Social Europe

politics, economy and employment & labour

  • Themes
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Seizing the assets of Russian oligarchs

Branko Milanovic 25th April 2022

The episode has proved, Branko Milanovic writes, that Russia is not ruled by a few rich men but by a single autocrat.

Russia,Putin,assets,oligarchs
From have-yacht to have-not: the German federal police this month impounded in Hamburg the Dilbar, owned by a sister of the sanctioned Russian oligarch Alisher Usmanov (M J W / shutterstock.com)

The threat of confiscation of Russian oligarchs’ assets has been floated since at least December of 2021, around the time Russia issued its ultimatum to the United States and began the military manoeuvres around Ukraine’s borders. The assets were then ‘frozen’ (or even confiscated) by the US and a number of mostly European countries after the Russian invasion began on February 24th. What lessons can be drawn so far?

The first lesson we can learn from the confiscations is that before February 24th Russia was not an oligarchy, as many people believed, but an autocracy. Rather than being ruled by a few rich people, it was ruled by one person.

To draw this (rather obvious) conclusion, we need to go back to the initial rationale given for the threat of asset seizure. The US government ventured the idea before the war and with the expectation that the oligarchs, faced with the prospect of losing most of their money, would exert pressure on the Russian president, Vladimir Putin, not to invade.  

We can assume that 99 per cent, perhaps all, of the targeted oligarchs (and those who feared they might be) realised the stakes and were against the war. But if so their influence was, as we now know, zero.


Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content. We will never send you spam and you can unsubscribe anytime.

Sign up here

So, ironically and perhaps paradoxically, they were punished not because they were powerful but because they were not. If their sway over such an important matter, on which their entire assets and lifestyle depended, was nil, then the system was clearly not a plutocracy, but a dictatorship.

Political fiat

There is a distinction to be made between the early and more recent Russian billionaires. The former, beneficiaries of the privatisations when the Soviet Union collapsed, controlled the political system. The late Boris Berezovsky, who gained control of the main public television channel, brought Putin to the attention of his predecessor, Boris Yeltsin, because he thought Putin could be easily manipulated.

The more recent oligarchs have by contrast been treated as custodians of assets which the state might, by political fiat, take from them at any time. As it happened, it was not the Russian state which seized these but the American one (along with some others). It did so precisely because it thought, probably not accurately in all cases, that these billionaires were ‘state oligarchs’.

This is the lesson as to the nature of the Russian political system. As to the implications of the seizure of assets, these are of two kinds: global and Russia-specific.

Much less sure

The global implication is that plutocrats who in the past often moved their money from their own countries to the ‘safe havens’ of the US, the United Kingdom and Europe will be much less sure that such decisions make sense. This applies in the most obvious way to the Chinese billionaires who might experience the same fate as their Russian counterparts. But it may also apply to many others.

The frequent use of economic and financial coercion means that if there are political tensions between the west and (say) Nigeria or South Africa or Venezuela, the same recipe will be applied to the billionaires from these countries, whether simply as a punishment or out of an expectation that they should influence the policy of their governments. Under such conditions, they would be very unwise to keep their money in places where it may be as insecure as at home.

We can thus expect the growth of other financial centres, perhaps in Gulf states and India. Financial fragmentation would be driven not only by the fears of billionaires but by those of potential US adversaries, such as China, that their governments’ and central banks’ assets might too prove to be just pieces of paper.

Complete power

What are the likely implications for Russia? Here we have to take a longer-term view, and to look past the Putin regime. The conclusion that billionaires and people close to power will draw is one that was drawn a few times in Russian/Soviet history—only to be forgotten.


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

But let’s leave aside the ancient conflicts between the boyars of the feudal nobility and the tsar. Consider just the similarities with Josef Stalin’s regime. Stalin was able, through skillful manoeuvring, to move from being a ‘grey blur’ (as his assassinated adversary Leon Trotsky put it) to acquisition of complete power—including, in his final years, over the Communist Party’s Politburo.

Putin has not yet started executing people around him, but he has shown that politically they do not matter at all. The conclusion to be drawn, I believe, by future Russian oligarchs (including the top figures in state-owned companies, formerly known as ‘the red directors’) is that made by the Politburo members after Stalin’s death: it is better to have a collective leadership, where individual ambition will be checked, than to let one person assume full power.

The oligarchs to come will realise they can stick together or they will hang together. Under Yeltsin, when they did dictate policy, they preferred to fight each other. They brought the country close to anarchy and even civil war, and in so doing facilitated the rise of Putin, who introduced some order.

Economic logic

For the other implication it is also useful to go back in time. During the early privatisations in the 1990s, it was typically asserted that no matter who got the privatised assets, they would have an incentive to fight for the rule of law, simply to protect their gains. Politically, the Communists would thus not be able to return to power.

Comparison was made with the plutocratic ‘robber barons’ of late-19th and early-20th-century America. They often became rich by dubious means but they had an interest in fighting for the safety of property once they got rich. The expectation was that the Russian billionaires would do the same.

These expectations were however upended by the billionaires finding a (seemingly) much better way to make their money safe—move it to the west and invest in real estate, companies, football clubs or just buy yachts. This seemed an excellent decision—all the way through to about eight weeks ago.

The new, post-Putin billionaires will probably not forget that lesson. So we may expect them to favour the creation of a true oligarchy (rather than allow for another autocracy), and to insist on the domestic rule of law—just because they will no longer have any place else to which they can move their wealth.

This is a joint publication by Social Europe and IPS-Journal

Pics3
Branko Milanovic

Branko Milanovic is a Serbian-American economist. A development and inequality specialist, he is visiting presidential professor at the Graduate Center of City University of New York and an affiliated senior scholar at the Luxembourg Income Study. He was formerly lead economist in the World Bank's research department.

