Russian oligarchs and officials are depressed by the loss of accounts and Western sanctions on the economy, but feel powerless to influence Putin. However, everything may change in the near future.
Two months after Russia’s invasion of Ukraine, the silence – and even acquiescence – of the Russian elite has begun to break down.
Dividing lines between factions of Russia’s economic elite are becoming more visible, and some of the tycoons – especially those who made their fortunes before President Vladimir Putin came to power – have begun to speak.
For many, the key factor was their own problems. Radical sanctions imposed by the West have lowered a new Iron Curtain on the Russian economy, freezing tens of billions of dollars of many businessmen along the way.
As one businessman, along with many of the country’s richest men, was called to meet with Putin on the day of the invasion:
“In one day they destroyed what had been building for years. This is a disaster.”
At least four oligarchs who made it big during the more liberal Yeltsin era have left Russia. At least four senior officials have resigned from their posts and left the country, the most senior of whom is Anatoly Chubais, the Kremlin’s special envoy for sustainable development and the Yeltsin-era privatization czar.
In interviews, several Russian billionaires, high-ranking bankers, high-ranking officials – current and former – who spoke on condition of anonymity out of fear of retribution, described how they were all shocked by Putin’s increasing isolation and felt powerless to influence him, because his inner circle is dominated by a handful of hard-line security personnel.
Publicly voiced complaints have largely focused on the government’s economic response to Western sanctions. No one directly criticized Putin.
Vladimir Lisin, a steel tycoon who made his fortune during the Yeltsin years, criticized the Duma’s proposal to counter sanctions by forcing foreign buyers to pay in rubles for a range of goods other than gas. In an interview with a Moscow newspaper, he said the measure risks undermining export markets that Russia “fought for decades”warning that “the transition to settlements in rubles will only lead to the fact that we will be thrown out of international markets.”
Vladimir Potanin, owner of the Norilsk Nickel steel plant and one of the architects of Russian privatization in the 1990s, warned that proposals to confiscate the assets of foreign companies that fled Russia after the war would undermine investor confidence and set the country back to the revolutionary year of 1917.
Oleg Deripaska, the aluminum tycoon who also amassed a fortune during the Yeltsin era, went the furthest by naming a war in Ukraine “madness”, but focused on the economic consequences of the invasion. He predicted that the economic crisis caused by the sanctions would be three times worse than the 1998 financial crisis that rocked the Russian economy. Deripaska threw down the gauntlet to the Putin regime by saying that his policy of state capitalism over the past 14 years “did not lead to either economic growth or an increase in incomes of the population”.
Later, in a post on his Telegram channel, Deripaska wrote that the current “armed conflict” – This “madness, for which we will be ashamed for a long time before our descendants”. However, in the next sentence, he indicated that the West was equally to blame for “hellish ideological mobilization from all sides”.
When 37 of Russia’s richest businessmen were summoned to the Kremlin to meet Putin hours after he started the war on February 24, many of them were overwhelmed and shocked. One of the participants said:
“Everyone was in a terrible mood. Everyone was sitting there crushed”
“I have never seen them so dazed, another participant said. – Some of them couldn’t even speak“.
As usual, they waited more than two hours before the president appeared in the ornate Catherine’s Hall in the Kremlin, enough time to consider their fate. For some executives, when they quietly discussed the aftermath of Putin’s war, it was the moment they realized it was over for the business empires they’d been building since Russia’s transition to a free market more than 30 years ago.
“Some of them said, ‘We’ve lost everything’– said one of the participants.
When the President arrived, no one dared to let out a protesting groan. Stone-faced, they listened as Putin assured that Russia would remain a part of world markets – a promise rendered meaningless by a series of Western sanctions – and told them he had no choice but to start his own. “special military operation”.
Repression and the split of the elites
Since then, Putin has stepped up threats against anyone who criticizes the war, hastily issuing new laws allowing a 15-year prison sentence for anyone who says anything about the Russian military that the Kremlin deems false. His administration has proposed the creation of a new system of deputies in Russian ministries who will report to the Kremlin on “emotional climate and moods”.
One oligarch said he expected the coming crackdown to be “cannibalistic” compared to the “vegetarian period” of previous years.
Despite a rise in US intelligence warnings, many in the Moscow elite believed that Putin was limiting his targets to separatist areas in eastern Ukraine. officials “they thought it would be limited to actions in Donetsk and Lugansk, and that’s what they were preparing for”, said a senior official. According to him, they were ready for Western sanctions, including the suspension of the international financial messaging system SWIFT, “but weren’t ready to such“.
As Russian military casualties mount and troops retreat, the war is viewed with growing anxiety not only by Western-sanctioned billionaires, but even by some security officials, two people familiar with the matter said.
One of them referred specifically to Shoigu, who took part in the preparations for the war:
“They all want to live a normal life. They have houses, children, grandchildren. They don’t need war. They are not all suicidal. They all want a good life. So that their children are provided with everything and they can travel to the most beautiful places.”
The growing pressure on their foreign bank accounts is a source of particular chagrin for the elite. Even officials who tried to protect themselves by transferring their money to accounts owned by business partners are now finding those accounts blocked.
Who will oppose Putin
On the face of it, the Russian economy appears to have stabilized after the first salvo of sanctions, helped by more than $800 million a day in revenue from oil and gas sales to Europe. The central bank’s policy of forcing exporters to sell 80% of their foreign exchange earnings prevented the ruble from collapsing, and Putin said the “economic blitzkrieg” against Russia had failed.
But earlier this month, NB chief Nabiullina warned that the full effects of the sanctions had yet to be felt and that the worst was yet to come. Manufacturing, where “virtually every product” depended on imported components, is beginning to shrink, stocks of imported consumer goods are depleted. “We are entering a difficult period of structural transformation. The period when the economy can live off reserves is finite”– she said.
Under such circumstances, Putin’s position is precarious, says Sergei Pugachev, who worked in the Kremlin until he left Russia in 2011. The population is still lulled by the state propaganda machine, hiding the death rate in the Russian army, and the lack of an immediate effect of sanctions:
“But in three months, stores and factories will run out of supplies, and the scale of the death of the Russian military will become clear”
Despite the near-death blow to their interests, for now, the Russian business elite still appears to be frozen in fear. “I don’t know who has enough balls to fight back, – said one of the businessmen. – But if the war drags on and they start to lose, then there will be more chances. There will be a serious battle over the Donbass, and if it is not successful, there will be a big battle within Russia among the elites.”
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