John Helmer: Leaky Russian Sanctions, or the Difference Between an Oligarch and a Crony

Yves here. This post focuses on the considerable gap between rhetoric and action as far as sanctions against Russia are concerned. John Helmer describes who is exempted from sanctions against Russia and why.

By John Helmer, the longest continuously serving foreign correspondent in Russia, and the only western journalist to direct his own bureau independent of single national or commercial ties. Helmer has also been a professor of political science, and an advisor to government heads in Greece, the United States, and Asia. He is the first and only member of a US presidential administration (Jimmy Carter) to establish himself in Russia. Originally published at Dances with Bears

When Alfred Sloan ran General Motors in Detroit, he supplied Nazi Germany with engine technology, assembly lines, and working capital for Messerschmidt and Junker warplanes, Panzer tanks, troop and gun transports, along with land mines and torpedo detonators. The Germans said they couldn’t have invaded Poland, Belgium, Holland, Norway, France, or Russia without him. Sloan was breaking US law at the time, so he destroyed the company records of his collaboration with Berlin. He also supplied the US war effort with comparable military technology, if a bit slower in the air.

World War II was a good business for Sloan. “The business of business is business” is a motto attributed to Sloan. He may not have said it. There’s no doubt he thought it.

Since March of this year the US Treasury has declared war on Russia, and through the Office of Foreign Assets Control (OFAC) it has ordered US businesses and banks not to collaborate. The European Union (EU) and other US allies, like Switzerland, Japan, Norway, Canada, and Australia, have been asked by Washington to implement the same measures. But the country sanctions lists aren’t quite the same. In the gaps and differences, a model of Russian business is emerging into plain light. A theory of the political succession in Russia, too.

For reports on the legality of sanctions against Russia, and the court rulings which have influenced the wording of EU sanctions, click. Legal challenges by Russians on the EU sanctions list are now under way in the European Court of Justice. A legal challenge in Canada resulted in the removal of two Russian banks for the Ottawa list — read here.

putinAccording to the American sanctions model, Russian businessmen who are believed to be personally close to President Vladimir Putin, have been designated on the lists. In March they were referred to as “members of the Russian leadership’s inner circle”. As the lists grew longer, the rationale was stretched too. Andrei Fursenko (right), a former education minister and currently a Kremlin adviser, was sanctioned for this reason: “although not being designated for being a member of the Russian leadership’s inner circle, Fursenko first met Putin in 1993 and they remain closely associated.”

But Fursenko is a government official, not a businessman. Russian officials, including military officers and members of parliament, have been targeted, according to Executive Order 13661, dated March 19, because the US president has “[found] that the actions and policies of the Government of the Russian Federation with respect to Ukraine—including the recent deployment of Russian Federation military forces in the Crimea region of Ukraine undermine democratic processes and institutions in Ukraine; threaten its peace, security, stability, sovereignty, and territorial integrity; and contribute to the misappropriation of its assets, and thereby constitute an unusual and extraordinary threat to the national security and foreign policy of the United States.”

Business figures like Vladimir Yakunin (below left), head of state-owned Russian Railways, have been designated because of proximity. In Yakunin’s case, the US says he has been “neighbors [with Putin] in the elite dacha community on the shore of Lake Komsomolsk and they served as cofounders of the Ozero Dacha Cooperative in November 1996.”


They are the Putin “cronies”. The White House, Treasury, and OFAC paperwork doesn’t use the term “cronies”. That was introduced by anonymous US officials briefing the press at the time President Barack Obama first introduced sanctions against Russians on March 20. UK Prime Minister David Cameron used the term “cronies and oligarchs” around Putin when announcing UK sanctions in July.

Cameron flubbed. There is all the difference in the world between cronies and oligarchs, and British sanctions policy carefully observes it. So does US policy.

