Why Some Say Putin Is Happy His Oligarchs Are Getting Sanctioned

Additional reporting by John Hyatt and Matt Durot.

One longtime Kremlin watcher says Russian President Vladimir Putin is “largely indifferent” to punishments imposed on his country’s billionaires for the carnage he unleashed in Ukraine. Putin has a “friends with benefits” relationship with Russia’s wealthiest and considers only what they’ve done for him lately, he says. Another expert is convinced the president might even favor the international sanctions because the oligarchs will be forced to bring their billions home to Russia, increasing Putin’s leverage over them.

The Russian president, who many believe is the richest person on the planet, doesn’t care about money, says another. His only interest is power.

In just the last two-plus weeks, Russia’s oligarchs have seen their fortunes go into a tailspin. Forbes counts nine who’ve been sanctioned by the E.U., U.S. or U.K. since Russia invaded Ukraine, joining another 11 who experienced the clampdown before the unprovoked Feb. 24 attack. They’ve lost control over their super-yachts, mega-mansions and championship soccer teams. If sanctions hold, exports from their mines, metal-processing plants and oil and gas facilities will slow to a trickle. They may have learned some tricks that will help them shelter a percentage of their assets, but life can’t be much fun as an international pariah.

If they’re expecting sympathy from the man who caused all this upheaval, experts say, they’d do better getting a dog.

“Putin’s a guy who I say has always been playing this ‘friends with benefits’ game,” said David Charles Lingelbach, who spent several years in the 1990s working as president of Bank of America Russia and is writing a book about oligarchs. “He has these alliances with people and then he tosses them overboard when they no longer suit him.”

According to Lingelbach, all of Putin’s real billionaire allies–Yuri Kovalchuk, Arkady Rotenberg and Boris Rotenberg, who helped him get his “foot on the wealth ladder” in the 1990s–were sanctioned back in 2014, after Putin’s troops swarmed Crimea. Putin is “largely indifferent” about the rest of the business elite, even those who claim to be close to the president, Lingelbach said. A public illustration of that dynamic was the Feb. 24 meeting Putin had with a group of the country’s business elite. Putin spoke, then got up and left. None of the billionaires were allowed to ask a question or say a word.

“He’s the one who put them in the position of being rich in the first place,” said Alexandra Vacroux, the director of Harvard University’s Davis Center for Russian and Eurasian Studies. To Putin, the oligarchs are “basically servants who were supposed to keep the economy running.”

If nations allied with Ukraine are going to cripple the Russian economy, then the servants are mere distractions, Vacroux said.

Peter Rutland, a Wesleyan University professor who studied Russia for more than three decades, pointed to the 2003 arrest of Russia’s then-richest man, Mikhail Khodorkovsky, as a “tipping point” in Putin’s relationships with the billionaires. Khodorkovsky, who Forbes estimated to be worth $3.7 billion, was thrown in jail for alleged tax evasion after funding opposition parties against Putin. With the benefit of hindsight, we can see that as the moment Putin began to choose security over economics, he said. The invasion of Ukraine takes this a step further. “Now we know that he basically doesn’t give a damn about economic interest,” Rutland said.

Others argue that Putin sees the sanctions as a way for him to increase his power over the oligarchs. Putin has structured Russia’s economic system so that sanctions would make the billionaires more dependent on him, said Daniel Treisman, a political science professor at the University of California, Los Angeles.

“Russia’s oligarchs rely on Putin, whose personal permission is required to make large amounts of money in the country,” Treisman said. For years, when oligarchs would sell assets, it was reported that they would convert the rubles to dollars and move them out of Russia to diversify their holdings and protect themselves by using a more stable currency. If they’re blocked from making profits abroad, the oligarchs are forced to double down on their operations in Russia. “In this sense, the current isolation and decrease in oligarch wealth increases Putin’s leverage over them,” Treisman said.

Another boon for Putin: The oligarch’s troubles could result in a series of distressed asset sales, and a new crop of comrades could pick them up at deep discounts and therefore be beholden to the president, said Stanislav Markus, a professor of international business at the University of South Carolina. “My prediction is they’ll be bought out by Putin’s cronies in the law enforcement agencies,” Markus said.

Not everyone is persuaded the sanctions could have a positive spin for Putin. A source familiar with the Russian government’s inner workings who asked to remain anonymous due to the sensitivities of the topic agreed that Putin may like the oligarchs being “forced to bring wealth inside Russia,” though they believe the president’s position becomes weaker if Russia’s access abroad is diminished.

U.S. financier and prominent Putin critic Bill Browder, who insists that Putin has made a deal to take 50% of the wealth from the country’s leading oligarchs, argues that sanctions could go a “long way toward drying up” the resources Putin needs to continue the war. Meanwhile, Sarah Mendelson, the head of Carnegie Mellon University’s Heinz College in Washington, D.C., said the sanctions have “threatened” a foundation of Putin’s regime.

Of course, it’s impossible to know exactly what Putin is thinking. The pro-Ukraine countries are counting on the sanctions against Russia’s billionaires to help ramp up the heat on the president to change course and end the violence. Signals from the Kremlin, however, show that Putin might not give a damn.