Russian President Vladimir Putin gives a speech at an awards ceremony for the Russian national soccer team at the Kremlin on July 28, 2018. Photo: AFP / Pool / Pavel Golovkin

With concern growing in the United States and Europe over Russia’s so-called oligarchs and the money they have stashed abroad, it is worth considering two fundamental questions. First, who qualifies as an oligarch? And, second, does every oligarch deserve to be regarded with suspicion?

Suspicion is certainly the order of the day in the US, where the authorities have announced massive sanctions against two Russian tycoons, Oleg Deripaska and Viktor Vekselberg, as part of an effort to punish the Kremlin for its alleged meddling in the 2016 presidential election. Similarly, after the nerve-agent attack in England on former Russian double agent Sergey Skripal and his daughter, the United Kingdom has implemented new measures aimed at preventing money-laundering, with capital inflows from Russia to come under the closest scrutiny.

The problem is that the criteria Western governments are using to identify Russians worthy of investigation and even punishment remain overly broad. The most common definition of an oligarch is a person whose wealth depends on political connections – particularly to Russian President Vladimir Putin. On its so-called Putin list – a sanctions watch list created last January – the US Treasury identified 96 “oligarchs” based on the mere fact that they are worth more than US$1 billion.

In fact, even the focus on ties to Putin is flawed. After all, many of today’s wealthy Russian businessmen – including Deripaska (who is being punished by the US) and Roman Abramovich (who has been protected by Israel), as well as Alfa Group’s Mikhail Fridman and Norilsk Nickel’s Vladimir Potanin – got their start under Putin’s predecessor, Boris Yeltsin.

Moreover, some wealthy Russians who benefited from Kremlin connections in the past have already fled Russia, and are now doing business in the West or living there in exile. Former Bank of Moscow president Andrey Borodin has received political asylum in the UK. Yevgeny Chichvarkin, a former mobile-phone tycoon, has actively campaigned against Putin since fleeing Russia in 2009. And Mikhail Khodorkovsky, once Russia’s wealthiest man, spent 10 years in prison on trumped-up fraud and embezzlement charges after funding Putin’s opponents.

Given this, Western governments need a more nuanced definition that distinguishes “bad” oligarchs from the rest. Such a definition should include, first and foremost, direct and current involvement with the Kremlin leadership in business and personal deals, including large, politically sensitive government contracts. For example, the billionaire magnate Arkady Rotenberg has constructed natural-gas pipelines for state energy giant Gazprom and is building a bridge to Crimea.

Such involvement can also include nepotism. In the 1990s, Alfa Group’s Pyotr Aven authorized Putin’s controversial commercial deals in St Petersburg when he served as minister for external economic affairs, and Alfa Group has employed both the son-in-law of Russian Foreign Minister Sergey Lavrov and Putin’s own eldest daughter. In such cases, the oligarchs in question are clearly acting as loyal servants to Putin’s regime.

A second criterion for defining a “bad” oligarch should be that a major part of his or her business dealings are in Russia, and thus depend on at least tacit government support. That means potentially giving a pass to the many wealthy Russians who in recent years have been selling off parts of their holdings in Russia and investing in Western countries (presumably at least partly because of sanctions).

To be clear, every individual who has amassed a major fortune in Russia did so at least partly in cooperation with the state. But that does not mean they all deserve to be punished equally today

For example, Abramovich, a former governor of the Arctic region of Chukotka, Mikhail Prokhorov, who ran as an independent candidate in the 2012 Russian presidential election, or Alexander Lebedev, the longtime financial backer of Novaya Gazeta, have sold nearly all of their assets in Russia and pursued legal and transparent businesses in the US and the UK.

Should they not be treated differently from the likes of Rotenberg, Yury Kovalchuk (known as Putin’s personal banker), or Putin’s de facto deputy Igor Sechin, not to mention Russia’s super-wealthy public officials?

To be clear, every individual who has amassed a major fortune in Russia did so at least partly in cooperation with the state. But that does not mean they all deserve to be punished equally today. Joachim-Napoléon Murat and Jean-Baptiste Bernadotte were both Napoleon Bonaparte’s pawns. Yet whereas Murat stuck by Napoleon (and was ultimately executed for treason), Bernadotte, in his position as King Charles XIV John of Sweden, eventually helped to bring about Napoleon’s defeat.

Not everyone is basing treatment of Russia’s wealthy on sweeping generalizations. Israel granted citizenship to Abramovich. More surprising, France dismissed a money-laundering charge brought against another billionaire, Suleyman Kerimov, though Kerimov, a member of Russia’s Federation Council, does maintains close ties to the Kremlin.

But some, like the US administration, continue to paint all wealthy Russians with the same brush. This is counterproductive. If the West really wants to hurt Putin’s regime, giving oligarchs an incentive to take their money and leave is a lot more effective than punishing those whom Putin considers his enemies.

Copyright: Project Syndicate, 2018.

Vladislav Inozemtsev

Vladislav Inozemtsev is director of the Center for Post-Industrial Studies in Moscow.