Some experts are expressing a different note of caution. Additional sanctions might send signals to oligarchs that it is time to become even more loyal to the Putin regime and consolidate their wealth around the Kremlin.
It has long been known that London is a magnet for Russian dissidents and billionaires. For that matter, London has been the destination of the elite and the wealthy for centuries. London is 31 per cent foreign-born, profiting from successive waves of ultra-rich American bankers, Arab sheiks, and Honk Kong Chinese, especially after Xi Jinping’s recent abrogation of his “one nation, two systems” promise. Even with Indian capital flow restrictions in place, there has also been a surge in rich Indians buying properties in prime London areas such as Mayfair and Belgravia in recent years. But it’s Russians who have dominated the influx, with current estimates showing approximately 300,000 Russians calling London their home, and a very noticeable surge of approximately 100,000 in the past five years.
For those who have noticed, the nicknames of “Londongrad” and “Moscow-on-Thames” are both well known. They represent the billions of dollars in cash that have been injected into the British economy in recent years. An entire Russian subculture has arisen, with specialty stores and restaurants becoming more noticeable supporting the newly formed Russian sub-communities. There are also four Russian-language newspapers and a glossy Russian-language magazine that advertises top jewellery, while running articles comparing the virtues of cars with price tags starting at £200,000.
So why London? Russian business executives are drawn to the capital by “the flexibility of anything to do with banks”, part reason why Russians have also snapped up a quarter of homes selling for £20 million or more in the last decade. But there’s a much richer group of Russians drawn to London, known as oligarchs, many of whom are accused of corruption or ties with the Kremlin. Keen to hide their suspicious wealth, they have bought some £1.5 billion worth of real estate in the UK capital, according to Transparency International. Oligarchs have been seduced by Britain’s twin attractions: the scope for largely anonymous investment orchestrated through its Companies House business registry; and the promise of a justice system that affords even suspicious money a fair hearing in the event of disputes. The London Stock Exchange is the leading foreign trading platform for Russian businesses, where around 60 companies with a combined worth of £70 billion are listed, including Gazprom, Rosneft, Sverbank, VTB, Lukoil and Norilsk Nickel.
There are scores of Russian oligarchs with bases in London, owning ultra-expensive properties in the capital and surrounding broker belts. Take Alisher Usmanov, for example. Usmanov is said to have made more than £18 billion from gas and telecoms businesses and splits his time between his north London mansion and his Tudor manor in Surrey, once famously owned by Jean Paul Getty. Both properties are worth a combined £100 million or more. Born in Uzbekistan when it was part of the Soviet Union, the 68-year-old Usmanov was jailed in 1980 for corruption, but having served six years he was released by the Uzbek Supreme Court.
Oil tycoon Oleg Deripaska, like Usmanov, is a close friend of Vladimir Putin. Deripaska, whose net worth is more than £4 billion, according to Forbes rich list, owns a £50 million home in Central London’s exclusive Belgrave Square. Once Russia’s wealthiest man, Deripaska and other members of Putin’s inner circle, were blacklisted by the US Treasury Department over alleged international crimes. However, Donald Trump lifted sanctions on three companies connected to him, despite objections from the US Congress.
The list goes on and on. Russian father of five, Mikhail Fridman (net worth $15.5 billion), calls Britain his home, having bought a large mansion in North London for £65 million in 2016. Igor Shuvalev ($12 billion), a former Russian first deputy prime minister and the ultimate Putin loyalist, owns a 5,380 sqft penthouse apartment worth £12 million, just a few hundred metres from 10 Downing Street, home of Britain’s prime minister.
These are just few of Russia’s richest men, with huge assets abroad, who will likely face punishment if President Putin orders his troops to invade Ukraine in the coming weeks. Urging Putin to ‘step back from the brink’, the two allies warn that any incursion would trigger sanctions ‘against companies and people with close ties to the Kremlin’. Britain has already imposed sanctions on 180 individuals since Russia invaded and annexed Crimea in 2014. Six of them are particularly close to Putin: businessmen Yuri Kovalchuk ($4 billion), Arkady Rotenberg ($3 billion) and Nikolai Shamalov ($2 billion); former KGB officer Sergei Chemezov ($3 billion); Russian Security Council Secretary Nikolai Patrushev ($2 billion) and FSB Chief Alexander Bortnikov ($2 billion). Even so, Britain has to date taken a rather softer line on Russia’s business elite than the US. In 2014 the US slapped sanctions on 60-year old Igor Sechin ($2.5 billion), CEO of Rosneft, Russia’s largest oil producer. Widely seen as the most powerful man in Russia after Putin, Sechin has yet to be sanctioned by Britain.
