Tuesday, Mar 22, 2022 • 24min
Will Sanctioning Oligarchs Change the War?
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Among the actions taken by the West to punish Moscow for the invasion of Ukraine is the blacklisting of the incredibly rich and politically connected Russian businessmen known as oligarchs.
But how could sanctions on Russia’s superwealthy increase the pressure on President Vladimir V. Putin to end the war?
Guest: Matt Apuzzo, a reporter for The New York Times, based in Brussels.
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Sabrina Tavernise
Barack Obama
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Verified
Break
Sabrina Tavernise
00:33
From
The New York Times
. I'm Sabrina Tavernise
. This is The Daily
.Share
00:43
To punish
Russia
for invading Ukraine
, the US and Europe have targeted Russia's richest businessmen with a series of strict sanctions that have been described as a financial death penalty.Share
00:57
Today, I spoke with my colleague,
Matt Apuzzo,
about the logic of punishing oligarchs and whether it may actually change the course of the war.Share
01:11
It's Tuesday, March 22.
Share
01:26
Matt
, we've been hearing a lot over the past couple of weeks about the richest Russians in the world and Western governments' attempts at going after their wealth. And I wanted to start with a really basic kind of explainer about who they are.Share
Matt Apuzzo
01:40
Yeah. When you hear oligarchs, it means two things. One, you're talking about somebody who's very, very rich in
Russia
, but being rich in and of itself doesn't mean you're an oligarch. You also have to be in proximity to power if to be benefiting from the government, and you also typically have government sway.Share
Sabrina Tavernise
02:02
Got it. So what exactly are the Western governments doing to these rich, politically-connected Russians?
Share
Matt Apuzzo
02:08
So what you're seeing is you're seeing governments saying you can't do business with these oligarchs. They can't be your customers, they can't be your suppliers, they're on a blacklist. The idea is we're going to cut off all of these rich powerful guys from, essentially, the Western economies.
Share
Sabrina Tavernise
02:28
So you cut all these people out of Western economies, and then what? What's supposed to happen next?
Share
Matt Apuzzo
02:33
Well, it's twofold. So the thinking goes that, first, if you profit from the government committing violations or otherwise sort of trampling all over international norms. Well, then Western governments are saying you're making money off of that, so we're cutting you off. That's the first part.
Share
02:55
The second part is actually, I think the bigger thing, which is the theory is if we blacklist Russians who are rich and powerful, that creates pressure on
Putin
. It's sort of a bank shot argument. The idea is these guys have sway with Putin
or these guys, at the very least, are a political constituency that helps keep Putin
in power. And if they feel economic and political pain, then Putin
is incentivized to maybe change his ways. The problem is, it just has never worked.Share
Sabrina Tavernise
03:38
What do you mean it doesn't work?
Share
Matt Apuzzo
03:41
So go back to 2014. That was when
Vladimir Putin
invaded Ukraine
the last time. He annexed the Crimean Peninsula. That was the last time the Western world was outraged at Putin's
behavior in Ukraine
.Share
Barack Obama
03:56
Good morning, everybody.
Share
Matt Apuzzo
03:57
One of the responses at the time was -
Share
Barack Obama
03:60
We're imposing sanctions on more senior officials of the Russian government.
Share
Matt Apuzzo
04:04
We're going to put economic sanctions on these guys.
Share
Barack Obama
04:07
In addition, we are today sanctioning a number of other individuals with substantial resources and influence who provide material support to the Russian leadership.
Share
Matt Apuzzo
04:17
And we're going to squeeze some oligarchs, and we're going to put pressure on
Putin
.Share
Barack Obama
04:20
For this reason, we've been working closely with our European partners to develop more severe actions that could be taken if
Russia
continues to escalate the situation.Share
Matt Apuzzo
04:30
And it was all the same sort of tough talk then. And you know, this is feeling a little bit like déjà vu.
Share
Barack Obama
04:36
That can only happen if
Russia
also recognized the rights of all the Ukrainian people to determine their future as free individuals.Share
Matt Apuzzo
04:50
So that was the response to understand how this didn't work and why this didn't work. A really good case study is of
Arkady Rotenberg.
Share
Sabrina Tavernise
05:00
Tell us about him.
Share
Matt Apuzzo
05:02
So
Arkady Rotenberg
is childhood friends with Vladimir Putin
, right? There's this famous photo of him and Vladimir Putin
in their judo outfits. I mean, they're judo sparring partners going way back. So you've got that friendly relationship, but there's also a real financial symbiotic relationship between him and Putin.
