The Great Jewish Oligarchs’ Escape: ‘The Ground Is Trembling. They Will Stream Into Israel’

As Ukraine war rages and the West tightens the screws on Russian oligarchs, many of them look to Israel to escape ? Some already hold Israeli citizenship, exactly for these kinds of circumstances ? Billionaires will benefit from Israeli law, allowing them to hide sources of income for a 10-year period

By Shuki Sadeh, HAARETZ

“Tonight, I say to the Russian oligarchs and the corrupt leaders who’ve bilked billions of dollars off this violent regime: No more. The United States Department of Justice is assembling a dedicated task force to go after the crimes of the Russian oligarchs,” declared U.S. President Joe Biden in his State of the Union Address on March 1. “We’re joining with European allies to find and seize their yachts, their luxury apartments, their private jets.” Then he added this direct warning: “We’re coming for your ill-begotten gains.”

Biden’s declaration came as, in the wake of Russia’s invasion of Ukraine the previous week, Western countries were putting heavy economic pressure on Russia and on the oligarchs close to President Vladimir Putin. Activity by Russian banks was frozen in several Western countries, as was the ability of Russian companies to raise funds in Western capital markets. Some of the Russian banks were banned from using SWIFT, the international clearing system. Russian planes were forbidden from flying in the skies of Europe, a step that was also adopted by the U.S.

These steps are already affecting the Russian economy: share prices of large Russian corporations have plummeted in stock exchanges around the world, and the value of the ruble has fallen sharply, triggering an increase in the interest rate in Russia to 20 percent. Thus, it is not only oligarchs who have begun to feel the ground shift, but also businesspeople with ties or activity in Russia.

The coastal Israeli city of Herzliya Pituach, favorite among Israel’s richest.

‘In the wake of the American sanctions following the annexation of the Crimean Peninsula, there was a flow of businesspeople to Israel’

Israel is not obligated to any Western recommendations and has not announced restrictions of any sort on Russian businesses – and in the meantime, private jets from Russia have continued to land at Ben-Gurion Airport. One jet owned by Roman Abramovich landed at Ben-Gurion on the day after Russia’s invasion began. Nevertheless, the prevailing assessment is that Israeli banks will adopt the European and American regulatory rules, as has already been happening in recent years. Since the crisis began, and all the more so since the full-scale fighting began, there has been a noticeable increase in interest by Jewish businesspeople operating in Russia in extracting their funds from the country.

“I am currently consulting for five businesspeople active in Russia,” says attorney Ram A. Gamliel. “There is a sense of panic. It is unclear where this is going. At the same time, you have to say the truth: if it were the opposite case – if the authorities in Russia were those who were acting against the businesspeople – they would be a great deal more frightened,”

Gamliel says that the period prior to the outbreak of the war, when harsh economic sanctions had not yet been imposed, gave the businesspeople a chance to properly prepare for the eventuality: “The cutoff from SWIFT does not automatically hurt everyone; it hurts the center of investment inside Russia. Mainly, it makes it difficult to bring in or send out money from the country. Anyone who is smart managed to transfer funds during the waiting period.”

Crony economics

The oligarchs are businesspeople who amassed their wealth following the collapse of the Soviet Union, during the process of privatization of the country’s natural resources, like coal, oil, gas and aluminum. “I have no proof of the source of the wealth of each and every one of them, but in the broad perspective – there is no clean money whose source is in Russia. They benefited from the fruits of public corruption,” says former Meretz lawmaker Roman Bronfman, a native of Ukraine. “This is money the source of which is in an act of robbery perpetrated against all of the citizens – of natural resources or of the state budget. The average [monthly] pension in Russia comes to $200, and the gaps between rich and poor are the highest in the world.”

The Neve Tzedek neighborhood in Tel Aviv, where Roman Abramovich owns several properties.

At first, the oligarchs were aligned with Boris Yeltsin, who pinned his hopes on them, hoping they would help turn Russia into a liberal democracy. However, with the Putin’s rise to power in 1999, he began using the legal the system to persecute the three oligarchs of the Yukos oil conglomerate: Leonid Nevzlin (who has a 25 percent ownership stake in Haaretz), Vladimir Dubov and Mikhail Khodorkovsky. The first two fled to Israel, whereas Khodorkovsky was given a 10-year prison sentence on charges of theft and tax evasion.

