Western Sanctions Pressure Mounts on Russian Oligarchs... Some Preemptively Transfer Assets

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Russian oligarchs, the wealthy elite, are coming under pressure due to sanctions imposed by Western countries following Russia's airstrikes on Ukraine. Steel companies that created the wealth of these oligarchs are facing bankruptcy risks, leaving them with nowhere to secure their assets. However, some reports suggest that many have already secretly moved their assets, raising questions about the effectiveness of the sanctions.

According to the Wall Street Journal (WSJ) and others on the 22nd (local time), Severstal, Russia's largest steel company, is facing bankruptcy due to financial sanctions following the invasion of Ukraine. Although it transferred $12.6 million (approximately 15.27 billion KRW) in interest on dollar-denominated bonds to Citigroup in the U.S. last week, the payment reportedly did not reach bondholders due to the sanctions. As a result, Severstal will be legally in default as of the 23rd, five business days after the interest payment due date. Debt repayment is exempt from sanctions, so there remains a possibility that the interest payment may be recognized at the last minute.

Severstal is owned by mining magnate Aleksey Mordashov. Mordashov is a close associate of Russian President Vladimir Putin and holds assets worth about $29 billion. He is also on the European Union (EU) sanctions list, and as a result, Italian authorities have seized his luxury yacht and residence.

Evraz, a steel company whose largest shareholder is Roman Abramovich, owner of the English professional football club Chelsea, is also reportedly facing bankruptcy. The bond interest payment was due on the 21st, but payments were blocked by the bank Soci?t? G?n?rale due to sanctions. Abramovich is also on the UK and EU sanctions lists.

Another oligarch, Dmitry Pumpyansky, had his luxury yacht Axioma seized in Gibraltar, a British Overseas Territory, on the same day. Pumpyansky is chairman of OAO TMK, Russia's largest steel pipe manufacturer supplying the state-owned gas company Gazprom.

Bloomberg reported that Russian oligarchs have stored vast wealth in Cyprus, but recently, major shareholders of Russia's large steel company MMK, including Viktor Rashnikov and mining magnate Aleksey Mordashov, have moved assets out of Cyprus to other locations within weeks. Bloomberg stated, "Billionaires who have hidden assets overseas suddenly have far fewer options," adding, "Taking money back to their collapsing home country to be seized by Putin, or keeping it in jurisdictions like Cyprus or the Caribbean under U.S., UK, or EU control, both carry the risk of seizure."

However, some argue that it is difficult to fully identify the oligarchs' assets, and many have already transferred ownership to family members or others, reducing the practical impact of the sanctions. The BBC reported that Alisher Usmanov, known as Russia's steel king, claimed he is not the owner of most of his UK assets, including real estate and yachts, as they have been transferred to family trusts. Usmanov is a prominent Russian oligarch who made his fortune in steel, mining, and telecommunications. Until 2018, he was the second-largest shareholder with over 30% stake in the English Premier League (EPL) club Arsenal and established commercial ties with Everton through his company USM.

This content was produced with the assistance of AI translation services.