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Why the US has hit some Russian oligarchs with sanctions but not others

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Why the US has hit some Russian oligarchs with sanctions but not others

Vladimir Potanin is Russia’s richest man. He is among the nation’s authentic oligarchs, owns a stake within the nation’s greatest nickel producer, helped the Kremlin finance the 2014 Winter Olympics in Sochi and has been photographed enjoying hockey with President Vladimir Putin.

But six weeks after Russia’s invasion of Ukraine, he has nonetheless not been hit by US or EU sanctions because of the warfare. Though he has been added to Canada and Australia’s sanctions record, Potanin is in a lucky class — for now not less than — of main Russian executives who’re nonetheless capable of do offers with the west. Potanin’s holding firm this week agreed to buy the Russian enterprise of French financial institution Société Générale.

That Potanin and others have to date averted an asset freeze or transaction ban has raised questions, together with in Congress, concerning the logic underpinning the US sanctions regime in response to Russia’s aggression.

“If the primary qualification was hyperlinks to Putin, the record could be loads longer,” mentioned one western banker who has labored extensively with Russian oligarchs.

Potanin, whose representatives didn’t reply to a request for remark, is much from the one inconsistency.

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The UK and EU have each put sanctions on Alexei Mordashov, the proprietor of one among Russia’s greatest steelmakers and a minority shareholder in Financial institution Rossiya, whose shareholders embody a few of Putin’s greatest recognized associates. The US has not.

The identical applies to Mikhail Fridman and Petr Aven, two of the opposite authentic Russian oligarchs who’ve maintained shut ties with the west through the years.

Petr Aven has maintained shut ties with the west however has been placed on the UK and EU sanctions record © Charlie Bibby/FT

Neither the US nor EU have put sanctions on Leonid Mikhelson, who has in depth enterprise ties with Gennady Timchenko, the billionaire and Putin’s longtime pal. The UK imposed sanctions on Mikhelson final week.

Alisher Usmanov, the Russian metals and mining tycoon, was hit with sanctions by the US instantly after the warfare in Ukraine, however his firms weren’t. Roman Abramovich has been positioned underneath sanctions within the EU and UK, however not within the US after Ukrainian president Volodymyr Zelensky requested him to be spared given his function as mediator within the peace talks.

In one other head-scratcher, the UK and EU have imposed sanctions on Andrei A Guryev, the chief government of PhosAgro, the Russian phosphate fertiliser producer, however not on his father, Andrei G Guryev, the corporate’s largest shareholder, nor on PhosAgro’s second-biggest shareholder, the billionaire Vladimir Litvinenko who was Putin’s doctoral thesis adviser in St Petersburg. Not one of the three has been focused by the US.

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The newest rounds of sanctions symbolize a departure from earlier packages. They seem geared toward individuals with a giant function within the Russian economic system whereas passing over others with nearer Kremlin connections.

Former US officers and folks aware of deliberations contained in the Biden administration mentioned one purpose for the selective nature of its sanctions regime was that Washington needed to keep away from the errors it made when it focused Russian oligarch Oleg Deripaska’s aluminium firm Rusal and En+ in 2018.

That transfer had not been correctly scrutinised beforehand, based on officers engaged on the sanctions on the time. It precipitated market turmoil as aluminium costs rose and industrial clients hurried to safe provides. To ease the disruption, the US was compelled to concern waivers to western firms and people working with the Russian teams and ultimately took Rusal and En+ off its sanctions record fully.

“Rusal was the primary main concern that was blocked and what the Trump administration did as quickly as they noticed the implications of that, they gave a free cross to Rusal and Deripaska,” mentioned Edward Fishman, a former Russia and Europe sanctions lead on the US state division.

Vladimir Putin and Vladimir Potanin at an ice hockey match
Potanin, proper, enjoying ice hockey with Russian president Vladimir Putin in 2018 © Alamy

The Biden administration was intent on sustaining the soundness of the commodities markets and avoiding any unintended financial disturbances, mentioned present and former administration officers.

Sanctions towards Potanin and his firms might roil markets in nickel and palladium, key elements for automotive batteries and catalytic converters, inflicting issues for auto producers. Mikhelson is the founder and chair of liquefied pure gasoline producer Novatek.

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A former Treasury official mentioned the power sector had been “very expressly written out, not less than initially, of the sanctions that have been imposed on the onset of the invasion”.

“That is now not about honest and unfair,” the individual added. “We’re pulling our punches the place there could be implications for the US and our allies.”

US lawmakers have begun to query why some Russian businessmen with shut ties to the Kremlin have managed to skate underneath the radar.

“Was there any inside disagreement throughout the Treasury division’s Workplace of Overseas Property Management about how sure oligarchs could be shielded from the deep financial impression on these sanctions?” David Scott, a Democratic congressman, requested Treasury secretary Janet Yellen at a Home of Representatives committee assembly final week.

“Have you ever refused to sanction different key oligarchs? Is there a pecking order?” he added.

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Yellen replied: “I’m not going to supply feedback on a selected person who we haven’t sanctioned.”

