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How Sanctions Against Russia Expose Cracks in Britain’s Political Class

Nina Cross

21st Century Wire

Bill Browder was invited to the Foreign Affairs public session in February so that he could promote his well-polished narrative of malign influence, human rights abuses and aggression by the Kremlin. This will be used to help frame British sanctions policy towards Russia. But two weeks later, the grilling of  Gregory Barker on his role in overcoming the sanctions against Russian billionaire Oleg Deripaska’s firms – reveals an emerging rift in the British establishment over Russian sanctions.

The Western establishment loves Russian money.  Russian treasures, including state assets, were bought at basement-bucket prices through Yeltsin’s loans-for-shares programme.  It is claimed that opportunists such as Mikhail Kordokhovsky made money by rigging auctions of state assets, paying a fraction of the value, then passing the proceeds to offshore shell companies.  Money made through individuals such as Kordokhovsky and other championed ‘capitalists’ of Russia, eventually made its way back into Europe and London. When Vladimir Putin first came to power in 1999, UK leaders Tony Blair and David Cameron rode the wave of opportunity that Russia was open to business, and yachting with oligarchs or taking large party donations were just perks of the time.  All types of Russian money seemed welcome.

However, geoolitical winds change, and today we are told money-laundering is a very big problem. Money is passed directly into the UK or via offshore accounts from unnamed sources, and is used to buy British property and assets, or provide capital for high yield investments and hedge funds.  But it is not only funds from Russian money-laundering and tax avoiders.  And it is not just the UK that is affected.  It is a worldwide problem originating from many different sources many of which may affect the UK.

However, Russia does not deny that there is a problem in London, and has suggested it is not incidental:

The willingness of the UK to provide a “safe haven” to criminal money from around the world has been consistently criticised by Russia.

The fact is the Russian authorities have asked the British government for assistance in several cases involving Russians accused of corruption, money laundering, and embezzlement committed in Russia. Yet the UK has refused to cooperate, as in the case of Andrei Borodin who lives in a house in Henley worth £140m, dubbed ‘Britain’s most expensive house.’  He was awarded political asylum in the UK, ‘a fugitive from persecution,’ after being accused by the Russian authorities of massive fraud.

And this takes us back to the love of money;  there are those who just love Russian money and those who are trying to advance an adversarial political and geopolitical agenda regarding Russia.  This is has become a very real schism inside of the British establishment, and what was apparent during the Foreign Affairs questioning during which Gregory Barker was described as:

very rich, smart Western facilitators have been helping people to get around sanctions.  Effectively, it is a legal form of sanctions-busting. ….There is a question of whether it is in the public interest…..especially because you are a parliamentarian.

The right type of oligarch

Oleg Deripaska is clearly the type of oligarch a certain part of the British establishment does not like: he is the wrong type of oligarch.  Why? He is the type that still made money from his business in the UK despite sanctions.  More crucially, he is the type not soliciting the West’s help in liberating Russia from Putin.

In contrast, there is a type of oligarch that is very popular with the Foreign Affairs committee.  This is the type that asks the West to help them ‘modify the behaviour’ of the Russian government, that claims their human rights have been abused, the type promoted by Bill Browder.  This is the right type of oligarch.  It is no coincidence then that the current sanctions inquiry has included evidence by GML, the company of the majority shareholders of what was Yukos Oil Company. The story of Yukos is described by the International Centre for Legal Protection (ICLP) of the Russian Federation as follows:

In 1995 and 1996 a handful of oligarchs took control of Yukos, a vast Russian energy company with huge oil and gas reserves. They achieved control by paying $600m to the government officials who were at that point running Yukos and managing the privatisation process, and by rigging the privatisation auctions. The Yukos oligarchs then went on to evade billions (USD) in tax by routing oil production through Russia’s low tax regions, despite having no operations in these places. When presented with a tax demand they rapidly shifted further Yukos cash into tax havens overseas, including by paying an unprecedented $2bn dividend to themselves. Following this Yukos went into liquidation.