Other oligarchs made their way out, as well. Nevertheless, there were some who decided to maintain good connections with the Putin administration, which intensified corruption in Russia and turned it into a country in which crony economics ruled the day. The oligarch Mikhail Fridman, for example, was considered in the 1990s to be an independent businessman without links to the regime, but he got closer to the circle of oligarchs around Putin, as did his partner in the major banking group Alfa, Petr Aven. Fridman has Israeli citizenship, too. Last week, Aven and Fridman found themselves on the sanctions list over their close relationship with Putin.

Roman Abramovich attends the UEFA Women’s Champions League final soccer match, last year.Credit: AP Photo/Martin Meissner

Aven and Fridman’s Alfa Group has a business partnership with two other oligarchs who are well-known in Israel – Viktor Vekselberg and Len Blavatnik. Vekselberg invested in Fifth Dimension, the company headed by Defense Minister Benny Gantz before he went into politics, as well as other high-tech initiatives. Blavatnik is the owner of Israel’s Channel 13, and previously owned the Clal Industries conglomerate, which controls Nesher Cement and other companies.

Roman Abramovich’s super yacht Solaris is seen at Barcelona Port, this month.Credit: ALBERT GEA/ REUTERS

Alfa Group formed a partnership with companies owned by Vekselberg and Blavatnik called AAR, which in turn became one side of the TNK-BP partnership, one of the largest petroleum companies in the world. In 2013, Rosneft, the Russian government’s huge energy company, acquired the private company for $55 billion, while BP was left with a minority holding of only 19 percent.

Since the crisis began there has been a noticeable increase in interest by Jewish businesspeople operating in Russia in extracting their funds from the country

The enormous buyout, which was personally approved by Putin, made Vekselberg and Blavatnik extremely wealthy. Following the buyout, AAR announced that it was planning to reinvest most of the money in Russia. Previously, there had been a serious commercial rivalry between BP and AAR.

Several investigative news articles revealed how in 2008 and 2009, authorities in Russia harassed BP managers in the country. In other words, the AAR oligarchs received the protection of Putin’s regime. This is, in part, why some in the West believe that Blavatnik – although he is a U.S. citizen who left Russia at a young age (but who did return there to do business together with Vekselberg, his friend from his school days in Moscow, following the fall of the Iron Curtain) – is an oligarch in every sense.

His close associates are incensed by him being described as an oligarch, stressing that Blavatnik was merely a financial partner in the oil dealings, is not a crony of Putin’s, and that he invests the profits that he gained from the buyout in Western countries and not in Russia, notwithstanding the press release that was issued at the time.

Viatcheslav Moshe Kantor.Credit: Nimrod Gluckman

According to a profile of Blavatnik that appeared in New York magazine in 2014, Russian authorities harassed BP managers in the country in 2008 and 2009, including placing surveillance on the company’s directors. The chief executive of TNK-BP, Robert Dudley, was frequently summoned to appear before courts far from Moscow. After he complained about the condition of his health, it was found that when he stopped eating in the company offices he felt better, which in turn raised suspicions that he was being poisoned.

It isn’t hard to imagine a situation in which, in the wake of an invasion by Israel of one of its neighboring Arab states, a boycott is imposed on wealthy Israeli tycoons

Dudley departed Moscow for Germany quite suddenly, once he realized that policemen were heading to his apartment for a “visit.” Disagreements among the partners continued for years afterward, until the company was sold in 2013.

The current crisis closes the circle: Last week, BP announced the sale of 20 percent of its shares in Rosneft, as part of the international economic sanctions that have been imposed on Russia.

Unprecedented sanctions

The sanctions that have been imposed since the start of the crisis are considered unprecedented, and raise the question of whether it is legitimate to act against businesspeople in such a personal way. It isn’t hard to imagine a situation in which, in the wake of an invasion by Israel of one of its neighboring Arab states, a boycott is imposed on wealthy Israeli tycoons. While it is true that when sanctions were imposed against Iran actions were taken against private companies that were linked to the Iranian nuclear project, including cutting them off from the SWIFT system, the notion of personal sanctions is considered something relatively new.

Russia’s President Vladimir Putin, left, and Russian tycoon Oleg Deripaska, in 2013.Credit: Sergei Karpukhin/REUTERS

In recent years, following the Russian invasion of the Crimean Peninsula, and evidence coming to light of Russian involvement in U.S. elections, Washington has declared sanctions against several oligarchs thought close to Putin, including Viktor Vekselberg and the aluminum and metals magnate Oleg Deripaska.

