Oligarchs ‘fear Putin more than losing their billions’

Russian oligarchs are more fearful of retribution by Russian President Vladimir Putin than they are of losing their billions, Russian opposition leader and formerly imprisoned oligarch Mikhail Khodorkovsky said in an interview.

Khodorkovsky said that sanctioned oligarchs like Zurich-based oil tycoon Viktor Vekselberg, Rusal aluminum baron Oleg Deripaska, Severstal owner Alexei Mordashov, US-based media mogul Len Blavatnik and London-based Alfa Bank founder Mikhail Fridman all fear Putin’s ability to exact deadly revenge than reinvest their ill-gotten – and now mostly frozen – assets into Ukrainian private companies.

“I think [oligarchs] are more afraid of Putin than sanctions,” Khodorkovsky said. “If it’s sanctions, it is only money. If it is Putin, it’s their lives.”

The Group of Seven, under the leadership of Italy, is currently discussing the proposal to issue up to US$300 billion in bonds backed by frozen Russian central-bank assets to fund Ukraine’s war effort and economic recovery.

Political leaders in the G7 and the European Union are also discussing the transfer of Russian oligarchs’ frozen assets to a Ukrainian private-sector investment fund to be managed by the troika of the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation (IFC) and the US International Development Finance Corp (DFC).

The decision by Putin to allow the death of corruption crusader and domestic political foe Alexei Navalny in his Arctic gulag on Friday only confirms Khodorkovsky’s point that Putin’s vindictiveness – against real or perceived enemies – has no limits.

Putin originally made Khodorkovsky the poster child of what will happen to any oligarch who dared mount any political challenge to the Kremlin by arresting Russia’s wealthiest business owner in October 2003 on tax charges and later imprisoning him for a decade in brutal Russian penal colonies.

Putin personally made Khodorkovsky’s fall from grace as a public as possible, using Klaus Schwab’s World Economic Forum in Moscow, the first held outside of Davos, Switzerland, in October 2003 as the stage to takedown the “uppity” oligarch who was about to announce the entry of America’s Exxon oil giant into his orchestrated $45 billion merger of Russian oil companies Yukos and Sibneft.

This reporter witnessed Khodorkovsky’s humiliating downfall as he stood outside Moscow’s Marriott Grand Hotel waiting for the arrival of Putin to the economic conference billed to show Russia was now open for business. While waiting for Putin with the Russian and foreign press, Khodorkovsky received a call on his mobile phone informing him that Russian police were ransacking his home and harassing his wife and children.

Just after Khodorkovsky hastily left the WEF forum, Putin arrived in his motorcade, stepped out to greet the press gaggle, and then in perfect feigned innocence asked: “Where did Mikhail Borisovich get off to?”

Viktor Vekselberg – once called the most American Russian oligarch for paying Harvard $10 million to repatriate the Danilov bells back to Russia and political ties to both Hillary Clinton and Donald Trump – made the bulk of his $20 billion-plus fortune selling his stakes, along with partners Blavatnik and Fridman, in the TNK-BP oil concern to Russia’s state-owned Rosneft in the spring of 2013. Rosneft is controlled by Putin’s closest ally, Igor Sechin.

Already under US and EU sanctions and residing in Switzerland, where he has citizenship, the Lviv Oblast, Ukraine–born Vekselberg should be the first oligarch to offer up his frozen billions to the new Ukraine fund.

“The Russian oligarchs know their funds will remain frozen until the day that Putin leaves power and so they better off voluntarily allowing their fund to be reinvested than be permanently confiscated and seized,” said a British mergers-and-acquisitions lawyer working for the Ukrainian government.

Khodorkovsky told a Hudson Institute audience in Washington, DC, that the Biden administration’s decision not to give full political and military support to Ukraine “now means Putin will be in power for the next five to 10 years.”

Even his fellow Ukraine-born (in Odessa) unsanctioned oligarch, the Anglo-American Sir Leonard Blavatnik, prefers to re-invest the billions gained from the sale of TNK-BP in US and media purchases such as Warner Music, the Broadway musical Hamiliton and the multibillion-dollar DAZN sports streaming group rather than investing in Ukrainian agriculture, applied-technology and logistics companies in his native land.

Vekselberg, Blavatnik and Fridman all made most their billions from the sale of their TNK-BP venture with the UK’s BP Plc, a joint venture that ended up becoming so acrimonious that allegations arose that the head of TNK-BP, later to become BP CEO, Bob Dudley, was poisoned in Moscow by his Russian partners in a move to push out BP of the joint venture.

