the devastating kind being used against Russia are reserved for the worst acts of aggression and war. The West has deployed an economic weapon that was until recently unthinkable. It must be used wisely.
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