Know your oligarch: A guide to the Jewish billionaires in the Trump-Russia probe

Yet it seems that the steps now being taken have raised the ante. “The international sanctions framework was established for the sake of the war on terror and the struggle against the Iranian and North Korean nuclear programs. The Americans and the Europeans are taking it a step further now,” says attorney Yehuda Shefer, former director of the Israel Money Laundering and Terror Financing Prohibition Authority, which operates as part of the Justice Ministry. “In my opinion, this is a legitimate move insofar as it relates to authoritarian regimes that are being aided by wealthy individuals who are unable to explain the source of their wealth.”

According to several experts, the personal sanctions on oligarchs have two intertwined objectives: exerting pressure on them in the hopes that this will in turn be placed on Putin; and exerting direct economic pressure on Putin himself, who is on paper not at all a wealthy person, because his assets are evidently in the hands of those close to him. “Personal sanctions against oligarchs are likely to be more effective than the broad steps being taken against the Russian economy, such as the matter of the SWIFT system,” says Shefer. “We are already seeing several oligarchs who are trying to make a compromise or who are declaring a spirit of reconciliation.”

Alex Tenzer, a social activist among immigrants from the former Soviet Union, says: “The fury of oligarchs in Russia is much more dangerous to Putin than opposition activist Alexei Navalny is. People always know how wars begin, but not how they end. In my estimation, this is the first time in 22 years that there is a chance for change in Russia.”

Nevertheless, others believe that it is still too early to know the extent and significance of any “oligarch revolt” against Putin. After the decapitation of the Yukos group soon after Putin took power, the oligarchs have not voiced any public criticism of him. Oligarch Mikhail Fridman, who owns the Alfa Group banking conglomerate, may have published a letter in the Financial Times calling for peace; Abramovich may have announced that he would try to be a mediator; and Deripaska may have expressed concern for the situation of the economy in Russia – but none of them has come out with any profound criticism of Putin himself.

‘Perhaps these times will induce some self-examination, in light of the links between the Israeli political elite and the oligarchs’

Fridman recently held a press conference in London in which he reiterated the messages of his Financial Times op-ed, but he refused to make an explicit condemnation. “It’s a very sensitive issue. We have dozens of partners and I do not have a right to put all of them at risk,” Fridman told reporters.

“If I make any political statement that is unacceptable in Russia it will have very clear implications for the company, for our customers, for our creditors, for our stakeholders. I do not have a right to push on that situation,” Fridman said. “They should not suffer, all these hundreds of thousands of people, just because I

Links with the oligarchs

Amid all the recent developments, it seems that the recommendation of Foreign Minister Yair Lapid to the other members of the cabinet – that they should refuse any oligarchs’ request for assistance in evading sanctions – did not garner any special attention. It may be that the warning had particular significance: seated around the cabinet table are several ministers with links to oligarchs.

There’s Gantz, who prior to his entering politics was chairman of Fifth Dimension, a start-up that developed artificial intelligence systems for military, governmental and civil intelligence applications. One of his investors was Vekselberg, and one reason for the collapse of the company is sanctions that the U.S. Treasury Department imposed on Vekselberg in 2018.

Finance Minister Avigdor Lieberman is known for his links with the administration in Russia and his many years of close contact with various oligarchs. One of these is Michael Cherney, who owns quite a bit of Israeli real estate, including an apartment in a luxury tower in Tel Aviv that is registered in the name of companies registered in Cyprus. In 2018, an investigative piece on Israel’s Channel 13 news revealed that Lieberman had in 1998 (when he was not holding any public position) received $3 million from the government in Russia, with the aim of helping to lower the ruble exchange rate in order to save an Austrian bank. (Lieberman contended that this was “fake news.”)

Housing Minister Ze’ev Elkin is associated with several oligarchs who helped him by providing loan guarantees when he ran for mayor of Jerusalem in 2018. Among those who provided guarantees to Elkin are the oligarchs Temur Ben Yehuda (aka Temur Khikhinashvili), who serves as chairman of the Israeli- Russian Business Council, Yuri Zablonsky and Lev Kenago. Ben Yehuda, a former partner in the power station in Be’er Tuvia together with the oligarch Boris Lozhkin, was at that time visiting Israel together with the then-deputy prime minister of Russia, Maxim Akimov. According to Elkin, not a single one of those who provided his loan guarantees is associated with Putin. “Lapid is correct in his recommendation,” Elkin has said. Elkin also received contributions from the oligarchs Vladimir Gusinsky and Mikhael Mirilashvili.

