It has been a long year since Liz Truss launched a rolling programme of sanctions on Russia’s oligarchs. Speaking three days after the invasion of Ukraine, the foreign secretary, as she was then, signalled an end to the UK government’s no-questions-asked approach.
“We are targeting oligarchs’ private jets, we’ll be targeting their properties, we’ll be targeting other possessions that they have,” she told Sky TV. “There will be nowhere to hide.”
For two decades, Moscow’s gold flowed into the British property market, its private schools, its football clubs. Russian industry was capitalised in London, with dozens of companies listed on the stock exchange and debt sales organised by City banks. Russian money made its way into politics too. Lubov Chernukhin, wife of a former Russian finance minister, gave so much money to the Conservatives that she is known as the biggest female political donor in British history.
We are in a different world now. As the anniversary of the Ukraine war approaches, it is time to ask how effective the measures to curb the power and influence of those who benefited financially from Vladimir Putin’s regime have been. Have the oligarchs really nowhere to hide?
Not quite. The impact on lifestyles is very real. Travel bans mean yachting holidays in the Caribbean, ski trips to Verbier and private jet flights between one European capital and another are no longer possible. The freedom to invest and move money has been curtailed. More than 35 companies with links to the Russian state or blacklisted oligarchs have had their shares suspended in London.
But enforcement of sanctions has been patchy. There are three big factors limiting their efficacy: offshore secrecy, national differences in regulation, and the shelter offered by jurisdictions outside the western sanctions zone, such as Turkey and the United Arab Emirates (UAE).
As the Guardian reported last year, not all properties are subject to asset freezes. The Land Registry usually puts a notice on frozen assets, stating they cannot be sold without explicit permission from the Office of Financial Sanctions Implementation. But there is no such notice on the £150m trophy home on Kensington Palace Gardens acquired by Roman Abramovich. Its ownership is unknown, hidden behind a company incorporated in Cyprus. Likewise Hamstone House – a £7m Surrey mansion previously linked to the magnate Oleg Deripaska, whose ownership is obscured by another Cypriot company.
While the oligarchs themselves have been blacklisted, in many cases their family members have not. They can continue to live in the UK, own property, spend money.
Regulation varies widely, even within the EU. While all member states have signed up to the same sanctions list, enforcement is not centralised, which can lead to different approaches. Most countries use a licensing system – banks, lawyers or estate agents must ask for permission before carrying out transactions for sanctioned individuals. But a transaction that passes muster in Cyprus, for example, may not be approved in Latvia, where politicians are set on guarding against Russian influence. This opens the system to arbitrage, with transactions routed through the more lenient jurisdictions.
And then there is Dubai. Russian capital has flooded into the emirate since the war, with Russians accounting for the biggest group of non-resident property buyers, according to local estate agents.
Turkey, which has adopted a neutral position on Ukraine, has opened its ports to superyachts. Abramovich was reported to have located four of his vessels there last summer, with several of them moored at Port Azure, which bills itself as the country’s first megayacht-only marina in Turkey.
Brussels is concerned enough about the UAE to have coaxed the Irish diplomat David O’Sullivan, a former secretary general of the European Commission, into returning as an envoy for the implementation of sanctions. His job is to ensure “continuous, high-level discussions with third countries to avoid the evasion or even the circumvention of the unprecedented restrictive measures that have been imposed on Russia since the start of its war against Ukraine”.
The financial retaliation against Russia has united Europe and its allies, but it has also exposed their differences.
