Russian oligarchs struggle to sell assets and escape international sanctions

Two hours after emailing a luxury home real estate newsletter to thousands of ultra-wealthy clients Friday morning, Shawn Elliott, president of the ultra-luxury division of Nest Seekers International, said: received three contacts. They weren’t from potential buyers, but from sellers.

The calls came from New York and Miami, two locations popular with wealthy Russians, a possible sign of what could become the fast-paced sales of luxury homes, waterfront properties, yachts and apartments with panoramic views, as Russians struggle to preempt international sanctions.

“People like that have their contacts,” Elliott said of the Russian owners. They asked, “’If I were to sell, how fast could you sell this and how fast could you sell that?’”

The impact of coordinated US, UK and EU sanctions sent shockwaves through the Russian elite. Some oligarchs are taking action in anticipation of what could come, looking to move yachts, sell assets and adapt to a wave of sanctions that have come faster than usual and are more expansive than before.

Russian billionaire Roman Abramovich, who has not been sanctioned, announced on Wednesday that he will sell English football team Chelsea Football Club as it is “in the best interests of the club, the fans, the staff as well as the sponsors.” and club partners”. He said the net proceeds from the sale would go to a foundation set up to help “victims of the war in Ukraine”.

Russian billionaires Mikhail Fridman and Oleg Deripaska broke with the Kremlin and called for an end to Russia’s war in Ukraine. The European Union announced sanctions against Fridman last week and Deripaska has been on the US sanctions list since 2018.

“This is a very worrying time if you are a Russian billionaire,” said former US State Department official Max Bergmann. “Lawyers are busy right now, trying to figure out how to purge oligarchs from various company boards and how to divest assets in the United States.”

“We are getting a new inquiry every hour,” said Erich Ferrari, a lawyer representing foreign companies and individuals in the conduct of sanctions. “The phone is ringing non-stop with people all over the world who have been sanctioned or have had their businesses affected.”

Financial institutions in jurisdictions where there are no sanctions, such as the United Arab Emirates, are following the example of the US and the European Union and freezing accounts held by Russians, Ferrari said.

Some Caribbean countries — where Russian-controlled entities have set up offshore businesses in secrecy — will no longer serve as corporate partners for these Russian companies, leaving many of them unable to operate, Ferrari added.

“I don’t remember an international sanctions program that made everyone fight,” the lawyer said.

The race to avoid sanctions comes after the White House announced total lockdown measures on eight Russian elites, as well as their families and associates. All of them will be blocked from the US financial system, which means their assets in the country will be frozen and their properties will be blocked for use.

“This caused a sudden panic,” Bergmann observed, “because the old guard, curiously, did not know that this [invasão] was coming, and I think they were surprised that Vladimir Putin finally decided to invade.”

Bergmann explained that an oligarch can go to court to try to stop sanctions, but in the short term, these Russian billionaires are selling and shipping their assets.

“What you’re already seeing are oligarchs going crazy about this and moving their yachts to places where they can’t be extradited,” said the former US State Department official. “We have seen yachts start sailing to Montenegro, where there is no extradition treaty.”

See images of Russian billionaires’ yachts that were confiscated

Last Wednesday, French authorities seized a yacht they said was linked to Igor Sechin, a sanctioned Russian oil executive and close associate of Putin, as he prepared to flee a port. But the company that runs the ship denied that Sechin owned it.

In New York, Manhattan District President Mark Levine is calling for more sanctions on Russians and the seizure of their property: “We are still waiting for the US government to put the wide circle of Putin-linked oligarchs on the sanctions list. This is the prerequisite for seizing the ultra-luxury homes that many own in Manhattan. We need action on this NOW,” he wrote on Twitter.

The Biden administration is not just enforcing sanctions. The Justice Department announced a new task force dubbed KleptoCapture. The operation will bring together prosecutors specializing in sanctions, money laundering and national security to investigate possible criminal activities by the ultra-rich Russians the US government believes are supporting Putin.

“We will leave no stone unturned in our efforts to investigate, arrest and prosecute those whose criminal acts allow the Russian government to continue this unjust war,” Attorney General Merrick Garland said in announcing the new task force.

Experts observing the effort of various government agencies — most notably the Treasury and Justice departments — believe the amount of coordination is unprecedented and signals a determination to pursue these oligarchs and any illegal activities with renewed force.

“It may take a little bit of prosecution and regulatory burden to impose sanctions on extraordinarily wealthy individuals who have a lot of resources,” said Edward Fishman, a former Russian State Department sanctions leader. “By putting together this high-level task force that is clearly overseen by some of the most senior officials in the Biden administration, I think it signals that they are going to apply these sanctions quite aggressively,” he said.

Many oligarchs use shell companies to protect their properties, causing authorities to track down a number of companies before discovering the real owner.

“Part of the reason we haven’t seen a lot of legal action is because these oligarchs are extremely wealthy, and while many are committing white-collar crimes, they hire very expensive lawyers to get things right,” said Bergmann, a former Department of Justice official. State.

Such a crackdown could end up causing anger in Russia, experts warn. “One problem for Putin is that he has a very angry class of people who are very rich and powerful who are returning to Moscow and St Petersburg, and they don’t want to be there,” Bergmann said.

One possible area of ​​vulnerability for Russians in the US is the millions of dollars oligarchs have invested in property in New York, Miami and elsewhere.

Elliott of Nest Seekers International said rich Russians are savvy and predicted: “There’s going to be a sale on these guys because they’re smart. They will put at least 20% below the market price because at the end of the day 80% of something is better than nothing.”

Time is of the essence for some Russians who are not currently sanctioned but may be worried that they are next.

“As of today, there is nothing illegal about liquidating your assets,” Elliott said.