If there’s one story you read today make it this one, from Politico Magazine. It’s triggered by the crisis in Ukraine, but it’s been a long time coming.
The point of this short story is clear: Western leaders are waking up to the fact that Russia no longer fears or even respects them. Why? Well:
“Russia thinks the West is no longer a crusading alliance. Russia thinks the West is now all about the money.”
Quite so. More specifically,
“Putin’s henchmen know this personally. Russia’s rulers have been buying up Europe for years. They have mansions and luxury flats from London’s West End to France’s Cote d’Azure. Their children are safe at British boarding and Swiss finishing schools. And their money is squirrelled away in Austrian banks and British tax havens.
. . .
They have seen firsthand how obsequious Western aristocrats and corporate tycoons suddenly turn when their billions come into play.
. . .
they know full well it is European bankers, businessmen and lawyers who do the dirty work for them placing the proceeds of corruption in hideouts from the Dutch Antilles to the British Virgin Islands.”
Why, our very last blog, via Global Witness, was about the former Soviet Union and its dirty money parked in Britain and other shady hideouts. For an in-depth investigation of the British angle, if you haven’t already read it, see this Vanity Fair article about London (whose author is, as it happens, today’s TJN blogger). See also our TJN narrative reports on the British Virgin Islands, on the (former) Dutch Antilles and on the United Kingdom.
In theory, the Politico story notes, the hoards of Russian wealth in Europe makes Moscow vulnerable. Europe could stamp its foot firmly down in money-laundering investigations and cut them off from the oceans of corruptly obtained, or outright stolen, wealth. But no: Austria and Luxembourg, in alliance with Switzerland – and, yes, the United Kingdom – just keep sabotaging real progress. Anything like the U.S. Magnitsky Act would be just too much to stomach for those high-society, upstanding European criminal facilitators. And we don’t want to upset our European offshore banking fraternity – especially with all that juicy, crooked Russian and ex-Soviet cash sloshing about.
Now, here is another article by the same author, Ben Judah, entitled How Britain Betrayed Ukraine:
“Chanting ‘shame on you’, more than 150 protestors crammed onto a cold London pavement. But they had not chosen either the Ukrainian embassy or the Houses of Parliament to demonstrate. They were protesting outside Number One Hyde Park. As they shouted, the Ukrainian protestors craned their heads upwards to the metallic balconies of this hulking icon of a new London. London buses, not Berkut troopers, hummed passed. Then began the singing for the dead.
To the British, Number One Hyde Park is a symbol of what David Cameron as prime minister and Boris Johnson as mayor envisage for London. This glinting billion-pound development was built to reel in foreign billionaires.
To the Ukrainian demonstrators below, Number One Hyde Park is a symbol of impunity.”
That article is also worth reading in full. (As mentioned, for a more in-depth look at One Hyde Park and its astonishing roster of offshore-diving owners, click here.)
We have said on many occasions that hosting a corrupt, corrupting infrastructure to hoover up the world’s dirty money is a national security issue, for all of us – whether in the victim countries (both Russia and the Ukraine in this case, from the perspective of their ordinary citizens) or in the perpetrators (European havens, the United States, and others).
But that’s not all. Having wreaked all that harm overseas, Britain also faces the the problem that hosting an oversized financial centre, and hoovering up such gargantuan quantities of dirty money, can weaken one’s own economy. From the perspective of ordinary people at least, secret offshore banking is a losing proposition – almost any way you look at it.
The Politico story ends with a wonderful quote:
“Europe is really run by an elite with the morality of the hedge fund: Make money at all costs and move it offshore.”
Once again, read the whole story. It’s short, and it’s worth it.
Now, from the BBC:
“David Cameron and Barack Obama have agreed Russia must face “significant costs” if it does not change course after deploying troops in Ukraine.”
Let’s see just how far those ‘costs’ go. Will the UK government have the courage to stand up to the City of London on this one?
We won’t be holding our breath.
(Update 1: we were wrong: Britain has now taken aggressive countermeasures. Prince Edward has announced that he will pull out of the Sochi Paralympics. If that doesn’t stop Putin, nothing will.)
Update 2: the longer-term national security risk that the City of London poses for Britain is likely to be from China, which is gearing up to hand out benificence in the form of offshore Renminbi trading. Before too long, the City will become so dependent on this drug that British politicians won’t even be able to say boo to Beijing.
Update 3: Courtesy of a fortunate photo, we now see this Guardian article entitled “UK seeking to ensure Russia sanctions do not harm City of London.”
A truly shameful moment in British history, and as good a confirmation of the analysis in this blog as one could get.
Update 4: see our follow-up blog, with the Streetwise Prof’s analysis of how to put pressure on Russia.
Update 5: Naked Capitalism points to this blog, adding “Richard Smith points out that one should be wary of single-factor analyses, but this is indeed likely to be part of the equation.” That comment is spot on. To quote from Treasure Islands:
“That is not to say that all these problems don’t have other explanations. They always do. Tax havens are never the only story, because offshore only exists in relation to elsewhere. That is why it’s called offshore.”
Update 6: more on this from The American Interest, with a significant and illuminating focus on the Magnitsky Act.
Update 7: See Britain’s KGB sugar daddy, The Daily Beast, and British Officials Oppose Sanctions Because Russia’s Elite Are London’s Cash Cows, and the more timid Punishing London’s Oligarchs is Not Enough, John Gapper, Financial Times.
Update 8: Judah now writes in the New York Times, in another article well worth reading:
“Britain is ready to betray the United States to protect the City of London’s hold on dirty Russian money. And forget about Ukraine.”
Spot on. And it is far from the first time.
Update 9: London spin machine tries to rebut NYT “City betrays US” thesis – by quibbling
Update 10: How the UK helped Viktor loot Ukraine. Private Eye. “Without policing the lawless company-incorporation business, for which there are no real plans, tomorrow’s Yanukovyches will still find a useful corporate haven in supposedly respectable Britain.”
Update 11: The much-too-special relationship: American Interest looks at this story, embeds it in a broader context of the range of possible threats that the City poses to the United States.
Story hat tip: Adrienne Margolis, with thanks.
For an alternative image of Putin’s attitude to the world, see here.