Russian government policies helped create many of the country's billionaires and now they are the reason many of those billionaires are losing billions of dollars of wealth.
These oligarchs got rich when the Russian government awarded them control of newly-privatized, state-owned enterprises. But sanctions imposed by the U.S. and European Union to protest Russia's incursion into Ukraine have erased some of that wealth.
As of Monday, the 19 richest Russians lost $14.5 billion so far this year, while the 64 richest Americans gained $56.5 billion, according to Bloomberg Billionaires, which tracks the net worth of the world's richest people.
"These sanctions are really hitting these guys," says Rob LaFranco, an editor at Bloomberg Billionaires. "They're losing a lot of money every day and it's continuing to go down."
They're losing money in the Russian stock market, where their companies' stocks trade, and wealth in the West, where they own basketball and football teams and real estate and where many have had their assets frozen.
Alisher Usmanov - a close confidant of Vladimir Putin and Russia's richest man - owns metals conglomerate USM Holdings and Arsenal Football Club in England. He has lost close to $3 billion. These sanctions have "created a sense of panic" among these Russian oligarchs, says LaFranco.
The sanctions include travel bans and frozen assets for individual oligarchs as well as restricted access to capital markets for their companies. The U.S., which had already frozen the assets of many Russian oligarchs, such as Rosneft CEO Igor Sechin, last week announced new sanctions that restrict access to American capital markets by companies like Rosenft. But that was before the Malaysian Airline passenger jet carrying nearly 300 people was shot down over disputed territory in the Eastern Ukraine.
Since then, Ukraine, U.S. and many European countries have been blaming Russia-supported rebels in the area for downing the plane with a Russian-made surface-to-air missile, but as of Tuesday U.S. intelligence hadn’t determined who pulled the trigger.
Now the EU is threatening to impose additional sanctions against Russia including freezing more assets of individuals and corporate entities, and a possible arms embargo.
Russian billionaires will not welcome new sanctions, says LaFranco. But, Putin will likely try to lessen the impact. For example, says LaFranco, Putin has offered Russian billionaire Gennady Timchenko contracts to help rebuild insfrastructure in Crimea. "He has ways to offset the losses that they're seeing in the West and the declining value of their assets, and that's the game that they're all playing with one another right now," says LaFranco.
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