Oligarchy

CONFISCATION OF OLIGARCH PROPERTY

It is impossible to put a price on the harm Russia has caused Ukrainians in the last year. No amount of reparations, aid or foreign direct investment will bring back a single killed soldier or murdered civilian. However, attempts to estimate how much it would cost just to rebuild basic infrastructure suggests we are looking at a colossal sum.

The United Nations says damage to Ukraine’s heating and power infrastructure alone now amounts to more than $10 billion. Taking into account indirect losses — from people losing their jobs, as just one example — the damage was estimated at up to $600 billion in March, and it’s increasing all the time.

As such, it feels pretty feeble to be celebrating the delivery of $5.4 million — less than a ten-thousandth of that total damage, or, to put it a different way, enough for one Bayraktar drone — to the Ukrainians, but hopefully it’s a sign of greater things to come.

• “While this represents the United States’ first transfer of forfeited Russian funds for the rebuilding of Ukraine, it will not be the last,” said U.S. Attorney General Merrick Garland.

The money belonged to Konstantin Malofeyev, who was charged with violating U.S. sanctions in April 2022. In case you think it looks suspiciously nimble that he was charged just two months after Russia’s full-scale invasion in February 2022, the sanctions in question dated back to the initial invasion eight years previously.

• “Kremlin-linked Russian oligarch Konstantin Malofeyev played a leading role in supporting Russia’s 2014 invasion of eastern Ukraine, continues to run a pro-Putin propaganda network, and recently described Russia’s 2022 military invasion of Ukraine as a ‘holy war,’” said FBI Assistant Director Michael J. Driscoll at the time.

In February, the U.S. Department of Justice unsealed an indictment against Viktor Vekselberg covering $75 million worth of property, while Andrew Adams — the head of “Task Force Kleptocapture” — says the government has identified fully a billion dollars of forfeitable property. If all of that can be sent to the Ukrainians, it could make a significance difference.

Elsewhere in the world, however, progress is less impressive. A sanctions evasion case brought in the U.K. against Pyotr Aven is stuck in legalistic ping pong, bouncing back and forth between courts as lawyers debate whether Account Freezing Orders should or should not have been imposed. The sum involved totals 327,800 pounds (or about $410,000, significantly less than a hundred-thousandth of what Ukraine needs to repair the damage done to its infrastructure and economy), and presumably most of that has already gone to legal fees. (Aven’s lawyers incidentally are from Gherson LLP, the sister firm of Discreet Law LLP, which tried to sue Bellingcat founder Eliot Higgins on behalf of mercenary king Yevgeny Prigozhin.)

The U.K.’s National Crime Agency has scaled back an investigation into another wealthy Russian (identified by the Financial Times and others as Mikhail Fridman, though I haven’t seen any official confirmation of that), and there’s a legal debate ongoing here as well, this time about the validity of the warrant used when officers raided his house. That is a further payday for the oligarch’s legal team (according to the Times, Fridman is also represented by Gherson LLP), which is, of course, excellent news. Lawyers are people, too, each of them has a mother.

Speaking of mothers, it’s been a good few months in the European Union, where lawyer Max Cessieux successfully challenged sanctions imposed on Yevgeny Prigozhin’s mother. She was designated for allegedly having previously held shares in his companies, but the court ruled that she no longer did so, and their familial relationship was not sufficient grounds to hold her responsible for the horrors perpetrated by her son.

It’s been mixed news for sons, however. Formula One driver Nikita Mazepin, the son of Uralkali part-owner Dmitry Mazepin (represented by six different lawyers — “D. Rovetta, M. Campa, M. Moretto, V. Villante, T. Marembert and A. Bass” — which seems like a lot to me), successfully overturned part of his own designation on the EU sanctions list, which means he can return to racing cars within the bloc, providing he does it under a neutral flag.

However, even if Nikita Mazepin can drive Formula One cars in the EU, that won’t be much good to him if he can’t race in other parts of the world, too, particularly in Britain, where most of the racing teams are based, so he’s challenging his sanctions in Canada and in the U.K.

• “Negotiations to join a Formula 1 team usually begin in May or June of the previous year. Thereafter he must be able to enter the UK, not just for the British Formula 1 race, but for briefings, ergonomics design work, training and attending the team’s base,” his lawyer Rachel Scott told a British court earlier this month.

It is, however, unclear if he’ll be in much demand as a driver if he doesn’t come with the kind of financial backing that his dad’s companies previously provided to the team he drove for. “Uralkali” used to be written in huge letters across the Haas team’s cars and, although the EU’s court said it has not been proven that Nikita “directly benefited” from his father’s sponsorship of the team, there is certainly evidence that Dmitry took a strong interest in what was going on. In fact, there’s a show on Netflix (Season 4, Episode 4) in which you can watch Dmitry directly threatening the team’s cash-strapped boss to pull his sponsorship unless his son gets given his teammate’s car (which Dmitry had become convinced was the reason he was outperforming Nikita on the track). It’s quite something. He’s even got a St. George’s Ribbon (the orange-and-black symbol of boorish Russian nationalism) pinned to his T-shirt while he does it.

In fact, if you’re interested in learning more about the tensions that result when a team relies for funding on the parent of a rookie driver with a history of making a bit of a tit of himself on social media, and who struggles to stay on the track so much so that motorsports fans nicknamed him “Maze-spin,” then I highly recommend checking it out.

