Sanctions against Russia are working, but they alone can’t end kleptocracy

Oliver Bullough



It is now almost exactly a year since Russia launched its unjustified, vicious and — even judged on Vladimir Putin’s own terms — deeply counterproductive war on Ukraine. The most important conclusion anyone can draw from the last year is about how profoundly everyone underestimated the Ukrainians’ willingness to defend their nation. Yes, Russian leadership was bad, Russian plans were dreadful and Russian kit has proved unreliable, but Ukrainians have fought heroically and will be remembered by history as heroes.

The second most important conclusion is that the West has acted with greater resolve and unity than many of us anticipated. We had all — including, of course, Putin — become accustomed to the fact that, when forced to choose between their values and their revenue streams, Western politicians routinely prioritized the money. That has, for the most part, not happened, and those leaders deserve credit too.

But this newsletter is about oligarchy, and I want to talk about how well Western countries have done in responding to the threat posed by weaponized corruption to the heart of our system. 

Over the decades of his reign, Putin has transformed Russia into one of the world’s purest examples of kleptocracy — “a crime that requires the use of multiple jurisdictions to hide crooked politicians’ money” — and as such he and his cronies have relied on the greed of Western enablers, the complacency of Western politicians and the inadequacy of Western law enforcement agencies to move, hide and spend the stolen wealth. We therefore all share some of the blame for what he built in Russia and therefore for what has happened to Ukraine. We should all be improving our systems to prevent another kleptocracy like Putin’s from forming, and here we have been found deeply wanting.

The sanctions, that the U.S., U.K. and the EU imposed, have been good. Hundreds of Russian oligarchs have been cut out of the Western financial system and Russian state assets have been frozen. I was heartened to see that Joe Biden in Kyiv said there would be more sanctions “against elites and companies that are trying to evade or backfill Russia’s war machine.” But often it feels like politicians think sanctions are a sufficient response on their own, which they are not. They are a bucket under a leak in the roof, a bandage on a stab wound or a patch on a punctured tire. If you don’t mend the roof, disarm the assailant or sweep the tacks off the road, the problem will return, worse than ever.

There has been heartening legislation in the U.K. — in the form of corporate transparency legislation, bringing light to the ownership of property and companies, both of which are favored ways for oligarchs to hide their assets. But in the European Union, movement has been in the opposite direction, thanks to November’s disastrous ruling from the European Court of Justice, which was in response to a complaint appropriately enough from a businessman with multiple companies in tax havens. A law enforcement official in, say, Ukraine trying to work out who’s behind a Dutch company bidding for a state contract will no longer be able to just look it up, which provides corrupt officials with the shield of anonymity they have abused for far too long (including, for example, in medical procurement).

  • “The French language expression for a public company is “société anonyme.” This ruling has gone a considerable distance to render all companies anonymous… Amendment there must be, and soon,” notes this Irish lawyer, who expresses well the flaw in the ECJ’s judgment.

Instead of amendments, there has been a collective political shrug from a continent that really should by now have recognized the danger to its integrity and values posed by anonymous wealth. The United States is at least moving in the right direction, as it implements the Corporate Transparency Act, but where is the urgency? Companies will not be able to file beneficial ownership information until January next year. Can the American state really not move faster than that?

  • “The international order built on democracy, free markets, and the rule-of-law is under assault from autocracy, kleptocracy, and criminality. This assault has been fueled by opaque legal structures—such as anonymous trusts and other similar legal arrangements—created by the rule-of-law world, which provide sanctuary for the stolen wealth of the world’s worst actors,” noted 12 U.S. senators in this letter to the head of the Financial Action Task Force, demanding it toughen up its proposals.
  • “As the war in Ukraine demonstrates, the work you are doing is instrumental to defending democracy, the rule-of-law, and free markets. The updates to Recommendation 25 present a once-in-a-decade opportunity to shore up our financial defenses against kleptocracy and criminality. We hope you meet the moment.”

And then there’s enforcement. It’s not enough to pass laws, adopt resolutions or expose ownership information, you also need to act on it. If you don’t, you’re like someone who wants to get fit, who pays for gym membership, who buys the latest athleisure wear, but who never gets on the treadmill or attends a single class. Getting results requires perseverance, sweat and focus. This is where the hard work starts, and I see no sign of recognition from Western countries that they need to do more to investigate oligarchs, prosecute them and confiscate their wealth, and will need to do more for decades.

