In the shadowy world where finance meets national security, the Russian oligarch list actually does mean something

Russian President Vladimir Putin toasts with attendees after a state awards ceremony for military personnel who served in Syria, at the Kremlin in Moscow

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Russian President Vladimir Putin toasts with attendees after a state awards ceremony for military personnel who served in Syria, at the Kremlin in Moscow
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Thomson Reuters

  • As mandated, the US Treasury released a list of individuals with financial ties to the Kremlin. It did not place more sanctions on them.
  • This may seem limp, but in the world of international finance and security, lists like this give players pause.
  • It’s also important to remember that all sanctions should come with a plan. If not, they can do more harm than good. It’s clear the Trump administration has no plan for countering Russian aggression.

Yes, it seems the US Treasury cribbed its list of individuals with financial ties to the Kremlin from Forbes Magazine’s list of richest Russians.

And yes, the White House and the State Department have said that there will be no additional sanctions on Russia, despite the fact that hours before this Treasury list was released, CIA chief Mike Pompeo said Russia would doubtless meddle in our elections again.

So yes, it appears the Trump administration released this list kicking and screaming. It was, after all, mandated by a law – the Countering America’s Adversaries Through Sanctions Act (CAATSA) – meant to punish Russia for its meddling in the 2016 presidential election – meddling President Donald Trump still refuses to fully and unreservedly acknowledge. It is a law he signed because he had no choice.

In the shadowy world where global finance intersects with national security, lists are signals to be taken seriously. The preamble to this list’s release saw the emergence of the DC swamp things one tends to see when powerful people are under serious duress. In this case, it was lobbyists articulating the interests of the Russian elite.

Then after the list was released, Russian President Vladimir Putin at once shrugged it off as a joke while also calling it an act of aggression. He spun the well-oiled Kremlin wheels of projection and victimization, its classic defense mechanisms, and accused the US of using the list to meddle in Russia’s upcoming “elections.”

But which is it? Is this list mean or meaningless?

Bring it on home

“While Treasury made clear these are not sanctions, financial institutions will be hard pressed to not take note of this list and evaluate their exposure to those listed,” Boris Zilberman, a deputy director at the Foundation for Defense of Democracies told Business Insider in an email.

“Any future sanctions on Putin’s inner circle will very likely be derived from such a report and as such both financial institutions, those listed, and the Russian government are likely be to evaluating defensive measures. [Treasury Secretary Steve] Mnuchin just actually said that he expects sanctions to come out of this report, [to be determined], but that’s good signaling for the financial institutions.”

There is also a classified report included with the list that should contain more detail that’s for the world of spooks and politicians. The world of finance will take something different from this list – a warning to beware of certain activity.

“[The list] will cut off front channels, not back channels,” one international financier told me after the list was released, requesting to remain unnamed.

“Back channels,” the financier said, means that people like him will be looking more askance at structured investments coming from Cyprus (a Russian tax haven since the fall of the USSR) through Geneva, Switzerland. They will see more family office investments from Zug and Zurich in Switzerland, or from the Cayman Islands and the Bahamas. There will be investments going into London through Africa from Geneva-based accounts. Russian Foreign Direct investment will increase. And there will be more money flowing toward Singapore, where the only problem is that the government makes it difficult to take that money out.

This is all to say that the mere creation of a list means that this particular Russian money making its way around the world will be longer and more winding.

“One of the counter moves by the Russian Ministry of Finance has already been [to] put in place mechanisms for Russia’s elite to repatriate their fortunes through the issuance of Eurobonds,” Zilberman said. “While Putin has for a while now been seeking for Russia’s elite to bring home their billions, doing so would ultimately lessen Russian financial influence in Europe and beyond. Ultimately a win for the US and EU.”

Doing the least

Now, I’m not saying that the Trump administration did the right thing with this list here. For one thing, it just so happens that, because of how the privatization of the USSR went down and how the country’s economy was reconstructed afterwards, Russia’s richest people are often inextricably linked to its state.

So the Forbes list was likely somewhat useful by accident of history.

What I am saying is that it’s possible that the CAATSA was written by lawmakers who understood the unique challenge of the Trump presidency – a presidency that has given clue after clue that it is operating under the influence of Russia, in some measure.

This law was written with the understanding that the Trump administration will only move against Russia if it has to, and that (by its very nature) it is an administration that often tries to look as if it it’s doing the most, while it’s really doing the least. (See: Steve Mnuchin’s one-sheet tax plan.)

What’s more, it’s also important to remember that sanctions aren’t something to be thrown around hastily. Last year, Eric Lorber, now senior adviser to the Under Secretary for Terrorism and Financial Intelligence at the Treasury, testified about Russian sanctions before Congress. This was before he took his post at Treasury, and though hawkish on the need for action against Russia, he also warned that when sanctions are placed, they should be with a specific purpose in mind.

“Sanctions are a means to an end, and Congress and the administration must be clear as to what the end is and how to achieve it,” he said. “Ramping up economic pressure on Moscow without clear objectives, the employment of other coercive tools, or the buy-in from the administration – is unlikely to get Moscow to change its behavior.”

In short, when it comes to sanctions, there needs to be a plan. And you can be certain the Trump administration does not have one.