TOPSHOT – Russian President Vladimir Putin, surrounded by top military officers and officials, tours … [+]
Additional reporting by David Dawkins
U.S. President Joe Biden announced on Thursday a new round of sanctions targeting nine Russian oligarchs and the country’s largest financial institutions following Russia’s sweeping attacks on Ukraine. The sanctions follow similar measures imposed by the U.K. and Canada and a narrower tranche of U.S. sanctions enacted earlier this week.
The newly sanctioned oligarchs include three father-son pairs with close ties to Russia President Vladimir Putin: Igor Ivanovich Sechin, the billionaire chairman of oil company Rosnet and his son Ivan Igorevich Sechin; the politician Sergei Borisovich Ivanov and his son Sergei Sergeevich Ivanov; and security chief Nikolai Platonovich Patrushev and his son Andrey Patrushev. The list also includes three financial elites: Alexander Aleksandrovich Vedyakhin of Sberbank, and VTB Bank’s Andrey Sergeyevich Puchkov and Yuriy Alekseyevich Soloviev.
But as Russia’s invasion of Ukraine shows, Biden’s latest round of sanctions are too little, too limited and too late, according to six academics and policy thinkers who spoke with Forbes. All said that Biden needs to target all of the oligarchs (not just the handful Biden has so far named). Two of them argued that Western governments needed to go after the oligarchs’ extended families. Others suggested booting Russian financial institutions from the global banking network SWIFT, echoing U.K. Prime Minister Boris Johnson. According to Harvard scholar Emily Channell-Justice, the sanctions should cause pain to Russia’s middle class, which might be the only way to get ordinary Russians to turn against Putin. Some of that appears to be happening already: Several posts on Twitter Thursday show Russians turning out to protest the war, in cities from St. Petersburg to Moscow.
Meanwhile, Russia and the world are already paying the price for Putin’s power play. Russia’s MOEX stock index has lost a third of its value since Monday’s market open, while Russia’s ruble hit an all-time low on Thursday. Oil prices surged to more than $100 per barrel, the first time since 2014, while U.S. stock indices are down this week. Germany, Europe’s biggest economy, announced Tuesday it was halting the Nord Stream 2 pipeline project, which was slated to deliver natural gas from Russia.
“Now we have a Sanctions War in addition to a real war,” tweeted Dmitri Alperovitch, one of the thought leaders who spoke with Forbes.
Emily Channell-Justice
Director of the Temerty Contemporary Ukraine Program at the Ukrainian Research Institute, Harvard University
Channell-Justice told Forbes that for sanctions to work, they have to prove painful not only to Russian oligarchs but to the Russian people. “If Russian public opinion turns sour on Putin, or if the average Russian no longer wants to follow Putin, then we’ll see a shift,” she said. “If you have sanctions that trickle down into Russian society and prevent people from building wealth, you’re starting to actually hit the population in a way that hasn’t happened before.”
The problem with limiting sanctions to the wealthiest Russians is that Putin has consolidated power so much that there’s not enough room for dissent inside his echo chamber, Channell-Justice said. “It has to be Russia’s biggest state banks, any financial institutions that oligarchs or anyone with economic power use, hitting them in their assets,” she said.
Nikita Kulachenkov
Private investigator formerly of the Anti-Corruption Foundation, the organization started by opposition political leader Alexei Navalny
Kulachenkov said that sanctions needed to focus on the oligarchs’ bottom lines. “Most of the sanctions employed since 2014 were really soft and they were directed at the economy,” he told Forbes. “But governments that aren’t elected don’t care about the economy. They aren’t afraid of not being elected again.”
Sanctions will work best if they target not just the oligarchs and government officials, but their families, Kulachenkov said. That’s because many of their families are the ones living in luxury and spending the “corrupt” money in Western countries. Countries could also cancel the residency permits for family members. “That would be painful,” he said. Kulachenkov added that it might already be too late to impose meaningful sanctions, considering conditions on the ground in Ukraine.
