Putin’s Wallets. How Usmanov and Friedman Escaped EU Sanctions and Why That’s Dangerous

Ukraine received two news from the European Union – good and bad. On the one hand, the EU extended sanctions on Russia for 3 years, on the other – lifted restrictions from Russian oligarchs Alisher Usmanov and Mikhail Fridman.

Main: Lifting restrictions: the EU removed Russian oligarchs Alisher Usmanov and Mikhail Fridman from the sanctions list. Reasons for concessions: the lifting of sanctions was lobbied by France due to the detention of its citizens in Baku, and also Slovakia and Luxembourg. Asset returns: the oligarchs’ European accounts will be unfrozen, property returned, and Fridman will regain access to business. National barriers: Ukraine calls for each EU member state to impose sanctions separately, but this initiative has its nuances. What happened so far: the European Union had imposed sanctions only temporarily. Every six months all EU countries must agree to extend them. Previously, Hungarian Prime Minister Viktor Orbán often used this to remove either Moscow Patriarch Kirill or Russian oligarchs Petr Aven or Viktor Rashnikov from the sanctions list. But this time France unexpectedly stated its desire to lift sanctions on Usmanov. Slovakia joined, pressing to lift restrictions on Mikhail Fridman. This stance by Paris is not tied to a change in Emmanuel Macron’s general policy toward Russia. France remains a key partner of Ukraine. Also read: Ukraine is not costly for Europeans: interview with the French minister Adad Officially in Paris they refused to explain their motives in detail, saying only that it is connected with a “specific national security issue.” According to the Financial Times, lifting sanctions on Usmanov could be part of an agreement with Azerbaijan, which has recently pressured Paris. It concerns, in particular, the release of businessman Marten Ryan, arrested in Baku on espionage charges, and Theo Kleer – an artist sentenced to three years in prison for graffiti in Baku’s metro. Official Baku denies any agreements regarding Usmanov, but the next day the Azerbaijan president pardoned Ryan. Although most Usmanov assets are in Russia, he himself is a native of Uzbekistan. Lifting sanctions from him has been pursued by a whole group of Turkic states. Turkey, Azerbaijan and other regional states view Usmanov as their unofficial ambassador and patron who connects Central Asia with Europe. Previously, Turkish President Recep Tayyip Erdoğan, in a letter to Robert Fico, indicated that lifting sanctions on Usmanov is supported by Azerbaijan, Kazakhstan, Kyrgyzstan and Uzbekistan. “The reason is that Usmanov has invested heavily in Central Asia, has common interests with the Aliyev family, and uses this channel to lobby for lifting sanctions,” explains RBK-Ukraine source in diplomatic circles of one regional country. Regarding Fridman, his removal from the sanctions list was lobbied by Slovakia. Additionally, Luxembourg, where Fridman’s key company LetterOne is registered, supported this decision. This is related to the oligarch’s lawsuit against Luxembourg in The Hague Arbitration Court. Among other things, Luxembourg stated that its position in this case would become more vulnerable if the EU only excludes Usmanov from the sanctions list. If it were not possible to reach an EU-level agreement, thousands of individuals and entities could come under sanctions in the worst case, starting with Putin, many of whom have been on lists since 2014 year. In total – more than 3 thousand persons and companies. Thus most other EU countries went along with France, including long-standing supporters of sanctions. Latvia, Lithuania and Estonia particularly blocked Fridman’s and Usmanov’s removal until the end. Practical consequences: Excluding Usmanov and Fridman from the European sanctions list primarily removes entry bans to EU countries and allows unfroze their European assets. Both Russian billionaires will be able to freely manage their property and bank accounts in EU jurisdictions, says RBK-Ukraine analyst Yegor Ostapov of the Network for National Interests Protection “ANTS.” Fridman has a wide corporate network in Europe, as he controls the investment company LetterOne. This includes stakes in telecom operators Turkcell and Qvantel, the Holland & Barrett chain of pharmacies, and the Remedica pharmaceutical project. The exact amount of his blocked assets is not publicly disclosed, but the scale of his claims against Luxembourg suggests billions of dollars. Fridman will