How U.S. sanctions take a hidden toll on Russian oligarchs
Documents show how sanctions afflict Putin insiders — and how far they go to evade them
(Illustration by Frank Hulley-Jones; Photograph by Vasilis Tsikkinis/Getty Images)
As U.S. sanctions bit into Russia’s billionaire class in 2018, an accounting firm in Singapore issued a secret appraisal of a $200 million debt owed by one of the targeted oligarchs.
The verdict was bracing. The money was owed by a company controlled by Oleg Deripaska, according to a copy of the appraisal, at a time when his energy and mining empire was reeling from sanctions the United States had imposed on Russian oligarchs in response to “Russia’s worldwide malign activity.”
Now Deripaska’s assets were at “risk due to the unstable political situation, demonstrated by the latest round of sanctions,” the accounting firm wrote. Recovering more than a small fraction of the $200 million, the firm concluded, “would be difficult if not impossible.”
This meant a loss of tens of millions of dollars, as the impact of sanctions rippled across a hidden corner of what critics call Russia’s kleptocracy.
U.S. officials involved in sanctions policy say visibility into the private ledgers of targeted oligarchs is rare, even in classified settings. Details of the Deripaska debt-gone-bad, however, are revealed in a massive trove of financial records obtained by the International Consortium of Investigative Journalists (ICIJ) and shared with The Washington Post and other news organizations. The Pandora Papers, as the trove is called, provide insights into the reach of U.S. and European sanctions targeting a range of Russian elites at a time when these punitive measures serve as the overwhelming weapon of choice in Washington’s combative relationship with Moscow.
Over the past seven years, the United States and Europe have imposed sanctions on more than 800 Russian individuals and entities for alleged “malign” behavior including Russia’s annexation of Crimea, armed incursions into Ukraine, attempted assassinations of political dissidents, cyberattacks on Western institutions and disruptions of U.S. elections.
The Pandora files show sanctions not only hitting their Russian targets but then triggering losses that spread across their interconnected financial networks.
The documents contain material on at least 46 Russian oligarchs who appear on the Forbes list of billionaires. Among them are Deripaska and Gennady Timchenko, who amassed a fortune through oil trading. There are also people exceptionally close to Russian President Vladimir Putin, including Peter Kolbin, a childhood friend suspected by U.S. officials and others of holding hundreds of millions of dollars in assets for him.
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Pandora documents show that Timchenko and Kolbin changed the registered ownership of offshore companies as sanctions hit.
But the files also underscore the limits of sanctions, making clear that vast quantities of Russian money continue to slosh through secret global accounts while Moscow’s actions beyond its borders seem undeterred. Russia remains in control of Crimea, a prominent critic of Putin was poisoned last year, and U.S. intelligence agencies accused Moscow of mounting a new attack on a U.S. presidential election.
Current and former U.S. officials said the losses and reactions depicted in the documents demonstrate the reach of the West’s financial arsenal. The officials said these punitive measures influence the Kremlin’s calculations if not always change its course.
“What it shows is that these networks don’t feel untouchable,” said Julia Friedlander, who served in senior positions at the Treasury Department and the White House during the Obama and Trump administrations. “Although sanctions have often failed to deliver on larger political goals,” she said, they disrupt adversaries who “rely on our financial markets as an element of their own power.”
A losing $200 million shuffle
Deripaska, 53, was among seven Russian oligarchs sanctioned in 2018 by the U.S. Treasury Department. Several of his companies, including Rusal, one of the world’s largest aluminum conglomerates, were also targeted in an effort to put more pressure on the Kremlin.
The impact of such measures can be severe. Treasury designations all but lock targets out of global markets, where the U.S. dollar is the dominant currency, and bar U.S. banks and companies from doing business with them.
Treasury cited Deripaska’s close ties to the Kremlin and noted that he had been “investigated for money laundering and … accused of threatening the lives of business rivals, illegally wiretapping a government official, and taking part in extortion and racketeering.”
In 2016, Deripaska had used a company called A-Finance Ltd. to issue a promissory note for $200 million, according to records related to that transaction in the Pandora files. The documents do not explain why the Russian billionaire took on that debt, which required interest payments of $10 million a year.