Rotenberg
is this big construction magnate, pipelines and big construction projects. You know, Rotenberg's
companies got something like $7 billion dollars.Share
Sabrina Tavernise
05:33
Wow.
Share
Matt Apuzzo
05:33
In construction contracts associated with the 2014 Winter Olympics, which were in
Sochi
, Russia. And in particular one of the things that the United States
government was interested in, his company's got contracts to build a bridge into Crimea, right? So the United States
government is looking at this and saying, here's a guy who not only has, you know, sway from a friendly relationship with Putin
, but he has a financial stake in what the Russian government does.Share
06:06
And so this is a guy who, in the universe of sanctioned theory is perfect. He's somebody, if you can put financial pressure on
Arkady Rotenberg
, well, then you can put indirect pressure on Vladimir Putin
.Share
Sabrina Tavernise
06:20
Got it. So
Rotenberg
is really like the poster child for someone, the US would want to sanction. It was his connection to Putin
that made him really rich.Share
Matt Apuzzo
06:28
Exactly. And it's no surprise that in 2014, he is front and center in this theory of we're going to sanction oligarchs to put pressure on
Putin
.Share
Sabrina Tavernise
06:37
So what actually happened to him once they did?
Share
Matt Apuzzo
06:41
Not a heck of a lot, actually. I mean, remember, this guy's a Russian construction tycoon. He's not building bridges in North Dakota. This is a guy whose money is coming from Russia, but let's play Russian oligarch here for a minute.
Share
06:60
You are a billionaire, and you can spend your money on whatever you want, what do you want to spend your money on? If you're a billionaire in
Moscow
, maybe you want to have a summer home somewhere really warm to get away from those Moscow
winners, right?Share
Sabrina Tavernise
07:17
Yeah.
Share
Matt Apuzzo
07:17
Maybe you want to have a really nice yacht. Maybe you want to have helicopters, and you want to jet around the world, and you want mansions, and butlers, I don't know. What do really rich people want? Fancy London apartments. And you know, if you're
Arkady Rotenberg
, one of the things you want is you want the ability to collect fine art and in Manhattan
, in particular, because Manhattan
is, you know, one of the centers of the world for such things.Share
07:45
Sanctions are supposed to cut you off from that sort of lifestyle. It's supposed to be really painful. And it's supposed to say like, all right, you're rich in
Russia
. If you want to be rich in Vladimir Putin's Russia
and stay in Russia,
and not spend your money, and not do any dollar transactions and not come to the United States
, not buy anything in the United States
, good luck with your billions, enjoy Moscow
. That's the point of these sanctions.Share
Sabrina Tavernise
08:10
So it's supposed to make you, effectively, a pariah, which for a guy like that would be really painful because he wants to buy art, and he wants to go to
New York
.Share
Matt Apuzzo
08:18
Yeah, I mean, what fun is being a billionaire if you can't spend it on cool stuff all around the world, right? And so that's what it was supposed to happen. But it didn't happen.
Share
08:35
He literally, within weeks, he's buying stuff in
New York
City, investigators have found something like $91 million dollars of transactions from Rotenberg's
family's accounts into the United States
economy.Share
Sabrina Tavernise
08:49
Wow.
Share
Matt Apuzzo
08:49
After being sanctioned. And you know, the big one for me, eight weeks. Eight weeks after he gets sanctioned, investigators have found that he purchased a $7.5 million dollar painting in
New York
City. I mean, literally, eight weeks. That sanctions, it took eight weeks to get around sanctions. So, you know, if the point is to squeeze him and say, "you can't participate in the finer things in life". He didn't feel very squeezed.Share
Sabrina Tavernise
09:20
So,
Matt
, how is that even possible? I mean, how exactly does Rotenberg
evade the sanctions so seemingly effortlessly?Share
Matt Apuzzo
09:30
Well, I think the first thing to understand sanctions sound really like strong and harsh sanctions, and there's just a name on a list. When the
United States
, the United Kingdom
and the European Union
sanction you, they put your name on a list. And you know, that's inconvenient because now every company or every bank doing business, is supposed to be checking the list to make sure. Hey, we shouldn't be doing business with this guy.Share
09:59
But that's sort of all it is. They're not really looking for you. The government isn't coming after you. They just put you on a list. So now the game becomes, okay, how do I hide my name from everybody I want to do business with?
