WASHINGTON DC (CI UKRAINE) – Leading Russian oligarchs such aluminum tycoon Oleg Deripaska, Swiss-based oil baron Viktor Vekselberg and nickel king, Vladimir Potanin have all but resigned themselves that Russian President Vladmir Putin will soon decree a renationalization of their domestic holdings.
[Renova Chairman speaks to Capitol Intelligence using CI Glass at summit meeting between Russian President Vladimir Putin and Italian PM Enrico Letta in Trieste, Italy on November 11, 2013]
High-level banking and legal sources, who have worked with all the major oligarchs since the dissolution of the Soviet Union in 1991, said the overwhelming consensus among oligarchs is that Putin will soon issue an official decree announcing that properties privatized since 1991 be returned to the Russian state.
“Nationalization is not a question of, but if, and only how soon,” one top banker said.
United Company Rusal controlling shareholder, Oleg Derispaska, has already set in motion moves to spin-off all non-Russian based assets into a separate company to avoid an upcoming nationalization.
Already sanctioned by the US and UK, Deripaska is considered the oligarch who has consistently sought to have the closest ties with the Kremlin – from marrying Boris Yeltsin’s granddaughter, Polina Yumasheva — to cheer leading Putin’s economic agenda up to the pharaonic, $50bn Sochi Olympic Games.
Even the most Western of oligarchs, Viktor Vekselberg, seems set to lose all his Russian assets not only in Russia but also in West notwithstanding becoming a Swiss citizen and his Renova Group headquarters discretely nestled on the ultra-prestigious Klaus Strasse 4 in Zurich.
Vekselberg made his fortune by being the major shareholder of Russian oil group TNK with fellow oligarchs such a now US citizen, Len Blavatnik and Alfa Bank founder, Mikhail Fridman.
Vladimir Potanin, the owner of the world’s largest nickel mining group, Norilsk Nickel [LSE:MNOD], incredulously gave an interview to Reuters warning Putin may not return to 1917 by seizing foreign owned assets.
“Potanin knows that Putin has always wanted to see Norilsk Nickel under state control – for the not so small reason of Norilsk’s horrible environmental track record in Siberia,” the source said.
Putin, since taking over the Russian presidency, following Boris Yeltsin’s resignation on December 31, 1999, has never hidden his contempt and his disdain for Russia’s robber barons even to the point of publicly humiliating an oligarch for some misdeed or other.
“Putin when he took over the Kremlin was determined to kick-out the oligarchs like Boris Berezovsky from controlling the Kremlin as they did under Yeltsin,” an M&A lawyer said.
The younger Vladmir Putin decided to use Klaus Schwab’s first World Economic Forum in Moscow in 2003 to have Russian oil tycoon, Yukos owner Mikhail Khodorkovsky, arrested under the glare of the Russian and international press.
The planned merger of Yukos and Sibneft with the entry of America’s Exxon of Rex Tillerson as a minority shareholder, pushed the Moscow Stock Exchange to an all-time historic record high. Today, there is talk the Moscow Stock Exchange may close for good.
Shortly after the incident Khodorkovsky was arrested for tax evasion and sentenced to nine years in a forced labor prison, with his sentence extended by another 5 years before being released into exile in 2013.
The arrest of Khodorkovsky, and his lengthy imprisonment in a harsh regime gulag, was a meant as a clear message and new pact between the Kremlin and the oligarchs: “You may keep your business and billions but if you ever enter into politics as did Khodorkovsky, you will end up in gulag or worse.”
Putin’s 2003 Separation of Business and Politics pact lasted until the annexation of Crimea in 2014, an action triggered by the Maidan pro-EU protest that ousted Russophone kleptocratic president, Viktor Yanukovych.
For most of 2003 to 2014, the Russian oligarchs knew it was best to keep away from Kremlin politics, the oligarch barriers of the Kremlin had been breached by arriviste such Putin’s chef and Russia’s Eric Prince, Yevgeny Prigozhin and the sanctioned owner of Geneva-based commodity trading house, Gunvor’s Gennady Timoshenko.
It is understood Prigozhin, and possibly Timoshenko, seduced Putin like the Tsarist Rasputin to rush through an annexation of Crimea rather than pursue financial/diplomatic talks to acquire the peninsula from Ukraine for $50bn + and favorable future oil supply contracts as the United States bought Alaska from Tsar Alexander II in 1867.
The current Ukraine-Russian war seems also driven by this new group of oligarchs that have infiltrated the Kremlin while better known oligarchs such as Deripaska, Vekselberg, Fridman and Potanin failed to use their unlimited resources to oust these new, and damaging arriviste from the seat of Russian power.
It is a good guess that the annexation of Crimea costs the Russian economy up to $1tln and the Ukraine-Russian war will end up costing double that amount and maybe much more.
[US Senator Jerry Moran (R-Kansas) speaks to Capitol Intelligence/CI Ukraine using CI Glass on US sanctions against Russian companies like Oleg Deripaska’s Rusal, secondary sanctions, FATCA compliance; and US aid and US Development Finance Corporation (US DFC) investment to Ukraine at the American Bankers Association Washington Summit on March 9, 2022]
The oligarch will not find themselves crunched both by Western sanctions and the wholesale renationalization of their “ill-gotten” assets in Russia.
US Senator Jerry Moran (R-Kansas) said he agrees with US House Committee on Financial Services Chair Rep. Maxine Waters (D-CA) and ranking member Rep. Patrick McHenry (R-NC) that Congress should institute a regime of secondary sanctions on all those who do business with the Russian oligarchs and their businesses, especially mainland Chinese based companies.
One idea that is gaining momentum in congress is the idea of drafting legislation requiring US Treasury Secretary Janet Yellen to bar US financial institutions from any financial transaction with any foreign bank that is not in full adherence to the Foreign Account Tax Compliance Act (FATCA). Under existing FATCA regulations, all non-U.S. foreign financial institutions (FFIs) must be able to search their records for customers with indicia of a connection to the U.S. and to report the assets and identities of such persons to the U.S. Department of the Treasury.
Therefore, any non-US bank not capable of accepting deposits from US citizens would be barred from doing any transaction with any US financial services company and those creating dividing every foreign banking institution on a white or black list.
Putin has little choice but nationalize all of Russia’s natural resources and former state-owned companies from the oligarchs, something he has always wished to do since being appointed by Boris Yeltsin as prime minister.
However, one source close a major oligarch said no-one will shed any tears “as they all were nothing more than lottery winners.”
PK Semler in Washington, DC with editing by Nigel Wright in Los Angeles. For more information, please email pks@capitolintelgroup.com
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