FLIGHT MH17
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Malaysia Airlines flight 17

Russian billionaires fear more sanctions over downing of MH17

Russia's mega-rich say sanctions could cripple nation unless Vladimir Putin moves to end the Ukraine conflict in aftermath of MH17 tragedy

PUBLISHED : Monday, 21 July, 2014, 11:12pm
UPDATED : Tuesday, 22 July, 2014, 10:30am

Russia's richest businessmen are increasingly frantic that President Vladimir Putin's policies in Ukraine will lead to crippling sanctions - but are too scared of reprisals to say so publicly.

One Russian billionaire warned that if Putin doesn't move to end the war in Ukraine after last week's downing of a Malaysia Airlines jet in rebel-held territory, he risks becoming an international outcast.

That would put him in the same bracket as Belarus'Aleksandr Lukashenko, famously labelled by the United States "Europe's last dictator".

Speaking on condition of anonymity, the billionaire said what was happening was bad for business and bad for Russia.

Igor Bunin, who heads the Centre for Political Technology in Moscow, said nobody would speak out because of the implicit threat of retribution.

"The economic and business elite is just in horror," he said. "But any sign of rebellion and they'll be brought to their knees."

The downing of MH17, which killed 298 people, led to renewed threats of tougher penalties by the US and the European Union.

They have already put sanctions on Russian individuals and companies deemed complicit in fuelling the pro-Russian insurgency in Ukraine.

US Secretary of State John Kerry said the available evidence suggested Russia provided the missile used by the rebels to down the airliner.

British Defence Secretary Michael Fallon has accused Putin of "sponsored terrorism".

While the EU has so far imposed less punitive measures against Russia than the US because of opposition from countries such as Italy and Austria, the UK and the Netherlands are leading the push for tougher action.

Of the plane victims, 193 were Dutch and 10 were British.

The US has already imposed penalties on state-run companies and members of Putin's inner circle, including billionaires Gennady Timchenko and Arkady Rotenberg.

The latest sanctions, announced a day before the Malaysia Airlines attack, barred Novatek, a gas producer partly owned by Timchenko, from using US debt markets for new financing with maturities longer than 90 days. Novatek's London shares fell 8 per cent over two days, cutting its market value by nearly US$3 billion.

"Russia risks becoming a pariah state if it does not behave properly," British Foreign Secretary Philip Hammond said.

"We now need to use the sense of outrage that is clear to get a further round of sanctions-tightening against Russia."

Additional US measures may be imposed in the next few weeks, with industry-wide sanctions probable in September if investigators determine the rebels carried out the attack, said Eurasia Group, a research and advisory firm based in New York.

The group said Europe was likely to take less wide-ranging steps because it has closer business ties with Russia.

Mikhail Kasyanov, who was Russia's prime minister during Putin's first term as president, from 2000 to 2004, warned: "The threat of sanctions against entire sectors of the economy is now very real and there are serious grounds for Russian business to be afraid.

"If there will be sanctions against the entire financial sector, the economy will collapse in six months."

On the day of the Malaysia Airlines tragedy, Putin blamed the government in Ukraine, saying the state over whose territory the aircraft was travelling is responsible.

Olga Kryshtanovskaya, a sociologist at the Russian Academy of Sciences in Moscow, said Putin's inner circle, most of whom have a background in the intelligence services, "completely rule out the possibility that Russia is responsible for this and point the finger squarely at the Americans".

One longtime Putin ally who runs a major state company said Ukrainian forces shot down the plane with US connivance.

This amounted to a war against Russia without a formal declaration, the executive said, asking not to be identified.

All this war - and talk of war - has the country's business elite "living in a state of fear" and trying to get their money out of the country, Kryshtanovskaya added.

Alexander Lebedev, a former billionaire who owns The Independent and Evening Standard newspapers in the UK, said he doubted that Russia would ever repair its relationship with the US and its European allies.

"The clock has moved back to the 1980s" and the height of the cold war, said Lebedev, who served as a Soviet intelligence officer in London.

"But in the 1980s, the two sides contained each other. Now we have a war, so it's worse."

Watch: Obama: Putin must push separatists to aid MH17 probe