Putin enables the lifestyle of Russia’s elite – until they lose faith, there is little hope of peace

A year into its war, Russia is not any closer to accomplishing its objectives in Ukraine. And yet, to the surprise of western observers, neither battlefield losses nor economic misfortunes have softened its initial demands of demilitarisation and regime change in Ukraine. If there is one thing that’s clear, even in the proverbial fog of war, it is that the end is nowhere in sight. Russia is not any more ready for good-faith negotiations today than on the first day of the invasion.

What makes the Putin regime so impervious to western sanctions? Why is Putin unconcerned with the human costs of war? And is there anything that would bring Russia to the negotiating table?

The answers to these questions have to do with the peculiar domestic context in which the Russian leader operates. Unlike democratic leaders, who stay in power by providing goods to the public, Putin’s survival strategy consists of catering to a small number of political elites who make up his inner circle. As long as the inner circle remains happy, either as a result of direct payoffs and rents or policy, it has no incentive to replace him.

As it is, Putin’s inner circle consists of two remaining power blocs: the top-ranking FSB intelligence officers and the heads of the military and defence structures. Though similar in their ideological positions – both are anti-democracy, and isolationist – the two blocs’ ability to see eye to eye is impeded by their competition for power, resources and their leader’s ear. Everything they have attained they owe to Putin.

In exchange, they pay back with loyalty and support and, when necessary, by doing some of his bidding. The FSB’s primary job is to identify and preempt threats to the regime. Its operatives do so through spying, intimidation, sabotage, false-flag operations and other similar activities. It is largely to the FSB’s credit, for instance, that Putin has seen so little public opposition to the war.

If the FSB is Putin’s eyes and ears at home, the military is the fist he shakes at Russia’s external foes. The job of his top generals is to maintain Russia’s military superiority – or the appearance of it – by developing and testing new weapons, even if they only last until the end of the parade route.

Ukrainian servicemen near Bakhmut, Donetsk, where the reported death toll ratio is five Russians to one Ukrainian.
Ukrainian servicemen near Bakhmut, Donetsk, where the reported death toll ratio is five Russians to one Ukrainian. Photograph: Marko Đurica/Reuters

The war has put each of these blocs to the test, and both have flunked spectacularly and repeatedly. The most recent military offensive, led by a close confidant of Putin, General Valery Gerasimov, has seemingly choked even before it started, with Russian death toll at Bakhmut – a town of questionable military importance – reported as a staggering five-to-one ratio compared with Ukrainian losses. The FSB has also fallen on its face on more than one occasion, most recently in a foiled plot to destablise the government of Moldova, likely with the goal of using the country’s territory or military resources to aid in Russia’s war with Ukraine.

These failures notwithstanding, Putin’s inner circle retains influence in his decision-making process, and hence is key to any hope of Russia finally taking seat at the negotiating table. However, members of Russia’s intelligence and military elite are also impervious to western pressure. True to their anti-west rhetoric, they do not hold vast foreign assets, at least not in their own name. They prefer to live in Moscow rather than abroad, vacation in Yalta rather than in the French Riviera, and cheer for Russian football clubs rather than those in the Premier League.

We have seen that battlefield losses alone will not compel Russia to engage in good-faith negotiations. Forcing Russia to agree to a settlement – and to honour it– is impossible without swaying the members of Putin’s inner circle. According to scholars of international conflict, wars end when their costs become unbearable to at least one of the adversaries. Putin and his regime are impervious to the human costs of war. The children and grandchildren of Putin’s confidants are not the ones thrown into the meat grinder at Bakhmut – they are safely ensconced in elite boarding schools, luxurious villas and invitation-only country clubs, bought and paid for with their family’s ill-gotten gains. Ironically, many of these safe havens are located in western Europe and North America.

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And yet, aside from a handful of high-profile seizures of superyachts in the war’s early days, the west has done precious little to target the members of Putin’s inner circle. To be precise, most of Putin’s cronies – and some of their families – eventually made it on to the official sanctions lists at most western countries in the last year. But no wealthy Russian worth their salt would ever put their assets, foreign or domestic, under their own name. Tax evasion and shady accounting has been the lifeblood of the Russian financial system since at least the 90s. Putin himself is suspected to be the world’s richest man, but is known to officially declare only a modest apartment in St Petersburg.

Destabilising Putin’s symbiotic relationship with his cronies is the only real way to inflict costs on the Russian leader. And while Putin’s generals may welcome Russia’s growing isolation, they also have long recognised the investment value and money laundering potential of London and Paris real estate. So while they are toiling away in their Moscow offices their girlfriends, wives and children are spending their time in their luxury residences in the so-called decadent west.

The west has balked at taking the simplest steps in enforcing sanctions, such as centralising tracing and information-sharing, forcing banks to reveal account ownership rather than putting the onus of reporting on the account owner, annulling sanctions against family members. Do they really expect that the sanctioned cronies will willingly hand over their assets?

The generals and strongmen may have few obvious and direct ties to the west, but that just means the west has to do a better job of identifying and targeting their fixers, mistresses and children. If a handful of individuals can trace a London apartment to Russia’s defence minister, then top forensic accountants can certainly do similar things at scale.

To see any real results, the west must start applying its anti-corruption and money-laundering laws to seize the ill-gotten villas, freeze the offshore accounts and revoke the golden passports. The battlefield losses will take on a different meaning only when coupled with real costs in wealth and lifestyle. This wealth is what bought Putin the loyalty of his inner circle in the first place. And, while some will stand by him, others may reduce their enthusiasm for future offensives or become less helpful plotting coups and false-flag operations. In fact, the continuous string of flops, stunted offensives and foiled plots experienced by “world’s second best army” may suggest that some of this may have already been happening.

Military success should be celebrated, but it has not been decisive enough to convince the Russian elite to quit sending other people’s children to slaughter. Embarrassing military defeats, coupled with personal financial losses, might.

  • Olga Chyzh researches political violence and repressive regimes; she is an assistant professor in the department of political science at the University of Toronto

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