The Interpreter

A special project of Institute of Modern Russia
Giant matryoshka dolls at the opening of the Russian Winter Festival held at the South Bank Centre in January 2008 | Rex/Fotobank

Why London Is So Crucial To Putin’s Russia

In 1733 Voltaire published a series of works called “The Letters of the English Nation” or “Lettres philosophiques” which were a compilation of his observation of politics and religion on the Island. He remarked on the love and high regard that monetary pursuits and commerce were held, such that they transcended all religious or ethnic divisions:

“Take a view of the Royal Exchange in London, a place more venerable than many courts of justice, where the representatives of all nations meet for the benefit of mankind. There the Jew, the Mahometan, and the Christian transact together, as though they all professed the same religion, and give the name of infidel to none but bankrupts.”

And as it was in Voltaire’s day so it is at present, where the corrupt Nigerian minister, Arab prince or any number of Russian oligarch’s, corrupt officials or the run of the mill gangster can buy houses, start companies and hide the true provenance of untold sums of pilfered monies, and whose only enemy is that of bankruptcy.

It is especially true for those from Eurasia and Russia, where London has become the focal point for the necessary activities of laundering and managing the elite’s funds. That is why when Ben Judah penned his piece “Why Russia No Longer Fears the West” in Politico– exposing the integral role of London in enabling the continued autocracy that is Putin’s Russia (like the fact that Rosneft, Gazprom and steel producer Severstal are all listed on the London Stock Exchange and is the hub for the $181 billion in Russian business Merger and Acquisition activity over the last two years) and why a serious response to Russia’s aggression in Crimea would include serious financial sanctions — it was met with defensive vitriol in defense of London’s welcoming status for all people’s—oligarchs and companies close to the regime included.

And it has never been a secret that London has served as the autocrat’s financial center, along with the coordinating hub of the numerous crown dependencies and territories that are among the most recognized tax havens (places like Jersey, the Isle of Man, British Virgin Islands, Cayman Islands, Turks and Caicos, and Gibraltar). Not only do these places allow for the criminally-easy incorporation of shell companies and strict banking secrecy, but also have—due to their unusual status in the British Empire—the unique ability to easily transfer and hold assets within Britain proper.

Leading the vitriolic defense of London’s position as a legitimate (and illegitimate) financial hub was FT’s Janan Ganesh, who penned an article attacking the “zeitgeist journalism” and criticism of London (and the UK). Curiously, the defense of London does not deal with it as a hub of dirty money and for enabling Russian companies, and their CEO’s who are often close confisants of Putin himself, access to international finance, but instead turns into a defense of London’s multi-cultural make up and its welcoming position on immigration. Ganesh defends London’s status by pointing to its long history of welcoming immigrants and those with outspoken views (which has caused much resentment), and that the presence of large estates and homes do not impact the majority of the city’s residents. He even notes that Karl Marx was once a resident in Hampstead.

However, Ganesh’s logic is rather curious (especially when one notes that Karl Marx lived off the support of his friend Engels and was not buying sports teams, like Abramovich did with Chelsea), and seems more of a defense of London’s high real estate prices than its role in enabling the pillaging of nations and organized crime. That the average citizen of London is doing quite well and states; “Londoners appreciate the anguish shown on their behalf by the foreign media. But, really, we are coping.”

Well, to be frank, the concern is not on the behalf of the average Londoner, nor is it on London’s real estate prices (and as someone who lives in NYC I would show little sympathy anyway), but rather on the fact that the welcoming attitude and embrace of business and money from Eurasia continues to enable, propagate and encourage the regimes of autocrats the world over, especially Putin’s Russia. The mansion’s that make up “Londongrad” are of little consequence, it is the encouraging environment and hesitance to stop the flow of capital that are of concern. Point in case is when a document belonging to a senior government official was photographed going into Downing Street which read; “the UK should not support for now trade sanctions or close London’s financial centre to Russians” in relation to possible sanctions against Russia over Crimea.

And the newcomers that Ganesh seems to defend are not political exiles (although those too are welcomed, especially if they have money), but insiders of the regime. These are not the exiles and immigrants of history that Ganesh points too who are speaking politically unpalatable positions, they are quiet beneficiaries of the corruption and capriciousness of their home countries, and London’s welcoming barristers, laws and politicians.

And this is not to say that no other nations are culpable. The U.S. itself has its own issues with financial corruption—and its own domestic tax haven in the form of the state of Delaware—along with the other more recognized tax havens such as Switzerland, Luxembourg, Netherlands, Liechtenstein, Latvia and Cyprus. But few are as large or as important as is London, as the WSJ recently reported; “from 2004 to 2013, the combined total of bonds and loans raised by Russian businesses in London was nearly $400 billion, including about $47 billion last year alone, according to Dealogic. Banks charge fees of up to 3% of the amount borrowed, or about $1.2 billion a year on average over the past decade.”

Yes, Ganesh is right that London is much more than a playground for the rich; it is also a wonderful city that is home to the incredible multiculturalism that he rightly defends. Yet, it is also a place that is an integral piece in the machinery that allows autocratic regimes to bribe, provide and pillage their elites and nations into sustaining their regimes. To allege otherwise is to nothing less than a refutation of an obvious and undeniable fact.