Shortly after the UK government announced sanctions against Vladimir Putin’s family and financial network on Friday, Russia’s Ministry of Foreign Affairs advised citizens to avoid travelling to Britain.

The official evidence proffered by the Russian government to illustrate the UK’s “unfriendly attitude towards our country” is a delay in issuing visas to Russian citizens. But critics say that the move was actually a direct response to the personal sanctions against Russia’s leader.

If this is true, it is a puzzling and disproportionate reaction, but it also indicates that sanctions are working.

 

Different types of sanctions

Before Russia invaded Ukraine, UK Foreign Secretary Liz Truss vowed that any incursion into Ukrainian territory would be met with “the toughest sanctions regime against Russia… ever”. She didn’t disappoint. Since the war began on February 24, Russia has been hit with successive waves of co-ordinated sanctions from the US, EU, UK and their allies. It has even usurped Iran’s title as the most sanctioned country in the world.

Whereas the sanctions imposed in the wake of Russia’s annexation of Crimea in 2014 were widely viewed as feeble and lax, the current sanctions programme has been swift, severe and relatively comprehensive.

Sanctions have targeted Russia’s elite and the government’s ability to fund and supply the military. Exports of dual-use goods which be used by Russia’s military have been banned by the US, EU and UK, as has all business with state-supported weapons manufacturers. Japan and the EU will also stop exporting high-tech components such as advanced semiconductors to Russia.

Other sanctions are designed to “constrict Russia’s economy”, in the words of US Treasury Secretary Janet Yellen. Freezing half of the $630bn foreign currency reserves held by the Central Bank of Russia (CBR) was one such measure, causing the ruble to plummet by 22% before the CBR intervened and imposed tight currency controls.

The total value of goods exports to Russia from China, Korea, Japan, Turkey, France, Germany and the US was down by nearly 40% year on year in March, according to the Bank of Finland Institute for Emerging Technologies. Before the war, those countries provided around half of Russian goods imports.

And Russia has also been largely cut off from western financial markets, with most major banks removed from financial messaging system SWIFT and excluded from western financial systems.

As confidence in Russia’s economy and its future flags, so does support for Russia’s war with Ukraine, which dropped by 7% in April, according to polling by Levada Centre.

 

Some sanctions are More Equal than Others

When it comes to personal sanctions, however, the West seems to have dropped the ball. Individuals sanctioned since the start of the war with Ukraine can broadly be arranged into two categories. The first group consists of oligarchs and the bosses of state companies; the second group is more complex, comprising mostly of executives and founders of modern, private companies.

The former are clearly beneficiaries and facilitators of the regime which is currently waging war on Ukraine – the likes of Abramovich – but they remain underrepresented on the sanctions lists. Only nine of Russia’s 100 wealthiest individuals have been sanctioned by the US, EU and UK. Vladimir Potanin, Russia’s second-richest man, according to Forbes, has not been sanctioned by any of the three jurisdictions.

Potanin’s business partner Mikhail Prokhorov has also proved adept at dodging sanctions. He is yet to be included on the US, EU or UK lists of sanctioned entities, in spite of his $13bn net worth, much of which comes from assets acquired after the collapse of the Soviet Union, when his bank financed the privatisation of vast state assets. Prokhorov owned the Brooklyn Nets until recently, but sold off the last of his stake in 2019, reportedly at Putin’s request.

The sanctioned founders and executives of independent companies, on the other hand, are largely not complicit in the system and have nothing to do with its war in Ukraine. Sanctioning them feels like a desperate attempt to placate hawks by plugging the obvious oligarch-shaped gaps in the sanctions programme.

Oleg Tinkov is one example. Unlike the oligarchs, who obtained their wealth in the sell-off of state assets in the turbulent 90s, he made his money by importing electronics wholesale and selling them on in Russia at a markup. In this sense, he perhaps most closely resembles Lord Alan Sugar, although he models himself on Richard Branson.

Tinkov is best known in Russia for his neobank Tinkoff – the largest digital bank in the world by user numbers. Two months into the war, Tinkov took to Instagram and publicly lambasted the “crazy” war, insisting that 90% of Russians opposed it. He also asked: “How could the army be good if everything else in the country is s**t and mired in nepotism, sycophancy and servility?”

Shortly after the comment, Tinkov sold his 35% stake in TCS Group, which owns Tinkoff Bank.

