War in Ukraine: Alicher Ousmanov or the limits of the hunt for Russian oligarchs

It is a symbol of the hunt for Russian multi-billionaires and their outward signs of wealth.

Alisher Usmanov, sometimes described as Vladimir Putin's "favorite oligarch", keeps seeing his most "bling" assets seized by the European and American authorities, who have put this businessman, for a long time the most rich man from Russia, blacklisted in early March as part of sanctions against Russia.

But, at the same time, during seizures, business continues.

The sanctions regime that Washington has put in place against Alicher Ousmanov allows him despite everything to continue to trade with the rest of the world (almost) as if nothing had happened, revealed the Wall Street Journal on Wednesday March 30.

The American economic daily was even able to consult exchanges of e-mails within the Biden administration.

American officials refer to it as a strategy to "mitigate" the effect of sanctions against this magnate of iron, metals in general and telecommunications.

Armored car and oversized yacht

Alicher Usmanov has become the embodiment of a certain schizophrenia of international sanctions against the oligarchs.

On the one hand, we must hit hard those who are accused of having enriched themselves thanks to their proximity to Vladimir Putin.

“It is morally difficult to accept to let these wealthy Russians enjoy the advantages of the Western way of life when they have always been at the side of the Russian president”, explained at the beginning of February to France 24 Peter Rutland, American academic and author of a book on the Russian economic elite.

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Alicher Ousmanov has felt the stick of sanctions falling on his heritage several times.

His luxury Mercedes, estimated at more than 600,000 euros, was seized in Italy on Wednesday March 30.

The heavily armored vehicle - it is supposed to ward off the simultaneous explosion of two grenades - is suspected of having been used by Vladimir Putin and some of his distinguished guests to move around in peace, underlines the Guardian.

Two weeks earlier, it was the yacht of this billionaire, whose personal fortune was estimated at 21 billion dollars before the war in Ukraine, which had been immobilized in Germany.

A decision by the authorities which has not gone unnoticed because the "Dilbar", 156 meters long, is one of the largest yachts in the world, and it has been clogging up the port of Hamburg for more than a month. 

But that's not all.

Alisher Usmanov can no longer use one of his two private planes and the Italian authorities have seized one of his villas and five other cars.

The British football club Everton has also terminated all its contracts with the Russian multi-billionaire, which was its most important sponsor.

So many measures that did not please the main interested party, who described them as “unfair and legally unfounded”.

He recalled that all his assets had been placed in British "trusts" - financial entities which appear as the legal owners of the assets - for the benefit of his children, just before the start of the war in Ukraine.

Alicher Ousmanov thus deplored that the European authorities targeted assets that did not belong to him... This is also the reason why Germany refuses to use the term "seizure" for the yacht "Dilbar" and prefers suggest immobilization.

“Attenuated” sanctions

But these sanctions do not hurt Alisher Ousmanov's sources of income.

And that's the rub.

Europe has decided to attack the personal assets of the oligarchs first.

For its part, Washington also wants to sanction the companies that these Russian economic elites run.

Except that the United States has concocted a tailor-made sanctions regime for groups controlled by Alisher Usmanov, a maneuver that shows how much the United States fears that too much harshness will do too much collateral damage among Western groups. 

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Sanctions are never imposed on a company if the person concerned holds more than 50%.

Washington could have made an exception to this general rule for Alicher Ousmanov, who owns only 49% of USM, the conglomerate and investment fund that is at the origin of his fortune.

It is this multinational that controls Metalloinvest, the Russian iron and mining giant;

it also manages its investments in groups like Facebook, Twitter, Uber, Airbnb, Xiaomi, etc.

So there remain the “hundreds of other companies” of which this oligarch is the majority shareholder, notes the Wall Street Journal.

But the US Treasury has issued a “general exemption” allowing all groups belonging to Alisher Usmanov to escape sanctions “for the time being”. 

To get the hang of it, "we need to get the message across that we're looking at these companies in more detail, or something like that," a US Treasury official wrote in an internal email seen by the Wall Street Journal.

“I have never seen such an exemption regime, let alone for a Russian oligarch,” acknowledged to the American business daily George Voloshin, an analyst specializing in financial crimes for Aperio Intelligence, a British financial advisory firm and economic. 

But the United States knows very well that trying to hurt an oligarch can be very painful for the rest of the world.

In 2018, the drastic sanctions decided by President Donald Trump against the Russian aluminum magnate Oleg Deripaska had led to a chain reaction.

First there was a more than 15% rise in aluminum prices, then subsidiaries in Europe of Rusal (the multinational owned by Oleg Deripaska) flirted with default and several leading business partners of this Russian group - such as Siemens, Mercedes or the mining giant Rio Tinto - had lost millions of euros in contracts.

Washington had urgently had to distribute exceptional licenses allowing Rusal to resume operating normally on the international scene.

Risk of collateral damage

The Biden administration has no desire to see history repeat itself with Alicher Ousmanov, who is one of the major players in the iron market… “Factories in Texas, North Carolina and Mississippi depend on materials raw materials provided by Metalloinvest”, recalls the Wall Street Journal.

Sanctions against Metalloinvest could cause the price of iron to explode, in a context already marked by a sharp rise in the price of raw materials.

Ironically, Alicher Ousmanov could have benefited from it since USM is at the head of the “largest iron reserves in the world”, underlines the Mining Digital site, 

Above all, the US Treasury has admitted that it does not have an accurate picture of the extent of Alisher Ousmanov's empire.

The US administration has identified at least 800 entities in which the Russian oligarch has stakes.

Impossible to assess the extent of the collateral damage if Washington prohibited all American groups (including the banking system) from doing business with the myriad of entities linked to the billionaire.

In 2019, after the sanctions fiasco against Oleg Deripaska, international sanctions experts, such as Joshua Kirschenbaum of the German Marshall Fund, warned that the current arsenal of US sanctions did not allow effective pressure on Vladimir Putin's entourage.

The way the Biden administration is proceeding cautiously with Alicher Usmanov demonstrates that Washington has still not managed to solve this equation.

Or, as another US Treasury official put it in an email seen by the Wall Street Journal, “this approach sounds more like a publicity stunt than financial sanctions.” 

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