An island state advertises itself as the destination of choice for the super-rich — mainly from Russia — to launder their money and reputations, while enjoying the high life and low taxes. Then it discovers all is not what it seems.
It is not just Cyprus that might have cause to regret its business model. As the natural resources of the former Soviet Union were being plundered by a few ruthless and politically well-connected individuals, Britain set itself up in the early 1990s as a welcome home, or second home, for a new global elite.
London is both playground and battleground for rich Russians. Occasionally, things go wrong. The murder of Alexander Litvinenko in the capital was one of the more brazen attacks. The discovery last Saturday of the corpse of Boris Berezovsky at his well-guarded Berkshire mansion has raised more suspicions. Was it the suicide, as was the initial suggestion, of a man who had lost much of his fortune taking on his enemies? Or was it something more sinister?
I only met Berezovsky once, over lunch several years ago, when he complained bitterly about his treatment at the hands of his erstwhile protege — Vladimir Putin. I did not bring out my hanky for a man who was kingmaker during the dissolute regime of Boris Yeltsin.
Once he had consolidated his power, Putin famously summoned the oligarchs, including those who had installed him in the Kremlin. That was then, this is now, they were told. The deal was: They could carry on their business dealings inside and outside Russia as long as: A) They did not meddle with politics. And B) They looked after the financial interests of the siloviki — the political/security establishment.
Some of them did not listen. Mikhail Khodorkovsky, who made public his political ambitions, languishes in prison; Vladimir Gusinsky, who started the once-fearless NTV television station, was forced to flee. Berezovsky legged it to England before they could get him and then mounted a one-man campaign of denunciation from his gilded cage.
Some of Russia’s exiles are pro-Kremlin. Others are anti-Kremlin. Some were pro and have become anti. One or two who were anti have been persuaded to become pro. Some ended up in Israel or Cyprus. Most would rather spend time in Courchevel in the winter or the Cte d’Azur in the summer; but they would rather speak English. The US tends not to be a favoured destination, because the authorities have an annoying habit of asking intrusive questions.
This is competitive tendering, in terms of law and tax enforcement and Britain comes in lower than other American and European rivals. Apart from the weather, what is there not to like there? An industry has been created to cater to the oligarchs’ every need. Former ministers represent them in the Lords; former spin doctors do their PR; lawyers queue up to represent them, using Britain’s hideously indulgent defamation laws to slap suits at the first sign of trouble.
Financial advisers make sure the oligarchs pay as little as possible on their earnings, savings and even their council tax. Private boarding schools welcome their children and their chequebooks.
A parallel economy of designer shops, private jets, speedboats and security guards exists for them and for the new rich of China, Brazil, the Middle East and elsewhere. The top end of the skewed housing market in London and the south-east exists only for them.
Back in 2007, I wrote after a trip to Moscow, that several Russian friends and acquaintances (lawyers, journalists, architects) were “flabbergasted that the British authorities have been so indulgent towards the Russian corporate invasion”. This was about six months after Litvinenko’s murder and my friends had little time for the national outrage. I wrote: “If the price of making the City a haven for low-tax oligarchs and other assorted spivs is to turn London into a mobsters’ paradise, then that is our lookout, they say.”
The morality of Britain’s assorted activities is for others to determine. Apart from the work of the hitmen (and they could hail from anywhere), the services rendered to the super rich are all legal. The issue is more the effect this has on our body politic.
Britain’s approach to Russia has long been contradictory. Over the last decade, while Britain opened the doors to the elite, diplomatic relations were, to borrow a popular Russian word, “slozhny” (complicated). The recriminations following the murder of Litvinenko sent them into permafrost.
For the past year or so, strenuous efforts have been made to improve matters. There has been no ostentatious attempt to press a “reset” button (which the Obama administration announced, only to drop). Instead the Brits have taken a more gradual, nudge-nudge approach.
In spite of deep differences over Syria, Russia’s foreign and defence ministers were recently welcomed to London on a carefully choreographed joint visit.
Problems such as the resurgence of Russian espionage in the UK (and one assumes British reciprocation over there) are being talked down. “Friendship” is talked up — often with embarrassing results. Several senior figures resigned from the newly established Conservative Friends of Russia, when they discovered it was little more than a cheerleader for Putin’s Kremlin.
The British government is candid about its motives. Improving trade is what matters now and niggly little problems like murders should not be allowed to stand in the way. The Foreign Office attempted to justify the refusal to make public government papers on Litvinenko by asserting that openness would cause “serious harm to the national security and/or international relations”.
David Cameron likes to use the term “global race”. It is not quite clear what the destination is, but diplomats (and financiers) regard pragmatism as a sign of a more mature foreign policy. After all, if we did not do these things, others will move in and take away the business. Perhaps Britain wishes to emulate Cyprus and cosy up to all comers. It will be helpful if Britain lets its public know.
— Guardian News & Media Ltd
John Kampfner is a former chief executive of Index on Censorship. He also edited the New Statesman from 2005 to 2008.
