Streetwise Professor

July 21, 2014

The Dogs of Accounting Have to Hound Putin, Not the Average Oligarch With Dirty Money

Filed under: Economics,Politics,Russia — The Professor @ 6:48 pm

An idea to combat Putin and Russia that is gaining traction is to go after dirty Russian money in places like Londongrad and New York and Switzerland. Superficially it is an attractive idea, but upon further analysis it will be ineffectual, and perhaps counterproductive.

I say this as an early recommender of asymmetric financial warfare against Russia. In the immediate aftermath of the invasion of Georgia almost 6 years ago, I wrote that the US should “cry havoc and let slip the accountants of war.” But I recommended pointing the forensic accountants directly at Putin and his chief henchmen. Now, that would include Sechin, Ivanov, Yakunin, and the like.

Going after oligarchs and minigarchs in Belgravia or other similarly fashionable enclaves would certainly discomfit them, but would hardly cause VVP to lose a minute’s sleep, let alone to tame his aggressive ways. Only to the extent that these individuals are straw buyers for Putin would threatening their assets with confiscation for having been acquired illicitly bother the Russian president in the slightest.

Indeed, going after Russians with large investments overseas could actually redound to Putin’s benefit. The ability to spirit their wealth out of the country is the main protection that rich Russian have against Vlad’s predations. He has been campaigning for “on shoring” of Russian wealth squirreled away abroad: he has a variety of reasons to do so. A vigorous investigation of foreign investments and holdings of Russians would help spur the very on shoring that Putin wants (for others, I mean). I can just see him saying: “Come to Vova!” This would be a self-inflicted wound.

Pressuring Putin requires going after his money, and that of his closest cronies, not the wealth of the Abramoviches or Deripaskas. That said, this is a daunting task, given the labyrinth of shell companies and straw buyers that no doubt connects Putin et al to property, investments, and accounts. Indeed, it is likely the case that there is no document with Putin’s name on it: a verbal agreement, backed by the very credible threat of a serious health or legal problem in the event of breach, may suffice. Or if such a document exists, it is in Putin’s safe. (With all the appropriate stamps, of course: it’s not official without stamps!) These documents would say something like “I, Gennady Timchencko, hold in trust for Vladimir Vladimirovich Putin 40 percent of the shares in Gunvor.” Or, “I, Arkady Rotenberg, do pledge to pay to Vladimir V. Putin 20 percent of the gross revenues from state contracts or contracts with OAO Gazprom paid to my companies.” (Putin would probably prefer dividends to ownership per se.)

Thus, attacking Putin’s wealth will be a challenge, and one that no doubt requires the active involvement of US and other intelligence agencies. Moreover, given that definitive ownership would no doubt be difficult to establish, no doubt the US would have to lean on financial institutions which it has strong, but not definitive proof, are the repositories of Putin’s billions, in order to put those monies at risk.

But that’s where investigative efforts should be directed. Harassing even the most obscene, obnoxious oligarch with the dirtiest money in London or the south of France won’t affect Putin’s ¬†policy in Ukraine or anywhere else in the slightest. It might be psychologically satisfying to do this, but it will be ineffectual at best, and counterproductive at worst.

 

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3 Comments »

  1. It is as hard to find the accounts as it is easy to find the origin of the money on those accouts: oil and gas revenues from Russia. Cutting those would have an immediate effect, Putler’s stashes could be found later and even used to compensate the associated costs to the Euroweenies. If anyone were remotely serious about stopping Putler, that is.

    Comment by Ivan — July 22, 2014 @ 1:08 am

  2. Hi prof!

    Sounds like a job for the NSA.
    Delving into secret (!) financial accounts is probably less fun than passing round pics and selfies of naked and beautiful young people in compromising positions but surely a lot more productive (welfare enhancing)for the Free World.

    Comment by SimpleSimon — July 22, 2014 @ 1:48 am

  3. Eventually other nations will go after leaders of the USA companies, & politicians. Trust is already way down in the market place.

    Comment by Chris — July 22, 2014 @ 7:30 pm

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