The Russian oligarchs who control most of Russia’s strategic energy, mineral, and metal assets – the resources required for Russian to field and fuel its armed forces – are not sanctioned. Not even those oligarchs known to be especially favoured, even personally close to Putin, like Oleg Deripaska, (below left) control shareholder of the aluminium monopoly, Rusal; and Roman Abramovich, (right) control shareholder of the Evraz steel and coal group.


Russian oligarchs controlling US assets worth several hundred millions of dollars include two with well-known political ambitionsto replace Putin – Mikhail Prokhorov and Anatoly Chubais. Neither qualifies as a familiar or a crony of Putin’s. So far, Washington and Brussels have left them unscathed.

Well-known Novorussian supporter and former military commander in the Donbass, Igor Strelkov (Girkin) – himself sanctioned by the US and the EU – has mentioned “homegrown oligarchs” as part of a “Fifth Column” plotting against Putin and the “financial and economic health of the country [as they] try to shift the resulting costs [of sanctions] to the general population.” According to Strelkov, “it’s an either-or situation, either Russia fully restores its real sovereignty, or it will be destroyed by the coalition of oligarchic clans, both internal and external.” For Strelkov’s full remarks on September 11, click.

Strelkov hasn’t (yet) identified the oligarch clans he is targeting. He is believed by Russian sources and Novorussian media to include officials Vyacheslav Surkov (right), Igor Shuvalov, and Mikhail Abyzov. At least one of these, Abyzov, is believed to have helped finance Dmitry Medvedev’s campaign in 2012 to keep the presidency. His US assets are reported here.

They are missing from the list of US designated and sanctioned individuals and entities, which can be researched alphabetically here.

Washington makes special exceptions, quietly. For example, Sberbank owns 50% or more of the private Turkish bank, DenizBank, and the terms of US sanctions on Sberbank ought to apply to such entities. However, on October 6 OFAC exempted DenizBank from the capital restrictions applying to Sberbank. Here is the exception. The Russian and Turkish media reported the move, and Reuters and Wall Street Journal followed. The Wall Street Journal reported intensive lobbying by Turkish government officials of their US counterparts. “Keeping the Turkish bank sanctioned would have had little impact on Sberbank but would have instead harmed the economy of a partner country, a U.S. official said” – according to the Journal.

A comparison of the individual Russian names on the sanctions lists (current to the start of this month) reveals that the US has targeted Yakunin and Igor Sechin, chief executive of Rosneft, but the EU list omits them. Yakunin and Sechin are potential presidential or prime ministerial candidates, in the event Putin were to retire or replace Medvedev at the prime ministry. Another of the candidates allied with Putin, but opposed to Medvedev, is chief of the Kremlin staff at the moment, Sergei Ivanov. He is on the US proscription list; he is not on the EU list.

The EU list is heavy with Russian military officers, and the head of the Foreign Intelligence Service, Mikhail Fradkov; they are not sanctioned by Washington. One important name on the EU list is Konstantin Malofeev. The Swiss and Norwegians have also sanctioned him. Malofeev’s importance is that he is believed to be financing separatist units in Donetsk and Lugansk. This is so widely reported and believed among the allies, it is striking that Malofeev is not on the US list sanctions list.

Malofeev, who runs a Moscow-based asset holding called Marshall Capital, is not of oligarch size. His website describes his investment interests as “telecommunications, media and technology, as well as real estate and agriculture.” The UK High Court provides an intimate record of Malofeev’s interests in agriculture because he has been sued in London for $225 million in fraud by state bank VTB. That story can be read here. The record shows that VTB failed.

The Marshall Capital website also indicates that Malofeev “supports the Saint Basil the Great Charitable Foundation, established by Konstantin Malofeev in 2007, as well as a range of other cultural and social projects including the Safe Internet League.”

Malofeev makes no secret of his Russian loyalties (below left, wall portrait of Tsar Alexander III). No record can be found of Malofeev with either Putin or Medvedev. Below right is is the only photograph of Malofeev with a current Kremlin official. This one, seated to Malofeev’s left, is Igor Shchyogolev, a former telecommunications minister and currently an assistant to the president. Shchyogolev has been sanctioned by the US, but not by the EU.