US Treasury secretary Janet Yellen during a House committee meeting
US Treasury secretary Janet Yellen confronted a Home committee assembly however refused to substantiate whether or not there was a pecking order that decides whether or not an oligarch is hit with sanctions or not © Al Drago/Bloomberg

The EU regime can be riddled with inconsistencies. Curbs on Russian oligarchs have been topic to horse-trading by EU member states, mentioned individuals briefed on the method, as capitals search to both defend industrial belongings or main employers that may very well be affected.

In a number of circumstances, the chief executives of Russian firms relatively than the homeowners have been focused within the first occasion, in a largely symbolic transfer that spares wider financial fallout.

Former US officers aware of discussions contained in the administration mentioned Washington might also be holding again on some people to keep up ambiguity round its response and depart itself some flexibility to do extra at a later stage.

However a lot of the rationale seems to be financial. Throughout her committee look, Yellen pressured that the US was extremely attuned to any blowback from any sanctions and was calibrating its actions accordingly.

“Our aim from the outset has been to impose most ache on Russia whereas, to the most effective of our potential, shielding the USA and our companions of undue financial hurt,” she mentioned.

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Extra reporting by Henry Foy in Brussels

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Elon Musk barred from accessing US Treasury payments data

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Elon Musk barred from accessing US Treasury payments data

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Elon Musk’s crusade to slash US government spending suffered setbacks on Thursday after a federal judged barred the Treasury department from handing data from its payments system to outsiders and one of the billionaire’s staffers was forced to resign over racist social media posts.

Judge Colleen Kollar-Kotelly put the temporary order in place after Musk boasted that his team at the Department of Government Efficiency (Doge) was “rapidly shutting down” Treasury remittances. They apparently gained access to the system that disburses trillions of dollars, including social security payments and Medicare, each year.

Hours after the judge’s decision, 25-year-old coder Marko Elez, who was working for Doge at the Treasury, abruptly resigned after apparently racist comments from a dormant social media account were unearthed. The Wall Street Journal first reported on the historic remarks.

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Elez was one of a handful of young engineers recruited by Musk’s Doge and installed in various government agencies. When asked about their roles this week, President Donald Trump called the coders “very smart” and defended their work.

Representatives of government employees and retirees had earlier this week sued to stop the sensitive data — accessed by Elez — being shared with Musk and others at Doge, arguing that such moves were “depriving them of privacy protections guaranteed to them by federal law”.

Although the US government reassured the court that only two of Doge’s emissaries, Cloud Software Group chief executive Tom Krause and Elez, had access to the sensitive system, Kollar-Kotelly pushed for an order preventing any information being shared outside the Treasury, while she considers a more permanent injunction. 

As a result, Musk himself will not be able to review data pulled from the payments system. 

The legal challenge comes as Treasury officials and the White House have sought to quell fears over Musk’s and Doge’s purported access to the system, and his broader authority, after the entrepreneur suggested his team was unilaterally cancelling “illegal” payments. 

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On Monday, Trump said Musk, who has been made a special government employee, “can’t do — and won’t do — anything without our approval”. 

Press secretary Karoline Leavitt also confirmed that Musk would extricate himself from any situations where he might have a conflict: “If Elon Musk comes across a conflict of interest with [his companies’] contracts and the funding that Doge is overseeing, then Elon will excuse himself from those contracts . . . he has abided by all applicable laws.”

Anti-Musk protesters outside the US Department of Labor in Washington on Wednesday © AP

Doge, whose emissaries have infiltrated the networks of various government agencies, including USAID, Health and Human Services and the Department of Transportation, has been sued multiple times by groups claiming the body is circumventing various legal protections.

Separately on Thursday, a judge in Massachusetts ordered a deadline for federal employees to accept or reject a buyout package — part of a personnel reduction effort spearheaded by Musk — to be extended at least until Monday.

The White House also confirmed that only 40,000 workers had thus far accepted the offer, well short of the hundreds of thousands it had previously forecast.

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Additional reporting by Steff Chávez in Washington

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Justice Department sues Chicago and Illinois over 'sanctuary' laws

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Justice Department sues Chicago and Illinois over 'sanctuary' laws

A pedestrian walks past the flag of Puerto Rico and the colorful door to the sanctuary apartment of Chicago’s Adalberto Memorial United Methodist Church in Chicago in 2021. The church has provided shelter to immigrants in the U.S. illegally.

Charles Rex Arbogast/AP


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Charles Rex Arbogast/AP

The Department of Justice is suing the City of Chicago, the state of Illinois and Cook County over their “sanctuary laws” that limit cooperation with immigration authorities.

The lawsuit, filed Thursday in federal court in Illinois, accuses those jurisdictions of “making it more difficult for, and deliberately impeding, federal immigration officers’ ability to carry out their responsibilities.” 

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Responding to the lawsuit, Illinois Gov. JB Pritzker’s office said in a statement: “The bipartisan Illinois TRUST Act, signed into law by a Republican governor, has always been compliant with federal law and still is today. … Instead of working with us to support law enforcement, the Trump Administration is making it more difficult to protect the public, just like they did when Trump pardoned the convicted January 6 violent criminals. We look forward to seeing them in court.”

