Putin's doing what no one else will: Fighting the oligarchs

The Kremlin has launched a campaign to rein in Russia's wealthy elite in a move that is creating a backlash of discontent against Vladimir Putin.

The government has proposed new tax laws that will seriously limit the ability of the country's moneyed classes to hide their wealth abroad.

The legislation will seek to clamp down on companies and individuals using offshore tax havens and make Russian citizens liable for tax at home regardless of which country they earn their income in.

The measures are aimed at the wealthiest Russians, who systematically seek to move their assets and often their families abroad because they lack confidence in a system that can trample over private property rights when individuals fall out of favour with the authorities.

Putin is attempting to stem the country's disastrous capital flight as the Russian economy slides into recession for the first time since he became president 14 years ago.

Aggravated by punitive western sanctions imposed on Russia because of the crisis in Ukraine, the economic downturn has led to capital flight rocketing this year to an estimated £60bn - double last year's figure.

Aside from an attempt to increase revenue, the crackdown is also the latest Kremlin move to whip up patriotic fervour by putting pressure on the rich to invest at home. The populist move, which will play well with ordinary Russians deeply resentful of the corruption and fabulous fortunes of the elite, is creating mounting alarm among the rich.

They are already worried about a new law passed last month that requires Russians to declare to the authorities whether they possess a foreign passport. Once people come forward the law is widely expected to be used to impose restrictions on citizens with dual nationality.

The wealthy are likely to be most affected, having gone to great lengths to secure foreign passports as a gateway to the West as a safety precaution in case they fall foul of the authorities.

"As Russia closes in on itself, there's a very clear feeling that things are going to get tougher for the elite, that there will be far less room for manoeuvre," said a top Moscow banker with a second home in Belgravia. "And if there's one thing the rich don't like it's when you try to box them in and take away the freedom their money buys."

Putin, who is rumoured to be fantastically rich and under whose watch a small group of close associates have become multibillionaires, is angered by the eagerness with which many Russian entrepreneurs create complex offshore corporate ownership structures, especially in Cyprus.

The Kremlin leader is concerned by the loss of tax revenue and regards the movement of assets abroad as "unpatriotic". The new tax law proposals follow sharp falls in the price of oil, Russia's main source of revenue.

Pressure on Russians to move assets and corporate structures back from abroad has intensified in the wake of the Ukraine crisis, which exposed the vulnerability of Russian-owned overseas assets to western sanctions.

In September Arkady Rotenberg, a close associate of Putin's since the days when the two were young men and judo sparring partners, had assets worth £30m seized in Italy after his name was added to a US and European Union travel ban. The assets included a luxury hotel in the centre of Rome, bank accounts, company shares and property in Sardinia.

Members of the country's wealthy elite are also growing concerned by restrictions that are gradually being imposed on Russians travelling abroad. Law enforcement and intelligence officers, defence ministry staff and even prison warders are among 4m state officials who are now in effect banned from travelling abroad.

Officially the restriction, which is strongly reminiscent of Soviet-era travel bans, was introduced to prevent state secrets from being divulged.

But critics warn that it is part of a wider trend to control citizens and prevent them from becoming "corrupted" by being exposed to the West. Even students at the interior ministry's academy are now forced to hand in their passports, and lawmakers are discussing bringing in a travel ban on anyone who has unpaid traffic fines.

"It is far easier to cultivate the image of the country as a besieged fortress when military personnel, the police and intelligence agencies are unable to see the outside world with their own eyes," wrote Vladimir Ryzhkov, a former opposition MP.

Since Russia's controversial seizure of Crimea and the crisis in Ukraine, Putin's approval rating among ordinary Russians has shot to more than 80%. But among the elite, instead of euphoria there is mounting discontent and apprehension over the virulently anti-western course Putin has set the country on.

"Nationalism, self-isolation, anti-Americanism, sanctions, foreign investment plummeting and Russia as a pariah state, things like this are a disaster for a wealthy businessman who has property in America and Britain and whose children go to a British private school," said a Russian tycoon worth hundreds of millions of pounds, who recently moved to London.

"Most wealthy Russians are horrified by what's happening under Putin. They don't dare speak out for fear of losing everything. But nothing lasts for ever - not even fear."