Russian Oligarchs on the Run

Hosted by Christina Ruffini and Sir Richard Dearlove

Guest

Louise Shelley

Louise Shelley is the Director of the Transnational Crime and Corruption Center at George Mason University and an expert witness on Russian money laundering through real estate.

Episode Summary

While foreign correspondent Laura Haim is on assignment in Paris reporting on the effects of the war in Europe, she's also been following the story of a small coastal village in the South of France that's drawn Russians for years - and not just wealthy Russians, but some of the world's most notorious Russian oligarchs. However, with the war in Ukraine, the town is in a state of flux. With sanctions in place, many Russians' have had their assets frozen - making it hard to maintain their estates. For these oligarchs, where they are headed now has been the subject of growing speculation and reporting. Laura sits down with Louise Shelley, director of the transnational crime and corruption center at George Mason University, who is an expert witness on how Russian money is laundered through real estate, and Sir Richard Dearlove, former head of Britain's Mi6, to discuss where Russian oligarchs are fleeing to and why, what countries are letting them in, and the potential of corruption in Ukraine during rebuilding.

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Transcript

INTRODUCTION

Mcfarlane: I'm Julia McFarlane, and you're listening to One Decision, the podcast that looks at the choices made that have shaped the world. This week, we have a special episode for you. Foreign correspondent Laura Haym is back as a guest cohost for One Decision. She joined us recently to talk about the French elections. While Laura's currently on assignment covering the war in Ukraine and its impact on Europe, she's also been following the curious story of a small coastal village in the South of France, Saint-Jean-Cap-Ferrat, a town that's attracted a stream of Russians for years. And not just your average wealthy Russians, but some of the world's most notorious oligarchs. However, with the war in Ukraine, the town is now in a state of flux. With sanctions in place, many Russians have had their assets frozen, making it hard to maintain their estates. Meanwhile, across Europe, Ukrainians are moving in. At least 12,000,000 refugees have left Ukraine since the war began in February, moving to different countries in Europe. Nearly a 100,000 have ended up in France. The small town of Saint-Jean-Cap-Ferrat hasn't escaped impact. Its French citizens witnessing changes in the local economy as a result of the war. And as for those Russian oligarchs, where they are headed now has been the subject of growing speculation and reporting.

Mcfarlane: In today's roundtable, our guests discuss just that. So without further ado, here's Laura Haym.

ROUNDTABLE

Haym: Thank you, Julia. Bonjour, everyone. Hello, everyone. And thank you for having me on the podcast. So now to help us learn more about Russian oligarchs, where they're moving to, what countries are letting them in, and why, we've brought an expert, Louise Shelley, the director of the Transnational Crime and Corruption Center at George Mason University. She has been an expert witness about how Russian money is laundered through real estate. And of course, One Decision's very own Sir Richard Dearlove, former head of Britain's MI6, who has, as we know well, a wealth of experience and knowledge about this. So welcome, Louise, and welcome, Sir Richard.

Shelley: It's a pleasure to be with you.

Haym: Sir Richard, with your experience, I am really curious to know if you knew about this town, Saint-Jean-Cap-Ferrat.

Dearlove: I had certainly heard about it, yes. And I am well aware that there's a sort of aggregation of very wealthy, questionable Russians who've located themselves in this area.

Haym: Did your service when you were the head of the intelligence community in Great Britain, did you have, for instance, some agents there to track the oligarchs arriving there?

Dearlove: That's the sort of question that I probably won't want to answer. But what I'll say to you is that my knowledge of the French Security Service is that they are extremely efficient. They're one of the most performant in the whole of Europe.

Haym: Louise, did you hear also about this town? What's your feeling about the fact that all those oligarchs arrived in the past ten or twenty years in the South of France?

Shelley: It's more than twenty years, and they arrived in the South of Spain. And it's been a very present part of the rich Mediterranean community. But the French did not investigate the Russian presence as much as the Spaniards did.

Haym: And the Spanish did an investigation on that?

Shelley: The Spanish did multiple investigations over multiple years.

Haym: What did they find?

Shelley: They found massive numbers of oligarchs, oligarchs that were connected to organized crime, and they rounded up large numbers of criminals, and they kept this under watch.

Haym: In contrast to France, how do you explain that, Louise? How do you explain that?