A spokeswoman for Deripaska disputed the U.S. allegations against him and dismissed questions about the promissory note. “None of the allegations of illegal activity made against him … have ever been upheld in court,” Larisa Belyaeva said in an email response to written questions from The Post.
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Belyaeva said that “Deripaska did own A-Finance Limited” but “denies allegations that would suggest any illegal activity by this company.”
The Pandora records show that the note was held by Saffron International Assets Ltd., a shell company controlled at the time by another Russian oligarch, Evgeny Novitsky, a billionaire who has held shares in one of Russia’s largest cellphone networks.
But the promissory note changed hands in 2017, according to Pandora records, when Saffron was acquired by a prominent Russian financier, Kirill Androsov, as part of what one document describes as an “offsetting agreement” between Androsov and Novitsky. Androsov had served as senior aide to Putin, during his tenure as prime minister between 2008 and 2012, before leaving government, setting up investment funds and establishing a presence in Singapore.
The transactions are recorded in the internal files of a Singapore-based firm, Asiaciti Trust, which helped Androsov, 49, and other clients set up companies, including in the British Virgin Islands, where Saffron was registered.
In November 2018, Androsov expressed concern about collateral damage from the sanctioning of Deripaska. Through an intermediary, Androsov told Asiaciti that the Deripaska note “posed a certain reputational risk to the entire structure” of his offshore companies, according to an internal Asiaciti account of the call.
At the time, Saffron was part of a collection of companies Androsov controlled in an interlocking structure, according to diagrams in the Pandora files. His representative asked Asiaciti to remove Saffron from that web and move “the entire issued shares in Saffron to his personal name,” documents show.
Asiaciti officials at first seemed skeptical, calling the request “slightly abrupt,” but ultimately agreed that “it would be prudent” to isolate Saffron from Androsov’s other companies, according to notes of Asiaciti officials’ internal discussion.
In a written statement, Asiaciti denied any wrongdoing but declined to discuss its interactions with Androsov, citing its desire “to maintain confidentiality and protect personal data.”
A month later, in December, Abacus Capital, a financial services firm based in Singapore, issued the grim appraisal of this problematic asset on Androsov’s books.
In its report, Abacus noted that the promissory note’s value had already been downgraded substantially because Saffron had failed to secure any collateral or a guarantee of repayment from Deripaska. Abacus then delved into the distressed state of his assets, with charts showing shares of his companies, including En Plus Group, plunging on global exchanges as sanctions kicked in. In the end, Abacus concluded that Androsov and Saffron were unlikely ever to collect more than 10 percent of what was owed. Just two years after the $200 million note was issued, it was worth barely more than $18 million.
Abacus did not respond to requests for comment.
The records leave some questions unanswered, including why Androsov was willing to take on Deripaska-related debt with no collateral. The files do show that Asiaciti was suspicious about this and other aspects of Androsov’s business.
Asiaciti ultimately concluded that Novitsky was actually in control of companies registered to Androsov and cited a “lack of economic sense” behind transactions involving the two men.
In an April 2019 board meeting, Asiaciti executives decided that concerns about the matter exceeded the firm’s “acceptable risk appetite” and moved to sever its relationship with Saffron and other Androsov companies, according to an account of that meeting. The document indicates that Asiaciti also planned to file “suspicious transaction reports” with authorities.
An audit of Asiaciti by the Monetary Authority of Singapore questioned its handling of accounts related to Androsov, Novitsky and others, concluding that the firm’s compliance practices “were assessed to be weak,” according to a copy of the report in the Pandora trove.
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In response to a letter sent to the firm by the ICIJ and The Post, Asiaciti said it is “committed to the highest business standards, including ensuring that our operations fully comply with all laws and regulations.” The firm said it “found many inaccuracies and instances where important details were missing” in the letter sent to it enumerating details found in the Pandora documents. Asiaciti provided no specifics.
Belyaeva, the spokeswoman for Deripaska, rejected any suggestion that there was hidden or nefarious purpose to the A-Finance-related transactions. “It simply defies belief that companies [Deripaska] founded — that generate billions of dollars in revenues and comply with the highest standards of corporate governance — would engage in this sort of petty scheming,” she said.