Malofeev has defended his financial contributions in Crimea and Donbass as religiously-inspired philanthropy and humanitarian aid; he denies funding troop formations or military operations.

“I’m really a monarchist. My views were formed as early as 16 years old and since then they have not changed. I do not believe in democracy… In ancient Athens or Novgorod, when one hundred people gathered and they all knew each other and chose their leaders – it was a democracy. Democracy in its modern form – this is show business. When hundreds of millions vote for someone they have seen only on television… it’s not a matter of choice. It’s a question of how you sell a particular product on TV. For this reason, I just do not believe in this formula for the state system …

“The monarchy is now thriving in such influential countries like England, Saudi Arabia, Japan. The time will come when we will talk about the monarchy as the current system of government, and not about it as a history topic… The whole logic of Russian history comes from the fact that people believe that it is led by God’s elect, and not by the people… We need a church-going people. We need people who understand that the monarch is anointed by God. So long as 5% of the population will go to church on Sundays, there will be no monarchy. When 50% of Russians attend the church, the monarchy will be a necessity.”

Regarding Putin, Malofeev says Russia is “very lucky” to have him. “Only thanks to him is Russia respected in the world…The longer he will rule Russia, the better for the country.”

At his office in Moscow Malofeev was asked to say why the US has omitted him from its sanctions list. At print time there was no reply.

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  1. indio007

    Russia didn’t annex Crimea. It annexed itself

    How many times has Russia invaded Ukraine now? 5 times ? 6 times?

    Is NC becoming an arm of US propaganda?

    1. Yves Smith Post author

      Technically, Russia did annex Crimea after Crimea asked to be annexed. Crimea could not initiate being integrated into the Russian state. Russia had to do that. So your ire is totally off base.

      And we are far more critical of anti-Russian spin than just about any financial site. For you to accuse us of running US propaganda when we have consistently pointed out that the US provoked Russia and fomented a coup in Kiev against a democratically elected government, and earlier repudiated its promise not to move NATO into former Warsaw Pact states, is a malicious misrepresentation of our position.

      1. Tom in AZ

        Yves is letting you off lightly, This is about the only place that hasn’t bought into the nonsense that the US is protecting the poor Ukrainians from the invading Russian hordes.

      2. optimader

        “earlier repudiated its promise not to move NATO into former Warsaw Pact states”
        I have read this claim frequently, but have yet to see a link corroborating any such promise or identifying any such agreement.

        East Germany joined NATO by virtue of reunification in 1990.
        In 1991 Poland Hungary Czech republic and Slovokia formed the Visegard Alliance for the purpose integration w/ EU community and NATO.
        They were admitted into NATO in 1999, followed by six other former Warsaw Pact countries in 2004.

        By my recollection of the times and consistent w/ what I’ve read, NATO did not solicit these former Warsaw Pact countries, it’s the other way around.
        IMO a fair question to ask is why did they terminate their Warsaw Pact memberships? As Sovereign countries, are their economic and defense alliances their own decisions to make?

        So the relevance of NATO and the CSTO ( the Warsaw Pact legacy alliance) existence may merit debate, but as long as the alliances exist, isn’t it the business of Sovereigns to participate in their own percieved self interest?.

        1. Lexington

          I have read this claim frequently, but have yet to see a link corroborating any such promise or identifying any such agreement.

          Their “source” is that Saker and other pro-Russian bloggers have repeatedly asserted that such such assurances were informally given, even though US officials have always denied this and there is nothing in the public record to substantiate it.

          NC’s default position is that anything published by pro-Russian bloggers is uncritically accepted as truthful while anything asserted by the US and its allies are lies. Fact and fiction are ideologically determined. Citations are for chumps.

          I would modestly suggest that the quality of the analysis should be evaluated in light of the integrity of the methodology used to produce it.