Shelley: Because the Spaniards were so concerned about, basically, the invasion of so much Russian money and so much dirty Russian money into Spain that they started investigating this in the, oh gosh, maybe 1995. And online, you can find leaked documents from the Spanish investigation because the Russian oligarchs were involved in trying to compromise these investigations, so these materials couldn't be used against them.

Haym: Sir Richard, how do you explain that those governments like the Spanish government or the French government letting them in?

Dearlove: Well, I think you have to look at the bigger context, which was, you know, Cold War ended, things changed massively in Russia. In some aspects it's opened up to the West. Its trade became important in a way that it was isolated during the Cold War. And I think to begin with, there was a laissez-faire attitude.

Haym: Laissez-faire attitude, which is a kind of very French expression, if I say. A laissez-faire attitude means, for the listeners of this podcast, it means, oh, we let everything happen there. So there was this kind of laissez-faire attitude.

Dearlove: Yeah, and I mean, I think the point that Louise made about the difference between the Spanish approach — I mean, you look at Spain was, for example, a venue for a lot of British criminals who were trying to escape justice. So Spain has a tradition of going after, let's say, undesirable individuals who set up house in Marbella or wherever it is, and spend their ill-gotten gains on the Costa Brava. I think the French attitude towards Russia was rather different, and they were only concerned about the Russian community initially if there was a specific security question which related to, you know, internal security of France, or there was some aspect of suspicious activity which reflected the activity of the Russian state rather than Russian individuals. But, you know, so in the early days, things were very, very different. But, you know, we've moved on such a long distance now. I think we understand far more the problems that we're up against and the infiltration of criminality.

Haym: Sir Richard, you are talking a few minutes ago about the UAE, the United Emirates. And I would like to ask you this question. The New York Times tracked recently the flight records of some oligarchs through different sources. I know that some of them have been to Dubai, sometimes to Qatar, of course, to the United Emirates. How do you explain that they're going there?

Dearlove: Well, because it's been quite clear that the UAE's attitude towards having them is equivocal. I mean, they're quite keen to attract international money. These people still run big businesses. They're still influential. Their reputation, of course, is highly questionable, but it's an obvious venue for them. They've been encouraged to go there. So if they can't stick around in Europe, what are the alternatives? The alternatives are possibly Turkey.

Haym: Which becomes really important. We can see that with what's happening with President Putin and President Erdoğan in Turkey dealing together about the Ukrainian war. So Turkey is also quite important in the Russian aspect and diplomacy. Correct?

Dearlove: Absolutely. And I mean, it's clear what Erdoğan is trying to do. He's trying to position himself as a potential intermediary, so that if at any point there are going to be peace talks between Ukraine and Russia, probably Turkey would be the obvious player to separate but communicate between the two sides. There's a huge Russian community in coastal Turkey. They've been there for years. They're well established. I think the other issue with a lot of the oligarch families is they want to make very sure that their children are not in Russia, so that if there is a general call-up to the military and we get beyond the special military operation, their children are out of reach of the Russian state. I mean, there's no question about that at the moment. You know, world has closed down partially for these Russian families. But on the other hand, there are still sufficient places to go, which have a culture which accommodates them — luxury hotels, all the rest, and, you know, is prepared to welcome them and to an extent their money.

Haym: And also fiscal facilities for them to launder their money. Correct? I mean, do you think Dubai is an interesting place for that? Or again, the UAE, the United Emirates?

Dearlove: Yes. I think Dubai perhaps has more flexibility than — I mean, The UAE is maybe a bit more regulated, but I think all of those will offer facilities to these Russians, so it's an obvious place. Look, they've always been a sort of crossroads culturally, and they've always been less censorious, let's say, on political issues because of their own — you know, you're talking about autocracies, you're not talking about democracies. And it's a very clear-cut situation. And these Russians are running out of choice of places to go, and the ones that are left are pretty clear-cut.

Haym: How, in your opinion, they're dealing with Putin far away? Because they're not in Moscow anymore. Do you think President Putin is using them when they're overseas?

Dearlove: Well, I think it depends on the relationships that they have with Putin and the Siloviki, but I think most of the influential ones have straight links into the regime. They will have their means of communication. They will have their interlocutors. I'm quite sure that the Russians will use their intelligence and security organizations to facilitate those oligarchs that they see as favorably disposed towards Putin and not a problem for the Russian state. But there will be those that are deceiving us that they're in opposition to Putin, but aren't in reality that at all. I mean, you know, it's a very nuanced situation.