Aargh, I intended to focus on the challenges of confiscating wealth, but I got distracted by irrelevances again, which is ironic since that appears to be what has happened to our entire legal system. We were promised the confiscation of oligarchs’ wealth for the benefit of Ukraine, but instead we’re getting endless nonsense for the benefit of oligarchs’ lawyers. Of course, this is how the rule of law works, and if we’re going to start complaining about how wealthy people get preferential treatment in court, we’re going to need a bigger boat. But Ukraine is being destroyed right now and, as British parliamentarian (and all-round good egg) Chris Bryant put it earlier this year, when presenting a bill to allow for the seizure of Russian state assets, that is not an academic question. Someone has to pay to repair the damage, and why should it be the Ukrainians?

• “Here is the main point. This is a political decision, not a legal one. Nearly $350 billion of Russian Central Bank reserves have been frozen by democratic countries around the world, and 26 billion pounds of that is frozen in the United Kingdom. Canada, Italy, the European Union and the United States are all considering action. It is the very least we owe the people of Ukraine. Russia has forfeited its rights to these assets. It owes Ukraine far more than money; it owes it blood,” he said.

His bill, despite wide cross-party support, isn’t going anywhere, but the question of who pays to rebuild Ukraine will only get more urgent. I hope confiscation will be on the agenda at the Ukraine Recovery Conference to be held in June. The conference already has a good plan but needs more money if it is to have a hope of fulfilling these objectives. Confiscating Russian money would not only provide funds to help implement this plan but would also help ensure wider support from democratic countries, too, since their citizens would be less vulnerable to appeals from demagogues arguing that the money would be better spent at home.

If the only people who benefit from oligarchs’ wealth being sanctioned are oligarchs’ lawyers, then sanctions are not working.

DOWN THE TUBES?

One of my favorite oligarchical locations in London is the disused Brompton Road tube station, which Ukrainian tycoon Dmitry Firtash bought from the British government in 2014, shortly before he was indicted by the U.S. government on corruption charges (which he denies). He’s never got to enjoy the old tube station, sadly, since he’s been stuck in Vienna battling extradition ever since, but it remains an eye-catching monument to Britain’s willingness to sell anything to anyone who’s got ready cash.

Firtash got rich from his close relationship with Gazprom, but gas may now prove to be his undoing, if allegations aired by Ukraine’s security service are upheld in court (if you are reading that document via Google Translate and find it confusing, it may be helpful to know that “блакитне паливо”/“blue fuel” means “natural gas”). According to the agency, Firtash embezzled gas worth almost $500 million from the state energy company.

• “Effectively we are talking about the embezzlement of money from ordinary Ukrainians who paid their utility bills,” its statement said.

Group DF, Firtash’s company, “firmly and categorically” denies the accusations, but it is interesting to look at what it was doing with its money during this period. In the summer of 2019, it was partly funding Rudi Giuliani’s travel and living expenses while the lawyer traversed the globe looking for information useful to Donald Trump. Everyone involved says the relationship between Firtash and Giuliani was “an inadvertent error” (after all, who among us hasn’t accidentally found themselves on the hook for $36,000 in private jet fees for the U.S. president’s lawyer?), and nothing has been proven.

However, the statement from Ukraine’s security service does raise the intriguing prospect of the embezzlement of huge sums in Ukraine leading to the Trump White House. Perhaps it’s not just Britain that’s willing to take money from anyone.

GOLDEN PASSPORTS

Troubling news from people who invested in Cyprus and/or Malta to obtain citizenship, since it appears the two EU islands have been quietly canceling the citizenships-by-investment of dozens of Russians and Belarusians over the last year or so. In February, Moritz Körner, a liberal member of the European Parliament from Germany, tabled a written question to the European Commission about sanctions violations, asking how many sanctioned people possessed these so-called golden passports.

Unusually, the written answer — which came earlier this month — actually volunteered information beyond what he requested and informed him that Cyprus had canceled the citizenship of 43 individuals, and Malta had done so for another two, one of whom is designated on the EU sanctions list and the other in the U.S.

The whole point of purchasing citizenship is that it gives you the same rights as someone who gains it in the usual way, but this news does rather suggest that economic citizenship is limited, and purchased passports can be canceled long after they have been awarded.

This follows the suggestion by U.K. Security Minister Tom Tugendhat that Britain could consider scrapping visa-free entry for citizens of any country with a golden passport program, which would also remove one of the programs’ major plus points. These passports tend to be used as “super visas” for wealthy citizens of poor countries who wish to visit rich ones, and if they lose their travel privileges as well as their irrevocable nature, they will lose much of their appeal. Bad news for oligarchs, bad news for the kind of countries that sell passports, but perhaps not such a big deal for the rest of us.

WHAT I’M READING

I’ve been reading “The Hunger Games” to my nine-year-old and had forgotten how very absorbing it is. Last night, we started on the second book in the trilogy and — after he went to bed — I thought I’d read an extra chapter or two. This was a bad idea as, when I next looked up, it was 1 a.m. and I’d finished it. I am not feeling very bright today, so, if this newsletter has been more than usually incoherent, please blame Katniss Everdeen. It’s all her fault.