Four dozen countries have applied a broad array of financial restrictions, export control measures, and targeted sanctions in response to Russia’s full-scale aggression against Ukraine. The intent of these restrictions was to limit sanctioned individuals’ ability to provide support to the Kremlin, and from there, convince Russian billionaires to use all available means to affect Russian president Vladimir Putin’s decisions. Although the sanctions have slashed individual oligarchs’ wealth, the number of Russian billionaires and their collective net worth actually increased over the past year since the Russian invasion began. Individual sanctions have contributed to a “rally around the Kremlin” effect and increased elites’ dependence on Moscow.

Individual sanctions, in their current form, are a weak tool for dismantling Russia’s crony capitalism, which combines incentives for elites’ loyalty to the regime and punishment for defection. Russia’s war in Ukraine and Western sanctions have provided the Kremlin with new opportunities to reward loyal tycoons through asset redistribution and heighten economic repression against renegade business elites.

The system has been in place since Putin was elected Russia’s president. Two months after his inauguration on May 7, 2000, the president gathered twenty-one Russian tycoons in the Kremlin. In this historic meeting, Putin struck a kind of “social contract” with Russia’s richest men, who had amassed their spectacular wealth during the previous decade. In exchange for their loyalty and political non-interference, Putin promised the oligarchs that his government would stand by the results of the chaotic privatization of the 1990s that enriched Russia’s post-Soviet elite. In the coming years, the Putin government put the unwritten rules of the social contract into effect. The oligarchs who reneged on his deal paid with their lives and freedom. The loyalists who pledged their allegiance to the president became the regime’s benefactors.

The class of wealthy economic elite in Russia has swelled over Putin’s long reign, fueled by ample opportunities for predatory asset stripping. The poor protection of property rights and recurrent economic hardships have incentivized many oligarchs making money in Russia to stash their wealth abroad. To tighten his government’s grip on business and political elites, Putin launched the “deoffshorization” campaign in 2013, which resulted in a series of measures prohibiting Russian officials from holding their assets abroad and levying hefty taxes on profits made through overseas ventures.

Before 2014, Russia’s economic elite, unwilling to bend to Putin, moved their capital and residency abroad. Between 2008 and 2014, 1,993 Russian nationals received the United Kingdom’s “golden visas,” which offered residency to people investing £2 million or more in the country. The United States, Portugal, and Austria were among the top issuers of investor visas for wealthy Russians. These opportunities began fizzling away following the imposition of Crimea-related sanctions on a number of Russian oligarchs linked to the Kremlin. Despite the financial losses that the Russian tycoons incurred, the list of Russian billionaires grew by a third—from 77 in 2016 to 106 in 2018—and their net worth rose to a collective $485 billion in the two years following the 2014 tranche of sanctions.

When Russia brazenly invaded Ukraine, the U.S. government promptly levied an array of well-coordinated economic and individual sanctions. By the one-year anniversary, the U.S. Treasury Department’s Office of Foreign Assets Control extended asset freezes and travel bans on more than 2,400 individuals, including at least forty-six Russian or Russian-born billionaires. The European Union, similarly, has sanctioned some 1,473 Russian nationals.

A day after the invasion, Putin called a meeting with four dozen Russian tycoons and heads of state-owned companies. In the meeting, Putin demanded solidarity from Russia’s business community in exchange for support from his government. He also threatened defectors, thus reiterating the rule of the “social contract” struck in 2000. In the subsequent months, business moguls who expressed criticism of the Russian government lost their valuable assets. Russian billionaire Oleg Tinkov, for instance, who slammed the “crazy war” against Ukraine on Instagram, reported selling his 35 percent stake in Tinkoff Bank—one of Russia’s largest lenders—to a company controlled by Vladimir Potanin, a Putin confidant and Russia’s richest man. According to Tinkov, the shares he traded were worth “ten times more” than what Potanin purchased them for. Another public critic of the war in Ukraine, billionaire Oleg Deripaska, lost the $1 billion hotel and marina complex in Sochi, ostensibly for condemning the Russian invasion. In December 2022, Putin supported a legislative initiative that would confiscate the assets of the Russian citizens who fled abroad and criticized the war.

