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It can get scary being a Russian oil billionaire

Capital flight was an issue for Russia even before the crisis in Ukraine, but with Russian President Vladimir Putin's unpredictable geopolitical decisions, Russia's oligarchs are becoming increasingly concerned about the investment climate and economy in general.

Chairman of conglomerate Sistema, Vladimir Yevtushenkov in St. Petersburg, in May.
Sergei Karpukhin | Reuters
Chairman of conglomerate Sistema, Vladimir Yevtushenkov in St. Petersburg, in May.

The arrest on Tuesday of Russian billionaire Vladimir Yevtushenkov, chairman of Sistema, a Russian conglomerate which includes an oil business, certainly did not do much to quell those fears. Russian stocks plunged after news of the arrest.

The recent sanctions against Russia, along with political uncertainty both internally and globally, have caused panic and fear among some of Russia's richest men, many of whom expect Yevtushenkov's energy assets to be transferred to other oligarchs who are more friendly with the Kremlin.

"Sistema has long had a tumultuous relationship with the Kremlin, being one of Russia's largest companies, and also owning many strategic industries ... (but) Sistema's leadership, Yevtushenkov included, have not always bent to the Kremlin's strategy," said Lauren Goodrich, senior Eurasia analyst at geopolitical intelligence firm Stratfor.

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Sistema acquired a regional energy firm called Bashneft in 2009 at a time when Russian oil giant Rosneft was attempting to take over the same company, Goodrich said. Sistema may have wanted Bashneft for financial reasons, but Moscow sees control of Bashneft as control of a critical asset in the sometimes restive Republic of Bashkortostan.

Moreover, state-controlled Rosneft did not want another major energy competitor in the oil-rich region, according to Goodrich and others.

One Russian oligarch, who agreed to speak to CNBC on condition of anonymity, agreed that the arrest of Yevtushenkov involves the government trying to take over Bashneft and transfer funds to Rosneft.

Marlen Kruzhkov, a U.S.-based attorney who often advises clients from the former Soviet Union, said Yevtushenkov's fate speaks to the importance of the oil industry in Russia, which has few if any growth industries outside the energy sector.

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"The consensus is that this is a politically driven matter—the Kremlin has made it a priority to consolidate the oil industry as it is the life blood of the Russian economy, Kruzkhov said.

He told CNBC that the issue is not whether Yevtushenkov broke any laws. The arrest was meant to send a very clear message to others like him: If you don't play ball with us, this could happen to you too.

Edward Mermelstein, a New York-based attorney for Rheem Bell & Mermelstein who works with Russian clients, told CNBC that this is just the beginning and that "more heads will roll."

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"Anyone outside the circle or in the opposition will be making contributions Roman-style," Mermelstein said. "The ruble is tanking and I think at the rate gas is going, Russia will be paying Europe to buy it. What a mess."

Perhaps surprisingly, Russian Economy Minister Alexei Ulyukayev publicly said this week that the Yevtushenkov arrest could trigger more capital flight as it spooks Russia's markets and investors.

"The buzz is that there are similar contests with Kremlin insiders and it is very likely that we will see other large corporations being either sold or wrestled from owners by those with close ties to the Kremlin," Mermelstein said. "The idea is to consolidate power and money as the economy descends into collapse."