also recover elite real estate, including villas in Saint-Tropez on the French Riviera. “As for the company, if Fridman is a primary shareholder there, then by this logic he could gain access to it as well. But for reclaiming control over funds, real estate, and business he will still need to go through a number of legal and administrative procedures,” Ostapov notes. In turn, Usmanov does not have significant business in Europe, but owns property worth hundreds of millions of euros. Among his best-known European assets is the 156-meter superyacht Dilbar, valued at about 600 million dollars, which was detained in the port of Hamburg. He also owns villas on the coast of Italian Sardinia, property in Bavaria on Lake Tegernsee, and has numerous bank accounts in European banks. What happens next: The Office of the President of Ukraine finds the EU’s decision not to extend sanctions against Usmanov and Fridman “very strange.” “We do not see changes in circumstances that could justify this. Russia continues the war, and their ties to the Kremlin, which were among the grounds for sanctions, have not disappeared. It looks especially strange against the backdrop of intensified US sanctions and the adoption of “hellish sanctions,” says Vladyslav Vlasyuk, the presidential commissioner for sanctions policy. In the meantime, Ukraine already offers to compensate the lifting of EU sanctions with restrictions from individual states. “I call on all EU member states to immediately announce the introduction of their own national sanctions against these two individuals,” wrote Ukrainian Foreign Minister Andriy Sibiga on X. Usmanov and Fridman have long been under national sanctions by the United Kingdom, the United States, Canada, Australia, Switzerland, and Japan. After the general European restrictions were lifted, Latvia, Lithuania, and Estonia promptly joined. “We are already working with many EU member states on national sanctions against Usmanov and Fridman. At the same time, we are working with Brussels on new sanctions decisions, particularly regarding Russian oligarchs tied to the military-industrial complex,” Vladyslav Vlasyuk separately notes to RBK-Ukraine. However, such an approach can only partially compensate for the generally European sanctions, especially if de facto inland offshore centers of the EU like Luxembourg do not join. “Now it looks more like a display of disagreement with lifting sanctions by some countries. And although it is an acceptable substitute at the national level, at the EU level this is a very unpleasant precedent,” Ostapov says. What prevents Russia from repeating the exchange pattern of detaining individuals in return for lifting sanctions on other Putin circle members or his “wallets” is a rhetorical question. At the same time, there is some positive for Ukraine in this situation. Extending sanctions immediately for 3 years instead of six months would guarantee that such bargaining is not repeated in the near future. This is especially important given the possible rise of right-wing radicals to power in several European countries. But the EU has already shown weakness, revealing inconsistency, and Russia will surely try to take advantage of it again. FAQ: – Why did the European Union decide to lift sanctions against Alisher Usmanov and Mikhail Fridman? – The decision resulted from lobbying by certain EU countries. France pushed for Usmanov’s removal, presumably as part of a deal with Azerbaijan over the release of detained French citizens. Lifting restrictions for Fridman was demanded by Slovakia, and also Luxembourg, which sought to reduce its risks due to Fridman’s oligarchic lawsuit against Luxembourg in The Hague arbitration for 16 billions of dollars. – Will Usmanov and Fridman be able to travel freely and do business worldwide? – No, because both oligarchs remain under strict restrictions in the United States, the United Kingdom, Canada, Switzerland, Japan, and Australia. In addition, Latvia and Estonia immediately imposed their own national sanctions, blocking their entry and property on their territory outside the general European decision. – How does Ukraine react to European sanctions being lifted on Russian businessmen? – Ukrainian authorities called Brussels’ steps an unpleasant precedent and urged EU states to impose individual national sanctions against these individuals. Simultaneously Kyiv is working with the European Commission on new restrictions against Russian businessmen involved in supporting the Russian military-industrial complex.