The Oligarchs’ Fire Sale

"Oh, what a tangled web we weave, when first we practice to ..."  Sir Walter Scott

George Rebane

As an idle exercise I’ve thought of what most likely is going on with those Russian oligarchs who have had their financial plans upended by all the sanctions and who stand to lose more in the coming weeks/months.  Reports are that they’re selling their expatriate assets – land, estates, townhouses, yachts, airplanes, art, securities, … - that can be seized and/or confiscated.  So what do you do if you’re one of Putin’s pals worth a few billion dollars, with a good part of it spread around the world, and you find your name on the internationally published sanctions shit list (SSL).

Well, I imagine that their objective is to survive in the post-Putin world with enough money to make their life comfortable wherever they may wind up once the dust settles and Russia regains some semblance of normalcy.  Now such a QoL does not require billions, a few tens of millions would do nicely, and even better with a few hundred million.  Time to have a couple of yard sales, one in Russia, and one in divers parts of the globe.  But now comes the tricky part.

Assuming you do have some trusted agents (relatives?) living in different parts of the world, how do you sell your stuff?  Let’s dispense with ill-gotten assets; all your foreign stuff has been legitimately obtained and held in their host countries, with above-board purchase monies paid and transferred through the then world banking systems.  But now you cannot sell any of it without payments going through the post-sanctioned banking systems.  Any sums entering those conduits of finance could and will be confiscated/frozen; in short, you wouldn’t be able to spend such monies even after a legal transfer of title to the buyers.  So what to do?

Well, you would have to sell your $200M yacht to someone for say an above-board $1,000, with your agent having negotiated a sub-rosa payment of $20M consisting of fungible tangibles like precious stones or gold bullion that can be squirreled away out of sight.  We’re assuming here that such buyers with ready access to fungible tangibles can be found in the world’s markets.  So let’s postulate that you can sell enough of your expatriate assets for stashes of valuable commodities that await your emigration from mother Russia.  (I assume that those on the SSL will not be welcome in a post-Putin Russia for all the obvious political reasons.)

After the dust settles, you see yourself ensconced in a luxurious townhouse in Buenos Aires or Santiago.  But will you be living the life of ease that you had planned and carefully endowed through a sufficient cadre of trusted agents?  You must know that now-expatriate former oligarchs on the SSL will be tracked and monitored by everyone from various intelligence services and Interpol on down.  On the more sinister side, you can expect that criminals of various stature will also track and know the whereabouts of SSL graduates.  And they all know that you still have considerable wealth in untrackable but readily transportable forms stashed away here and there.

Since SSL members will forever remain exposable pariahs, no matter where they settle, starting with the local authorities, no one will show any great concern if suddenly your wife or one of your children is kidnapped and quietly held for ransom.  For now you are a marked man for the rest of your born days.  I’ll end this little fantasy by wondering how an oligarch would fare if he decided to sign his in-country assets, or his overseas stashes, to Putin’s Russian state to provide much needed foreign exchange.  Would this generate survivable goodwill into post-Putin years?  We can dissect this another time or in the comment stream.  But we can all depart these musings with the conclusion that today it probably is not much fun being a known Putin toady and an oligarch on the SSL.

Comments

[scenes]

I was thinking about that some.

One lesson for any billionaire out of this is that you need some serious dosh stored worldwide and a few boltholes. Run afoul of the people who run the money and it's all gone, whether you're a Russian oligarch or a truck driver cutting up rough in Ottawa. It's largely a side effect of computers and modern communications.

A variant I was considering were all the Ukrainian oligarchs, as that country has an economics system that roughly rhymes with Moscow's. Will they come out of this with all their stuff intact?

https://en.wikipedia.org/wiki/Ukrainian_oligarchs

Plus there were bound to be people with their feet on both sides.

There has to be Chinese wealthyfolk who are watching this all with interest, whether they fear their own government or the US hegemony's.

If I had that kind of money, one lesson is the lack of value of playing by the 'rules'. There aren't any. Nothing is really private, nothing is really yours, nobody is a neutral arbiter. You might as well go criminal from the get-go.

[George Rebane]

Good thoughts Mr scenes. Your points about the rich dudes in China, Ukraine, and elsewhere where ultimately envy rules are on the mark IMHO.

[Bill Tozer]

Russian mafia. Ukraine mafia. Ain’t much difference between the two of you are in one of their clubs in America.

Russian Banks to Switch to Chinese Card System after Visa, Mastercard Suspend Operations in Russia

https://www.nationalreview.com/news/russian-banks-to-switch-to-chinese-card-system-after-visa-mastercard-suspend-operations-in-russia/?

Alpha Bank again, eh.

[fish]

If I had that kind of money, one lesson is the lack of value of playing by the 'rules'. There aren't any. Nothing is really private, nothing is really yours, nobody is a neutral arbiter. You might as well go criminal from the get-go.

...ding, ding, ding....!

It has certainly worked for President Bad Finger and his ne'er do well spawn.

[fish]

Putin Orders Companies To Make Debt Payments To Foreign Creditors In Rubles

Troll level: Superior

if he orders them to pay at the prewar rate of exchange....

Troll level: Grand Master

https://www.zerohedge.com/markets/putin-orders-companies-make-debt-payments-foreign-creditors-rubles

[scenes]

"Ain’t much difference between the two "

Modern times make it a bunch more interesting. Of course, it used to be a lot harder to get that rich, usually involving a natural monopoly in hard goods rather than selling ads in a surveillance-based business. I guess the Russians/Ukrainians got their money from old-fashioned industries.

