A Global Hunt for Russian Oligarchs’ Assets Has Begun

Martiak Market Update

Welcome everyone to the

Martiak Market Update with your host Mark Martiak. Mark is a Managing Director

of Investments with AGP/Alliance Global Partners, a

registered investment adviser and broker-dealer, member of FINRA/SIPC. This show will explore topics

ranging from market updates to the global economy and personal finance. Money

is knowledge, and Mark wants to help you navigate your relationship with money

by offering timely guidance and his unique perspective. Here's Mark Martiak.

Mark speaking: Welcome.

Thank you for joining me as we discuss key trends shaping our industries and

markets.

It’s been a humanitarian crisis for the

people of Ukraine, many of whom have faced devastation as the Russian invasion

and war entered a third week.

You hear a lot about economic sanctions that

have been put in place by countries including the U.S..

During this program, I want to look at sanctions

placed on Russia’s Oligarchs who are on the move amid a global dragnet that

Western governments have cast to ensnare their yachts, villas, jets, and bank

accounts.

You May Have

Wondered: What is a Russian Oligarch?

Oligarchs — or extremely wealthy business leaders who are

politically connected — became

more prominent in Russia in the 1990s, but they are not unique to

Russia.

Many Russian oligarchs are heavily involved in and benefit from

Russian President Vladimir

Putin's regime, with some serving in political positions.

For example, when Putin opened a new bridge to

Crimea in 2018 — a region Russia had annexed from Ukraine in 2014 —

the bridge was built by his friend Arkady Rotenberg's company and the truck he

drove across it was made by Sergei Chemezov's state corporation Rostec,

according to The

Carnegie Moscow Center, a think-tank that focuses on domestic and

foreign policy.

There is often a line of succession for oligarchs

in politics. For example, Dmitry Patrushev, the son of Russian Security Council

Secretary Nikolai Patrushev, was appointed as Russia's minister of agriculture,

according to The Carnegie Moscow Center.

Numerous Russian oligarchs and government officials were

sanctioned by the U.S. in 2018, in part for the regime's occupation of Crimea

and for continuing to instigate violence in Ukraine, according to the U.S.

Treasury Department, which announced the sanctions. Rotenberg’s son and Patruskev

were included in that round of sanctions for their involvement with the regime.

"Russian oligarchs and elites who profit from this corrupt

system will no longer be insulated from the consequences of their government's

destabilizing activities," Treasury Secretary Steve Mnuchin said in a

press release about those sanctions. (1)

The Biden administration announced it

would expand its sanctions on Russian oligarchs, further taking aim at Putin’s

close-knit, elite network. The Biden administration blames the oligarchs for providing the

resources critical to supporting Putin's invasion.

"Treasury

is committed to holding Russian elites to account for their support of President

Putin's war of choice," said Treasury Secretary Janet Yellen. "Today,

across the U.S. government and in coordination with partners and allies, we are

demonstrating our commitment to impose massive costs on Putin's closest

confidants and their family members and freeze their assets in response to the

brutal attack on Ukraine." (2)

The new sanctions

targeted the likes of Alisher Usmanov, the owner of an iron and steel

conglomerate, who Forbes has estimated to be worth more than $15 billion. The

White House said that Usmanov’s property will be blocked from use in the United

States, including his superyacht and his private jet, which is one of Russia’s

largest privately owned aircraft. His

superyacht, one of the world’s largest, was just seized by Germany.

Billionaire Oleg Deripaska already

got a jump on things. His yacht, Clio, reportedly

departed Sri Lanka two weeks ago and is headed for the Maldives, where it is

expected to dock soon. (Deripaska is no stranger to sanctions, having

personally been sanctioned by the U.S. in 2018.)

A Russian oligarch’s yacht was damaged in Spain’s Balaeric Islands

over the last weekend in February, reportedly by a Ukrainian sailor seeking

revenge for Russia’s invasion of his home country…. The luxury yacht, the

155-foot-long Lady Anastasia, with an estimated value of nearly $8

million, reportedly belongs to Alexander Mikheev, CEO of

Russian arms company Rosoboronexport.