Dmitri Alperovitch
Cofounder and former CTO of cybersecurity firm CrowdStrike and chairman of Silverado Policy Accelerator, a Washington think tank
Alperovich also said it’s too late for sanctions to stop a Russian invasion of Ukraine. He proposed sanctions that targeted “the illicit money that the Russian government figures as well as oligarchs have stashed abroad.”
“I think we have to be very thoughtful about what types of sanctions we do impose once [Putin] invades, because the last thing we want to do is corner him where he feels like he has nothing to lose,” Alperovitch said. “He can lash out in numerous ways, including in cyberspace, to attack our institutions, our companies and our economy.”
Alperovitch said that sanctions should be paired with muscular military posturing. He suggested increasing the deployment of troops to NATO countries and moving intermediate-range ballistic missiles closer to Russia, in the Baltics, since Putin has in the past talked about what he calls a threat from Latvia, Lithuania and Estonia. “That will be significant leverage for potential negotiation of a resolution,” Alperovitch said.
Bill Browder
CEO of Hermitage Capital and the leading proponent of the Magnitsky Act, which authorizes the U.S. to slap sanctions on violators of human rights
Go after Putin’s money, Browder told Forbes. Freeze the offshore assets and ban the travel of the wealthiest Russians and their families, he said. “If the U.S., the UK, the EU and Canada were to jointly make a list of the 50 oligarchs who hold Putin’s money and freeze that money, Putin wouldn’t go any further into Ukraine, and there would be no loss of life,” Browder said. “If the major Western countries tiptoe around Putin and issue half-cocked sanction lists that don’t get to the nub of the matter, then Putin will think there’s not that high a personal cost and he will go forward, and many people will die.”
Christopher Glück
EU Director of Forefront Advisers, a Brussels-based political-advisory firm
Strangle Russia’s access to Western capital markets, Glück said. The U.S. already has a prohibition against buying Russia’s sovereign debt from Russia, but Americans can buy it on the secondary market, so European Union traders buy Russian government bonds and sell them to Americans, he told Forbes. “A very obvious move for the EU would be to ban primary-market operations in ruble-denominated debt for Russia,” Glück said. The next level of escalation would be a ban on secondary-market trading, which would cut off Russia entirely from western capital markets, he said. “That makes it very costly and difficult for Russia to refinance itself – unless China steps in.”
Freezing Russia out of SWIFT, the global network that allows 239 banks across 15 countries to process cross-border payments, would be the most harmful sanction the West could levy on Russia, Glück said. Though Russia has a domestic system for transferring funds, cutting off the country from international payments would impact not just Russian companies but U.S. and European countries with business interests in Russia, he said.
The West could also target military-sector bank Promsvyazbank, state-owned development bank Vnesheconombank, and Bank Rossiya, which is considered the Kremlin’s favorite bank, Glück said.
Sanctioning Russia’s billionaires is “just not enough,” he said.
Maria Snegovaya
Visiting Scholar at George Washington University, Adjunct Senior Fellow at CNAS
Snegovaya said that Biden’s first round of sanctions are “more than expected … but not enough,” and that new sanctions should hit other Russian financial institutions beyond those Biden named on Tuesday. Putting more Russian banks on the Specially Designated Nationals And Blocked Persons List “would really hit the Russian economy pretty badly,” Snegovaya said, singling out Sberbank as the most important target. Removing Russia from the SWIFT global banking system could also be effective, she said, although not to the extent that many analysts expected.
As for longer-term measures to limit Putin’s aggression, Snegovaya said the EU needs to free itself from its dependence on Russian energy, while the U.S. needs to impose export controls in other sectors, including technology: “There’s a need to limit supply to Russia of some of the technologies that Russia uses against the West.”
Snegovaya said that it’s difficult to discern how Putin will react to any given sanction or measure. “Nobody really knows whether a specific step is going to provoke Putin or deter him,” she told Forbes. “He sounds like he lives in a different world.”
