As Russian forces poured into Ukraine in March 2022, Italian authorities seized the world’s second-largest superyacht in the port of Trieste––a $578 million vessel owned by Russian oligarch Andrey Melnichenko, who built his fortune through ownership of Russia’s largest coal company. The seizure followed economic sanctions by the European Union, including targeting assets of oligarchs with proximity to the Kremlin.
Spencer Woodman, an investigative journalist at the International Consortium of Investigative Journalists, is a prominent voice exposing the corrupt world of Russian oligarchs. Woodman told The Politic he thinks of an oligarch as a “person who acquired their great wealth, usually in the billions…through often-corrupt connections to the highest levels of the Russian state and the system of patronage, favor-peddling, and influence.”
“Power in Russia is not determined by free and fair elections. It’s determined…by a constituency of ultra-rich industrialists and business people who have a close, symbiotic relationship with the Kremlin. This allows them to get the state’s blessing to engage in lucrative businesses that enrich them. They in turn support the Russian state—specifically the presidency and the political circle of Vladimir Putin,” Woodman said.
The close relationship between Russian elites and the state is long-standing. During the Boris Yeltsin era in the 1990s, oligarchs amassed wealth through government contracts and the rapid privatization of extractive industries in post-Soviet Russia. Jeffrey Sonnenfeld, a Yale School of Management professor who specializes in corporate governance, explained how these oligarchs capitalized on the Soviet Union’s collapse to build their fortunes.
“With the implosion of leadership that preceded Putin, the oligarchs took advantage of the restructuring and perestroika of the Russian economy. People of average means became enormously wealthy through buying undervalued state resources,” Sonnenfeld said.
“That led them to look for somebody who would be a good figurehead for them…but [Putin] turned out to be quite conniving—he manipulated them.” In the summer of 2000, Putin held a closed-door meeting at the Kremlin with 21 of Russia’s oligarchs and offered them a deal: bend to his will and stay out of politics to keep their wealth and privileges, or face exile and imprisonment.
Putin made his first example out of Russia’s then-richest man, Mikhail Khodorkovsky. When armed Russian police stormed his private jet at Novosibirsk airport in October 2003, the oil baron had a net worth of around $15 billion. He made his fortune under Yeltsin by purchasing Siberian oil fields in a rigged auction for only $310 million—a tiny fraction of their $5 billion market value.
Egor Lazarev, a Yale assistant professor who teaches in the Department of Political Science, recounted this infamous episode to The Politic: “There was a criminal case against him. He was arrested and put behind bars for a long time.” Khodorkovsky was stripped of his oil company, and thus his power and fortune.
Khodorkovsky’s arrest was prompted by his brazen criticism of Putin and his accusation of Kremlin corruption. This included his 2001 founding of Open Russia, a pro-democracy movement that sought to strengthen civil society in Russia.
His riches-to-rags story sent a strong message to the oligarchs: cross Putin and you will lose everything. “While some of them still have significant wealth, none of them have significant power anymore…[Putin] is wealthier than all of them,” Sonnenfeld said.
Khodorkovsky is not isolated as a victim of Putin’s tyrannical regime. While he survived imprisonment and is now exiled in London, many others were not so lucky.
Since the 2022 invasion of Ukraine, many prominent Russians have died under suspicious circumstances. “Those who challenge [Putin] have found themselves stumbling into the way of ongoing traffic, or falling out of window sills. It isn’t just one or two random misfortunes––just in the last two years, there have been over 60 of them,” Sonnenfeld said.
Despite Putin curbing oligarchic power in recent decades, many oligarchs still faced sanctions after Russia’s invasion of Ukraine. Phil Kaplan, a professor at the Yale Jackson School of Global Affairs, was involved in developing the U.S. sanctions policy.
In email correspondence with The Politic, Kaplan described how Western sanctions “involved some highly popularized actions like the seizures of pleasure yachts, but also some less glamorous grunt work by sanctions policy analysts to compile exhaustive information on a broad swath of Russian oligarchs and to list them as Specially Designated Nationals.”
Once the oligarchs are on the Specially Designated Nationals list, their assets and financial transactions are blocked in the U.S. and in most foreign banks. Oligarchs were targeted by sanctions because they are integral in funding the Russian state, Kaplan explained. “When you think about Russian oligarchy, it’s important to understand that these aren’t just rich businessmen operating in the private sector who also happen to be ‘friends’ with Putin. Rather, they are deeply implicated in the Russian state—they support its decisions and they help to fund its initiatives, including the war.”
Although Russian sanctions have not forced Putin’s hand, Kaplan argues it is wrong to dismiss them as ineffective. “They definitely ‘work’ insofar as they impose real costs on Russia, make it harder for it to wage its war, and signal to other nations that we remain invested in international norms around territorial conquest.” For example, Russia’s state budget saw its revenues from oil and gas decline 24% in 2023, forcing the Kremlin to hike corporate taxes to offset the losses.
“When Putin eventually comes to the negotiating table, one of the primary things he’s going to want is sanctions relief—in particular around energy sanctions. So even if they haven’t yet brought about our ultimate political aims…the sanctions are still exercising a meaningful function in the war.”
The private sector delivered another major financial blow through an unprecedented voluntary corporate exodus. This economic upheaval originated at Yale, where Sonnenfeld’s research team at the Yale Chief Executive Leadership Institute was the driving force in exposing and motivating these companies to exit Russia.
“There’s a team of 50 Yale students that managed to catalyze the historic stampede of over 1,000 firms that exited Russia in protest over its invasion of a peaceful sovereign nation,” Sonnenfeld told The Politic. His team of experts, research fellows, and students maintain a detailed list of companies graded from A to F on their exposure to Russia. After the list went viral, companies hoping to quietly continue operations were thrust into the spotlight of public scrutiny and pressured to leave the Russian market.