On two occasions, in 2008 and 2012, Justice Minister Gideon Sa’ar received contributions from Gusinsky in the Likud primaries. Between these two primaries, when he served as education minister, Sa’ar appealed to the Population and Immigration Authority to come to his assistance, beyond the letter of the law, and issue a passport to Gusinsky, as reported by Israel’s Channel 14. The general- director of the Housing Ministry, Aviad Friedman, formerly managed Gusinsky’s business interests in Israel.

“Perhaps these times will induce some self-examination, in light of the links between the Israeli political elite and the oligarchs,” says Shefer. “Vekselberg, for example, has gotten into trouble involving corruption affairs, and he is close to Putin. In the Fifth Dimension affair, there was a focus on suspicions of criminal actions relating to the bidding, but there was also something else important there – an oligarch close to Putin might have received access to Israel Police intelligence, through his contact with a former army chief of staff, Gantz. Lieberman received the gift of $3 million in 1998 in order to lower the rate of the ruble, and now he is in charge of the money that flows through Israel, and is connected with Cherney and with other oligarchs.”

In the meantime, it seems all of the signs are pointing toward oligarchs returning to Israel. Many of them hold Israeli citizenship, partly for these sorts of circumstances. They are likely to benefit from the so-called Milchan Law, which established that returning residents or new immigrants do not have to report on their source of income for a 10-year period.

“Businesspeople will stream into Israel,” says one individual who advises oligarchs. “In the wake of the American sanctions following the annexation of the Crimean Peninsula, there was a flow of businesspeople to Israel, which was followed by a certain ebbing of the flow. Abramovich, for instance, also has Portuguese citizenship. It seems as if Israel was already becoming less attractive to many of them. Now, a long line of Russian businesspeople, whose worth is in the billions of dollars, will arrive and will buy homes there. Personal sanctions against people like Fridman and his partner Petr Aven are something that people in this community did not think would happen. The ground in Europe is shifting below their feet, and it will be felt in Israel.”

Dodging sanctions

It’s still too early to know what effect the sanctions will have. Aside from the steps that have been announced, it would seemingly be a Sisyphean task to home in on capital stored away in tax havens around the world. In Panamanian documents leaked in 2016, it was revealed that individuals close to Putin had carried out transfers of funds amounting to some $2 billion in tax havens – and that was only one example of the oligarchs’ use of tax havens.

The Ukrainian oligarch Igor Kolomoisky, who holds Israeli citizenship and was previously close with Ukrainian President Volodymyr Zelenskyy, before relations between them soured, was sued in Israel in 2019 by a Ukrainian government bank that had been nationalized. The lawsuit was based on a claim that Kolomoisky and his partner stole some 2 billion shekels from the bank, an allegation they deny. The introduction-of-evidence hearings in the case have not yet begun, partly because EBN & Co., the Israeli law firm that is representing the governmental bank of Ukraine, was preoccupied for two years with coming up with documents in Ukraine. In a petition recently filed with the court, the attorneys describe how their emissaries made the journey to office buildings on the island of Jersey, a tax haven in the English Channel, in order to locate the representative of a front organization connected with the Ukrainian oligarch.

Another way to extricate capital is through real estate, a practice that is well known to oligarchs in both Israel and the United Kingdom. “Oftentimes, on the property registration of homes of the oligarchs, their own name is not written, but rather that of a company in some sort of tax haven, because they are trying to conceal their assets,” says Roy Agagny, the co-CEO of Megiddo Financial Solutions. “In the case of a bank or public corporation, the sanctions are effective, but the authorities in the West will have a difficult time putting their hands on a sizable share of the assets, because of the camouflaged registration of asset ownership through the use of anonymous companies, which makes it difficult to identify the final beneficiary.”

Buying connections

If tax havens and real estate are practical locations for the funds of oligarchs, then philanthropy and contributions to academic, cultural, and other public institutions are a mechanism that is intended to protect their good name in the public arena. It may be that the war will change this situation, as well.

The Guardian reported last week on pressure being brought to bear on the Tate Gallery in London to remove Vekselberg from its roster of trustees, on which he appears in large part due to his past contributions. In the wake of the 2018 sanctions, Vekselberg no longer serves on the board of directors of MIT in the U.S.

Among the Jewish Israeli oligarchs, philanthropy plays a significant role, as well. Over the past 20 years, oligarchs have been heading public institutions in Russia and other former Soviet countries, in organizations called the Jewish-Russian Congress in various geographical locations, in parallel with the infusion of contributions to a variety of organizations.

