Sanctions Against Wealthy Russians Are Largely Symbolic and Won’t End the War

Every day that passes in Russia’s war on Ukraine, another mall or theater or maternity hospital is vaporized. Cities are under siege. Each day inches closer to a breaking strain, a point that — once crossed — risks a plunge into global nuclear confrontation.

Meanwhile, the U.S. and the North Atlantic Treaty Organization (NATO) are deploying economic sanctions, hoping they will convince Russian President Vladimir Putin and his supporters that it is time to go home. By any metric, the sanctions that have been levied against Russia, Putin, and the ruling oligarchs are massive. Nations, banks, businesses, whole currencies have been denied them across the board, and more are still in the offing if this thing grinds on.

Before an emergency NATO summit in Brussels today, President Joe Biden is widely expected to announce a new round of sanctions, along with a tightening of the current ones. Meanwhile, a bipartisan clutch of senators is working with the Treasury Department to lock down more than $130 billion in Russian gold reserves.

There are three main perils to levying such ruinous sanctions, two that are well known and a third hardly discussed. The first is the danger of Putin deciding the economic damage being done to his country amounts to an existential threat, which then motivates him to menace the world with his nuclear arsenal to make them stop. A NATO move to further stymie Russia’s petroleum industry could elicit such a response, which is why the issue is being handled like a grenade with the pin half-pulled.

The second is the bitter harm done to the Russian people, who are largely innocent of Putin’s crime beyond some being duped into supporting it by his state media. Putin does not seem to care if Russians starve in the darkness he has brought down upon them; his yacht-hiding pals on speed-dial with 12 numbers to the left of the decimal on their bank accounts are his primary, secondary and tertiary concern.

The wrenching effect of those sanctions must therefore be our concern, for they are deeply concerning. Are they having the desired effect? Are they putting pressure on Putin’s allies, or are they merely damaging broad swaths of the Russian population? “The experience of U.S. sanctions’ impacts around the world is important,” writes Khury Petersen-Smith for Truthout, “especially because Washington and other Western capitals hold up sanctions as an alternative to war. We should understand them instead, however, as a weapon of war. Their devastating impact results in widespread suffering that may be quieter or less visible to most in the U.S. than an invasion or airstrikes are, but that is no less deadly.”

On paper, at least, Putin’s pals are taking it in the chops. The truth, however, brings us to the third peril: the fiction of economic hardship, which is playing out among Russia’s wealthy elite even now.

“Let us first recall that the freezing of assets held by Putin and his relatives is already part of the arsenal of sanctions that have been tried for several years,” explains economist and author Thomas Piketty. “The problem is that the freezes applied so far remain largely symbolic. They only concern a few dozen people, and can be circumvented by using nominees, especially as nothing has been done to systematically measure and cross-reference the real estate and financial portfolios held by each of them.”

It always seems to come back to real estate, to land. Once upon a time, land ownership granted one the right to vote. Later, real estate became the preferred playground for money laundering. Now, in the age of the kleptocratic oligarch, land serves to hide assets while allowing the asset-holder to dodge international sanctions levied against their home country.

These sanctions are supposed to be cramping the style of Putin’s oligarchs to such a degree that they gather the will to drag him back from the abyss… but this tactic will only succeed if the oligarchs — and Putin, himself a billionaire many times over — are the ones who are truly impacted.

This is not happening; ordinary people are suffering in their place, and that suffering only promises to grow. The solution, according to Piketty, is to deploy sanctions that are far more specifically targeted than those currently in use. It would be the difference between using a scalpel and using a broadsword.

“To bring the Russian state to heel, we must focus sanctions on the thin social layer of multimillionaires upon which the regime relies: a group much larger than a few dozen people, but much narrower than the Russian population in general,” argues Piketty. “To give you an idea, one could target the people who hold over €10m ($11m) in real estate and financial assets, or about 20,000 people, according to the latest available data. This represents 0.02% of the Russian adult population (currently 110 million)…. To implement this type of measure, it would be sufficient for western countries to finally set up an international financial registry (also known as a ‘global financial registry’ or GFR) that would keep track of who owns what in the various countries.”

Unfortunately, such measures will be exceedingly difficult to impose, and for one reason: Russia’s billionaires are sustained and protected by the same financial system that sustains and protects Western and Chinese billionaires. The latter group will not willingly abandon these self-serving rules of capitalism, even if it means allowing Putin and his allies to remain largely untouched amid the suffering of the people.

Do these Western wealthy elites support Putin and his war? Perhaps, but not nearly as much as they support the mechanisms of capitalism that build their fortunes. If those mechanisms are dismantled in order to punish the Russians, they will no longer serve the billionaire class as a whole, and that is not to be tolerated, no matter how high the bodies pile up. “So why has no progress still not been made in this direction?” asks Piketty. “For one simple reason: western wealthy people fear that such transparency will ultimately harm them.”

Wealth must be extracted, wealth must be protected: These are the only two laws that really matter to that sub-segment of the global populace. As Jacob Broom was once noted to say, “Control the coinage and the courts; let the rabble have the rest.”

That all this plays out beneath the shroud of war is the cruelest of ironies, for what is war but capitalism at its most robust, the most lucrative of all human endeavors? Every war lines the pockets of those who peddle the weapons, and among the peddlers in this war are more than a few of Putin’s friends. Try to imagine convincing the Carlyle Group to make George W. Bush back down from his Iraq invasion. Never in hell would that happen; the money was too good.

At the barest minimum, we need to do better than the current sanctions, and we need to do so now. Piketty offers a blueprint for that endeavor, but there are surely others to consider as well. We need to knock down the financial barricades that separate the billionaires from even the notion of justice. More than that, we need to disenthrall ourselves from the shameful use of mass sanctions and collective punishment. Every day that passes inches us closer to Armageddon, and not even an oligarch can survive a nuke. Ashes to ashes, dust to dust.