In an article titled Putin’s Ukraine Strategy by Leon Aron, a director of Russian Studies at the American Enterprise Institute, there was one passage that got my private banker grey matter rushing around in its grey well-tailored suit.
“The president [Obama] is likely to have pointed out that the risks would involve Russia's membership in the G-8, the safety of financial and other assets of the Russian elite which are located outside of Russia, as well as the ability of the members of this elite and their families to visit, live or study in the U.S. and the EU.”
Notice the mention of the financial assets of Russia's elite. This would put some pressure on Putin, but enough pressure?
I don’t know. I’m just a banker. But what is interesting is how these assets could technically be frozen. Not as easy as it first may seem.
One of the main conduits have been different kinds of corporate structures.
These corporate structures are not Russian companies. There isn’t an account somewhere in a banking secrecy country with a few hundred million in it with a big fat Russian name as account holder.
What about Russian assets in Cyprus for example? A well known and popular place for wealthy Russians to place their assets and according to Quartz, they are setting up more offshore companies now than before the crisis.
An important point to remember here is that just because a company is registered in Cyprus, doesn’t mean the assets are held in a Cypriot bank. A Cypriot “company” can set up an account in a convenient, safe, stable, banking secrecy country and place assets there.
But back to my original point. Let’s say that the EU and the USA decide to freeze the assets of Russians held within the EU and the USA, how do you freeze the assets if they are (from a legal perspective) “owned” by a European legal entity?
I’m just going to leave you with that thought.
Enjoy the drinks.