Oligarchs got richer despite sanctions but this time may be different

For nearly a decade, sanctions have been little more than names on a list for wealthy Russians and now governments are working to give them bite

The first time the United States government slapped his family with sanctions and locked him out of the American financial system, Arkady Rotenberg waited about eight weeks, investigators say, before buying a $7.5 million painting in New York City.

That was in 2014, after Russia annexed Crimea, and since then the sanctions have hardly slowed down Rotenberg, a life-long friend and former judo partner of the Russian president, Vladimir V Putin. His estimated worth sits at about $3 billion, and his brother, Boris, became a billionaire after sanctions were imposed on him. Investigators have tracked at least $91 million passing into the American economy from accounts linked to the Rotenberg family.

Today, as Putin’s soldiers lay siege to neighbouring Ukraine, world leaders have responded by strangling the Russian economy. 

And a new raft of European and American sanctions has been announced, against Putin himself, as well as those considered close to him, including Boris Rotenberg and Arkady Rotenberg’s son, Igor. The logic now is the same as it was in 2014: Squeeze Putin’s allies to put pressure on him.

But despite such boasts, coming at what some analysts call a watershed moment, the question is whether the West can make its sanctions bite after largely failing to do so in the past. 

A New York Times analysis of global corporate filings identified nearly 200 companies associated with the Rotenbergs, spread across three continents and a dozen countries. Many of the firms are now inactive, but even after Rotenberg was placed on sanctions lists in 2014, he was able to take a stake in at least seven companies in European offshore tax havens.

As recently as 2020, Rotenberg became the beneficial owner of two companies — Robben Investments and Lucasnel — in Luxembourg, a tiny European Union country known as a tax haven for shell companies. 

Rotenberg has stayed wealthy and spent lavishly because governments rarely investigate or try to untangle the fortunes of those they target. As oligarchs hired high-priced accountants, lawyers and other middlemen to conceal their assets, governments largely left it to banks and companies to figure out for themselves whether they were doing business with people on the blacklists. 

Governments may need to change laws to tackle the problem.  

In the United States, the authorities have broad powers to seize property if they suspect a crime has been committed. Investigators caution, however, that they do not expect to find many oligarch fortunes in American bank accounts, or Russian superyachts in American ports. The harder task, they said, will be identifying transactions in real time when the buyers have concealed themselves behind shell companies and foreign banks. In France, the government is considering laws that would allow it to seize, not just freeze, assets belonging to blacklisted people. Similarly, the British government announced last week that it had seized a private jet suspected of being linked to the Russian oligarch Roman Abramovich. But the government’s argument — that it could seize the jet under a ban on Russian-linked aircraft entering Britain — has yet to be tested. And the plane in question is registered not in Britain or Russia, but in Luxembourg.

But there are some encouraging signs. 

More than five years after it was proposed, Parliament recently passed a law prohibiting people from hiding behind offshore companies when buying property. And the British government finally hit Abramovich with sanctions more than a decade after corruption allegations and evidence of ties to the Kremlin first emerged. 

©2022 The New York Times News Service