In 2005, by way of arbitration proceedings instituted in The Hague, the Yukos oligarchs, acting through three offshore companies controlled by Group Menatep Limited (GML), claimed that Yukos was misappropriated by Russia in a politically motivated move. In 2014 they were awarded an unprecedented $50bn by an arbitral tribunal comprising three arbitrators – an amount equivalent to more than 20% of the Russian government‘s annual spending budget in 2016. These awards were overturned by the Dutch court in 2016.

The Yukos oligarchs still seek to enforce the (overturned) $50bn awards and are appealing the Dutch court decision.

This is not the version that the UK government will consider when making its foreign policy towards Russia.  Instead, it will use the evidence provided by the men asking for ‘justice’ and claiming the Russian state took their business.  The report they submitted to the committee leaves out the fact the Hague overturned the ruling and the Russian state is no longer found guilty of misappropriating Yukos and is no longer required to pay $50bn to Yukos former shareholders. What is more, the individuals accusing the Russian State:  Nevzlin, Lebedev, Brudno, Shaknovsky, Dubov and Khodorskovsky are wanted for numerous crimes.  Apparently, this must be the type of oligarch which is in the UK’s public interest to have around. Hence, the UK government believes that Russia owes five wealthy individuals, wanted for serious crimes, the equivalent of more than 20% of Russia’s 2016 annual spending budget, although these men were asking for $100bn – approximately half of their country’s national budget. The motivation behind the decision of the Hague Tribunal Court in 2014 must be questioned given the extortionate amount awarded and the fact this would punish the entire Russian national economy.  Subsequent to the overturning of the Hague Court decision, other courts have also overturned tribunal awards to the Yukos oligarchs.

The wrong type of oligarch

While the right type of oligarch has the support of the British political class, the wrong type has its contempt.  Oleg Deripaska is the wrong type: he is a ‘close ally of Putin.’  The ‘allies of Putin’ or “Putin’s inner circle’ narrative, has been pushed most aggressively by the government and corporate media since the US and EU-backed coup in Ukraine and the subsequent reunification of Crimea with Russia in March 2014.  Sanctions were imposed to register US and EU dissatisfaction that Russia reacted to an existential threat on its borders. The narrative of ‘malign Russian influence’ through money-laundering by oligarchs has been systematically pushed by the media and political establishment after Theresa May accused Russia of carrying out a chemical weapons attack in Salisbury last year.  The issue of money-laundering is now closely tied to narratives about the ‘Russian threat’ to the UK, and sanctions and money-laundering policies are the primary tools currently being wielded in preparation for UK foreign policy following Brexit.

The US sanctioned Deripaska in April 2018 for being in cahoots with the Russian government’s ‘malign activity’.  At the time, Deripaska was the majority owner of the energy firm En+, which had a main stake in Rusal, a large Russian aluminium firm. When the sanctions were imposed on the companies, Gregory Barker, En+’s independent chairman, helped to engineer a way to have them lifted.  Barker, who was made a Lord in 2015, had been Minister of State for Energy and Climate Change between 2010 to 2015, and in the late nineties he had been the head of corporate finance at Sibneft, the Russian oil company.  Under Barker,  Deripaska’s stake lowered from 70% to 44.95%, with an additional 10% put in trust, leaving Deripaska with voting rights for 35% of the company shares. With Deripaska’s influence diminished, Barker then removed shareholders from the board, making it majority-independent.

Sanctions and the narrative of national security 

This raises the question for sanctions hawks as to whether there should be individuals like Barker, a man of the establishment:

who is negotiating oligarchs’ way around sanctions, and therefore …undermining our ability to deal with the oligarchs, through whom President Putin operates in the west and uses some of that malign influence

Legally engineered ways around sanctions are therefore possible, but are being resisted, certainly by the Foreign Affairs Committee that influences foreign policy.  It also views the legal floating of En+ on the London Stock Exchange in 2017 as a threat, as a way of navigating around difficulties caused by sanctions against Russia:

We call on the government to investigate the gaps in the sanctions regime that allowed a company such as En+ to float on the London Stock Exchange, …

MI6 and Washington national security officials were also concerned about the floating of the company:

The floatation has provoked controversy in London where intelligence officers at MI6 have raised questions about why they were not consulted about the float given the potential implications for British security. One senior British official described the decision to allow the float to take place as a ”scandal”.

