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Ukraine: Sanctioning Russian oligarch’s wealth and the urgent need to reform the offshore financial system

Authors: by Giulia Mascagni & Mick Moore
Date:
Blog

Last week, the Institute of Development Studies (IDS) held an event on the global development and economic implications of the conflict in Ukraine, at which ICTD Fellows Mick Moore and Giulia Mascagni spoke on the subject of sanctioning Russian oligarch’s wealth, the menace of the offshore financial system, and the urgent need and opportunity to take action for reform.

One of the tools now being used to compel the Russian government to end the invasion of Ukraine is sanctions on the overseas assets of hundreds of ‘oligarchs’, i.e. very wealthy Russians with close connections to the Kremlin. Their offshore assets are being identified and frozen – and perhaps even expropriated. Because wealth is so unequally distributed in Russia and so much of it held offshore, the country is in principle vulnerable to these kinds of sanctions. But how vulnerable is it in practice? This offshore wealth has been sitting in London and other secrecy jurisdictions for many years, with little effort on the part of British and other governments to seriously question or even identify and monitor it.

It is still uncertain whether much of this offshore wealth will be identified, whether serious sanctions will be placed on it, and whether those sanctions will influence Russian government policy. However, even if these particular sanctions do not in this case work as intended, they could still constitute good news for most of the world, especially many low income countries. It is not only Russian elites who expatriate large amounts of corrupt money and hide it offshore. Many other elites do the same, especially when they get their hands of the fruits of the extraction of oil, gas and minerals. So far, those governments that are in a position to undercut these damaging rackets have shown little interest in doing so. Arguments about the corrosive effects on governance and democracy in, for example, Nigeria – and increasingly in Britain itself – have not gained at great deal of traction. But now that this hidden offshore wealth is being perceived, quite accurately, as a national security threat to a large number of relatively wealthy democracies, perhaps we will see more positive action. There might be a silver lining for much of the world from the tragedy now being inflicted on Ukraine.

To learn more, watch Giulia and Mick’s contributions to the panel event:

We need to know where Russian Oligarch’s wealth comes from. If it is legitimate wealth then it needs to be taxed appropriately, and if it is not legitimate then it needs to be prosecuted. We cannot afford to have money that is not legitimate in countries like the UK without questioning or investigating it, which is what has been happening so far.” – Giulia Mascagni

Links to the materials Giulia mentioned in her talk:

Illicit money is corrupting politics in countries like Britain. And I say that quite deliberately. The politics of Britain have been seriously corrupted by all that money that is flowing through London.” – Mick Moore

 

Watch the full event video here:

Further relevant stories:

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Giulia Mascagni
Giulia Mascagni is a Research Fellow at the Institute of Development Studies and Research Director of the ICTD. Her main area of work is taxation, but she also has research interest in public finance, evaluation of public policy, and aid effectiveness. She is an economist by training, holding a PhD in Economics from the University of Sussex. Her main geographical interest lies in African countries, with a particular focus on Ethiopia and Rwanda.
Mick Moore
Mick Moore is a Professorial Fellow at the Institute of Development Studies and the founding CEO of the International Centre for Tax and Development. He is a political economist whose broad research interests are in the domestic and international dimensions of good and bad governance in poor countries, focusing specifically on taxation in Asia and Africa.