Chasing Putin’s Oligarchs

There is yet another problem emerging with reliance on sanctions to deter Putin’s aggression against Ukraine: enforcement.  Generally,  one of the major ways sanctions are designed to work is by putting economic pressure on the oligarchs who surround a dictator–the hope being that they will turn on him and bring down his regime.  However, many past sanctions, especially sanctions on countries with petroleum wealth, have failed miserably because there is not enough international cooperation to ensure they those sanctions be respected.  

Even as Western nations are putting incredible constraints on the Russian economy, they are still buying Russian oil and gas.  That means it will be very hard to do what sanctions are intended to do most–hit the wealthy elite that surround Putin until they turn on him; thus, getting him out of power.  Furthermore, even if the West completely cut off all Russian oil and gas money today, there are too many other countries willing to step up and buy their oil at below market price on the black market.   This is how a host of countries have successfully evaded petroleum sanctions in the past–for instance, the way Venezuela avoids its Western oil embargo by selling to Iran and China.  History shows that keeping Russia from making money off its oil and gas is going to be next to impossible.  

Additionally, wealthy oligarchs can move money around through complex shell companies and convoluted financial transactions.  It will take a lot to make sure that this time is different–it will take the creation of an apparatus that the world has not yet seen.  We need such an apparatus desperately.  The ability of the super-rich to evade sanctions is a problem that desperately needs to be solved and needs to be solved with all haste.  But, with all haste may mean a long time.  Getting everybody on board and working together can’t be done overnight.  Meanwhile, Ukraine burns.  

There are still many governments around the world that are ambivalent about the Russian invasion of Ukraine.  There are developing nations around the world that are expressing sympathy toward the Russian perspective.  From Vietnam to South Africa, Russian disinformation is showing up in national news broadcasts, and common people have come to believe that Russia is fighting a war of self-defense against Western domination.  Countering this narrative is going to be difficult and could send the US closer to another Cold War.  It will have to be done, and it will take time.

Furthermore, not all of those governments are ever going to be willing to come on board–not to mention China, whose next move is anybody’s guess and certainly cannot be relied upon to not help Russia over the long term.  There are too many governments and too many private entities who for their own interests do not want to tackle the problem of sanctions enforcement.  Otherwise, it would have been solved a long time ago. 

          Sanctions are only as strong as their weakest link.  Putin knows this.  He understands the inherent weaknesses built into the system.  It is much of the reason he is ignoring international law and targeting civilians.  He believes he can destroy Ukraine without feeling the full effects of the sanctions. 

          This isn’t to say that sanctions shouldn’t be there.  They are absolutely necessary.  The international community needs to use every tool at its disposal.  However, there are two problems: enforcement issues mean it will take valuable time for the full force of sanctions to be felt; and there are going to be nations and private entities that are going to be unwilling to assist in enforcement.  

Sanctions are not going to be effective soon enough to actually deter Putin.  If Putin feels he can wait out the West he will try, and over time the deterrent effect of sanctions may prove to be fleeting.  We will end up chasing Putin’s oligarchs around.