U.S. Investigation of Offshore Capitals May Ruin Putin’s Regime, Aslund Says

The international expert community has been busy discussing the search of Russian offshore capitals by Americans. Anders Aslund assumes that this investigation may eventually put an end to Putin’s regime.

In his article for Project Syndicate, the Swedish economist claims that Putin’s power is weaker than it seems. Basically, his power is based on economic agreements he consolidated in the past. At this point, those agreements threaten Putin’s political career, Mr. Aslud says. 

At the same time, he says that Putin’s regime is in jeopardy since the local system lacks reliable rights to private property. Russian oligarchs are forced to keep their fortunes abroad, mostly in European jurisdictions. Yet, European governments are against Putin.

With the help of a group of loyal people, President Putin gradually created 3 circles of power – the governmental one, the one based on controlling state-owned corporations, and the one based on loyal businesses. The process started in the late 1990s when Putin was in charge of Russia’s Federal Security Service. During his first presidency in 2000-2004, Putin managed to consolidate the powers and lay the foundation of his future regime.

At first, he gained control over the Russian TV and political establishment. Later on, he spread his power over the parliament and the legal system. The next step was to take big corporations like Gazprom and Rosneft under control as well. The he captured the entire public sector and created big corporations with cheap public financing.

The third circle of power implied rich and powerful businessmen loyal to Putin. They are said to have been helping Putin hide his billions abroad. The whole point is, thanks to the absence of limitations, rich Russian businessmen can withdraw their profits to offshore tax havens. However, those tax havens are not as safe as they used to be, and Putin cannot control them the way he controls Russia.

For now, the USA and the UK are the two offshore destinations that are still anonymous. But that’s about to be changed according to the latest sanctions signed by the U.S. Congress and President Trump. The sanctions initiate a big-scale investigation to find Putin’s treasures hidden in London, New York and other Western cities. This makes Putin’s regime fragile, and Western politicians are likely going to benefit from that.