Russian President Vladimir Putin held a late-night oligarch meeting on November 16 where dozens of Russia’s top oligarchs expressed anxiety over a wave of nationalisations since the start of the war in Ukraine just under two years ago, Vedomosti reports.

As reported by bne IntelliNews, there has been a tsunami of M&A deals in the last year, as leading Russian companies and people close to the government have snapped up the businesses of departing multinationals. Amongst the victims of forced takeovers have been some leading Russian companies like Tinkoff bank and Yandex that have been acquired, or are being acquired, by state-owned businesses of people close to the Kremlin.

This is the third time that Putin has called in Russia’s business elite for a meeting. The first was held on July 28 just after he took office for the first time in 2000, where the president famously made the pact: keep what you got but stay out of politics.

Oil tycoon Mikhail Khodorkovsky famously reneged on that deal and was arrested in 2003, convicted of fraud in May 2005 and spent the next nine years in a Russian labour camp. Putin held a second oligarch meeting shortly after Khodorkovsky’s arrest where he added to the terms of the unwritten agreement, “… and use your wealth for the betterment of the country,” ushering in the “ZAO Kremlin” economic model. For several years Putin held one-on-one meetings with leading businessmen, who had to present their investment plans. Putin, acting more like a CEO than a president, would then “explain” how those plans could be adjusted to dovetail with the Kremlin’s own development plans.

ZAO Kremlin was a failure as the oligarchs continued to buy influence and pursue their own goals. In one famous incident at the end of this era Putin flew to the mono-city of Pikalyovo in 2009 and publicly humiliated a top oligarch Oleg Deripaska who had a factory there where the workers had not been paid for months. Putin, playing on the anger of protesting workers in the town, forced Oleg Deripaska, a top metals tycoon and once Russia's richest man and a close Kremlin insider, to sign a contract for supplies to help idle factories restart operations on live TV. The coup de grace was Putin’s venomous comment: “Give me back my pen” after Deripaska had signed the deal, but walked off the pen he had been given by Putin.

Putin abandoned trying to co-op the oligarchs into his programme to develop the economy and focused more on containing their avarice, turning instead to the stoligarchs, the small group of state-sponsored oligarchs that were personal friends of Putin’s and came to control a fifth of the Russian economy. The rest of the oligarchs were left largely alone to run their business in the privately owned part of the economy, managed by the liberal economics team, headed by former Finance Minister Alexei Kudrin and his protegees.

The details of the third meeting, held between 10am and midnight on November 16 remain vague, as few of those that attended where willing to talk, but leading Russian business daily Vedomosti reports that one of the topics of conversation was the rising anxiety amongst Russia’s captains of industry over the Kremlin’s aggressive policy of taking control of some of Russia’s biggest businesses.

At the meeting with dozens of Russian business leaders they complained of the increasing number of nationalisations that have occurred since the invasion of Ukraine, according to anonymous sources cited by Vedomosti.

The sources highlighted the trend of state seizures of private businesses over the past year and a half as "frightening" and expressed alarm. While officials attempted to address the 80 business mens' concerns during the two-hour meeting, participants left with the impression that the Kremlin would also raise taxes for increased war spending, rather than tightening fiscal policies, and that would also cause them problems.

The stated purpose of the meeting was to discuss ways to “improve Russia's investment climate” in the face of extreme Western sanctions and create conditions for companies transferring assets to Russian jurisdiction from "unfriendly" countries. However, the meeting can be characterised as yet another addition to Putin’s pact with the oligarchs: “… and pay more taxes to support the war effort or I will take your companies away after all.”

Prominent attendees at the meeting included Sberbank CEO German Gref and Russian Railways head Oleg Belozerov, who are both stoligarchs identified in bne IntelliNews’ 2016 cover article. Also in attendance were Kamaz head Sergei Kogogin, as well as government officials like presidential economic advisor Maxim Oreshkin, First Deputy Prime Minister Andrey Belousov, and Economics Minister Maxim Reshetnikov.

Russian Finance Minister Anton Siluanov has been working hard to avoid raising taxes to fund the war, where state spending has been ballooning as Putin clearly is preparing for a long war.

The sanctions were designed to starve the Kremlin of funds to fuel its war machine and that goal has clearly failed. After reporting deep twin deficits in December 2022 and January 2023, the economy has made a strong recovery and the economy is on course to turn in 2.2% growth this year, while most of the rest of Europe is teetering on the edge of recession. “The worst is over”, declared Prime Minister Mikhail Mishustin at an economic conference in October. The realisation that sanctions have failed to do enough damage to Russia to end the war quickly is starting to sink in as epitomised by a Wall Street Journal editorial on November 16 entitled “It's Time to End Magical Thinking About Russia's Defeat”, which admits sanctions have failed.

“At the front line, there are no indications that Russia is losing what has become a war of attrition. The Russian economy has been buffeted, but it is not in tatters. Putin’s hold on power was, paradoxically, strengthened following Yevgeny Prigozhin’s failed rebellion in June. Popular support for the war remains solid, and elite backing for Putin has not fractured,” the Wall Street Journal wrote.

Russia has survived the first two years of a proxy war against the West, but analysts are unanimous that the sanctions will tell over the longer term. Putin’s third oligarch meeting was all about getting ready for the problems to come, not the problems he already has to cope with.

Russia has already transformed from an open, largely private sector economy with an open current account, to a closed system where the state’s share and interference in the economy has rapidly escalated.

The threat of nationalisation is seen as a component of Russia's approach to punishing countries that have seized Russian in the rest of Europe, but well connected opportunistic entrepreneurs are also making use of the war chaos and the complete shake up nearly ever sector to enrich themselves and establish new empires, as bne IntelliNews reported in Russia’s new business elite.