The perceived threat to disloyal tycoons’ lives has compounded the risks of asset appropriation. During the first year of the war in Ukraine, a total of thirty-nine influential Russian figures, including fifteen Russian business leaders and executives, died under mysterious circumstances. The stream of inexplicable deaths by “suicide” or illness rocked the Russian business elite. The fact that the perished wealthy businessmen were predominantly from the oil and gas sector and many had ties to Putin led to speculation over the Kremlin’s involvement. Regardless of whether the Russian government, which has a long history of dubious “poisonings” and “window-fallings,” participated in the demise of these prominent Russians, the deaths engendered widespread fears in the oligarchs’ circles, effectively preventing them from speaking openly against the Russian government’s actions abroad.

The Russian state has also, notably, kept its promise to support loyal tycoons. After more than a thousand Western firms departed Russia, they left hundreds of billions of dollars’ worth of assets behind. The Russian state has nationalized these assets in retaliation for the freezes of Russian assets abroad. Moscow expropriated Exxon Mobile assets valued at more than $4 billion, and confiscated Shell’s shares in a Sakhalin project with Gazprom. Apart from the state itself, Putin’s loyalists have enjoyed the benefits of this wealth redistribution. Putin ally Gennady Timchenko, for example, was awarded a new state contract to sell Russia’s liquified gas to China. Yuri Kovalchuk, known as “Putin’s banker,” now owns most of the Russian Internet. A Chechen business leader close to Ramzan Kadyrov acquired a factory and what was left of Starbucks in the Russian-seized Ukrainian city of Mariupol.

To cushion the impact of sanctions on the wealthy Russians, Putin also endorsed changes to the Russian tax code that exempt sanctioned individuals from paying personal income tax and other taxes on frozen income and assets. Additional amendments to the Russian Criminal Code terminate criminal responsibility or soften the punishment for the most egregious cases of tax evasion in Russia. Simultaneously, new Russian laws criminalize calls for foreign sanctions against Russia or support in their implementation, and prohibit cooperation with international bodies “to which Russia is not a party,” such as the International Criminal Court.

The new measures implemented by the Kremlin to shield its loyalists from the sanctions’ pernicious effects have strengthened Putin’s crony capitalist system. Russia’s wealthiest individuals emerged $154 billion richer in March 2023 compared to a year ago. This is the wealth that the Russian government is eyeing for a new one-time war tax to patch gaps in the state budget. The current individual sanctions regime is too weak to pose an existential threat to oligarchs’ wealth—a kind of hypothetical threat that would have forced them to seek to change Russia’s policies and institutions. To weaken the symbiotic relationship between power and wealth buttressing Putin’s system, individual sanctions would have to be considerably broadened and deepened.

Oligarchs have enjoyed unrestricted access to their wealth by transferring legal titles for their assets to family members. Given this, sanctions would have to be applied to any nominee who has the formal rights to property of the sanctioned business elite. A critical vulnerability of the opaque web of trusts, off-shore companies, and subsidiaries owned by Russian billionaires is a small and secretive network of financial experts who manage the tycoons’ wealth. Identifying and sanctioning these wealth managers, who have previously escaped scrutiny, would likewise have debilitating consequences for the Russian oligarchs.

Effectively detecting and capturing tycoons’ assets requires the sharing of financial, banking, and intelligence information among countries. This has been achieved by the multilateral Russian Elites, Proxies, and Oligarchs (REPO) Task Force, in which intelligence services of the United States, Australia, France, Canada, Germany, Japan, Great Britain, and the European Commission cooperate. The efforts of REPO, however, would have to be extended to more countries. The interests and assets of Russian business moguls are spread across the globe. Sanctioned Russian moguls have been welcomed in Israel, Turkey, and the United Arab Emirates, among other states. The threat of secondary sanctions and reputational costs would have to be imposed on countries providing sanctuaries to Russian business elites and their business ventures.

The REPO Task Force countries must move quickly to simplify and expedite the seizure of the Russian tycoons’ assets for their use for Ukraine’s benefit. Freezing an asset is easier than confiscating it. The seizure of an asset typically involves a lengthy legal process, which is complicated by the burden of identifying its owner. Another challenge facing sanctioning governments is that they become responsible for the expensive maintenance costs of luxury properties or must allow their owner to access funds to upkeep their estate. As the Russian oligarchs have already filed lawsuits against sanctions in several jurisdictions, the REPO Task Force countries’ authorities need to establish mechanisms for asset seizure.