Eegore
Serious Thumper
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"It's all Greek to me.
IDK how to find and use a translator."
This is as close as I can get:
The snow-white columns of the Saint Catherine Hall in the Kremlin tower over 37 men in suits and masks. The three rows of classic chairs they sit on form a semicircle. It is Russia's most powerful oligarchs who have been summoned to be here on this afternoon of February 24 . Across from them, about ten meters away, Vladimir Putin sits behind a white desk with gold trim.
Twelve hours earlier, the first missiles were fired at Ukraine and the Russian invasion began.
The war was unavoidable, Putin tells the wealthy businessmen. 'There was a great risk that the survival of our country would be endangered.' The Russian president asks for support for the government and understanding for the painful sanctions that will follow from the West.
Less than two weeks later, the European Union placed eight of those present on the sanctions list. Their assets must be frozen and they are no longer welcome in the EU. Six months later, that number has risen to 26.
But eleven businessmen who sat silently in the Kremlin that afternoon, including the two richest Russians, have not been blacklisted to this day.
That is striking. Attendance at the meeting in the Kremlin is explicitly mentioned by the EU as a reason to introduce sanctions against, among others, Tigran Khudaverdyan, the CEO of Yandex, and Mikhail Poluboyarinov, the head of Aeroflot airline.
In its substantiation of the sanctions announcements, the EU uses the following sentence no fewer than twelve times: 'The fact that he was invited to that meeting shows that he belongs to the small circle of oligarchs close to President Putin and that he has committed actions or supports or carries out policies that undermine or threaten the territorial integrity, sovereignty and independence of Ukraine, as well as the stability and security of Ukraine.”
But who are the eleven men for whom this apparently does not apply? What makes them untouchable? Why does the EU – unlike the British – refuse to take away freedom of movement and property from these Kremlin henchmen?
Sanctions expert Roland Papp of Transparency International has his suspicions. “For these 11 individuals, there is clear evidence to sanction them because they were present at the Kremlin meeting. The fact that they are not on the list has political reasons.'
Confessional sessions
How the EU determines who will and will not be punished for its close ties to the Russian regime is a secret. EU diplomats and the European Commission therefore refuse to provide an explanation. "We are not commenting on which individuals or entities have been proposed or will be proposed, but all options are on the table," a Commission spokesperson said. She does emphasize, however, that an oligarch will not be placed on the sanctions list until all 27 EU countries have agreed.
This search for consensus is a diplomatic dance orchestrated in detail. This starts with what has come to be called the confessionals in the Brussels corridors . Diplomats from EU member states must 'confess' whether it is acceptable for their country to sanction oligarch X. Only when the European Commission is virtually certain that no country will interfere will it draw up the list of names of persons and companies.
A courier then takes the lists to the European capitals. Nothing is sent digitally. All this with the intention of preventing names on the list from leaking out. But that is an illusion, says Transparency International's Hungarian policy adviser Papp. Hungary is blackmailing the negotiations and blocking important decisions. Unfortunately, all 27 countries must agree to the sanctions, so it is not possible to keep Hungary, or any other country, out. I'm pretty sure if they send a sanctions list to Budapest, that list will also go to the Kremlin.'
The diplomatic dance ends with the approval of the foreign ministers, after which the sanctions list is published in the Official Journal of the European Union a few days later . If everything goes as it should, a Russian oligarch will only know at that moment that his European assets are being frozen and he is no longer welcome in the EU.
The most recent confessional sessions concluded on December 7. These should lead to a ninth sanctions package this week.
Hurt
The sanctions against individual Russians go beyond taking superyachts and luxury apartments in Amsterdam or Paris. The effect spills over to the companies that the oligarchs own or control. 'Control is a kind of safety net that the European Union uses when someone is not the owner, but does have influence on the business,' says lawyer Sebastiaan Bennink, who specializes in sanctions. 'All those oligarchs have now reduced their share of ownership. But these individuals are so influential that they can still speak of a say in almost all cases.'
Sanctions almost inherently create a dilemma. If Europe depends on the goods that an oligarch's company sells, for example natural gas or raw materials for battery production, the imposition of sanctions will harm the European economy. Frans Timmermans, Vice-President of the European Commission, is aware of this. 'Each subsequent sanctions package hurts a little more. A sanctions package must of course hurt the other side, but it also hurts us. That is in the nature of sanctions,' he says on June 2 of this year during a lecture in The Hague. 'Each time, countries have to consider whether that pain can be justified, because of course it should not lead to deep social unrest. Then you still help Putin to fuel division in Europe.'
Roland Papp disagrees. “Ultimately, the pursuit of keeping everyone happy leads to giving up too much. It makes European decision-making slow and less effective. That is how European decision-making works, but in the case of sanctions it is problematic. It leads to weak outcomes.'