In spite of his overt condemnations of the war, and the fact that he claims never to have set foot in the Kremlin, Tinkov was sanctioned by the UK after Russia’s invasion of Ukraine. Britain has since reversed some of the travel restrictions imposed against Tinkov, Vedomosti reports. It is unclear if the partial overturning of the sanctions against Tinkov was the result of an appeal.

“They must have thought ‘Look, here’s the main owner of a bank which pays lots of taxes to Putin’s regime’… But I’m sure they’ll work it out, because unlike us the English are decent people. Maybe it will take a year, two, even three, but they’ll take me off the list in the end. Because I don’t deserve to be on it. I’ve never collaborated,” Tinkov told journalist Yuri Dud.

“They put me on the list by accident, they made a mistake. But they made that mistake in the face of the enormous crime committed by the Russian government in starting this war. They’re simply shocked,” he added.

Other individuals from successful, modern Russian companies have also been sanctioned. They too tend to be innovators and career executives – the beneficiaries not of state-mandated corruption in the 90s, but of successful economic reform and liberalisation in the 2000s.

Dmitry Konov, former chairman of the management board of plastics manufacturer SIBUR, was recently added to the EU’s list of sanctions. Konov, too, falls into the category of non-oligarchs who appear to have been sanctioned simply because they are a big figure in the world of Russian business.

“A bunch of Russian businessmen who I don’t want to name have been fully sanctioned, although they’ve never even given a single interview. I’m not talking about the likes of Abramovich, but some people who are entirely uninvolved in politics. They’re looking at some other criteria, maybe the Forbes list,” Tinkov said.

Unlike the oligarchs, who have plundered the Russian economy for decades, Konov is part of a class of executive innovators who, alongside their teams, reformed outdated post-Soviet private companies into high-performing players.

He joined SIBUR in 2004, with the company on the verge of bankruptcy. By 2021, it was one of the world’s biggest petrochemicals manufacturers. Since then, the company’s turnover increased from $3bn to $16bn.

Konov, as part of SIBUR’s high-skilled management team, also transformed the company into an environmental leader in a country and an industry where ESG concerns are normally bottom of the list of priorities. It has focused on increasing the use of recycled materials in its production, reducing waste and launching environmental initiatives in the communities where it operates. It won acclaim in 2019 for becoming one of the first Russian companies to adopt a sustainable development strategy, and Forbes consequently listed it as one of Russia’s 30 most eco-friendly companies in 2021.

Konov has since stepped down as the chairman of the management board of SIBUR, and disputes the basis of the sanctions.

Alexander Shulgin, former CEO of Russian e-commerce major Ozon, is another example. After rising to the top of the company in 2017, he took Ozon to IPO on the Nasdaq exchange, where it raised a cool $1.2bn. It has now grown into a hugely successful company, often described as Russia’s answer to Amazon.

Shulgin was forced to step down as CEO of Ozon in April after the EU and Australia announced sanctions on him. The EU cites as justification for the sanctions Shulgin's attendance at a meeting in the Kremlin on the day that Russia invaded Ukraine. But the meeting was scheduled well before the outbreak of war, and the guests – Russia’s biggest employers – say that attendance was not optional.

 

Oversalting the borscht

The efficacy of the sanctions regime to date is largely down to how carefully targets have been selected. The plummet of the ruble after Russian foreign currency reserves were frozen is one example. The decision to tell Russians to stop travelling to Britain, apparently in response to sanctions on Putin’s inner circle, is another.

The risk is that western governments will discriminate less and less as they feel the need to keep up with the impressive pace they have set for their sanctions regime. With fewer oligarchs and high-profile targets left who actively support the regime, they are resorting to self-made businessmen and Russia’s managerial class.

This is an understandable logical extension of the sanctions designed to “hobble Russia’s economy”, but it risks looking indiscriminate and ill-considered. It could also have the unintended effect of undermining the moral basis of the sanctions programme, making Russia’s most liberal businessmen – and not its corrupt and exploitative ones – answerable for the government’s sins. Have we considered all the implications of cutting off economic ties with those who have brought the world of Russian business closer to the West?

If it maintains its current course, the sanctions regime risks doing the opposite of what it sets out to achieve: supporting the refrains of Russian propaganda and effectively pushing away the Russians who don’t support the war. One quarter of Russians are already feeling the effect of sanctions. As the war rages on, the West will need to consider how it increases that proportion without engendering resentment and isolation.