Androsov, whose résumé lists a master’s degree in business from the University of Chicago, did not respond to requests for comment sent to his personal email account or an address provided by Altera Capital, a Moscow-based investment firm where Androsov serves as managing partner.
In a recent interview with the Australian Broadcasting Corporation, Androsov denied that sanctions had hampered his business prospects and downplayed their overall impact. The measures are “much less an economic tool” and “much more political instrument,” he said. “Most of the Russian companies are quite successful operating, even under the sanctions, in other parts of the world, like China and Southeast Asia.”
For Putin insiders, evasive maneuvers
Another case in the Pandora trove focuses on two close associates of Putin who have known him for decades.
Timchenko, 68, has been accused by critics of using Kremlin connections to amass an oil-trading fortune estimated at nearly $20 billion. U.S. authorities have alleged that Putin was a secret investor in Timchenko’s Gunvor Group, which became one of the largest oil-trading companies in the world. Timchenko in 2014 denied that Putin “had any ownership, beneficial or otherwise, in Gunvor.”
Kolbin and Putin were childhood friends whose fathers met in the 1950s, the elder Kolbin once told a Russian newspaper. The younger Kolbin spent years working as a butcher in a St. Petersburg deli before his meteoric rise in net worth.
Current and former U.S. officials say they suspect that Kolbin has served as one of many “wallets” for Putin — trusted associates enlisted to secretly hold money and property in their names on his behalf.
As the United States targeted Timchenko and Kolbin for sanctions, the two men moved to reconfigure their offshore accounts, several documents in the trove show.
Timchenko and Kolbin had both been tied to a petroleum venture called LTS Holdings based, at least on paper, in the British Virgin Islands, according to the documents. For years, ownership of LTS had been split between two shell companies. One, called Lerma Trading, was listed by the U.S. Treasury Department in 2015 as a Timchenko front. The other, Southport Management Services Ltd., is not explicitly named as a Kolbin company in the documents, but the sequence of events depicted in the files suggests that it was under his control.
That split-ownership arrangement was stable for nearly a decade until Timchenko was sanctioned in 2014 for “providing financial, material or technological support” to the Russian government as it annexed Crimea, according to the Treasury Department announcement.
Within months, Timchenko’s shell company was no longer listed as co-owner of LTS Holdings in Pandora documents. Instead, Southport Management suddenly held all the outstanding shares.
A spreadsheet listing Kolbin as the “ultimate beneficial owner” of LTS Holdings indicates that Southport Management was probably his shell company all along.
The maneuvers didn’t shield LTS Holdings or Kolbin. Both were sanctioned by the Treasury Department the following year for their association with Timchenko.
After Timchenko and Kolbin were sanctioned, Alcogal, the Panamanian law firm that had handled the transactions for LTS Holdings, filed a suspicious activity report with authorities in the British Virgin Islands, flagging that Kolbin and Timchenko held accounts in the islands’ jurisdiction and had been sanctioned by the United States. Alcogal also resigned as agent to LTS Holdings, according to the documents, citing a “higher risk to our office” than the firm could tolerate.
In a detailed written statement, Alcogal did not specifically address questions about its handling of accounts linked to Kolbin and Timchenko but said, “We resign in cases where we suspect that the client is involved in money laundering, terrorism financing or other illicit activities,” or where the firm fails to get “full cooperation” from a client or cannot “carry out the required customer due diligence.”
Rather than dissolve, LTS Holdings moved to another offshore registry, according to another Alcogal document that does not provide additional details.
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Registration documents that are separate from the Pandora files show that LTS Holdings was registered in Cyprus in 2017, and that Kolbin’s daughter, Tatiana Kolbina, was the sole shareholder. Some Russia experts and journalists in Moscow believe that Peter Kolbin died in recent years. No obituary has appeared.
Kolbin’s relatives did not respond to requests for comment. A London law firm representing Timchenko declined to answer questions about the transactions involving Kolbin and LTS Holdings. The firm, Carter-Ruck, said that “our client’s unequivocal position is that he has always acted entirely lawfully throughout his career and business dealings.”
In recent years, U.S. sanctions have repeatedly prompted Russians to take evasive steps.