According to the reports, he was outraged after seeing video

of a Ukrainian apartment block that was hit by a Russian missile. Appearing

before a judge Sunday, the man reportedly said: “The armaments used are

produced by the yacht owner’s company. They were attacking innocents.” (3)

In recent

days, French authorities have detained a handful of ships subject to new

sanctions, including a 280-foot yacht, the Amore Vero, “True Love” in Italian.

They say it is owned by Igor Sechin, the sanctioned chief executive of Russian

oil producer Rosneft and

close ally of Russian President Vladimir Putin. They

swooped in during the night as the vessel was making what they described as

preparations to leave port in a hurry. (4)

On March 1st,

in his State of the Union speech, President Biden said (quote) “We are joining

with our European allies to find and seize your yachts, your luxury apartments,

your private jets,” referring to the new entity, called Task Force

KleptoCapture. “We are coming for your ill-begotten gains.” The

movement of the luxury yachts comes as the White House and Treasury Department

are expanding the number of Russian oligarchs subject to U.S.

sanctions, aiming to punish the financial elite close to Putin.

Biden said in his State of the Union address Tuesday night that the United

States would join Europe in efforts to punish Russian oligarchs and “seize their

yachts, their luxury apartments, their private jets.”

The U.S. and U.K. on Thursday, March 3rd,

unveiled still more sanctions and travel restrictions on a range of Russian

elites because of Russia’s invasion in Ukraine. As part of the American round,

the U.S. will impose visa restrictions on 19 Russian oligarchs and 47 of their

family members and close associates. The U.K. sanctioned two more oligarchs

including the former Russian deputy prime minister.

According to a White

House Fact Sheet, Full blocking sanctions on an expansive new list of Russian

elites and their family members who enable Putin and include imposing Visa Restrictions on 19 Russian Oligarchs, their 47 Family

Members and Close Associates: The Department of State is announcing a new

visa restriction policy to restrict the issuance of visas to certain Russian

oligarchs, their family members, and close associates. These oligarchs are

known to direct, authorize, fund, significantly support, or carry out malign

activities in support of Russia’s destabilizing foreign policy. (5)

Mark Wrap-Up: To what extent will

governments pursue Russian Oligarchs and separate them from their assets? How

much economic pain will it cause Putin’s inner circle? While the task

force aims to hold the sanctioned Russian elites accountable following the

country's invasion of Ukraine, tracking down and seizing their assets will not

be easy. These extraordinarily wealthy and powerful individuals —

including Vladimir Putin himself — have taken elaborate steps to protect their wealth around the globe.

Some oligarchs are trying to dodge penalties by moving

assets —

like their mega-yachts — into territories where sanctions don't apply and where

their property cannot be seized or their assets frozen. Geopolitical

risk is hard to price into the financial markets. In a flash, Russian Oligarchs

are paying attention to the headline risks and volatility that come with that

risk.

My thoughts are with the

people of Ukraine and everyone who is impacted by the war, whether in Ukraine,

in Russia or in neighboring countries. The international community has largely

come together, and I am heartened by the degree of global coordination by

governments, business, and regulators in the pursuit of peace for the region.

This is a complex and

fluid situation. As a fiduciary, I take very seriously my responsibilities to

my clients, and I will continue to assess the environment on your behalf.

Thank you for joining my program. I’ll

see you next time.

Outro (Female British Voiceover): Thank

you for listening to Martiak Market Update. Mark Martiak is the executive

producer. Sean Dooley is the producer. We also want to thank Libby Grant. If

you enjoyed this episode, subscribe, and leave us a review on Apple, Spotify,

or wherever you listen to your podcasts. Stay tuned for Mark’s next episode

coming soon.

Sources: (1) https://www.cbsnews.com/news/what-is-a-russian-oligarch/

(2) https://www.cbsnews.com/news/ukraine-russia-oligarchs-sanctions-justice-department/

(3) https://www.vanityfair.com/news/2022/02/russian-oligarchs-vladimir-putin-ukraine-sactions

Bess Levin 2/28/22

(4) https://www.wsj.com/articles/russian-oligarch-igor-sechins-yacht-is-seized-in-france-as-it-prepares-to-depart-11646313685

(5) https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/03/fact-sheet-the-united-states-continues-to-target-russian-oligarchs-enabling-putins-war-of-choice/