Yacht justice: A new front in the war drags Russia’s oligarchs into the spotlight

Usmanov is one of the “Russian elites” on whom the United States imposed sanctions and who, in the words of Treasury Secretary Janet L. Yellen, support Russian President Vladimir Putin’s “war of choice” against Ukraine. After years of cushy complacency in the service of Putin, some of Russia’s wealthiest and most well-connected are yoked with economic sanctions, hounded by bad press and spooked by public outrage over a chaotic invasion that is imperiling their lifestyle.

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The United States and its allies will not fight the Russian military on the battlefield, at this point, but they are waging an economic war against a particular class of Putin-connected Russian super-elite, often called “oligarchs,” in the theaters of conspicuous wealth: ports, airstrips, condo buildings, resort towns and the electronic trenches of international finance.

“Oligarchs be warned: We will use every tool to freeze and seize your criminal proceeds,” Deputy Attorney General Lisa O. Monaco said last week as the Department of Justice announced the deployment of an interagency enforcement posse called “Task Force KleptoCapture.”

“We are joining with our European allies to find and seize your yachts, your luxury apartments, your private jets,” President Biden said in a direct address to the oligarchs during his State of the Union address March 1.

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“You cannot bomb Kyiv in the morning and dock your yacht on the Côte d’Azur in the evening,” the deputy prime minister of Canada, Chrystia Freeland, wrote in the Financial Times this month.

The pursuit of the luxury assets of a vilified Russian elite has emerged as a sideline drama to the harder-to-take news of the devastation of Ukraine and its 2 million-plus refugees. Western news outlets have published a rogue’s gallery of yachts and their extravagant amenities: cavernous wine caves, antiaircraft defense systems, amphibious shuttles to carry Land Rovers to shore. Hackers rejiggered maritime traffic data to make it seem that Putin’s purported yacht had run aground on Ukraine’s Snake Island while bound for a destination named “HELL,” according to Bloomberg News reporter Ryan Gallagher. A 19-year-old student at the University of Central Florida automated a Twitter account to track the movements of jets belonging to certain billionaires.

Usmanov’s yacht, the German-built Dilbar, is docked in Hamburg, having arrived from Monaco in October for refurbishing. The White House announced March 3 that German authorities had seized the vessel; Forbes reported Tuesday that the ship was merely locked in place and that sanctions had triggered the firing of the entire crew.

Usmanov could not be reached for comment, but he issued a statement March 1 saying that the European Union’s “unfair” sanctions are based on “false and defamatory allegations damaging my honor, dignity, and business reputation. I will use all legal means to protect my honor and reputation.”

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For now, Dilbar is an opulent casualty in an economic war of attrition aimed at turning Putin’s inner circle into a noose. London-based investor Bill Browder, an anti-Putin and anti-corruption activist, shares the view that oligarchs are Putin’s “Achilles’ heel”: Squeeze the wealth of those who buffer the head of state and you may be able to disrupt his air supply.

Not everyone thinks this will work. Olga Chyzh, a professor of political science at the University of Toronto, says that seizing jets and yachts may make for a satisfying spectacle but is not a strategy for deposing Putin.

“Sanctions are another example of the West doing what it does best, which is just throwing a lot of cash at the problem and hoping it gets solved,” Chyzh said by phone, expounding on a March 5 tweet: “However sad they are to let go of their Western assets, oligarchs have even more to lose if Putin is no longer there to protect them.”

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Nevertheless, “there’s a certain amount of schadenfreude, watching rich people lose their toys,” says Alex Finley, a former CIA officer and author of spy novels who goes by her pen name.

Finley, who lives in Barcelona, has been tracking superyachts for book research — and, now, for sport. Using public websites that post their movements, she has watched some vessels leave European waters for the Seychelles, the Maldives and ports not covered by extradition agreements and tax constraints. Some vessels’ automatic identification systems have been switched off to mask the ships’ locations. On her strolls through the city, she was accustomed to seeing Dilbar, a behemoth barnacled to the coast of the Mediterranean. Using the hashtag “YachtWatch,” she posts status updates on Twitter for Dilbar and other luxury vessels.

“For me, the yachts are a big, easily recognizable symbol of the more serious side of this: These are people who support a dictator, and have been supporting him in carrying out destabilization operations against democracy, while at the same time coming here and taking all the benefits of the exact same democracies they were destabilizing,” Finley says. “So there’s a little bit of justice in seeing some of them losing their toys.”