Haym: Can they have an influence on him at this point? I mean, do you think President Putin is talking with some oligarchs about the war in Ukraine and also, for instance, the energy restriction? Because we can really see in Europe that at this moment, the debate is about the gas and the electricity restriction, which could happen in a few weeks here?

Dearlove: I mean, I think Putin's policy on Ukraine is Putin's policy on Ukraine. That is clearly driven by Putin and a very small group around him. I think the oligarchs are expected to fit in and support him. If they oppose him, then they're in a difficult situation. When you get onto the issue of Russian energy, yeah, I mean, there are energy oligarchs, it affects them fundamentally. And you know they will be as keen as Putin is to find alternative markets if Putin is going to embargo the West, let's say. Those alternative markets are gonna lie probably in Asia, China obviously, and they'll want to come to accommodation with individual countries. Some oligarchs will play a role in that.

Haym: Louise, you're an oligarch specialist. Do you think, again, those rich oligarchs could have an influence on President Putin?

Shelley: In general, the oligarchs at the moment have very little influence on Putin. He is living in a very close circle with his close advisers and he has, as you say in French, an idée fixe.

Haym: I mean, I'm glad to see that you and Sir Richard are speaking French. So for the listeners, idée fixe means fixed ideas. So go ahead. Thank you so much again for that.

Shelley: He's absolutely determined to dominate Ukraine, whether it makes economic sense, whether it makes long-term political sense for Russia and the West and with NATO, that's not his concern.

Haym: So you're saying that the oligarchs at this moment do not have any influence on him?

Shelley: I would say that at this moment, most of the oligarchs have absolutely minimal influence on Putin. But he has to decide what he is going to be doing about energy issues because that has enormous implications for the Russian economy because the Russian economy is totally dependent on oil and gas exports.

Haym: That much, we know that. But just to come back to the oligarchs, Louise, you heard about Roman Abramovich. Correct?

Shelley: I don't know Roman Abramovich. I certainly follow his life, his path, his trajectory, but he's not the only oligarch in the oil and gas sector.

Haym: So who is the most important oligarch at this moment for you who could have an influence on Putin?

Shelley: I don't think there are many oligarchs who are having an influence on Putin. I think that if you're thinking about Rosneft, if you're thinking about the Russian oil companies, there are people who have dual roles in Russia. They are running part of the economy, and then they are major investors and holders in the Russian oil and gas sector. And that's, you know, who we need to be focusing on. Because there's not this separation in Russia that you're thinking about elsewhere, that someone is an oligarch and then someone's in the government. There are oligarchs who are in the government, and then there are oligarchs who have sectors of the government that were privatized to them, that are very much, as Sir Richard talked about, dependent on Putin to maintain their businesses.

Haym: So that's a kind of relation between, again, Putin and the oligarchs. Even if they don't have an influence on him, it's an interdependent relationship. Correct?

Shelley: Yes. But it's also that some of the people running the Russian state, who are in lead positions in Russian government, are also oligarchs at the same time. And it's not just the oligarchs that you're thinking of, of Abramovich or Deripaska, who are powerful and international. They're also within the state apparatus.

Haym: There's an idea in France, and I'm curious to ask you both this question, that one day due to the fact that maybe Putin is sick, one oligarch can replace him. Do you agree with this idea?

Shelley: I think that the likelihood of who would replace Putin if he becomes ill is not an oligarch, but someone who's a member of the Siloviki, which is the power structures of Russia. Someone like Patrushev, somebody who is in Putin's inner circle at the moment. Whether that person would survive in power a long time, I don't know. But that's what I see as the next scenario.

Haym: Sir Richard, do you agree with that?

Dearlove: Yeah, I agree with Louise, absolutely. It'll definitely be initially one of the Siloviki, and I mean, I would go as far as to say almost for certain it would be Patrushev at the moment. Whether that figure will survive politically in the longer term is entirely another question, because then if you get back to a Russian election, and they do have elections in Russia, then you could see money and wealth and influence playing a different role in what one would describe as the Russian political system. But initial successor, definitely a Silovik. No question.

