Western sanctions are ensnaring more Russian business leaders, some of whom say they are being unfairly targeted. Can those in the private sector reduce their risks of being appointed? Maybe, if they make tough choices.
In 2014, most wealthy Russians were cool with the invasion of Ukraine and the illegal annexation of Crimea. Some in the West saw the silence as complicity. Moscow’s renewed war feeds stronger concerns. Questions are being asked about how Russian business leaders weigh the value of loyalty to the Kremlin against long-term or shifting global interests. What about the civic responsibilities of business leaders?
Wealthy Russians enjoy Western benefits, from safe banking to quality education to safe living and vacations in Europe. But some in the West may see them as less than courageous for not opposing Russia’s aggression in Ukraine and the slaughter of civilians.
That concern helps strengthen the consensus of Western support for the sanctions, which could have powerful effects on capital-starved Russia. Businesses can tap into Western capital markets for new equity financing or loans. For many people this may not have an immediate effect, but in the medium and long term, such access can be vital.
Some might say that the US has been slow to sanction individuals. In March 2014, President Obama authorized sanctions against “individuals … responsible for violating” the sovereignty and territorial integrity of Ukraine or for “theft of assets” of its people. Early sanctions targeted several officials and two former KGB friends of President Vladimir Putin who run state-owned companies, Rosneft CEO Igor Sechin and Rostec CEO Sergei Chemezov.
As the simmering conflict in eastern Ukraine dragged on, US patience wore thin. In April 2018, the US began sanctioning private sector business leaders. The first were Oleg Deripaska, owner of aluminum and auto companies, and Viktor Vekselberg, owner of a conglomerate that includes aluminum, oil, energy, telecom and other assets. A leaked US diplomatic message had named Deripaska “among the 2-3 oligarchs” Putin often turns to. But Vekselberg was not seen as close to the Russian president, a hint that US sanctions policy may cast a wider net.
In this regard, last March the US revealed an “extensive list” of targets: “elites and family members” who support Putin … or “were enriched at the expense of the Russian people … elevated family members to high positions … (or ) sit at the top of Russia’s largest companies and … provide resources” to support the invasion of Ukraine.
In July, the US singled out three private sector business leaders: Andrey Melnichenko, who owned fertilizer companies EuroChem and SUEK coal, Alexander Ponomarenko, chairman of the board of Russia’s largest airport, and Dmitry Pumpyansky, a pipe and pipe manufacturer. railway equipment.
More Russian business leaders may be sanctioned for no specific reason. Instead, they could be caught up in what is becoming a general economic war. As a result, business leaders may be less able to assess the risks of sanctioning, but they may still be able to reduce them. Here’s how.
Criticize the war. Some business leaders have. In February, banker Mikhail Fridman said war “can never be the answer”, Deripaska called for negotiations “as soon as possible” and steel magnate Aleksey Mordashev said it was “terrible” that Ukrainians and Russians were dying. In March, global steel magnate Vladimir Lisin said the lives lost were “impossible to justify”. In April, Oleg Tinkov, a senior banker, said “we are against this war”. He was soon forced to sell his bank at a huge discount.
Blame the Kremlin. It may not be enough to criticize the war. Despite Mordashev’s criticism, the US and the European Union have sanctioned him. Business leaders can be bolder if they are riskier. They may blame the Russian authorities or refuse to support the war effort. No prominent business leader seems to have done so. Tinkov’s punishment could be a hindrance.
Help Ukraine. Russian business leaders may be looking for ways to help Ukraine or its people. They or their companies can support Ukrainian refugees. They can stop collecting Ukrainian debts. They can help countries that suffer collateral damage from sanctions, such as those in Central Asia.
Some Russian business leaders may think they are trapped in a perfect storm. The Kremlin demands loyalty, but its war has destroyed unprecedented business value. Military setbacks and economic decline could weaken the grip of Kremlin leaders or spark change. If new leaders came to power, they could seek economic relief through better Western links, but sanctioned companies could lose ground. If a peace settlement were to emerge, sanctioned businesses could lose more of their assets to the West to help finance Ukraine’s recovery.
Russian business leaders have obligations to employees, owners, suppliers and customers. They must make reasonable efforts to protect these interests. Although business leaders may fear the Kremlin’s power, they may also realize that Russia’s war, isolation and economic erosion pose growing threats to their businesses. The choice is theirs to make.
William Courtney is a senior fellow at the nonprofit, nonpartisan RAND Corporation and was the U.S. ambassador to Kazakhstan and Georgia. He was a corporate executive.
