If you’re hoping that Western sanctions will topple the regime in Russia, here is a thread on why they won’t. 1/n

To bring regime change, sanctions must prevent the leader from distributing rents to the winning coalition, ie elites will remove the leader who is no longer useful to them. Putin’s winning coalition roughly consists of two groups of elites: oligarchs and strongmen. 2/

We all love to hate the oligarchs, yet there is more to know about them than catches the eye. Beyond the gaudy décor, overpriced yachts, and extravagant parties, there are two important factors. 3/

First, practically all assets oligarchs manage—entire industries—ultimately belong to the state, and currently the state is Putin. Putin is the final arbiter, the oligarchs are simply managers delegated with over-seeing day-to-day activities. 4/

Second, the relationship between oligarchs and the state is one-directional. Unlike Yeltsin oligarchs, who were more partners of the state, Putin’s oligarchs have no political power whatsoever. Their domain is strictly economic, and this is well-understood. 5/

Essentially, they got buckets of cash to keep their noses out of politics. Those who didn’t accept this role were forced into exile or worse (e.g., Berezovsky, Gusinsky). 6/

The oligarchs’ biggest asset is their personal connection to Putin. They use it to offer “insurance services” to business partners. This “insurance” protects from competition, and possible attacks by the other elite group—the strongmen. 7/

As far as the oligarchs are concerned, Putin’s continued support, and his continuation in power, guarantees their own position and provides additional money-making opportunities. 8/

Putin is their protector. If he goes, they will lose their remaining assets in Russia, may face corruption charges, prosecution, or worse. However sad they are to let go of their Western assets, oligarchs have even more to lose if Putin is no longer there to protect them. 9/

Putin has never trusted the oligarchs, and made sure that, no matter how rich, they never feel 100% safe. Enter the second group—the strongmen, Putin’s St. Petersburg friends. 10/

Originally street thugs, middle managers, low-level administrators, special ops, scientists, and athletes, they went from rags to riches when Putin put them in key government and other power positions. They are his closest friends and have the most direct access to his person.11/

They also have the most political influence. Strongmen are ideologically conservative and hostile towards the West. They view economics as a tool of the state and are unconcerned with Western sanctions. 12/

If anything, they view the looming Russia’s isolation and the forced return of the oligarchs to Russia as a benefit. Autarky and isolation facilitate repression, and further strengthens their position. 13/

Strongmen have no reason to remove Putin now—he is fulfilling their dream of a ruthless police state. 14/

Silver linings: First, the oligarchs ought to be growing wary by the rise of the strongmen. Second, their wealth and status hinge solely on their direct access to Putin—they have no mechanism for legitimating the continuation of their position beyond Putin’s rule. 15/

Their friendship with Putin is not something they can pass on to their children. And Putin is not getting any younger. 16/

Third, Putin is growing less and less interested in arbitrating their economic squabbles (e.g., privatization of Bashneft), and now delegates decisions that are of less interest to him. 17/

Unfortunately, this is still not enough, in my opinion. The safest solution for the oligarchs--and several have taken this route—is to jump on the bandwagon, embrace the aggressive-repressive direction in Russia’s politics, join the chorus. 18/

The bottom line: The current sanctions decrease the size of the pie, but the pie is still very large and Putin’s ability to distribute it is intact. No other candidate would guarantee a similar distribution to the current players. 20/

And selecting a new candidate is a coordination problem of its own. Hence, the probability of a regime change is low. 21/

What the sanctions DO achieve is the rapid weakening of the Russia’s economy, and with that, it’s military capacity. 22/

It is a matter of weeks before the state can no longer pay its employees—doctors, teachers, administrator, but also the police, the military-industrial complex, and the military itself. No new tanks, destroyers, or howitzers, and no soldiers to shoot them either. 23/

If you speak Russian, here is the source for background on the power dynamics:
https://carnegie.ru/2022/02/07/ru-pub-86379
https://carnegie.ru/2020/02/27/ru-pub-81158 24/24