You are here: Home / Politics / Seizing the assets of Russian oligarchs

Most Popular Posts

Visentini,ITUC,Qatar,Fight Impunity,50,000 Visentini, ‘Fight Impunity’, the ITUC and QatarFrank Hoffer
Russian soldiers' mothers,war,Ukraine The Ukraine war and Russian soldiers’ mothersJennifer Mathers and Natasha Danilova
IGU,documents,International Gas Union,lobby,lobbying,sustainable finance taxonomy,green gas,EU,COP ‘Gaslighting’ Europe on fossil fuelsFaye Holder
Schengen,Fortress Europe,Romania,Bulgaria Romania and Bulgaria stuck in EU’s second tierMagdalena Ulceluse
income inequality,inequality,Gini,1 per cent,elephant chart,elephant Global income inequality: time to revise the elephantBranko Milanovic

Most Recent Posts

transition,deindustrialisation,degradation,environment Europe’s industry and the ecological transitionCharlotte Bez and Lorenzo Feltrin
central and eastern Europe,unions,recognition Social dialogue in central and eastern EuropeMartin Myant
women soldiers,Ukraine Ukraine war: attitudes changing to women soldiersJennifer Mathers and Anna Kvit
military secrets,World Trade Organization,WTO,NATO,intellectual-property rights Military secrets and the World Trade OrganizationUgo Pagano
energy transition,Europe,wind and solar Europe’s energy transition starts to speed upDave Jones

Other Social Europe Publications

front cover scaled Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship
Women Corona e1631700896969 500 Women and the coronavirus crisis
sere12 1 RE No. 12: Why No Economic Democracy in Sweden?

ILO advertisement

Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power

The International Labour Organization's Global Wage Report is a key reference on wages and wage inequality for the academic community and policy-makers around the world.

This eighth edition of the report, The Impact of inflation and COVID-19 on wages and purchasing power, examines the evolution of real wages, giving a unique picture of wage trends globally and by region. The report includes evidence on how wages have evolved through the COVID-19 crisis as well as how the current inflationary context is biting into real wage growth in most regions of the world. The report shows that for the first time in the 21st century real wage growth has fallen to negative values while, at the same time, the gap between real productivity growth and real wage growth continues to widen.

The report analysis the evolution of the real total wage bill from 2019 to 2022 to show how its different components—employment, nominal wages and inflation—have changed during the COVID-19 crisis and, more recently, during the cost-of-living crisis. The decomposition of the total wage bill, and its evolution, is shown for all wage employees and distinguishes between women and men. The report also looks at changes in wage inequality and the gender pay gap to reveal how COVID-19 may have contributed to increasing income inequality in different regions of the world. Together, the empirical evidence in the report becomes the backbone of a policy discussion that could play a key role in a human-centred recovery from the different ongoing crises.


DOWNLOAD HERE

ETUI advertisement

Social policy in the European Union: state of play 2022

Since 2000, the annual Bilan social volume has been analysing the state of play of social policy in the European Union during the preceding year, the better to forecast developments in the new one. Co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), the new edition is no exception. In the context of multiple crises, the authors find that social policies gained in ambition in 2022. At the same time, the new EU economic framework, expected for 2023, should be made compatible with achieving the EU’s social and ‘green’ objectives. Finally, they raise the question whether the EU Social Imbalances Procedure and Open Strategic Autonomy paradigm could provide windows of opportunity to sustain the EU’s social ambition in the long run.


DOWNLOAD HERE

Eurofound advertisement

Eurofound webinar: Making telework work for everyone

Since 2020 more European workers and managers have enjoyed greater flexibility and autonomy in work and are reporting their preference for hybrid working. Also driven by technological developments and structural changes in employment, organisations are now integrating telework more permanently into their workplace.

To reflect on these shifts, on 6 December Eurofound researchers Oscar Vargas and John Hurley explored the challenges and opportunities of the surge in telework, as well as the overall growth of telework and teleworkable jobs in the EU and what this means for workers, managers, companies and policymakers.


WATCH THE WEBINAR HERE

Foundation for European Progressive Studies Advertisement

Discover the new FEPS Progressive Yearbook and what 2023 has in store for us!

The Progressive Yearbook focuses on transversal European issues that have left a mark on 2022, delivering insightful future-oriented analysis for the new year. It counts on renowned authors' contributions, including academics, politicians and analysts. This fourth edition is published in a time of war and, therefore, it mostly looks at the conflict itself, the actors involved and the implications for Europe.


DOWNLOAD HERE

Hans Böckler Stiftung Advertisement

The macroeconomic effects of re-applying the EU fiscal rules

Against the background of the European Commission's reform plans for the Stability and Growth Pact (SGP), this policy brief uses the macroeconometric multi-country model NiGEM to simulate the macroeconomic implications of the most relevant reform options from 2024 onwards. Next to a return to the existing and unreformed rules, the most prominent options include an expenditure rule linked to a debt anchor.

Our results for the euro area and its four biggest economies—France, Italy, Germany and Spain—indicate that returning to the rules of the SGP would lead to severe cuts in public spending, particularly if the SGP rules were interpreted as in the past. A more flexible interpretation would only somewhat ease the fiscal-adjustment burden. An expenditure rule along the lines of the European Fiscal Board would, however, not necessarily alleviate that burden in and of itself.

Our simulations show great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way. Raising the debt ceiling to 90 per cent of gross domestic product and applying less demanding fiscal adjustments, as proposed by the IMK, would go a long way.


DOWNLOAD HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube