Month: March 2022

On 17 July 2014 Malaysian Airlines MH17 was shot down. As noted by the Dutch and Australian governments when announcing legal proceedings on 14 March 2022:

1. Flight MH17 was shot down by a Russian Buk-TELAR surface-to-air missile system;
2. the missile system was transported from Russia to an agricultural field in the east of Ukraine on the morning of 17 July 2014 – an area under the control of Russian-backed separatists;
3. the missile system belonged to the Russian Federation’s 53rd Anti-Aircraft Military Brigade, and was accompanied by a trained Russian military crew;
4. from the launch site, the Buk-TELAR fired the missile that shot down Flight MH17, killing all 298 people on board;
5. the missile could only have been fired by the trained Russian crew of the Buk-TELAR, or at least by someone acting under their instruction, direction or control; and
6. the Buk missile system was returned to the Russian Federation shortly after the downing of Flight MH17.

These facts were gathered in part by the efforts of Bellingcat. As noted on their website: “Bellingcat is an independent international collective of researchers, investigators and citizen journalists using open source and social media investigation to probe a variety of subjects.” This innovative use of a wide range of sources investigated by professionals and volunteer supporters provides an interesting idea for ways of approaching the hidden oligarch wealth that was stolen from the Ukrainian and Russian people and whose owners provide support to the vicious Putin war on Ukraine.

The Financial Times recently highlighted three books that provide in-depth analysis of how the financial industry and its legal, accounting and consulting supporters managed to make the US and the UK “safe havens for dirty money.” These safe havens are now being looked at as the US, UK and European Union look to apply sanctions against oligarchs and their wealth. Of note the US Department of Justice has established a Task Force KleptoCapture as reported in the New York Times and the Washington Post.

At the same time there are increasing stories about oligarchs and their assets outside Russia. These include Alexei Mordashov whose ownership of the travel agency TUI is covered in The Guardian. The Guardian also covers a real estate development in a private housing compound in Surrey where it is estimated that more than 25% of the homes are owned by “Russians and those from former Soviet states.” Direct action is being taken including the capture of a balcony of a mansion in London linked to Oleg Deripaska as noted by the BBC. Similarly many luxury yachts are also being taken into custody in France, Spain, Germany, and Italy.

Much of this wealth has been carefully concealed using legal structures that hide true ownership. Looking behind these structures will require significant effort and expertise and most likely changes in laws and regulations to create transparency for the ownership of partnerships, offshore shell companies, Dutch BVs, North Dakota trusts, Delaware corporations and so forth. Perhaps a Bellingcat is needed to enlist bankers, lawyers, accountants and consultants to help do the research necessary to find the stolen wealth. But who better to find the money than those who helped hide it in the first place. A small price to pay to atone for past sins.

The terrible war by Putin against Ukraine raises many issues of which fossil fuel dependency of Europe on Russian oil and gas resources is just one. The emergence of wealth from these resources and how that wealth is used is of interest. Norway and Russia are two countries blessed with an abundance of fossil fuels that have created economic wealth and climate change crises. But the paths of these two countries vis-à-vis the use of the wealth generated from exploitation of those resources are substantially different. The path chosen by Russia potentially provides a way forward once the war is over and both Ukraine and Russia need to rebuild their economies.

Norway established an “oil fund . . . to ensure responsible and long-term management of revenue from Norway’s oil and gas resources, so that this wealth benefits both current and future generations.” This fund reports transparently on its activities and has a value as of the end of 2021 of approximately USD 1.4 trillion. That amount is just under USD 260,000 for each of the 5.4 million residents of Norway.

The Russian model is quite different. The Carnegie Council for Ethics in International Affairs in an article: How Did Russia’s Oligarchs Rise to Power provides access to an excerpt from a 2001 book by David Hoffman: The Oligarchs: Wealth and Power in Russia. In essence the oligarchs were able to amass huge amounts of wealth essentially through purchase of companies, many of which were based on fossil fuels, owned by the Russian government at very favourable prices. This transfer of wealth from the government to individuals gave away the value which would have been for the benefit of the Russian people to a small number of individuals.

It is difficult to determine the actual amount of wealth of the oligarchs but there have been a series of attempts to do so. In 2018 the National Bureau of Economic Research published study of the history of wealth in Russia produced by Thomas Piketty among others. In 2020 the Atlantic Council in an article “Defending the United States against Russian Dark Money,” the authors estimated that the value of “dark money” from Russia held outside of the country was about USD 1 trillion. The amounts can also be estimated from the real time billionaires list provided by Forbes Magazine. Regardless of the source, the Russian oligarch wealth would appear to be more than 70% of the wealth accumulated in the Norwegian fund – but that oligarch wealth is solely for the benefit of a few individuals rather than the Russian people from whom it was stolen.

The significant wealth of the oligarchs is now under scrutiny from those fighting the invasion of Ukraine by Putin and his army. It appears highly likely that the wealth of the oligarchs invested in assets outside of Russia, will be subject to sanctions and perhaps even confiscation. Chris Truax in The Bulwark suggest that this wealth could be the basis of a fund noy only to provide for support of the millions of refugees from the terrible Putin war underway but also a source of funding for the rebuilding of the destroyed Ukrainian infrastructure. And perhaps even for the necessary rebuilding of a Russian economy that is focused on meeting the needs of all the Russian people and not just the oligarchs.