Should the EU ban passports for sale?

European lawmakers want to prevent rich Russians from buying second citizenships. It's far too late for that.

Hello new subscribers! Thanks for signing up. I spent a long time reporting from around the world on the sale of citizenship for my first book, The Cosmopolites, so now that buying passports is in the news thanks to the Russian oligarchs who’ve apparently taken advantage of these schemes - and may be cut off from them in the near future because of the situation in Ukraine - I thought I’d expand a little on some tweets I posted last night to explain why second/third passports are so popular with the oligarch class, and how banning them is a well-intentioned but ultimately futile plan, given the circumstances. As always, feel free to drop me a line if you have questions or comments.

In response to Russia’s invasion of Ukraine, the European Parliament has reinvigorated its yearslong attempt to stop EU member states from selling their citizenship and residence rights to wealthy foreigners—this time, to Russians in particular. Their reasoning is that Russian oligarchs who help prop up Putin’s government could continue doing business as usual abroad behind the veil of another nationality, essentially using their second citizenship to avoid sanctions.

Whether they will be able to do this would depend on how financial institutions respond to the sanctions, and whether they treat their dual national clients “as” sanctioned Russians or “as” ordinary people with a different citizenship (particularly if the person is, say, Maltese and banking in Malta as a local, with all of a local’s rights). The Russians under sanction are named, and rather well-known people, so it seems hard to get around, but reports like the revelatory Suisse Secrets leak suggest that money is more important to some bankers than even war crimes, so there’s at least a precedent for being skeptical.

Also, while I am not a banking expert by any stretch, rich Russians (and non-Russians) have long established lots of ways to have access to their money wherever they go. They already have second and third citizenships. They have already diversified their assets by buying real estate and artworks and cars and boats; often, they’ve even moved their families abroad for good measure. Maybe they hold crypto! In other words, they have backup, and their backup has backup, which also has backup, which limits the effectiveness of certain sanctions in the first place. Does it suck to have your yacht seized during resort season? Sure. Is it annoying to get a call from your private banker telling you you can’t spend your own money? Definitely. But are these punishments the end of the world when you can camp out in Gstaad for the duration of the ski season, dine out using your daughter's credit card, and sell a Picasso or two for cash to a buddy? Cue the tiny violin.

There is nonetheless a clear symbolic and punitive aspect to the anti-second-passport move: everybody knows that a Russian passport is not a particularly great passport to have if you’re a member of the jet set and want to travel the world visa-free, so a superrich Russian is more likely to try to obtain a second or third citizenship than, say, a millionaire from France or Sweden. Again, it’s probably a good thing to make these peoples’ lives less comfortable, even in the abstract. I support it. I think we should pie them. The problem with the EU’s plan is that many of the people it wants to target already have secured second and third passports, through investments, or residence, or heritage, or a personal favor. To quote Jay-Z and Kanye: “I’ve got six passports/I’m never going to jail.”

Cutting off the chance to buy a passport in the EU won’t change things much for existing economic citizens. It also won’t prevent other countries that sell citizenship, like St. Kitts or Vanuatu or Antigua, from scooping up what’s left of the Russian market, and doing it real fast. (When I was reporting my book in St. Kitts, I by chance ended up renting a room in an Airbnb from a passport broker who helped Vkontakte founder Pavel Durov get his papers. I say “by chance” but it’s really not … that is just how common this sort of thing is!)

And it won’t cripple the industry behind the sale of citizenship, either. My hunch is that tons of wealthy and wealthy-ish people from states around and close to Russia will be looking to buy another citizenship because they’re so freaked out by what happened in Ukraine, and they want a plan B before it’s too late.

What about the countries doing the selling? The nature of these “citizenship by investment” programs (and their close cousin, residence by investment) is that they come and go and come again. For a while, in the early-to-mid 2010s, Cyprus was the go-to place for Russians; the country gained a reputation for doing everything short of stapling a passport to a millionaire's bank statement once they showed they'd invested more than EUR 2.2 million. Cyprus raised billions through the passport scheme, and subsequent leaks revealed that the majority of applicants between 2017 and 2019 came from China, Russia, and Ukraine. (Now’s a good time to remind you that Ukrainian oligarchs area also *a thing* and they are as hot for second citizenship as their Russian counterparts; my favorite passport anecdote is that when told that dual citizenship wasn’t legal under Ukrainian law, the politician Ihor Kolomoyskiy, who is Ukrainian and Cypriot and Israeli responded, “ah, but triple citizenship is not illegal.” I’m definitely stealing that line if I ever run for office.)

Anyway, Cyprus was apparently unwilling or unable to keep things clean. They even naturalized 1MDB’s Jho Low. You don’t need fancy due diligence software to figure out he’s up to no good, just Instagram! I imagine their laxity was the result of incompetence, laziness, bribery, and probably some cost-benefit math, but the result is that they ended up shutting down the scheme last year and are no longer in the business.

Still, to my knowledge, Cyprus did not rescind the majority of the passports it issued during the boom years. Why? Because revoking citizenship is really, really, really dicey. It’s literally what the Nazis did to Jews. It’s what Theresa May, in her capacity as Home Secretary, was reamed for wanting to do to ISIS members by the same good liberals who are now agitating for quite the same thing in the Russian context. It’s what Trump tried to do to, er,  Miami grandmothers? I am certainly not implying that Russian oligarchs are a persecuted class on par with German Jews and immigrants. They’re also not in the beheading business, as far as I can tell, and will not wind up stateless, either. What I’m getting at is that in all but the most extreme and morally unambiguous circumstances, revoking citizenship en masse is not a good look, whether it’s for political reasons or “naturalization fraud” (which, incidentally, is how McCarthyites sent anarchist Emma Goldman away to Russia). 

Revoking citizenship gets even more complicated when it’s obtained more “legitimately” (whatever that means) than by investing money, which happens too, and which the EU can’t stop. Roman Abramovich is apparently Sephardic enough for Portugal’s inquisition reparations passport. He is also Israeli, because of the country’s right of return law. Is it kosher to take those passports away, even though Abramovich is one of the biggest baddies in Putin’s orbit? Talk about a can of worms! So why should taking away any other passport without due process be OK? Given that a lot of people in the world, particularly those from the upper classes, have avenues of this sort available to them in some form, it’s pretty futile to tell them they can’t buy a Maltese passport anymore. Wealth finds a way.  

This is all to say that preventing Russian oligarchs from obtaining second or third passports is a largely ineffective way to hold them accountable or make them uncomfortable, and that it could have much broader and unwanted implications for the rest of us down the line. It won’t spell the end of citizenship-by-investment. It may even have the opposite effect.

I want to emphasize again that I think it’s a good thing to make the lives of Putin supporters harder, and I totally understand why European lawmakers would choose to pursue this avenue at this time. It’s politics, and the moment they’ve been waiting for. But take it from someone who’s spent way too much time thinking and reporting on and talking about passport-related politics: this is far too little, far too late.