Share
Sabrina Tavernise
10:14
Right.
Share
Matt Apuzzo
10:14
So if you check the list, you're not doing business with
Arkady Rotenberg
, you're doing business with somebody else.Share
Sabrina Tavernise
10:19
Got it.
Share
Matt Apuzzo
10:20
So how do you do that? And here I'll give everybody a primer on how to launder your billions. So the first thing you need to do is you need to find a trusted middleman. A lawyer is good. An accountant is just as good. But honestly just somebody you can trust, and that person is going to help incorporate a bunch of companies for you
Share
Sabrina Tavernise
10:45
Incorporate?
Share
Matt Apuzzo
10:45
Yeah, they're going to start a company, let's say, I don't know, we're like, let's say the British Virgin Islands or the Isle of Man. Cyprus is a good one, right? Somewhere where the banking system tends to be pretty secretive. And so you would like, ideally, to not have one. You'd like to have many. And even better if the one you make in Cyprus owns the one you made in the Isle of Man.
Share
11:11
It's to use apropos cliché, it's Russian nesting dolls. And so when you then decide you want to buy a piece of art, you have a middle man say, "I represent company A and that company is buying the piece of art". Anybody who checks the sanctions list says, well, the company is not sanctioned, this is a company doing business that's incorporated in Luxembourg.
Share
11:38
Now, if somebody wants to say, "hey, middleman whose company A, because we got to check the sanctions list, we've got to make sure we're not doing business with somebody on the sanctions list". They can say, "well, company A is actually owned by..." and then it turns out that they're owned by Company B.
Share
11:54
And maybe there's even a name associated with that because you can stick anybody's name on these things. But in the end it's you,
Sabrina
, you're the billionaire. You're buying the art, and I should, by the way, I should get some sort of fee for this.Share
Sabrina Tavernise
12:09
Are you the lawyer,
Matt
?Share
Matt Apuzzo
12:09
I should, I mean, I'm not a lawyer. But I mean, I feel like I could be an advisor to your oligarchs buying spree.
Share
Sabrina Tavernise
12:17
So, I mean, I guess what's coming to my mind is, you know, lots of super rich, powerful people hide their money this way, right? Not just Russian oligarchs. I mean, people who might be wanting to evade taxes as opposed to sanctions.
Share
Matt Apuzzo
12:31
Totally. And one of the reasons why it shouldn't be surprising that nothing happened to
Arkady Rotenberg
is that nothing happens to any of these guys, right? There have been for years, there have been these stories coming out, the Panama Papers
, the Paradise papers
, all the different papers that get leaked. These big leaks and they're super complicated.Share
Sabrina Tavernise
12:54
These are big investigations.
Share
Matt Apuzzo
12:55
Big, huge investigative projects going on with journalists all around the world based on huge leaks of financial data. But they all come down to one thing, if you're super rich, you can hide your money.
Share
Sabrina Tavernise
13:05
Right. So it sounds like the way that
Arkady Rotenberg
, Putin's old friend, was able to evade sanctions was that he was really, really good at hiding the fact that he was the one behind the money. That he was the one buying the painting in New York
.Share
Matt Apuzzo
13:24
You know what, though, I don't actually know that he was really, really good. I mean, maybe he was really, really good. But in this world, you just have to be good enough. Because for a lot of companies and a lot of industries, people don't really want to know. But I don't want to just, you know, single out art dealers, because let's be fair, governments weren't incentivized to go after these guys either.
Share
Sabrina Tavernise
13:51
But wait
Matt
. That's kind of confusing because governments are the ones that are drawing up the lists that these guys ended up on to begin with. So aren't they incentivized? I mean, they're doing it.Share
Matt Apuzzo
14:02
Yes, sort of. I mean, let's take the UK for instance. People have been warning for years and years and years, that these oligarchs were buying up property, really, really expensive property, all around
London
.Share
14:16
And when our colleague Jane Bradley and I were reporting this story out, she spoke with Phil Mason, who served for decades as a top adviser to the British government on international corruption. And he just said flat out, lawmakers in
Britain
saw Russian money as a source of jobs and investments.Share
14:36
It was sort of like a willing blindness, just like the art dealers didn't have a real incentive to say, "no, no, no. You have to tell us. You have to tell us". There wasn't a huge incentive in
Britain
to say, you know what, we're going to get serious about this. This isn't good, we're not going to allow this to happen.Share
Sabrina Tavernise
14:53
So,
Matt
, for all the reasons you just laid out, it seems pretty clear that the 2014 sanctions did not have their desired effect. Certainly not against Arkady Rotenberg
and people like him. Why would anyone think that sanctions against these same guys, many of them, stop Russia's war in Ukraine
now?Share
Matt Apuzzo
15:13
Yeah. I mean, it's a great question, and I'm skeptical. But there are some signs that things are changing.