This indicates that it is the intelligence services that are the primary forces pushing the hybrid warfare narrative, and therefore influencing the government policy, with neocon politicians naturally getting on board and falling into line with US instructions.  And in regard to money-laundering, are we to believe that is now a ‘national threat’?  As pointed out, the UK has been willing for years to provide a warm home for untraced money, Russian or other, via London’s many financial institutions.  Are we to believe that suddenly there is a new threat derived from this money that should make us all fearful?  The question is: is there a genuine desire to address the problem of money-laundering or is the narrative of security around Russian money-laundering a geopolitical pretext to target Russia with punitive action or seize Russian assets located in the West? It’s important note here also how this theme ties into the graduation of Washington’s supposed ‘anti-corruption’ legislation, the Magnitsky Act, to the new Global Magnitsky.

SEE ALSO: Darling of the Commons, Bill Browder, Helps Frame Britain’s Faux Human Rights Agenda

It is not just the British establishment that is divided, as shown by the January vote in the US senate on whether sanctions on En+ should be lifted.  A Democratic-backed resolution blocking Trump’s plan to lift the sanctions also on Rusal and the power firm JSC EuroSibEnergo was held and defeated by 57-42.  This, despite a global aluminum shortage, coupled with new US tariffs which have had adverse economic consequences in industries in a number of US-aligned countries including Canada. But the US establishment is still not giving up on its anti-Russia agenda.  A bill is being put forward by a bipartisan group of senators to punish Russia for ‘interfering in U.S. elections,’ ‘malign influence’ in Syria and ‘aggression in Ukraine.’  It includes sanctions on Russian banks and new sovereign debt.

It is unlikely to be passed given that last year Steve Mnuchin, the Treasury Secretary claimed the US would not sanction Russian sovereign debt as it might trigger unwelcome economic turmoil all round.  However, this would not seem to deter Washington’s most hawkish Russophobes.  And it is an idea being floated by part of the British government post-Brexit, with a view to bilateral sanctions with the US and even the EU.  The question should be asked as to whether such a punitive, coordinated sanctions policy would be imposed on any other country’s sovereign debt or whether this would be another mechanism through which to target Russia. Either way, this is a potentially dangerous precedent.

UK Foreign Policy increasingly tied to the US

The raising of this suggestion in parallel with the US legislation indicates some kind of coordinated thinking between UK and US neocons.   The eagerness with which the British government drives sanctions inside the EU, and is currently crafting its sanctions policies indicates it is likely to ally closely with the US on leaving the EU.  Last year the UK attempted to add names to the EU sanctions list created after the Crimea ‘annexation’ by the Russian Federation, but this was rejected by Italy.  What’s important is that this shows a willingness by the Foreign Office to aggressively push the Ukraine/Crimea narrative and lead with punitive sanctions against Russia, most likely in collusion with the US.

Author Diane Johnstone wrote:

Russian interference in American politics is totally welcome so long as it helps turn public opinion against a “multipolar” Russia, glorifies American democracy, and serves U.S. interests

This is also true in the case of Britain.  The establishment treats Russian oligarchs very generously as long as they are the right type of oligharch, while it vilifies any that associate with Putin as the wrong type.

Whichever side of the divide they are on, in the world of western media and politics, oligarchs serve the same purpose – a narrative for demonising Russia. Beneath this we see the clash inside the political class and the British elite, between those who want Russian money and those with a political agenda manipulated by US and UK military interests.

Author Nina Cross is an independent researcher and writer and is a special contributor to 21WIRE. See more of Nina’s work here

READ MORE RUSSIA NEWS AT: 21st Century Wire Russia Files




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