The Oligarchs’ Pact with the Devil

Much has been reported on western sanctions against Russia’s oligarchs [roughlytranslated from Greek means, “The rule of the few”] as a quick & easymethod to isolate and disconnect Putin from his unelected de facto cabal ofindustrialists in every economic sector. The objective is to degrade the wealthof these oligarchs to such a level through draconian monetary restrictions thatit might incentivize them to turn against their master.

An oligarch’s wealth always comes with a price when they buck againstthe government particularly in a non-democratic country. In a democracy it’sthe IRS performing endless deep-dive audits; in an autocracy it’s literally [corporate]Siberia.

The “rich and shameless” lifestyles of present-day Russian oligarchswere not achieved by business acumen, rather by political favoritism, legal& financial governmental guarantees and support, and a fixed market. Theseperks require unquestioned fealty, forever, to Putin himself. The oligarchs aremerely the caretakers of Russia’s essential industries who enjoy mind-blowing perksso long as they submit and abide by the rules, whatever they may be at thetime.

With respect to Putin, his domestic control resembles that of Mel Brooks’role as an all-powerful king in the movie The History of the World (1981) whoabuses his powers and unabashedly blurts, “It’s good to be the king.”

So you want to become an oligarch?

According to Forbes there are 2,668 billionaires worldwide present-day witha total net worth of $12.7 trillion. Because of the Russo-Ukraine war andsanctions, there are 34 fewer Russian billionaires, most of whom lost 50% oftheir net worth on average, but whose present-day total membership totals 83.

A billionaire’s wealth is so astoundingly mind-boggling, I’ve provided achart that explains what it would take on an average salary to achieve thislevel of wealth. In the following chart entitled ThreeMillion Years to Become the Next Elon Musk provided by thecollaboration of Forbes, OECD, Picodi and the National Bureau of Statistics ofChina. A US worker earning $69,392 annually in 2020 would take three millionyears to reach Elon Musk’s average annual wage.

The following chart entitled HowRussia’s Ultra-Wealthy Eclipse Their Country’s Economy providedby Bloomberg Billionaires Index and the IMF, underscore Russia’s lead in the extremeincome inequity. Interestingly Russian billionaires’ # 1 rank as a share of GDPis the only non-democratic country in the top 8 countries listed. This is rathertypical in an historically autocratic country that is rich in natural resourcesand whose revenues are export-dependent.

Crocodile Tears

In February, as the Russian military advanced in Ukraine, the US and westerncountries applied sanctions against the Russian oligarchs. The following chartentitled RussianBillionaires’ Wealth Crunch provided by Bloomberg Billionaire Indexpresents an estimate of their financial losses which crimped their lifestylefrom glitzy glamorous to merely enjoying an extremely comfortable life akin togoing from private jets to first-class on commercial airlines.

According to the following chart entitled The USBillionaires Profiting the Most from the Pandemic providedby Forbes, their American billionaire counterparts have profited, and continueto do so, rather handsomely through the pandemic and present-day during theRusso-Ukraine conflict with the fortune of being loyal to the markets and not “TheMan”.

Taking Away Their “Toys”

Sanctions against Russian oligarchs have prevented them from enjoying theirstupefyingly expensive and ostentatious “toys” such as superyachts, privatejets and super cars which have been seized and impounded. The following chartentitled The FrozenRussian Superyachts (And Those That Got Away) provided by Forbes, RussiaAsset Tracker and other media reports. It articulates the top Russian oligarchsand the status of their superyacht, defined as a luxury maritime vessel of atleast 80 feet (24 meters) although most oligarchs’ superyachts are far bigger.

With respect to market share, Russian oligarchs own 10% of the world’ssuperyachts replete with helicopter pads, swimming pools, even comprehensivewine cellars.

How Taxpayers Pay for Billionaire Asset Storage

The process of seizing billionaire yachts, private jets and super cars,however, is far more complicated. This section paraphrases passages in thearticle in The Atlantic published 7 April 2022, entitled. A YachtOwner’s Worst Nightmare.

Nabbing billionaire property, legally and physically, is like grabbingand holding onto a slippery eel with your hands. Whatever the nationality ofthe billionaire, they are well-versed in the art of evasion.

Prior to property seizure the challenge is identifying and confirmingthat the oligarch is indeed the owner of said property. Like any wealthyproperty owner, they’ve already established a byzantine series of shellcompanies to obscure the legal owner. Sometimes those superyachts are ahead ofthe game, set sail and disappear because they’ve turned off their trackingdevices.

To ensure that this property doesn’t leave the premises, whoever thelegal owner might be, the government often “freezes” these assets by notallowing them to leave or deregistering them which negates the insurance policymaking departure a high-risk financial adventure.

Once the government seizes the yacht, private jet, super car, etc. theymust maintain it in the same condition they seized it otherwise the governmentcould face damages & lawsuits afterwards from the owner should it be returned.To offset this risk, the government sometimes with a “wink and a nod” allowsthe seized property to be maintained by service companies hired by the owner.Nonetheless the government assumes the cost of storing and maintaining it fundedby taxpayer dollars.

Economic Lockdown

Since the start of the Russo-Ukrainian conflict evermore Russianoligarchs have been sanctioned. Many have taken it “personally” since they are legallycivilians. But because of their direct and intimate financial, operating andpolitical connections to Putin and the Kremlin, they can be consideredgovernment officials carrying out orders.

According to the following chart TheWorld’s Most-Sanctioned Countries provided by Castellum.AI,a global risk database that tracks law enforcement actions worldwide, sanctionsagainst Russia have vaulted them to the # 1 ranking.

Widening this perspective with respect to billionaires worldwide, theelite have no problem in leaving far more than their share the proverbial humandetritus in the environment as the following article entitled The OnePercent’s Huge Carbon Footprint provided by Carbonbrief. Disturbinglythe world’s top 1% is responsible for 48% of the world’s CO2 emissions.

The Billionaire Next Door

The following chart entitled Where theSuper Rich Reside provided by Forbes, gives a bird’s eye global viewof the regions billionaires prefer to reside.

Conclusion

The “salt of the earth” subsidizes, through their taxes, the storage andmaintenance of the elites’ super-luxury toys whether they’re sanctioned orunder investigation for alleged criminal activities. Oftentimes they own thesame engaging in preferential hiring practices and discriminating treatment ofthe few minorities who work for them. It’s a closed-end tax loop for criminals inwhich they play and we pay.

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The Cerulean Council is a NYC-based think-tank that provides prescient,beyond-the-horizon, contrarian perspectives and risk assessments ongeopolitical dynamics and global urban security.