- Interview by
- Luke Savage
Russia’s invasion of Ukraine, and the economic sanctions it’s elicited from Western countries, has generated much discussion of its oligarch class — symbolized by yachts and expensive properties in Europe, America, and throughout the world. What is the extent of oligarchy in Russia? What strategies do Russia’s economic elite use to hide their wealth? And how, if at all, can they be distinguished from their Western analogues?
To explore these questions, Jacobin’s Luke Savage spoke with Chuck Collins, director of the Program on Inequality and the Common Good at the Institute for Policy Studies and author of The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions.
Since Russia commenced its invasion of Ukraine, we’ve been hearing a lot about its oligarchs. The term has been somewhat selectively applied given that there are also plenty of oligarchs in the West. Nevertheless, there is a specific context for wealth concentration in Russia — and the concentration is quite extreme. What’s the overall picture?
To your first point, Dan Price, the CEO of gravity payments, tweeted, “Can anyone explain why a billionaire who takes advantage of the system to exploit other people is called an ‘oligarch’ in Russia and a ‘job creator’ in America?”
After the demise of the Soviet Union in the 1990s, a lot of public assets were privatized, rapidly creating a class of very wealthy Russian profiteers that were called, even in Russian society, the oligarchs. Another wave of oligarchs emerged as a result of their proximity to Vladimir Putin, controlling major corporations and industries. There is speculation that Putin himself may be among the wealthiest people in the world.
Scholar Jeffrey Winters has written a terrific book, Oligarchy, which is a global look at oligarchic societies and oligarchs. His definition: wealth plus power plus wealth defense equals oligarch. In other words, oligarchs are sufficiently wealthy that they can wield considerable political power and invest in defending their wealth, which in modern times means hiring lawyers, accountants, and wealth managers — the wealth defense industry.
Something that’s recurred a lot in discussions of the various sanctions that have been implemented in response to the invasion is the extent to which Russian oligarchs have sought to store and hide their wealth offshore — that is, in countries other than their own (this especially seems to be the case in Britain). How widespread is this practice? Is it mainly about tax avoidance or does it have other dimensions as well?
The Russian oligarchs have moved a lot of wealth outside Russia, buying substantial assets in the West. This has little to do with tax avoidance in Russia. This is partly a hedge against falling out of favor with Putin and because they want to globally diversify their assets. It’s also because they’ve joined the global elite lifestyle and want to own luxury real estate, yachts, private jets, etc. Because power is so concentrated in Putin, they may not be the most politically powerful oligarchs.
It is estimated that half of Russian oligarch wealth is offshore, so that creates an economic pressure point in response to Putin’s military aggression. Foreign countries are freezing oligarch assets and luxury items.
I’ve personally walked around a neighborhood in London that has so many mansions owned by Russian oligarchs that they call it “Londongrad.” Like oligarch assets worldwide, this is wealth that has been plundered from their societies, in this case the Russian people. London remains the global center of wealth hiding, though the United States is giving the UK a run for that title.
Global wealth is flooding into the United States, especially in luxury real estate. The New York Post did an exposé, complete with maps, on the luxury real estate holdings of Russian oligarchs in New York City. But other asset classes are being used to hold oligarchic wealth, including art, cryptocurrency, and jewelry.
Economic sanctions are a blunt instrument that harm the wider Russian population. As Bernie Sanders and others have pointed out, the Russian people are not our enemies. They are suffering at the hands of Putin and Russia’s oligarchs. As a strategy to put pressure on Putin, who seems immune to influence, targeting the assets of the oligarchs makes tactical sense.
And let’s not forget that the United States has the highest percentage of billionaires in the world — and that all the wealth of the Russian oligarchs that we know of equals one Elon Musk.
What specific mechanisms do Russian oligarchs tend to use to hide their wealth? Are they basically the same as those used by oligarchs and plutocrats everywhere?
Russian oligarchs use the same global techniques to hide their wealth as oligarchs around the world. And they depend on this “enabler sector,” the wealth defense industry of lawyers, wealth managers, accountants, to help them move assets around the world.
The reason we know anything about the workings of this system is thanks to data leaks from whistleblowers within the wealth management sector. The International Consortium of Investigative Journalists has assembled a “Russia Archive” documenting what we know about oligarchs from a decade of global leaks.
We know, for example, that the largest US law firm, Baker McKenzie, based in Chicago but with 4,700 lawyers worldwide, was a huge facilitator of Russian oligarch wealth services. Interestingly, they just announced they are closing their Russian offices — probably less out of principle than the fact that they are not getting paid.
In discussing the current sanctions targeting Russia’s oligarchs, Vice’s Edward Ongweso Jr recently observed that “global elites aren’t too interested in imposing sharp costs on members of their own class or establishing precedents that could come back to hurt them.” With this in mind, how impactful do you think the current sanctions will actually be on Russia’s oligarchs? Might their effectiveness be hampered in an effort not to inconvenience the Western superrich too much?
Yes, the bite of the sanctions will be compromised by the selfish interests of global billionaires and their hired hands in the wealth defense industry who are paid millions to hide trillions. But there are some indicators that, to the extent anything will influence Putin, some of his oligarchs are feeling the heat and calling for negotiations and peace.
Oligarch sanctions in Europe will probably be more powerful than US efforts. That’s because, as the Pandora Papers disclosed, the United States has become a weak link in the fight against global corruption thanks to our own wealth defense industry, including the American Bar Association. The United States is now a major destination tax haven for criminal and oligarch wealth from around the world, not just Russians. While other EU countries have been increasing transparency and cracking down on kleptocratic capital, the United States is a laggard. If the country is serious about clamping down on Russian oligarch assets, the first step is to get our own house in order.
You’ve written extensively about the problems of wealth hoarding and tax avoidance by the exorbitantly rich. For obvious reasons, there’s an overriding focus right now on Russia’s oligarchs. But do you think the current situation might represent an opportunity to launch a renewed offensive against the problem of billionaire wealth hoarding in general? Is there any legislation being discussed to that end?
I do think this interest in Russian oligarchs draws attention to the destructive ways that oligarchs are harming societies around the world, including the United States, which has increasingly become an oligarchy. I think it has fueled the renewed interest in taxing billionaires, which is included in Joe Biden’s new budget.
The first step in fixing the hidden wealth system is ownership transparency — requiring disclosure of beneficial ownership in real estate, trusts, and companies and corporations.
At the end of 2020, Congress passed the Corporate Transparency Act to require corporations to disclose their real beneficial owners to law enforcement. Groups like the FACT Coalition (Financial Accountability and Corporate Transparency) are vigilantly monitoring the rule-writing process to ensure the provisions don’t get watered down.
And in the fall, days after the release of the Pandora Papers, US lawmakers introduced the ENABLERS Act to require such attorneys, wealth managers, real estate professionals, and art dealers to report suspicious activity. The attention on Russian oligarchs has revived interest in this legislation.
But local jurisdictions can get into the act. Cities like Los Angeles are exploring municipal-level disclosure of real estate ownership so they can know who is buying the neighborhood. This shows there is an appetite for shutting down the hidden wealth system.