In a previous conversation, Dudley told this reporter that the poisoning in Russia forced him to leave Russia permanently for his and his family’s safety.

Other oligarchs such as Deripaska and Mordashov are now seen as prisoners of the Putin regime, who unlike Vekselberg and Blavatnik, do not have non-extraditable foreign citizenship and most of their assets outside the Kremlin’s reach.

The soft-spoken Mordashov, who was once considered the most professional of the Russian oligarch class, now has his Severstal steel conglomerate working full-time building the tanks and other war materiel for Putin’s invasion of Ukraine.

In the aftermath of Russia’s annexation of Crimea in the spring of 2014, Mordashov unsuccessfully attempted his own diplomatic efforts to forge a compromise capable of lifting US and EU sanctions against Russia while attending Italy’s Davos, the annual Forum Ambrosetti Workshop on Lake Como, Italy.

Khodorkovsky’s statement that Russian oligarchs fear Putin more than being impoverished, not an irrational fear after the criminally negligent homicide of Navalny, seems to be the opposite motivator for so-called American oligarchs such as Tesla and SpaceX owner Elon Musk. Unlike the oligarchs, Musk seems more afraid of going broke.

Musk has been weaponizing X – formerly know as Twitter and best described as his wealth-destructive acquisition – to become the principal mechanism to spread pro-Russian propaganda against Ukraine and to co-opt anti-Ukraine supporters of Donald Trump such as US Senator J D Vance and firebrand congresswoman Marjorie Taylor-Greene.

Musk apparently fears that any foreign-policy success leading to the re-election of President Joe Biden would trigger the stock-market collapse of Tesla and the divestment or break-up of SpaceX, as Tesla now faces unprecedented competition from China’s BYD and US Department of Defense scrutiny over SpaceX military contracts.

China’s BYD has already overtaken Tesla as a world’s largest seller of electric cars in the fourth quarter on 2023 and it significantly undercuts Tesla sticker prices on all ranges.  The late chief executive of Fiat-Chrysler, Sergio Marchionne, warned a DC audience more than a decade ago that the greatest threat to the survival of Western automotive brands would come from Chinese imports.

BYD also announced it is planning build an automotive plant in Mexico and subsequently benefit from duty-free exports to the United States under the United States-Mexico-Canada Agreement (USMCA). Tesla cannot be reached for comment as it has no media-relations staff.

The hope now is that the G7 will use it own authority to allow Ukraine to use the frozen $300 billion of Russian central-bank assets to acquire the modern arms such as F-16s and long-range missiles to defeat Russia’s entrenched positions and at the same time rebuild civilian infrastructure so it can attract the return of Ukrainian refugees from Europe and the United States.

One key figure instrumental in pushing the G7 needle is the former Italian prime minister and former European Central Bank head, Mario Draghi. Draghi, who orchestrated the initial decision to freeze Russian central-bank assets, was in Washington last week to receive the Paul Volcker Award at the National Association of Business Economics (NABE).

During his speech, he warned that failure to act in support of Ukraine and against autocrats in general will mean the end of globalized trade as we know it today and return to the old world of bilateral commerce between countries and reciprocal tariffs.

At the same time, Draghi noted that Ukraine’s entry into the European Union would not only be a source of profound change but also an enormous opportunity for Europe and others to participate in rebuilding what would be one of the largest members of the EU.

Without mincing words, Draghi said Ukraine without EU membership would also pose a risk for the stability of the eurozone.

“From a security viewpoint, the EU today represents the anchor that Ukraine has. The danger is, whenever the conflict would stop,  is to leave Ukraine as one of the most armed countries in the world. 

“It would have made a lot of sense to have Ukraine part of the EU,” he said, pointedly telling the US audience of economists that Ukrainians are fighting and dying for the values of the European Union.

Considered a dark-horse candidate to replace Jens Stoltenberg as NATO’s secretary general, Draghi noted that the EU spends more on defense than Russia, and that its total defense spend is second only to the United States’. The problem is that the EU’s defense spending is both inefficient and redundant.

One may only hope that Draghi has effectively used his enormous powers of moral suasion on his former G7 collegues to have them unlock the $300 billion of Russian state assets and up to $200 billion of oligarch assets so Ukraine can finally defeat Russia and take its rightful place in the European Union.