But why focus on Russia’s oligarchs? The simple reason is that they are a key pillar of support for the Putin regime, whereby billions of dollars at his cronies’ disposal are actively used to undermine and corrupt the institutions and democracies of the West. Oligarchs owe their very existence and the preservation of their wealth to the Russian state. On the other hand, they have also become vulnerable by planting money in the West, buying expensive property in places like London, and by sending their children to elite schools and universities. It’s estimated that some 2000 Russian children are sent to Britain’s most expensive and exclusive private schools every year, worth at least £60 million. More overseas pupils go through the British private system from Russia than from any other country, with the exception of China.
But vulnerability exists on both sides. With more than $1 trillion of Russian private money held abroad, this is a soft spot for the Kremlin that the West has been too timid to take on, largely because oligarchs have enmeshed themselves into Western elite circles. Oligarchs give money to major Western political parties, universities, and philanthropies. They employ top law firms, accountants, financial managers and real estate brokers. They have also bought influential newspapers and media, sports teams, and companies, at the same time becoming supporters of major cultural institutions and think tanks. Uprooting the influence of Russian oligarchs will therefore require aggressive sanctions, legal enforcement, visa bans, and restrictions. This will be a challenge in Londongrad, given the close ties between Russian money and the UK’s ruling Conservative party, raising the questions—will politicians have the stomach to impose them if Putin invades Ukraine?
A major problem is that current British law allows sanctions to be targeted on only those people and companies directly involved in destabilising Ukraine. This week, Britain’s Foreign Secretary, Liz Truss, confirmed that the law will be widened to include Russian financial institutions, energy companies and oligarchs close to the Kremlin. “There will be nowhere to hide for Putin’s oligarchs or Russian companies involved in propping up the Russian state”, she said, before adding that this would “include the seizure of property in London”.
Brave talk, but would the threat actually be carried out? After all, for sanctions to become effective, they would have to cause pain to the West itself. The UK government will also struggle to freeze the wealth controlled by the oligarchs because UK rules allow shell companies to be used to obscure the ownership of properties and other assets. As one expert said: “we can sanction a Russian politician or Russian general as much as we want, but we don’t necessarily have the ability to seize their assets because we don’t know who the true owners of those assets are”. Already, a promised Economic Crimes Bill, that could result in those suspected of having ties with Putin having to justify their wealth and curtail their shell companies, has been delayed for four years. Government critics say the foot-dragging is largely due to Prime Minister Johnson’s reluctance to strangle the goose that lays the golden eggs.
Some experts are expressing a different note of caution. Additional sanctions might send signals to oligarchs that it is time to become even more loyal to the Putin regime and consolidate their wealth around the Kremlin. They might find it necessary to withdraw their business investments and money from the UK and return it to Moscow to develop their business in the country of their birth rather than Londongrad. The alternative would be to cut their ties with Russia and position themselves as enemies of the Kremlin, which could be a life-shortening decision.
As one Kremlin spokesman pointed out this week: “Not everyone will wish voluntarily to follow the path of Boris Berezovsky.” Berezovsky, a London-based Russian oligarch turned vocal opponent of Putin, was found hanged in his home in 2013, amid suspicions he was murdered by agents of the Kremlin. Russian oligarchs Badri Patarkatsishvili, Nikolai Glushkov, Alexander Perepelichny, and Dmitry Obretetsky, all of whom died in mysterious circumstances in the UK in recent years, would probably agree.
John Dobson is a former British diplomat, who also worked in UK Prime Minister John Major’s office between 1995 and 1998. He is currently Visiting Fellow at the University of Plymouth.