Max Seddon in The Financial Times
As the west’s relations with Moscow plumb ever lower depths, the UK is abuzz with calls to do something about its oligarch problem. “We are going after the money,” Boris Johnson, foreign secretary, vowed after former double agent Sergei Skripal was poisoned.
A group of MPs recently singled out law firm Linklaters for its work on the London float of En+, owned by sanctioned oligarch Oleg Deripaska, and called for a crackdown on “corrupt” Kremlin-connected tycoons.
But the ones in real trouble may be the oligarchs themselves. They were once ideal go-betweens between Russia and the west. The real life models for the mafia money launderer in espionage novelist John le Carré’s Our Kind of Traitor saw no contradiction in sending their children to Eton. UK politicians had no qualms about staying on their yachts or serving in their boardrooms.
Now, feeling equally at home in London’s Soho and Moscow’s Soho Rooms — the nightclub so exclusive that, according to legend, Roman Abramovich once did not pass “face control” — is a liability. Mr Abramovich, who epitomised “Londongrad” bling when he bought Chelsea football club and a house on a street known as “ Billionaire’s Row”, struggled to get a UK visa. Suddenly, oligarchs are too Russian for a west eager to clean up its act and too western for a Russia hunting for “enemies of the people”. Or, as the Russian saying goes: if you sit on two chairs, something vulgar will happen to you through the crack in the middle.
“Even if you’re not sanctioned yourself, it still affects you,” a close friend of one of Russia’s richest oligarchs told me this week. “You go to a bank and the compliance department doesn’t want anything to do with anything Russian.”
Today, oligarchs are like hipsters with even worse dress sense: nobody will admit to being one, even if you know them when you see them.
Part of the problem is the nature of oligarchy, which has changed dramatically since Vladimir Putin took power 18 years ago. The classical definition is someone who acquired vast wealth, often through dubious political connections, by privatising state assets on the cheap, thus giving them huge power over the penniless political class.
In the 1990s, it was widely held that the real power in Russia lay not with Boris Yeltsin, but the oligarchs backing him. The late Boris Berezovsky liked to give the impression he ran the country during Yeltsin’s frequent absences due to heart problems and that he had handpicked Mr Putin as the next leader.
Mr Putin shifted the power dynamic in his first few years in office. Berezovsky and Vladimir Gusinsky, who challenged him through their TV channels, were forced to flee. Mikhail Khodorkovsky, who dared to take him on politically, was jailed for a decade.
That turned most of the other oligarchs into supplicants working under an unwritten rule: they were allowed to keep their wealth in exchange for staying out of politics.
The new set of prime movers were figures from Mr Putin’s childhood. They amassed huge fortunes after he became president — often through winning lucrative contracts from state companies such as Gazprom. After Russia annexed Crimea in 2014, the US sanctioned these individuals first in the hope they would convince Mr Putin to change course.
Instead, they circled the wagons around him. Yuri Kovalchuk, a billionaire banker who once owned a dacha outside St Petersburg next to Mr Putin’s, made a bizarre TV appearance in which he said that Russia had a “nationally oriented elite” that knew “what side of the barricades it was on”.
He went on: “I’m not against having a flat abroad or a villa on the Cote d’Azur, be my guest. But the question is: where’s your home?”
The more recent US sanctions have cast a wider net that has perplexed its potential targets. “Before, they were going after people who really made money with the regime. Now we don’t get what it is for. If you think we can go to Putin and tell him what to do, you don’t understand Russia,” one oligarch told me this week. If anything, he continued, the western attack on oligarchs benefits the Kremlin. First, moves against Russian capital push them to repatriate cash stashed abroad in western companies — a goal Putin has struggled to achieve for years. Second, many in the elite increasingly see little reason to leave key businesses in private hands, especially if they require state support.
And now that several sanctioned oligarchs cannot pay off dollar loans to the state banks to whom they pledged major assets as collateral, they may not be tycoons for much longer.
“Putin loves this,” the oligarch said. “The regime is winning. The people like it because nobody likes oligarchs, and the state consolidates.”
The pressure the tycoons face at home and abroad has put the entire UK oligarch service industry at risk. I recently had dinner with my first Russian teacher, who now runs a consultancy helping oligarchs and assorted pretenders get their children into exclusive schools. When I mentioned that I had heard one businessman with a prominent UK presence was facing trouble after the state nationalised a company he part-owned, the teacher nearly spat out his food. “You’re joking!” he said. “He’s one of my best clients!”