Share
Sabrina Tavernise
15:24
We'll be right back.
Share
Break
Sabrina Tavernise
17:06
So,
Matt,
you said you thought things could be different this time. What are you seeing that makes you say that.Share
Matt Apuzzo
17:13
A couple of things.
Share
17:13
Thank you, Mr. Speaker, with your permission I'll make a statement about the situation in
Ukraine
.Share
Matt Apuzzo
17:20
The first is that countries that didn't seem all that interested in cracking down on this problem suddenly are in the game.
Share
17:31
Now the UK and our allies will begin to impose the sanctions on
Russia
that we have already prepared.Share
Matt Apuzzo
17:38
The
United Kingdom
came out with a really big sanctions list after this most recent invasion.Share
17:45
The UK is sanctioning the following three very high net worth individuals,
Gennady Timchenko
, Boris Rotenberg
and Igor Rotenberg
.Share
Matt Apuzzo
17:55
Including the Rotenbergs who hadn't been on their list until now.
Share
17:60
This package includes financial sanctions that cut Russia's access to the most important capital markets.
Share
Matt Apuzzo
18:07
The
European Union
in a big way, has backed sanctions on oligarchs and people around Putin
.Share
18:17
You're seeing it from Japan -
Share
18:18
Australians always stand up to bullies.
Share
Matt Apuzzo
18:21
Australia -
Share
18:27
And governments like
Switzerland
, where you could famously park your money and not have to worry about such things, have said, we're going to freeze assets on sanctioned oligarchs.Share
Sabrina Tavernise
18:40
I mean, in
Switzerland
was famously a place where rich people parked their money to evade all sorts of things.Share
Matt Apuzzo
18:45
Exactly. And you know, it's not this sort of broad sanctions that you're seeing from
United States
, but it's a first step.Share
Sabrina Tavernise
18:56
Okay, so what else?
Share
Matt Apuzzo
18:58
The other thing is you're starting to see government saying we're coming for your stuff
Share
Joe Biden
19:03
Tonight, I say to the Russian oligarchs and the corrupt leaders who bilked billions of dollars off this violent regime, no more.
Share
Matt Apuzzo
19:11
Remember, until now, sanctions just meant you were a name on a list. Nobody came looking for your stuff. Nobody came looking for anything. Now -
Share
Joe Biden
19:21
We're joining with European allies to find and seize their yachts, their luxury apartments, their private jets. We're coming for your ill-begotten gains. And tonight -
Share
Matt Apuzzo
19:31
You got President
Biden
talking in the State of the Union about we're going to come for your ill-gotten gains.Share
Sabrina Tavernise
19:37
And by stuff, you mean -
Share
Matt Apuzzo
19:39
Like all the stuff that's awesome about being rich. I'm talking about your multi, multimillion-dollar home in London, and your château in the south of France, and your huge super yacht. These are now targets, and that is a huge change.
Share
Sabrina Tavernise
19:59
I mean, it does really feel like a big deal, because, as you said, governments didn't really have an incentive to do this kind of thing. They didn't want to take away those mansions, because they didn't want to forego that tax base and forego the spending that helped the rest of their economy. So the fact that they're doing this now, that does feel very different and big. But why now and not before?
Share
Matt Apuzzo
20:22
I mean, I think the short answer is everybody's watching on television, as you know, the Russian army lays siege to
Ukraine
. And that galvanizes people in a way that we didn't see in 2014. I mean, a really good analogy is 9/11
, right? 9/11
happens. Nobody was saying, "oh man, it turned out Osama Bin Laden
is a bad guy, turned out Al-Qaeda
is no good".Share
20:52
Everybody knew that. These guys were already on sanctions list. There have already been dossiers compiled on them. Everybody in government knew whose
Osama bin Laden
was. But there hadn't really been any concerted political will among the United States
and its international partners to get serious about it. And that's kind of what's happening now.Share
21:12
It's like, back in 2014, the Justice Department had a kleptocracy task force to go after ill-gotten gains around the world. And now they've announced a kleptocracy task force to go after ill-gotten Russian gains around the world. But this time it seems to actually be getting some teeth. They're getting, you know, some real manpower. They're talking about information-sharing with the
United Kingdom
. You're hearing the
United Kingdom
saying it's going to get serious about things.Share
21:41
The treasury is finally getting funding to force some transparency on this crazy opaque market for shell companies that we talked about. It just feels like there's a greater coordination now than there ever was before.