Mikhael Mirilashvili, for instance, is president of the Euro-Asian Jewish Congress. The nature of his relationship with Putin is not entirely clear: on the one hand he was imprisoned in a Russian prison for eight years while Putin was president, in the first decade of the millennium. On the other hand, he comes from St. Petersburg, too, and he knew Putin back when the president was the city’s deputy mayor. During the past decade, Mirilashvili was present on two occasions when Putin visited Israel – in 2012 and in 2020, when Putin dedicated monuments related to Russian heritage.

In the distant past, Mirilashvili was also the employer of one Yevgeny Prigozhin, who managed a restaurant owned by Mirilashvili. Prigozhin, who is also known as “Putin’s chef,” was connected with the Wagner Group private militia that was sent to Ukraine on missions to liquidate targeted enemies on Putin’s behal. Nevertheless, figures close to Mirilashvili stress that the two men have not been in contact for many years.

Mirilashvili has extensive business interests in St. Petersburg to this day through the Petro-Mir holding company, which is active in the fields of infrastructure, real estate and pharmaceuticals. Mirilashvili, whose son Isaac is a millionaire in his own right and the owner of Israel’s Channel 14, maintains good relations with the Israeli ruling elite, including former Prime Minister Benjamin Netanyahu, Shas leader Arye Dery, and former Mossad director Yossi Cohen.

Mirilashvili is also a heavy contributor to Yad Vashem, Israel’s official Holocaust memorial center, which has a research institute named for his father. The recent scandal over reports that Yad Vashem had lobbied Washington to refrain from placing sanctions on Abramovich was a reminder of the problematic aspect of this philanthropy. Abramovich is not yet on the sanctions list, and he denies any close association with Putin. Still, it seems as if he is preparing for such an eventuality, and he has decided to sell Chelsea FC, the British football club, evidently out of concern that economic sanctions against him would have a negative effect on the team. He has also reportedly begun to sell assets that he owns in London.

Late last month, it was revealed on Israel’s Channel 12 that Yad Vashem had approached the U.S. ambassador to Israel, Thomas Nides, with a request that sanctions not be imposed on Abramovich. This news follows another bit of fresh information: that the oligarch has made a contribution to the museum amounting to tens of millions of dollars. “These contributions are the buying of connections – it is precisely for these events that the sanctions are happening now,” says Bronfman.

Another oligarch considered close to Putin and who contributes to Yad Vashem is the president of the0 European Jewish Congress, Viatcheslav Moshe Kantor. Kantor’s wealth was amassed following the breakup of the Soviet Union, thanks to his taking over of the extensive fertilizer industry. He has a controlling interest in Acron Group, which is traded on the London and Russian exchanges. Its share prices have been sharply down this month. Kantor is the head of a body called the World Holocaust Forum that underwrote the events marking 75 years since the end of World War II, which were held at Yad Vashem in January 2020. At the central event, Putin generated a public scandal by making incorrect statements that supported his own historical narrative of the war. Film clips with incorrect data were displayed on the screen, and it was unclear who was behind them. Yad Vashem Museum subsequently issued an official apology.

Kantor is the mysterious “Kafka” referenced in a major dispute between Israeli automobile importers Michael Levy and Rami Ungar involving the import of Kia vehicles. The disagreement is scheduled to be addressed next month in the Supreme Court, in the wake of Levy’s appeal of a district court verdict in Ungar’s favor. One character who plays a role in the dispute is a corporate spy named Aviram Halevy, formerly a high-ranking member of the defense establishment who switched sides, first working for Levy and then for Ungar.

Halevi was recorded by Ungar’s people talking about work he’d done against a mysterious oligarch with the code name “Kafka.” In During court proceedings, it emerged that before switching sides, Halevi, had refused to sign an affidavit in Levy’s favor, partly because he was afraid Ungar would pass on information to “Kafka” showing that Halevi had acted against him. “Is Kafka a person who is liable to murder you?” Halevi was asked on the witness stand. “That is what I was afraid of, yes,” Halevi responded. Similar statements were made in a recorded conversation that was played for the court in which Halevi’s wife said she was afraid that her husband’s head “would be inside a crate.” Associates of Ungar have previously told The Marker that fears of the danger posed by “Kafka” were all in Halevi’s mind.

A spokesperson for the European Jewish Congress stated that “Kantor, as president of the European Jewish Congress, is currently engaged in rescuing and aiding Jews from Ukraine. As a British citizen, and as someone who has lived in Europe for over 30 years, he is not concerned with personal matters; he is solely concerned with the Jews of Ukraine.” Regarding the identification of Kantor as “Kafka,” the spokesperson said, “This connection is highly absurd.”