Will western sanctions really hurt Putin?

Boris Johnson has announced that the UK will impose personal sanctions on Vladimir Putin and his foreign minister Sergei Lavrov – and is as drawing up a ‘hit list’ of Russian oligarchs to target. ‘We have to make it deeply painful for the oligarchs that support the Putin regime,’ said foreign secretary Liz Truss. ‘There are over a hundred Russian billionaires … We will come after you.’

Will such actions actually work? For many top Russians, they are a badge of honour. ‘What? You haven’t been sanctioned yet?’ asked one Russian senator of the head of a Duma committee during a break in a Russian television show on which I was also a guest in 2019. ‘What kind of patriot are you?’

The remark was intended as a joke – but in a very real sense, being sanctioned by the West has become a kite mark of loyalty to the regime. Even before Johnson’s announcement, hundreds of Russian parliamentarians, generals, intelligence officials had already been sanctioned by the US and EU for their role in the annexation of Crimea, the destruction of a Malaysian Airlines Boeing over Ukraine, and the poisoning of Sergei Skripal and his daughter, and of opposition leader Alexei Navalny. Indeed the first ever round of such personal sanctions – which ban travel and freeze accounts and property – were imposed even before Crimea over the Russian State’s imprisonment and murder of whistleblowing lawyer Sergei Magnitsky in 2009.

If such sanctions were intended to make the Kremlin think twice about its aggressive and murderous behaviour, they have clearly failed. In some ways they have done Putin’s work for him, forcing wealthy Russians to bring their capital home where the Kremlin can better control it – and its owners.

It’s a similar story with the so-called ‘sectoral’ sanctions post-Crimea, which cut off major Russian companies from raising international financing. Gazprom, Rosneft and the others carried on just fine ­– even financing the now-binned £11 billion Nord-Stream 2 gas pipeline from their own resources. Small wonder that Putin’s ambassador to Sweden could confidently assert two weeks ago that ‘Russia doesn’t give a shit about sanctions.’

According to Bill Browder, formerly the largest foreign portfolio investor in Russia and Sergei Magnitsky’s employer, the problem so far has been that the sanctions imposed so far have ‘not caused any real pain’ to Putin or his inner circle. Even the UK’s Unexplained Wealth Orders, which controversially reverse the burden of proof and force persons under suspicion to prove the origin of their UK-based assets, have been ‘a true disappointment, not imposed widely or properly,’ says Browder.

So what kind of sanctions would Putin’s inner circle care about? Throwing the net much wider would be a start – ‘to create penalties for the enablers,’ as Browder puts it, from Putin’s propagandists to the western bankers and accountants who help the regime’s allies stash their money. In theory, Britain’s 2018 Magnitsky Act gave the government powers to investigate all money linked to foreign corruption, including in British territories such as the Cayman and British Virgin Islands, favourite parking spots for kleptocratic cash. In practice, it’s been pretty much business as usual. But if the UK and US governments were to ‘proactively require [offshore bankers] to come to the government with information and impose penalties for withholding it,’ Browder believes that billions in dirty Russian money will be uncovered.

There are signs that the UK government is already investigating a far wider circle of Putin enablers than just the oligarch ‘purses’ alleged to hold his personal cash. According to a senior UK security source, such a list could include top Russian media bosses and presenters as well as personal associates and family members of top Russian officials - up to and including Putin’s alleged mistresses gymnast Alina Kabayeva and Svetlana Krivonogikh, whom the Panama Papers alleged had amassed a $100 million fortune. ‘Previously our approach was focused on law enforcement,’ says the source. ‘There’s a feeling that it’s time to make this political.’

How to track these people’s money? Financial sleuths from Browder’s Magnitsky Global Justice Campaign showed the way a decade ago, tracking down a giddying network of shell companies, offshore trusts and Cypriot banks who laundered some $200 million stolen by corrupt Russian officials from their own treasury. That investigation proved that complexity is not the same as secrecy – at every stage of the laundry, someone’s signature has to appear on the paperwork. It’s just a question of looking for it. 

More recently, journalists working for imprisoned opposition leader Alexei Navalny’s Anti-Corruption Foundation uncovered a similarly tangled web of fake rental and consultancy payments from Russian state enterprises to various members of Putin’s family - including Krivonogikh - that included financing for a vast palace on the Black Sea. Much of the evidence was not buried in secret bank records but publicly available on Instagram. The view from Krivonogikh's seaside Monaco apartment revealed, after a little sleuthing on Google maps, her address. Her address led to the offshore company that owned the property, and so on. Combine that with leaked financial records from the Panama Papers and the Mossack Fonseca cache, the paper trail is hiding in plain sight.

If journalists can do it, governments should be able to as well – if the political will is there. Already, Vladimir Soloviev, one of the Kremlin’s favourite TV attack dogs, has been banned from visiting his Italian villa in the wake of the Ukraine invasion. ‘I was told that Europe is a citadel of rights, that everything is permitted … you told us that Europe has sacred property rights!’ complained Solovyev on his weekly TV show. ‘All of a sudden, now they say: “Are you Russian? Then we will close your bank account.”’

It’s vital not to prove Solovyev right. Measures should be targeted not against Russians in general but only against the regime’s insiders. Indeed many of the Russians who live in the West do so precisely because they have fallen foul of the Kremlin. ‘I know that many wealthy Russians in London are anti-Putin,’ says Lyubov Galkina, co founder of Zima magazine for the UK’s Russian-speaking community and Zima Russian restaurant in Soho. ‘Some of them moved here to protect their wealth and to give their children better future. And they love and respect this country.’

Putin and his propagandists would love it if the West began treating all 144 million Russians as the Kremlin’s willing collaborators. The answer is not blanket Russophobia, but smart use of data to target the people who enable his regime and its propaganda message. ‘It’s taken the biggest land invasion since world war two to awaken the west to Putin’s evil,’ says Browder. ‘We’re in a different world than we were two days ago.’