I was looking up the history of US seizure of German assets in 1941 (which was followed by a reciprocal seizure by the Germans). The money then became permanently seized in 1948. It makes sense if you are in a death struggle with an enemy.

Evidently, now it's sufficient to be a citizen of a country who has invaded another country that we don't defend but are kindly disposed to. A lot lower bar to jump. Between the truck drivers in Canada and Russian oil barons, it's pretty obvious that the banks are directly tied to the State Department and DOJ (or the Canadian version). I guess it's not so different from your ISP or email provider (or social media) throwing their doors open to any government request.

It was always bound to happen, not because they didn't always want that ability, but because it's a lot easier than it used to be.

Truly anonymous payment or communications systems will never be allowed to exist of course. Governments, including the US government, find it more important to spy on you than protecting their citizens from a worldwide threat.

[scenes]

from the Always At War With Eastasia Department.

"After 192 performances at the Metropolitan Opera, soprano Anna Netrebko will not be performing this year due to her support for Russian President Vladimir Putin.
The Met made several attempts to convince Netrebko, who has made statements critical of the war, to rebuke Putin but failed to persuade the singer."

https://www.foxnews.com/entertainment/anna-netrebko-out-met-opera-support-putin

[scenes]

(I'm assuming this is the new Ukraine v. Russia thread).

The politics of the average man.
https://twitter.com/ggreenwald/status/1500259902324936706

[Barry Pruett]

Follow the money.

[scenes]

BarryP "Follow the money."

Money has it's own mind, it always finds a way.

Stealing a quote I found on twitter.

"The decision to push almost 3 billion people (Russia, India & China) into trading with each other in currencies other than the dollar, will go down as one of the most short-sighted and self destructive policies in US history."

Maybe the truth is that it was always going to happen.

[George Rebane]

Don't think India will fit well into that triumvirate. Demographically India will the lunches of both China and Russia. And India has never lost much love for China. Russia is waiting for its Muslim invasion. Putin doesn't know it, but his real hope is with Europe, and that is the well he's already shitting into without there even being another. I see Russia and China going at it for trans-Ural Siberia well before the century is out.

[scenes]

"Don't think India will fit well into that triumvirate."

By signing up with non-dollar based transfer systems (which is all that is said there)? I don't see the harm to them. I suppose that the US could threaten India for interacting with Russia in any way, a sort of corporate takeover of the world.

To what extent is the value of the dollar buoyed up by it's use as a transfer mechanism? How much would it drop as countries realize that access to those systems can be cut off in a moment by violating US foreign policy?

In one sense, it's like the risk you take on by purchasing Microsoft products (particularly in large backends) or Tesla automobiles. Elon Musk is holding strong, but it's just one guy. The US government has a knife switch in it's hand.

That, to me, is the long-term change from this situation, it's just another great power v. smaller power war otherwise. The realization that large systems can be quickly weaponized (it was always true to some extent, but this is much larger) is a lesson that was just taught to the world.

[fish]

The next shoe to drop....

Pam and Russ Martens: Which banks owe billions on Russian credit default swaps?

https://wallstreetonparade.com/2022/03/the-big-question-on-wall-street-is-which-banks-owe-41-billion-on-credit-default-swaps-on-russia/

[Scott O]

scenes - "By signing up with non-dollar based transfer systems (which is all that is said there)? I don't see the harm to them."
A "non-dollar" system would, per force, mean a Yuan based system. I can't see anything else on the horizon. The Indians absolutely hate (and fear) the Chinese. Big time.
It's not just a monetary system, it's capitulation to their long time enemies.
Ain't happening.
You might investigate the massive investments the various Indian companies have made in former Euro companies against their competitors in China.
China buys Italian motorcycle and car corps and Indians buy English and Eastern Euro car and motorcycle corps. I just can't see the Indians going in with the Chinese unless they have no choice.
The Chinese are also heavily tied to US currency backed financial sources. If and when they try to bring down the US dollar as a standard currency, their own country will take a big hit.
Of course in China they just shoot protestors dead.
So there's that.

[scenes]

"A "non-dollar" system would, per force, mean a Yuan based system. I can't see anything else on the horizon. The Indians absolutely hate (and fear) the Chinese. Big time."

https://economictimes.indiatimes.com/news/economy/foreign-trade/india-russia-china-explore-alternative-to-swift-payment-mechanism/articleshow/72048472.cms

https://www.deccanherald.com/business/business-news/sbi-becomes-first-bank-to-link-up-with-chinas-bank-751517.html

https://www.unionpayintl.com/en/mediaCenter/newsCenter/companyNews/4850.shtml

https://economictimes.indiatimes.com/news/economy/foreign-trade/india-russia-china-explore-alternative-to-swift-payment-mechanism/articleshow/72048472.cms

https://www.reuters.com/article/npci-chinaunionpay-pact/national-payments-corp-of-india-to-tie-up-with-china-unionpay-idINKBN0O60LM20150521

I would guess that India develops it's own, but don't know.

Since the West weaponized electronic funds transfer, any large country that hasn't developed or looked into alternatives is foolish.

" I just can't see the Indians going in with the Chinese unless they have no choice."

Why can't they use both systems?