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Replies to post #506 on Crude Oil Discussion Board
Who are Russia's oligarchs and how do they play into the war in Ukraine?
Matthew Brown
USA TODAY
WASHINGTON — Vacated Mediterranean villas, marooned superyachts in search of accepting ports and billions in assets seized or devalued are just some of the headaches Russia's kleptocratic elite now face over President Vladimir Putin's invasion of Ukraine.
The so-called Russian oligarchs who surround the Kremlin – a small cadre of several dozen men who have made their riches thanks to connections to Putin's government – are seen by U.S. and European officials as key to curbing the Russian invasion of Ukraine and potentially building a post-Putin Russia.
"Part of why I think it's so important to go after the Russian oligarchs and the rest of the elite is that suddenly a bunch of oligarchs had to get on private jets, flee Monaco and the south of France and other places they have their homes and head back to Moscow," said Max Bergmann, a senior fellow at the Center for American Progress, a liberal think tank.
"And they're seeing potentially billions and billions of dollars in assets wiped out and seized. So you're gonna have a disgruntled class of very rich and very influential businessmen," Bergmann said.
In response to the Kremlin's invasion of Ukraine, dozens of countries around the world have levied punishing sanctions on Russia's financial institutions, including the Russian Central Bank. The backlash to Putin's invasion has precipitated a financial crisis in Russia that threatens to throw the lives of everyday Russians into chaos.
Russia's ultra-wealthy have also been targeted by sanctions — often by name — yet tracking down their global wealth and confiscating it is a difficult game for many Western governments. Russia's elite have now spent decades storing their wealth in Western financial institutions, real estate markets and luxury enclaves, making it painful for some of the West's own elite to separate themselves from the cash.
"The U.S. Department of Justice is assembling a dedicated task force to go after the crimes of the Russian oligarchs," President Joe Biden said during his March 1 State of the Union address.
"We are joining with our European allies to find and seize your yachts your luxury apartments, your private jets. We are coming for your ill-begotten gains," Biden promised.
The sanctions are "predicated on the idea that the 'oligarchs' will be hurt financially and that pain will push them to push Putin to stop the war in some way," said Matthew Schimdt, a professor of national security at the University of New Haven. This is a dubious line of thinking, he argued, because "Putin came to power, in part, because he took on the actual oligarchs."
What is an 'oligarch'?
The term "oligarch" rose to prominence in the 1990s, when cadres of young businessmen came to power in post-communist Russia by taking over the newly privatized state monopolies that had opened up in the late Soviet Union.
That class of oligarchs – who amassed their wealth and dominance of the Russian economy through corruption and coercion – dominated politics and business for years before Putin's rise.
Russian leader Vladimir Putin congratulates members of a Russian delegation, from left, Valery Gergiyev, businessman Roman Abramovich and Nizhny Novgorod Gov. Valery Shantsev, on Russia being selected to host the 2018 soccer World Cup.
During Putin's first term as president from 1999 to 2008, he consolidated power by arresting, exiling and harassing the so-called Russian elites who opposed his strongman rule. Putin billed himself as an anti-corruption advocate, but experts say he was really positioning himself as the center of all corrupt dealings in the country.
"He offered (the elites) a deal: give up your money or you give up your political power. And he forced out everyone who still wanted political power," Schmidt said.
Sanctioning oligarchs:Biden hits Russia's yacht-riding rich with sanctions. Will that blunt Putin's Ukraine invasion?
The Russian elites' ties to Putin
The remaining economic elites are now either dependent on Putin's government for their wealth, and consequently unlikely to oppose him, or otherwise "share his quasi-messianic vision ... of reestablishing Russia's place in history," by conquering Ukraine and resisting liberal democratic values, Schimdt said.
Intelligence analysts and academics focusing on Russia are in general agreement that Putin also has a strong grip on the security forces, who would be cru to any regime change or a settlement in Ukraine. Those forces have been bolstered in recent years to a crackdown on dissent at home.