          1. Vatch

            If an informal assurance that NATO would not expand east was made, what was the nature of that assurance? Was it intended to be a permanent prohibition against expansion? Or just an assurance that there would be no changes for a few years? Might it also have been predicated on the continued existence of the Soviet Union? There’s a fair amount of uncertainty here.

          2. Yves Smith Post author

            You could try using Google rather than making oh so reasonable sounding attacks on our integrity. It took me all of 5 minutes to find proof. But no, you’d rather level spurious charges based on your personal prejudice or worse.

            First, mainstream writers have pointed out the same issue, so this line of argument is hardly limited to “pro Russia blogs”. Second, we also have to point out your logical fallacy: “not A” does not mean “B”. We are anti US propaganda of all sorts, on the TPP and other trade deals, on phony bank and mortgage reforms, on Obamacare, on how the bailout was handled, on the supposed difficulty of prosecuting bankers for crisis-related misconduct. Pointing out how the US is engaged in anti-Russian propaganda, and many of the charges are trumped up, does not make us pro Russia.


            This archival record of a conversation between Gorbachev and Baker shows that Gorbachev was given repeated verbal assurances that NATO would not expand eastward but Gorbachev peculiarly never asked them to be committed to writing:


            This article explains what appears to be a significant cultural disconnect: in fact, Gorbachev WAS given verbal assurances, which he took as a real commitment. The US side came out of a legalistic tradition, so for them, the deal not being in writing meant it was not a deal. But even people like George Friedman of Stratfor have taken the Soviet side of this argument (again, disproving your contention that this is all an invention of pro Russian blogger riffraff):


            None other than George Kennan bemoaned the expansion of NATO into former Warsaw Pact countries, and said it would prove to be the worst foreign policy mistake the US ever made:


            1. OIFVet

              “The US side came out of a legalistic tradition…”

              True, except in diplomatic circles verbal commitments are supposed to carry A LOT more weight than a run of the mill campaign promise. It is all about trust, and the US established itself as untrustworthy as far as the Russians are concerned. Lesson learned I suppose. Just another example of crapification if you ask me.

            2. Lexington

              I’m getting tired of being told I don’t know how to use Google. I can use Google to find documents that fail to prove my (original) point with the best of them.

              Let’s review how we got to where we are: you stated categorically that “the US…earlier repudiated its promise not to move NATO into former Warsaw Pact states”, and I said that “US officials have always denied [such a promise] and there is nothing in the public record to substantiate it”.

              Which position is better supported by the available evidence? The Mary Elise Sarotte article you yourself cite actually says this:

              For their part, U.S.foreign policy officials from both the first and second Bush eras as well as the Clinton administration have consistently denied that any such agreement existed. Both Republican and Democratic administrations maintain that what was said in 1990 was a speculative part of the negotiations surrounding German unification and had no significance for the rest of Europe after that deal was done. Scholars have supported this interpretation; Mark Kramer has written of the myth of guarantees against NATO expansion


              Why do I need to Google stuff when others are willing to do it and make my case for me?

              Now as for the “archival record”, I need only point out that the document in question came from the Russian state archives. So what we have established is exactly this: Russia can produce documents that appear to corroborate its version of events. The only actual reference to the issue in the published part of the document has James Baker quoted as saying “We understand that not only for the Soviet Union but for other European countries [?!] as well it is important to have guarantees that if the United States keeps its presence in Germany within the framework of NATO, not an inch of NATO’s present military jurisdiction will spread in an eastern direction”. Note that Baker only acknowledges the importance of such guarantees to the USSR (and strangely other unnamed European countries) he does NOT offer such a guarantee. And he goes on to note that West Germany had not yet endorsed that position, implying it’s status was still uncertain. Also, there’s obviously a problem with authorship: it’s not apparent who wrote the document or what sources they were relying on. The document reads like a transcript but for reasons of confidentiality meetings of this type are not normally recorded. In order to be able to speak candidly both sides need to be assured that the other won’t be tempted to release incriminating recordings at some politically opportune moment in the future. If the document is authentic -and given its providence that is far from established- it was probably prepared by a Gorbachev aide using notes taken during the meeting. That raises a host of other issues in terms of problems with translation, conflicting perceptions, faulty memories, etc. Such documents are intended to serve as informal aide memoires for the participants, not as official records.