The project has gained major attention; the list now has around 100,000 media references and profiles, even though the team “didn’t put out any press releases nor commercialize it in any way,” said Sonnenfeld. “[The list] is freely available on a Yale website, allowing companies, journalists, and activists to track corporate responses. Based on the work of Yale students, we were able to classify the companies as to what magnitude their departure really was.”
Most companies expected their withdrawal to hurt profits, but the opposite happened. “They initially thought it might be at the cost of the well-being of their enterprises in the short term, but it turned out that they were rewarded enormously for pulling out,” Sonnenfeld explained. “Doing good was not antithetical to doing well. We’ve shown in extensive research that those companies who pulled out benefited from enormous surges in their market value, and those who stayed have suffered.”
Sonnenfeld’s researchers found that the 1,000 departing companies accounted for approximately 40% of Russia’s GDP—a strikingly high proportion. Though departing companies sold their assets to local Russian operators, this rapid corporate exodus has led to long-term structural economic deterioration as Western technical and financial expertise has been lost.
The combined impact of sanctions, corporate flight, and cost of war has severely damaged the Russian economy. Russia is facing slowing growth, high inflation, and extremely high interest rates set by the central bank—a recipe for stagflation.
The Bank of Russia has effectively mitigated shocks to the Russian economy through aggressive monetary policy designed to stabilize financial markets and prevent economic collapse. “The main measures Russia took in the immediate aftermath of the invasion were to sharply hike interest rates to quell inflation and to simultaneously implement capital controls to prevent money from leaving the Russian economy,” explained Kaplan.
Steven Tian, a Yale researcher who works closely with Sonnenfeld, described the devastating impact of such high interest rates on loan accessibility and the credit cycle. “We’re looking at a Russian central bank that has a 21% interest rate, but the ripple effects beyond that are massive. We’re seeing high inflation right now in the Russian economy, including food inflation over 20%. Loaning has basically come to a complete stop,” said Tian.
In the past few months, several high-profile oligarchs including Sergei Chemezov, Igor Sechin, and Alexander Shokin have voiced serious concerns that high interest rates could drive companies into bankruptcy. Their criticism appears to have motivated Putin to order the Central Bank of Russia to cancel the expected interest rate hike in December 2024.
Despite Putin’s apparent responsiveness to oligarchs’ concerns over interest rates, Russia’s broader economic trajectory remains bleak. The Kremlin’s efforts to prevent total financial collapse through fiscal stimulus and monetary policy have done little to address the economy’s structural weaknesses.
“Over the course of the war, the Russian economy has also substantially transformed into a ‘war economy’—that is, an economy where almost all of the growth is as a result of military spending,” explained Kaplan. “But that has come with its own issues—namely persistent inflationary pressures, a labor shortage, and brain-drain. Once the war ends, Russia is going to face a real risk of total stagnation because almost all other sectors in the economy have been hollowed out.”
Sonnenfeld agreed with this characterization, arguing that Putin is destroying his own economy to fuel the war in Ukraine. “[The oligarchs’] own businesses are increasingly being expropriated and seized by Putin, who’s turning his economy into a short-term war machine. These businesses are not reinvesting in their own technologies, infrastructure, or products. [Putin] is just running them into the ground. It’s the equivalent of somebody taking the living room furniture and throwing it into their fireplace to keep themselves warm.”
Just last month in January 2025, the Kremlin nationalized Rodnie Polya LLC, a major Russian grain company. “That just goes to show how desperate [Putin] is to cannibalize the entire productive economy,” added Tian.
Although most oligarchs have been sanctioned, they have effective ways to safeguard their wealth. The under-regulated global financial system provides loopholes, allowing oligarchs to obscure the origins of their wealth and access Western markets. Investigative journalist Spencer Woodman has reported on this issue extensively.
“Wealthy Russians, in a lot of cases, rely on complex and opaque systems of offshore finance in order to get their money into the global financial system,” Woodman told The Politic. “It’s hard for them to invest [Russian rubles] in stable investments and enjoy all of the spoils of the life of a global billionaire—the Mediterranean mansions, private jets, and private islands.”
The ultimate goal is to transform money into euros or dollars so it can be integrated into the global financial system. “[Oligarchs] do that by establishing shell companies that obscure the ultimate source of the money, and get it into a European Union country like Cyprus,” said Woodman. “Instead of a billionaire approaching a bank in London with a bunch of rubles that they can’t explain, they will have a firm in Cyprus that has financial statements audited by a major Western accounting firm.”
The International Consortium of Investigative Journalists’ Cyprus Confidential investigation revealed how major accounting firms like PwC and Deloitte helped Russian billionaires funnel their money through Cyprus and into shell companies, offshore assets, and Western banks. Woodman explained that the highly complex nature of these financial maneuvers makes them difficult to report on and root out.
“Banks like wealthy customers, and they often have compliance departments that are understaffed and just don’t have time to figure all this stuff out. So if they see a European company with a nice, global accounting firm auditing their financial statements, it’s an easier sell to get that money into the global financial system,” said Woodman.
The future of Russia’s economy and the oligarch class remains uncertain. In 2022, Biden said that the West would deliver a “crushing blow” to the Russian economy through sanctions. While key economic indicators in Russia have deteriorated, Biden’s expectation of a crumbling economy has yet to materialize. Russian elites have also proven adept at shielding their fortunes from Western punishment.
As long as these loopholes remain, oligarchs may continue to fund Putin’s war while living in luxury, even as Russia’s broader economy falters.