The Nickel King
Weak sanctions policies are exactly where men like Vladimir Potanin ($31.4 billion in wealth) and Leonid Mikhelson ($28.2 billion in net worth) benefit from. They are the two richest Russians according to the Bloomberg Billionaires Index and were both present in the Kremlin on February 24.
Potanin's career is intimately intertwined with the Wild West capitalism and nepotism that has gripped Russia since the fall of communism. The sale of state property in the 1990s was conceived and designed by Potanin . He secured a monopoly on the Russian mining and metal industries. In addition, the oligarch funded the 2014 Winter Olympics in Sochi and is President Putin's ice hockey buddy .
'Potanin is a major shareholder in investment company Interros and therefore also in Nornickel, one of the largest mining companies in the world. Nornickel is essential for the mining of metals such as nickel and palladium,' says Sanctions lawyer Bennink. '20 percent of the nickel and 40 percent of the world's palladium production comes from this company. This makes it extremely important for our Teslas or for rechargeable batteries.'
Since the start of the war, nickel imports from Russia to the EU have increased by 22 percent, according to a survey by the Reuters news agency. The valueof Dutch imports of Russian nickel even doubled in the first eight months of the year.
Nowhere is the relationship between Europe and Nornickel as close as in the Finnish village of Harjavalta. The German chemical giant BASF is building a factory there to process nickel and cobalt into batteries for electric cars. The location was chosen because of its neighbor, a Nornickel refinery. In 2018 , the two companies signed a long-term contractoff. This contract ensures Europe's local supply of raw materials for battery production .
In response to questions from Follow the Money, BASF says that 'almost all' activities in Russia have been phased out because of the war. But that does not apply to the existing contracts with Nornickel. "If BASF were to stop working with Nornickel and supply nickel and cobalt to Harjavalta, it would disrupt an important value chain for European production of batteries for electric cars." The spokesperson emphasizes that these metals are not on the European sanctions list.
Benjamin Sprecher, industrial ecologist at Delft University of Technology and an expert on the scarcity of critical metals, understands that the EU does not want to jeopardize supplies of nickel, copper and palladium from Russia. 'A company cannot simply switch suppliers because the entire process is geared to a specific quality and shape of a metal. Even whether it is supplied in blocks or rolls makes a difference.'
In addition, according to Sprecher, even if Potanin and his company Nornickel were to end up on the sanctions list, he would not foot the bill. 'It's just not that useful to put sanctions on certain metals from Russia, because metals are super easy to transport. Certainly the metals that are traded in small volumes, such as palladium. You load it into a truck and then you drive it to China. And then we Europeans buy it there, with the only effect that it is more expensive for us and that Chinese intermediaries earn money from it. It's a waterbed effect.'
This war shows how intertwined our economy is with some Russian parties,' says sanctions lawyer Bennink. 'All those structures and interrelationships are important when considering whether or not to sanction someone.'
Energy as insurance
Like Potanin, the second richest Russian also trades in a product that Europe wants. Leonid Mikhelson sells liquefied natural gas (LNG), imports of which have increased by 40 percent since the invasion of Ukraine . The vast majority of this comes from Mikhelson's company Novatek.
The EU spent €12.5 billion on LNG from Russia between January and September, five times as much as in the same period a year earlier. France is particularly avid buyer: in February and March, no country in the world bought more liquefied gas from Russia, according to a study by Columbia University .
Mikhelson's and his gas company Novatek's links with France go far beyond LNG sales. French energy company TotalEnergies owns 19.4 percent of Novatek's shares. In addition, TotalEnergies owns 20 percent of Novatek's main LNG project: LNG Yamal. French participations in Russian projects earned TotalEnergies $748 million in dividends in the first nine months of this year.
While other European energy companies – such as Shell and BP – are withdrawing from Russian partnerships in the spring, CEO Patrick Pouyanne made it clear during a hearing in the French parliament that , as long as there are no sanctions, TotalEnergies will maintain its Russian activities. 'Our only motivation is to bring LNG to Europe.'
But under the pressure of mounting criticism , TotalEnergies decides on December 9 to write down the shares it owns in Novatek from 3.7 billion euros to zero. However, the company will retain its equity interest in Yamal LNG and the 10 percent it owns in another Novatek liquefied gas project: Arctic LNG 2.
Despite the fact that many European companies are phasing out collaborations, it is the Russian oligarchs active in the energy sector who clearly have the best credentials to avoid the Brussels sanctions. Also the bosses of Lukoil,Gazprom , Gazprom Neft andGazprombank were all in the Kremlin on February 24, but have not been sanctioned.
A nuclear power plant in Hungary
Since the beginning of the war, European leaders have avoided direct contact with Russian oligarchs. An exception to this is the Hungarian Minister of Foreign Affairs and Trade, Peter Szijjártó. Between May and September, he had three meetings with Aleksei Likhachev, the boss of Russia's state-owned nuclear energy company Rosatom. Twice he flew to Istanbul for this, the third meeting was in Vienna. Szijjártó also turned up in October at an energy conference in Moscow.
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