              So I ask again: whose assertions are better supported by the evidence – in this case the evidence you provided yourself?

              And why am I getting beaten up for having the temerity to point out that NC seems unduly differential to the Russian viewpoint when you just proved my point again by attempting to decide the issue in favour of the Russians with reference to a shaky document of dubious providence and reliability that the Russians submitted on their own behalf, and which even at that fails to establish that any guarantee on NATO expansion was ever given?

              I sense there’s an argument coming about how Baker’s non-guarantee can be construed as a guarantee if only you look at it through the right cultural lens, but it’s getting late so I’ll limit myself to the following observation: in other cases where the Soviets perceived that vital interests were at stake, such as the SALT and ABM treaties, they insisted on formal written commitments. Why then would they fail to insist on such commitments on the issue of NATO expansion?

              I’ll go one better and answer the question: because in the latter case the Soviets were playing a very weak hand and both sides knew it. The US had no reason to agree to unilateral limits on its future freedom of action when the Soviets were in no position to insist on such limits.

              Now it could be argued, as George Kennan famously did, that NATO expansion ultimately undermines rather than enhances the security of the US and Western Europe. That’s a completely different discussion however, and one which has no direct bearing on the question of whether, as a matter of historical fact, the US ever promised not to expand NATO eastward.

              1. Yves Smith Post author

                You’ve just proven that you are the one with a bias here, big time.

                First, as we pointed out, but you chose to ignore, a former Reagan administration official, David Stockman, as well as a leading geopolitical expert, George Friedman, regard the Russian claim as valid. So this is hardly a fringe or pro-Russian view, as you keep trying to assert. Second, you look to be out to taint this blog rather than deal with the much bigger issue, that the US has been running a massive propaganda campaign as far as its meddling in Ukraine is concerned. We picked a fight with the Russians by installing an anti-Russian government through a coup. The Russian reaction was predictable.

                In keeping, your “shaky documents” claim is really a stretch. And there is other support for the Russian version in other records of the negotiation. This from a world-recognized archivist who works in an American university and has studied and taught in Europe. This is not a topic he follows, but even he has seen academic work in German that supports the Russian claim:

                There is no doubt that Genscher gave such a promise; but it was taken back at least in part before the end of the process.

                There is a detailed discussion here, but it’s in German and now it costs anyway:
                Ost-Erweiterung der Nato Das große Rätsel um Genschers angebliches Versprechen
                Im Februar 1990 sprach der damalige Außenminister mit der Führung in Moskau über die Ausdehnung der Nato nach Osten. Putin beruft sich noch heute darauf. Von Marie Katharina Wagner 203 80
                Preis: 2,-€ Zum Archiv
                19.04.14 15:24 | Politik

                I believe there were in fact multiple assurances, but I rely on testimony, not docs.

                I doubt that those docs in the Russian archives are fake, but when you can’t examine them yourself, one has to be cautious.
                I’d say it’s “unlikely, but not impossible.”

                1. Vatch

                  I must respectfully assert that this statement is an exaggeration:

                  “We picked a fight with the Russians by installing an anti-Russian government through a coup”

                  Yes, the U.S. meddled in Ukraine, and heavily so. But I find it very hard to believe that the massive demonstrations in Maidan were engineered by the U.S. Did the Soviets engineer the civil rights movement in the U.S. during the 1960s? A lot of U.S. conservatives thought they did, but I think the idea is absurd. What foreign government was behind the Occupy Wall Street movement? It really is possible for the people of a country to take some action on their own.

                  Did the U.S. influence events in Ukraine? You bet! Did the U.S. install a new government? No. The Ukrainian President crumbled under the pressure of the opposition, and left the country.