In 2014, the Treasury Department targeted Arkady Rotenberg, a childhood friend of Putin whose construction companies won contracts estimated at $7 billion for projects associated with the 2014 Winter Olympics in Sochi.
When Rotenberg then passed control of his companies to his son, Igor, Treasury responded by sanctioning the younger Rotenberg. Italian court documents shared with the ICIJ as part of the Pandora project show that the son’s companies suddenly faced difficulties paying bills.
Rotenberg subordinates in Moscow and Spain traded emails in 2018 in which they discussed revising contracts to swap out the names of companies under scrutiny and sending invoices to a new company still able to send money.
One of the employees joked about what colleagues should do if they got caught. “Remember guys, should they arrest me, don’t bring me oranges,” the employee wrote, according to the documents. “Go for chocolate cakes.”
The Rotenbergs did not respond to requests for comment.
‘Safe option,’ limited deterrence
U.S. officials and experts believe that sanctions have taken a cumulative toll on Russia’s economy, sapping its gross domestic product by as much as 1.5 percent annually. Even so, the past few years have been marked by new waves of alleged Russian aggression.
Last year, the Kremlin was accused by the United States and other Western governments of poisoning political activist Alexei Navalny, waging another assault on an American presidential election and carrying out a massive cyberattack known as SolarWinds on U.S. targets including federal agencies and Microsoft.
Then, this year, Russia moved forces to the border of Ukraine as part of a military buildup that rattled nerves in the region and raised fears of an invasion. U.S. officials say they believe Putin backed away from escalating Russia’s armed incursions into Ukraine in 2014 when his government and many of his closest associates were hit hard by U.S. and European sanctions.
The Biden administration announced two waves of sanctions against Russia within months of taking office and has threatened more.
The repeated reliance on sanctions reflects a belief in the coercive power of the U.S. economy and currency — but also a lack of palatable alternatives for confrontation with another nuclear-armed power, officials and experts said.
Sanctions represent a “safe option” on the menu of retaliatory measures against Moscow, said James Nixey, head of the Russia-Eurasia program at the Chatham House policy institute in London.
“You can’t ignore outright medieval-style” behavior by Russia, Nixey said. But “we don’t want to invade. We don’t want to start a war. We don’t want to endanger anybody any more than we have to.”
Stung but still maneuvering
Early on, Timchenko was cavalier about the punitive financial measures taken against him, saying he had no sizable assets in the United States and didn’t expect to feel a pinch. But costs accrued in unexpected ways. In 2014, Timchenko told the Russian news agency ITAR-Tass that because of sanctions, his wife “was unable to pay in Germany for a complex surgery on the spine.” When she tried to settle the bill with the clinic that performed the operation, he said, “the payment did not go through.”
Timchenko said the bill was ultimately paid, but expressed annoyance, calling the complications created by sanctions “a great stupidity.”
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Four years later, Timchenko sold a private jet, according to aircraft registration records obtained by the Reuters news service. He did so after telling ITAR-Tass that Gulfstream, the U.S.-based aircraft manufacturer, would no longer service his plane.
For Deripaska and Androsov, the impact of U.S. sanctions and their fallout has been mixed.
Earlier this year, a U.S. federal court dismissed Deripaska’s lawsuit seeking to have the sanctions against him lifted. Derispaska’s appeal of that ruling is pending. In 2019, he succeeded in getting the measures against several of his companies, including Rusal and En Plus, waived when he agreed to reduce his ownership stakes in them.
Several former U.S. officials said the U.S. government agreed to lift the penalties against his companies in part because of economic repercussions beyond Russia. Thousands of jobs were threatened at an aluminum plant in Ireland, for example, when Western companies faced punishment for doing business with Rusal, officials said.
Androsov, whose net worth is listed in the tens of millions of dollars in documents included in the Pandora trove, surfaced in media reports earlier this year as the buyer of a castle-like hotel in Lucerne, Switzerland. Androsov acquired the historic Château Gütsch from another Russian oligarch, Alexander Lebedev, who operates newspapers in London and previously served as a lieutenant colonel in the Soviet spy agency, the KGB.
“It’s my private and personal investment,” Androsov said in the interview with Australian broadcasters, adding that it is “kind of a trophy asset that could be inherited by your kids.”