President Trump and his appointees have often threatened to punish “sanctuary cities” and states before. During the first Trump administration, the Justice Department tried to withhold funding from those jurisdictions — but they fought back and were often able to defeat those efforts in court.

Chicago has been a focus for U.S. Immigration and Customs Enforcement operations since President Trump returned to office, spreading fear in immigrant communities and schools across the city and beyond.

Mayor Brandon Johnson told NPR’s Morning Edition that Chicago will stand by its policies.

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“We are firm in that our police department will not intervene or participate in any way” in immigration enforcement, Johnson said last month. “Whether you’re undocumented, whether you are seeking asylum or whether you’re seeking a good paying job, we’re going to fight and stand up for working people.”

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Russian billionaires Fridman and Aven sell Alfa-Bank stakes in bid to overturn sanctions

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Russian billionaires Fridman and Aven sell Alfa-Bank stakes in bid to overturn sanctions

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The sanctioned billionaires Mikhail Fridman and Petr Aven have sold their stakes in Russia’s largest private lender and its insurance arm, as they attempt to overturn EU sanctions against them.

Fridman and Aven offloaded Alfa-Bank and Alfa Strakhovanie to their longtime partner Andrei Kosogov last year, according to documents seen by the Financial Times, completing a deal struck in 2023 that values the two companies at about Rbs240bn ($2.5bn). The oligarchs held a combined 45 per cent stake in the bank and a 42 per cent stake in the insurer.

Kosogov, who is not under sanctions, has emerged from relative obscurity to become the largest shareholder in Alfa-Bank and LetterOne, the Mayfair-based conglomerate, after buying out his sanctioned partners.

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The oligarchs hope that selling the bank and insurer — a deal expedited by Russian government intervention on ownership of “economically significant” firms — will aid their challenge to the EU sanctions imposed on them in response to president Vladimir Putin’s full-scale invasion of Ukraine.

Last year, the EU’s General Court partially annulled the basis for the sanctions by ruling the bloc had not presented enough evidence to show Fridman and Aven were involved in efforts to undermine Ukraine.

The oligarchs’ victory was the highest profile blow to the EU sanctions regime against Russia since the invasion.

The EU sanctions remain in place, however, under a separate justification that points to Fridman and Aven’s status as “leading business persons [ . . .] involved in an economic sector providing a substantial source of revenue” to the Kremlin.

Fridman and Aven are separately challenging that justification. If they are successful, EU member states could decide to lift the sanctions, appeal the court decision or reinstate them under another new justification. Latvia has appealed against the first ruling in the oligarchs’ favour.

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Anitta Hipper, EU spokesperson for foreign affairs, said the European Commission could not comment on ongoing legal proceedings. “Restrictive measures against Petr Aven and Mikhail Fridman remain in place — these were renewed based on the Council decisions in September 2023 and March 2024,” she said.

Hipper added that the council of EU member states “regularly reviews the listings”.

UK and EU sanctions forced Fridman and Aven, as well as their former partners German Khan and Alexei Kuzmichev, to cede control over investment group LetterOne and resign from its board.

Kosogov, the former head of Alfa’s investment unit, had the smallest share in the oligarchs’ empire until he bought Khan’s and Kuzmichev’s stakes in Alfa-Bank and LetterOne in 2022, making him the largest shareholder in both companies. Khan and Kuzmichev lent Kosogov funds to buy their stakes in LetterOne for a combined $7bn and agreed an option allowing them to buy them back within 10 years, according to a High Court ruling in December.

Kosogov then agreed a deal to buy Fridman and Aven’s stakes in Alfa-Bank via a Cypriot holding company and secured an agreement to finance the purchase with a loan from state-run Gazprombank, according to correspondence seen by the FT.

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The regulatory approval in Cyprus required for the sale stalled, however, prompting repeated public complaints by Alfa-Bank’s Luxembourg-based parent company.

In the meantime, Russia passed a law allowing the state to redomicile “economically significant” companies held in western jurisdictions.

The initial list of such firms released by Russia’s government last March only named six — the first three of which were the local holding companies controlling Alfa-Bank, Alfa Strakhovanie, and X5, the supermarket group founded by Fridman.

Two months later, a Russian court annulled the Luxembourg-based company’s rights to Alfa-Bank and Alfa Strakhovanie, transferring Fridman and Aven the rights to hold the shares or offload them to Kosogov.

Kosogov has undertaken to pay for the deal out of his own funds, according to the sale agreements.

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Though Cyprus approved the deal in July, the Russian decision had in effect rendered it moot as Fridman and Aven no longer needed to seek EU approval to transfer control of the Russian companies.

The law “gives owners a legal way to wipe their hands, because it’s a court and government decision that they seemingly have nothing to do with, but the companies on the list always had good relations with the Russian government,” said Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center in Berlin.

By allowing Russian companies to pay dividends and protecting them from seizure under the sanctions, the process “ties their owners to the Russian regime even more closely”, she added.

Fridman and Aven declined to comment. Kosogov did not respond to a request for comment.

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