            3. Vatch

              I don’t have a copy of George F. Kennan’s Memoirs: 1925-1950, in front of me, but I know that he discusses the founding of NATO in the book. He was opposed to it, and he was especially opposed to the inclusion of nations remote from the Atlantic such as Turkey and Greece. Since he opposed the formation of NATO, Mr. Kennan could be expected to opposed any expansion of it. Of course, that doesn’t mean that he was wrong.

              There’s a lot of “he said / she said” types of disagreements about just what was said. See:


              I suspect that there was an assurance that NATO and its tanks would not enter the former Warsaw Pact countries right after they became independent of Moscow, and were still unstable. I doubt that there was any assurance that there would never be any NATO expansion. The Soviets were very tough negotiators throughout the Cold War. It’s hard to believe that the West was able to take advantage of them in this case, and I believe that the Soviets had a pretty good idea that the assurance about NATO was not permanent.

            4. optimader

              All conversational , did Baker have NATO policy authority?
              Should Sovereigns control their own destiny?
              At the time, Putin and his fmr KGB associates undermined Gorbechev/SU, its a shame the outcome was more chaotic than it could have been. File under: Putin regime change.

              Whether or not NATO expansion/existence is a good idea is another thread.

  2. Jackrabbit

    What this article hints at, but never quite makes the point, is that the US is trying to play off different factions in Russia with the intent of changing the nationalistic (read, non-cooperative), Putin regime.

    I believe the quote was: “The business of America is business.” (typo?)

    H O P

    1. Vatch

      I don’t know what Alfred Sloan might have said, but Calvin Coolidge said:

      “the chief business of the American people is business”

      It was a different GM executive, Charles Wilson, who said:

      “For years I thought that what was good for our country was good for General Motors, and vice versa.”

      Both quotes are the kind of oversimplification of complex reality that is very frustrating. Obviously the American people have far more interests than business, and GM’s interests never fully coincided with the interests of the U.S.

      1. optimader

        Correct on both counts re attribution. The Sloan deflection is a bit of a gratuitous deertrail into the woods relative to the subject.
        part 1 Billion-dollar medical project helped fund “Putin’s palace” on the Black Sea
        part 2 When Putin ordered up new hospitals, his associates botched the operation
        part 3 Russian Railways paid billions of dollars to secretive private companies
        part 4

        haven’t completed reading the whole series but so far it corroborates other things I’ve read.

  3. susan the other

    This just makes me think about Bradford’s postion (Brookings) in the debate with Hudson. Bradford was so sanguine about all of the stuff going down it was like a red flag. According to him… the really important thing… is that these various interests can come together at all… and pound out global agreements. Etc. So just looking at what we have set up – almost like an equation to be solved, with all the Ruskies and Chinese on one side and the Fellowship of the Ring on the other side – we have cleared our mind for the steps to resolution for achieving (not yet) legal immunity for our corporations. And we will proceed to make certain gains that destroy the middle class and enrich corporate interests. And Germany is the Shire. And China will be a wilder card than Russia.

  4. juliania

    I would say the reason the US isn’t sanctioning Malofeev is because he seems, on the basis of your report here, to be a wackadoodle who conflates monarchy with Russian Orthodoxy, and the US wants him to go on obfuscating in that regard because it serves the purpose of raising antagonisms against the fledgling democratic state Putin is in the process of creating, promoting divisions within that state.

    It is possible to be both a democracy advocate and a Russian Orthodox citizen, and that is what Putin is. He is popular because he is not a monarchist, nor does he have dreams of empire.

    I am an Orthodox Christian. I believe very strongly in the separation between church and state and from his statements, so does Putin. There are other Orthodox who do not hold this view. I disagree with them. (After all, Christ was not a monarchist; monarchists aided and abetted his crucifixion, for crying out loud!) But I digress. The point is, the US would like to encourage chaps like this one, it seems to me.

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