Haym: Louise, do you think the oligarchs have been weakened by the war in Ukraine? Outside the Russian system that's still extremely powerful in terms of economic influence? That's what I'm trying to understand also.

Shelley: So if you're asking, have they been weakened by Ukraine, I mean, yes, some of their net worth has declined dramatically. But also because this decision to go and wage war on Ukraine was made by Putin himself, it is not a decision in which the oligarchs took part. And they were, at the initial part of the war or before the war, Putin laid out his position, and they had to go along with it. And there has been little opposition. So it's not as if they've been weakened. They were not in a strong situation except financially before the invasion.

Haym: You think financially at this moment, the money went to Dubai, went to the United Emirates with them? Do you think they have access — they're there?

Shelley: I mean, they've managed to move their money. But also to have the influence that they want, and to live the kind of lives they want to live, they need access to their wealth in Western Europe, and to Western Europe, and to the United States. And that's been made more difficult for them.

Haym: What do you mean by the United States? Do some oligarchs are in the United States at this moment?

Shelley: They're not in the United States in their property. Their yachts are not in the United States, but some of them own very, very valuable properties in the United States, in Florida, in New York, and they don't have access to them.

Haym: There are lists of them. So the sanctions have been efficient against them or no, in your opinion, both of you?

Dearlove: Well, I think sanctions have worked to the extent of restricting the lifestyles of, you know, those who are close to Putin, those who've been sanctioned. I mean, there's no question about that. Whether the sanctions have worked in terms of restraining Russia's invasion in Ukraine is a completely different issue, and we can see clearly that because of the high price of energy, the Russian state is still making an awful lot of money to pay for the war in Ukraine. So, you know, there's a definite dichotomy there of analysis when you look at what's happened. But the financial systems in the States and in the UK have made life very difficult for individual oligarchs, if not for the Russian state. Do you agree?

Shelley: They've shortened some of their ability to spend money, but there are many properties in the United States that are very valuable that have not been frozen, that belong to Russian oligarchs and have not been frozen by our government. So for instance, in Florida, in other cities in the United States, in ski resorts, they've been identified and have not been frozen.

Haym: Which cities and who are we talking about?

Shelley: We're talking about, you know, major oligarchs. And we're talking about not just cities, we're talking about areas of ski resorts, urban areas. And this property hasn't been frozen. We've not been as efficient at finding this property as we should be, and not as efficient at freezing it. And confiscating it, that's an entirely different situation.

Haym: What do you recommend to the government to do about that?

Shelley: I think that they need to have much more cooperation with civil society that is locating these properties and helping them do the kind of analytical work that they haven't done previously on the location and the assets of oligarchs.

Haym: And Sir Richard, what's your recommendation?

Dearlove: Well I think I very much agree with what Louise is saying. I mean, there's an important point that's come up here, which is legally confiscation is difficult. I mean, for example, this business with these super yachts that have been impounded, and therefore become temporarily the possessions of the governments that impound them. There's a huge problem, which actually is infecting the insurance companies. I happen to be chairman of an insurance underwriting syndicate at Lloyd's. And you know, what on earth do you do with one of these boats if you're the insurer? If they're impounded, these things deteriorate at a massive speed and they become pretty much valueless in a rather short period of time. And the insurance companies do not want to face that situation and then have to pay the owners for the value of the boat. Anyway, I'm describing to you the complexity of one situation when you get into this issue. But, you know, I think for ordinary people looking at this, you know, they imagine that the government can just go around and confiscate everything. Of course, that's not legally possible in the United States, in the UK, and I'm sure it's not possible in France either.

UKRAINE AND CORRUPTION

Haym: Just to finish on that, we're going to wrap up here very quickly, but I would like to speak a little bit about — very briefly — to both of you. And I'm going to begin with Louise by the Ukrainian situation. According to your research, what's the Zelensky relation with the rich Ukrainians?

Shelley: I mean, one of the problems that overshadowed Zelensky before the Russian invasion was his very close relationship with Kolomoisky. Kolomoisky owned the TV channel where he had his wonderful show called Servant of the People. But Kolomoisky is also an oligarch, an incredibly corrupt oligarch. And he laundered huge amounts of money into Cleveland, into cities in the United States. And he's been subject to massive investigations for his corruption and money laundering into the US. So this overshadows Kolomoisky, but now he is, you know, defending his country. But it has been a problem in the anti-corruption efforts that preceded the war. And the presence of so much corruption will be a major concern when Ukraine starts to rebuild after this war.