Share
Sabrina Tavernise
21:56
So,
Matt
, you're talking about greater coordination. I wonder if we should see this greater coordination as, you know, effectively a sign that these Western governments are going to reckon with what their relationship with Russian money and Putin
had been. You know, to see this really concerted effort to dig for oligarch money, and to see them go out on a limb legally seizing assets, if we should interpret that as some type of reckoning with the sins of the past.Share
Matt Apuzzo
22:26
Yeah, I mean, color me call me a cynic here. But I don't see a lot of interest in reckoning with the past, and you know what, here's what I think is really happening. I think world leaders are looking at what's going on, and they're saying, what leverage do we have that we can pull that don't involve us going to
World War III
?Share
22:49
Clearly, you're seeing President
Biden
say, we're going to take a lot of steps, but I'm not putting American troops on the ground. I'm not gonna, you know, enforce a no-fly zone over Ukraine
. It's this calculus, what can be done, that has a chance of changing the outcome here that doesn't involve us all going to war? And when presidents and prime ministers look at what their options are, sanctioning oligarchs suddenly seems totally reasonable. It's an option. It doesn't involve us going to war. We got to try it.Share
Sabrina Tavernise
23:29
So they really genuinely want to end this war, and this is one of the levers that they have to try to do it.
Share
Matt Apuzzo
23:37
Yeah. And I guess we're going to finally figure out if that works, right? We've been talking for eight years about this idea that you can pressure
Putin
by putting the squeeze on the people around him, but then we never actually really put the squeeze. And so now I guess we're going to see if it works, and I don't know that it's a guarantee.Share
23:59
You know, all the intelligence, my colleagues and I have been hearing is that
Putin
is more isolated than ever. It's not exactly clear whose counsel he's taking. Is he gonna care that Arcady Rotenberg
can't buy art? I don't know.Share
Sabrina Tavernise
24:15
Right. I mean, effectively, does anyone really have influence on
Putin
?Share
Matt Apuzzo
24:21
Yeah. What if the answer is no?
Share
Sabrina Tavernise
24:25
Matt
, thank you.Share
Matt Apuzzo
24:32
Anything.
Share
Sabrina Tavernise
24:43
We'll be right back.
Share
Break
Sabrina Tavernise
25:18
Here's what else you need to know today.
Share
25:21
On Monday, President
Biden
confirmed that Russia
had used a hypersonic missile in its war against Ukraine
.Share
Joe Biden
25:29
As you all know, it's a consequential weapon, but with the same warhead on it as any other launch missile. It doesn't make that much difference, except it's almost impossible to stop it. There's a reason to use it.
Share
Sabrina Tavernise
25:45
The new generation of Russian missile is capable of flying at more than five times the speed of sound and can evade air defenses. On Saturday, Russia's defense ministry claimed it had used such a missile to destroy an ammunition depot in Western
Ukraine
, but The Pentagon
did not confirm the claim, and -Share
Ketanji Brown Jackson
26:06
I have dedicated my career to ensuring that the words engraved on the front of the
Supreme Court
building: "equal Justice under law", are a reality and not just an ideal.Share
Sabrina Tavernise
26:21
Judge
Ketanji Brown Jackson
, the first black woman to be nominated to the Supreme Court
, completed her first day of confirmation hearings before the Senate Judiciary Committee. Judge Jackson
, who was 51, spoke for under 15 minutes after four hours of remarks by senators on the committee. She pledged to decide cases, quote, "without fear or favor", if confirmed.Share
26:49
Today's episode was produced by Rikki Novetsky, Mooj Zadie, Luke Vander Ploeg and Jessica Cheung. It was edited by Paige Cowett and Liz O. Baylen. Contains original music by Marion Lozano, Brad Fisher and Elisheba Ittoop, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.
Share
27:13
That's it for
The Daily
. I'm Sabrina Tavernise
. See you tomorrow.Share
Break
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