The West has long been a playground for oligarchs, who love to dock in Saint-Tropez on the French Riviera, where they’ve gobbled up beachfront real estate, says Browder, the anti-Putin and anti-corruption activist. They love to ski in the Alps at Courchevel, in southeastern France, where mountaintop restaurants offer menus in Cyrillic and diamonds and wristwatches for dessert. They love to vacation at the five-star Hotel Cala di Volpe at the northern tip of Sardinia. Before the pandemic, at the yearly World Economic Forum in Davos, they toasted each other with wine worth hundreds of dollars a sip. They have multiple passports; they are not only Russian but also Cypriot or Greek or Portuguese.

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But this latest round of sanctions, intended to seize or freeze their assets in the West, is hitting them like “a nuclear bomb,” Browder says.

“I’ve dealt with them for years. I know how they think,” he says. “These are people who are monumentally arrogant. They think that everybody can be bought. And they think that everything is about money. And so they would be completely shocked that Putin didn’t share that view and he’s ready to destroy their money for another cause.”

The word “oligarchy,” from the Greek, means rule by a few. In the context of modern Russia, “oligarch” is an informal, catchall term for wealthy elite with ties to Putin. The past quarter century has seen two different generations of Russian oligarchy. In the 1990s, a few Russian opportunists swashbuckled their way to great wealth and power, acquiring and profiting off state assets in the herky-jerky transition from the centrally planned economy of the Soviet Union to nascent capitalism under Russian President Boris Yeltsin, whom oligarchs helped reelect in 1996. After assuming the presidency in 2000, Putin began to target, jail and exile the first-generation oligarchs, whose fraternization with the West and its democratic tendencies he may have viewed as a threat.

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“Putin and the KGB men who ran the economy through a network of loyal allies now monopolised power, and had introduced a new system in which state positions were used as vehicles for self-enrichment,” wrote the journalist Catherine Belton in her 2020 book “Putin’s People: How the KGB Took Back Russia and Then Took on the West.” Russia became “a regime in which the billions of dollars at Putin’s cronies’ disposal were to be actively used to undermine and corrupt the institutions and democracies of the West.”

“They are quite a talented bunch of people,” says Vladimir Ashurkov, the executive director of the Anti-Corruption Foundation, which was founded by Kremlin critic Alexei Navalny. “They probably would’ve thrived under any circumstances, in a Western entrepreneurial climate. … These people could’ve been building Russian Teslas and, you know, Facebooks of Russia. But they decided to employ their talents in getting crooked income.”

In 2016, the total wealth of Russian billionaires was equal to nearly 30 percent of the country’s income (around double the corresponding proportion in the United States). Rich Russians hold as much money outside Russia as the entire Russian people hold inside Russia, according to a 2017 working paper for the National Bureau of Economic Research by Filip Novokmet, Thomas Piketty and Gabriel Zucman. This wealth has translated to power and influence around the world; for decades Russian oligarchs have ingratiated themselves with journalists, lobbyists and lawyers, and showered millions of dollars on American businesses, universities, political causes and charitable organizations.

Now, suddenly, they are “radioactive,” says Jonathan Winer, a former deputy assistant secretary for international law enforcement at the State Department.

“These people have been a protected class,” says Winer. “They’ve spent decades buying that protection with foundations and gifts and scholarships, as well as with lawsuits — all the different ways you become part of the fabric of society. None of those things are there to protect them because there’s an angry mob united against them who now sees them as a threat to the foundation of the society.”

For some Russians, the aggressive stand against oligarchs is both welcome and too late.

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“We hoped that these sanctions would’ve been implemented a year ago,” says Ashurkov, the anti-corruption campaigner, who in January 2021 wrote to President Biden to urge the sanctioning of 35 oligarchs in particular (some were named last week). “If the West would have been less complacent about Putin and corruption for the last eight or 10 years, then I think Putin would not be so emboldened.”

“I’m seeing the headlines: $40 billion or $60 billion of wealth wiped out from the Russian elite — I don’t really care” because “it won’t change Putin’s mind,” says businessman Pavel Khodorkovsky, the president of the Institute of Modern Russia, who cautioned against the notion that such sanctions will lead to de-escalation in Ukraine.

Cracking down on oligarchs was the right thing to do, says Khodorkovsky — whose father, Mikhail, was a first-generation Russian oligarch who challenged Putin’s corruption of the state and was imprisoned for 10 years in Siberia — but the war had already started. Whether a Russian billionaire’s yacht is docked freely in Barcelona or stuck in Hamburg matters not to those who are being terrorized in Ukraine.

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