Haym: Do you think the money sent by the United States and Europe to Ukraine can go in the wrong way? I mean, do you think the corruption is so huge in Ukraine that the money is not going to go to where it should go?

Shelley: I'm saying at the moment, I don't think that there is massive corruption in the military assistance. But I believe very — there is illicit trade going on that we're analyzing at the moment at my research center on diversion of humanitarian aid. That is a serious problem. And what will happen when there is reconstruction money and how much of that will be diverted, corrupted, is a very significant concern for the future.

Haym: That's fascinating. And again, very briefly — Sir Richard, I'm going to come back to you in one minute. But very briefly, Louise, in your research, what did you find so far about the diversion of money, Western money going officially to the humanitarian aid, and apparently which is not going there?

Shelley: No, this is not a question of money being diverted. It's a question of the aid, food aid. So tangible items that are being diverted from their intended targets to, you know, for personal profit. And I'm just — we're just in the midst of starting this, but it's a problem that has been identified in the border areas.

Haym: Do you think it can happen to the weapons?

Shelley: I think that there is so much concern about the weapons and they're so visible that I'm not sure that the weapons can be as diverted as easily as the humanitarian supplies.

Haym: But the humanitarian supplies go to, for instance, very rich Ukrainians at this moment according to your research?

Shelley: That I can't say. There is some diversion going to organized crime groups that are operating in border territories.

Haym: Ukrainian organized crime groups, correct?

Shelley: I don't know if it's just Ukrainian groups. There have been longstanding groups operating along the border of Ukraine with the eastern parts of the EU. And those groups have not disappeared. But this is what I'm working on now. I can't tell you all the details. Give me a few months.

Haym: No. But I hope we will — you will be able to do another podcast with us when you will have finished your research because this is absolutely fascinating. Sir Richard, did you know about that?

Dearlove: Well, I wouldn't say I know about it. I'm suspicious. Look, I think with Ukraine, our hearts are with the Ukrainians. You know, we have this amazing sort of emotional commitment to them. But you have to bear in mind, if you go back, you know, before the Russian invasion, if you go back through Ukrainian politics over the last ten years, the country's been through successive crises and corruption within Ukraine has been a major problem. This hasn't necessarily gone away. It's been sublimated because of the military conflict, and I think I agree with what Louise is saying. I think it's unlikely at this point in time that the Russian — sorry, that the Ukrainian military, that the supply of arms is subject to corruption and diversion. I think in other areas, we have to worry because, you know, Ukrainian major criminality has been a problem in the area before the conflict started and it's not gonna go away just like that.

Haym: Perfect, and just to finish, that will be my last question. Louise and Sir Richard, how long do you think this conflict is going to go on?

Shelley: I don't see a ready resolution of this conflict. And whether it continues at this massive scale, I'm not sure, but it's not going away. Since 2014, when the invasion first occurred in Crimea and Eastern Ukraine, there has been guerrilla warfare for the last eight years. So this is not ending soon, unfortunately.

Dearlove: This is a war that started in 2014. We've got to remember that. And there's currently no end in sight. If you ask me to estimate, you know, before the conflict, as it were, begins to reduce, I would say another year to eighteen months at least.

Haym: Thank you so much. On this note, which is not an optimistic note, we're going to leave you there. Louise, thank you so much. We really would like to see your report and read your report and of course speak about your report, which seems absolutely fascinating. And Sir Richard, as always, we really appreciate your time on this podcast. And we hope you enjoyed this discussion about the oligarchs, the war in Ukraine, and we hope you will join us soon for another podcast dealing with international foreign affairs and diplomacy. Thank you so much, both of you. It was a pleasure to be with you.

Dearlove: Au revoir, plaisir, and Laura. Merci beaucoup.

Haym: Louise, thank you so much. Merci beaucoup. Thank you. Au revoir. Merci beaucoup.

Mcfarlane: That's it for this week's episode of One Decision. We drop new episodes every Thursday. Subscribe so you never miss an episode. Drop us a line. Tell us your thoughts. What decisions have impacted you and where you live? You can write to us. Our email is 1decision@1decisionpodcast.com. From me and the team, thank you for listening, and see you next time.