The security forces – and Putin's inner circle – are also filled with hardliners unlikely to be swayed by sanctions.
Will sanctions work?
That said, the Biden administration and its allies are hopeful that Russia's economic elite will find the prospect of a severely isolated Russia unappealing and can press for a future without Putin or a prolonged war in Ukraine.
"The oligarch class is going to look at this decision now as being totally reckless," Bergmann said, adding that "the purpose of sanctions in the Western response is to cause some real problems for Putin at home that may mean the rational decision here is to pull back forces to de-escalate the conflict."
In the meantime, the most punishing effects of the economic sanctions will be felt by the Russian people. Many Russians remember the economic collapse of the 1990s and how to cope, Schmidt noted, the economic pain will now likely dent Putin's approval rating. The cost of the war, in both Russian lives and economic toll, has already led to discontent in Russia.
Already, thousands have gathered in cities across the country, including in Moscow and St. Petersburg, to protest the war. While Putin has effectively hamstrung his most vocal opposition in recent years, he's not immune from public opinion – and is existentially concerned about a popular revolution deposing him.
"This war started in Ukraine but it will end on the streets of Russia. There is no other way," Schmidt said.
Follow Matthew Brown online @mrbrownsir.
Why it's so hard to quit Russian energy
Ben Geman, author of Axios Generate
Russia's invasion of Ukraine is spurring European Union and U.S. moves to cut imports from Kremlin-backed energy suppliers.
Why it matters: The efforts are especially urgent in Europe, which unlike the U.S. is extraordinarily reliant on Russian oil, gas and coal.
The White House announced a ban on Russian energy Tuesday, but as of last November, Russia provided just 7% of U.S. combined crude and petroleum product imports.
By contrast, Europe's dependence on Russia is a strategic and economic vulnerability and provides large revenues for Vladimir Putin's regime.
Aggressive moves to break that link might also speed movement to climate-friendly energy sources like wind and solar.
The big picture: Russia's role in the overall global energy economy is immense. It's the largest natural gas exporter, and the second-largest crude oil exporter after Saudi Arabia.
By the numbers: Last year, roughly 40% of EU consumption of natural gas — a vital source of heat, power and industrial energy — came from gas imported from Russia.
About a quarter of European oil and petroleum products came from Russia before the invasion. Europe soaks up about 60% of Russia's export of those commodities.
And Russia provides 46% of Europe's coal imports, according to European Commission data.
The plan calls for diversifying suppliers of pipelined and liquefied natural gas from countries including Azerbaijan, Algeria, the U.S. and Qatar.
It also includes faster permitting for renewables projects, greater energy efficiency, development of hydrogen projects, use of home heat pumps and more.
It starts with having enough gas on hand for next winter, something that was not the case this year. A key component of this plan is filling natural gas storage facilities to 90% capacity by Oct. 1.
The EU plan also includes importing more natural gas from friendly nations, such as the U.S., and cutting demand through energy efficiency initiatives and other steps. In total, officials say they could cut the demand for Russian gas by two thirds by the end of 2022.
Reality check: Russia's share of U.S. crude and petroleum product imports isn't trivial, but it's small enough to make the U.S. ban more of a symbolic strike at Putin's regime and revenues.
Plus, it was already starting to happen anyway.
"Most of my member companies had already self-imposed a boycott of Russian crude," Mike Sommers, CEO of the American Petroleum Institute, said in an interview.
"This announcement was already factored into most refiners' situation as they're looking for crude around the world," Sommers added. He cited preliminary federal data showing U.S. imports of Russian crude dropped to nothing in late February.
What we're watching: The European moves to break up with Russian energy are far more complex, especially right now.
"Putin is a very keen student of energy markets and he probably recognized, launching this, that it was a time when oil markets were tight, gas markets were tight and coal markets were tight, so there isn't a lot of spare capacity," Pulitzer-winning energy historian and analyst Dan Yergin said in an interview.
Andrew Freedman contributed reporting.