And finally, before I change the subject, I want to stress that Russia is not the world’s only kleptocratic regime. Yes, we need to make sure Ukraine wins this war, but we also need to make sure such wars don’t happen again in other parts of the world. If we could prevent oligarchs from accessing our economies, we would totally change their calculations. If oligarchs know their wealth would be confiscated if they spent it in the West, they wouldn’t bring it here. If they didn’t have access to the real estate markets, luxury goods and financial systems of the West, they’d have far fewer places to spend their hard-stolen cash, and then they wouldn’t steal it in the first place. Why would anyone bother stealing a billion, if they couldn’t spend it in Cannes, Miami or London?

If the money didn’t get stolen from the citizens of developing countries, those people would have the chance to build their lives in dignity and prosperity, and kleptocracy would never become entrenched. This is a prize worth fighting for, in my opinion, and would ensure something valuable resulted from the horror of the last year. Ukrainians have done more than enough to deserve that we make the small sacrifices that these measures would involve.


And an important thing to avoid is hypocrisy. If you want to know why politicians in countries like South Africa don’t take everything Westerners say as gospel, and don’t think it’s dreadful to stage naval exercises with Russian ships, it’s because they have become wearily accustomed to Europe, the U.S. and the U.K. demanding changes from poorer countries that they have no intention of implementing themselves. If you don’t give people reasons to trust you in the good times, they won’t trust you in the bad times.

And while I’m on the subject of hypocritical drivel that outrages people in the Global South while achieving nothing, the European Union has published another one of its six-monthly blacklists of “non-cooperative jurisdictions for tax purposes,” with the headline being that it has added Russia to the list.

  • “Russia is listed after the code of conduct group screened Russia’s new legislation adopted in 2022 against the good tax governance criteria of the code and found that Russia had not fulfilled its commitment to address the harmful aspects of a special regime for international holding companies (criterion 2.1). In addition, dialogue with Russia on matters related to taxation came to a standstill following the Russian aggression against Ukraine,” the statement says.

Don’t worry, it’s not you. That really doesn’t make any sense.

  • “It blacklisted a white country for the first time ever. Guess which one. Russia. Now, if that isn’t confirmation that EU Blacklists are all about politics and power, I don’t know what is,” tweeted the Caribbean economist Marla Dukharan.
  • “With this joke list, the EU continues to allow the super-rich and profitable to stash away their fortunes while ordinary people are battling with the cost-of-living crisis,” said Chiara Putaturo, Oxfam EU’s tax expert.

But what about the other countries singled out by this rightfully-much-maligned list? Has the EU finally moved on from its policy of blacklisting small islands with marginal significance to the global epidemic of tax evasion, simply because they lack the geopolitical heft to do anything about it, while ignoring large Western economies that are actually causing the despoliation of the world? Yes, it has. LOL, only joking, of course it hasn’t.

If you want to know more about this, I draw your attention to my past newsletters on this topic, of which there have been many.

In totally unconnected news (not), here’s a fun Financial Times article about how Ireland’s tax treatment of U.S. corporations is so unbelievably generous that the resulting capital flows have distorted the entire EU’s economic statistics. Which jurisdictions cause EU members a greater tax loss: Ireland or Russia? Luxembourg or Palau? The United States or Guam? The U.K. or Fiji? Which ones are blacklisted? Why do developing nations suspect our motives when we ask them to make economic sacrifices? See you in six months for more fun EU blacklist content. 


What are Central Bank Digital Currencies really for? Thanks to the folks who sent me material about Jamaica’s pioneering Jam-Dex, which has the — slightly misleading, in my opinion, but never mind — slogan, “No Cash, No Problem.” Part of the issue with the declining use of banknotes as a proportion of legitimate transactions, which is happening pretty much everywhere despite the objections I received when I said that last week, is that people who don’t have bank accounts could end up even more excluded from the economy than they are at present, if shops start refusing to accept cash money.

So, it’s interesting that Jamaica has been pioneering the use of its CBDC to pay benefits “for the furtherance of the inclusion of segments of the population that would otherwise not have been represented in the financial ecosystem.” If the CBDC can indeed help financial inclusion in Jamaica, that is heartening and could be an example to follow elsewhere.


I am inching my way through Martin Wolf’s “The Crisis of Democratic Capitalism” which is fascinating but requires more concentration than I am sometimes able to give it. At other times, I’ve been delighting in the revelations about money laundering contained in testimony given to the 1980s Kerry Commission into drug trafficking. So much ridiculousness, and so little has — ultimately — changed.

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