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Economy

Why 'Londongrad' Weighs On Britain's Russia Policy

Extraordinary Russian wealth has accumulated in London, much of it of questionable origins.  Inevitably, it will be factored into British decisions in the showdown with Vladimir Putin.

Driving past London's One Hyde Park in a Ferrari
Driving past London's One Hyde Park in a Ferrari
Eric Albert

LONDON — They are the most expensive and luxurious flats in the whole of London. Their ultramodern bay windows offer an unobstructed view onto Hyde Park. An underground corridor connects them to the Mandarin Oriental, the palace where Michelin-starred chef Heston Blumenthal has one of his prized restaurants.

In total, the 76 apartments in One Hyde Park, a building designed by legendary architect Richard Rogers, were sold for $2.4 billion, an average of $30 million dollars each, according to an investigation conducted by Nicholas Shaxson, author of a book on tax havens.

This is also the location that pro-European Ukrainians chose to demonstrate several times over the last few months. Among the owners of this luxury temple are Rinat Akhmetov — Ukraine's richest man with significant political influence, who Forbesestimates has accumulated a personal fortune of $12.5 billion.

Akhmetov is not the only representative of the Russian sphere of influence to have invested in One Hyde Park. Irina Viktorovna Kharitonina and Viktor Kharitonin, the co-owners of a large Russian pharmaceutical company, have two flats there. Construction magnate Vladislav Doronin is one of their neighbors. As for Alastair Tulloch, a British lawyer close to Russian circles, his name is listed as the owner of four apartments, whose real owners' names are hidden behind a shadowy organization.

The British capital is the major financial center for oligarchs from Russia and all former Soviet states, and is now sometimes referred to as "Londongrad." According to estate agency Knight Frank, Russian buyers represent 10% of luxury residences, while some 60% of the new files opened by the London Chamber of Commerce & Industry come from Russia or Eastern Europe.

The extraordinary court case between Roman Abramovich, the owner of London's soccer club Chelsea FC, and Boris Berezovsky, a famous opponent to Putin who died last year, also took place in London.

"A lot of oligarchs bring to London vast quantities of money and use this city as their headquarters to manage their personal wealth," says John Christensen from the association Tax Justice Network, who suspects that much of the wealth flow winds up circulating through money laundering.

A merchant banker, specialized in Russian business, confirms this implicitly. "A lot of Russian activities are legal and the laundering doesn't necessarily take place in London because it's too visible, but it's indeed here that the lawyers, the legal experts and counsellors are."

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Russian oligarch and Chelsea FC owner Roman Abramovich — Photo: Marina Lystseva/GNUFDL

Since it concerns illegal money, it is impossible to accurately say how much this represents. However, even Russia's Central Bank has estimated that two-thirds of the capital that leaves the country come from illegal activities. According to Tax Justice Network, capital flight in Russia over the last 30 years is as high as $798 billion.

School connections

Another clue for this is that most foreign investments made in Russia come from Cyprus, the British Virgin Islands, Bermuda and the Netherlands (via the Dutch Antilles). In other words, tax havens, most of them directly under London's jurisdiction. "For the most part, it's laundered money that comes back to Russia," accuses Ben Judah, author of the book Fragile Empire: How Russia Fell In And Out of Love With Vladimir Putin.

Worse still, even oligarchs accuse each other. Alexander Lebedev, who earned his fortune in finance and owns the British dailies London Evening Standard and The Independent, wrote in a Feb. 26 op-ed in The New York Timesthat Andrei Borodin, a former chief executive of Bank of Moscow who now lives in Britain, is someone who "can continue to live off the proceeds of their crimes." Borodin rejects all accusations of corruption.

According to Judah, Russian money now influences British authorities. He underlines the fact that oligarchs are well integrated in the upper echelons of British society, partly because they send their children to the most expensive private schools. There are 2,150 Russian children in the biggest boarding houses, representing tuition fees of about $97 million per year. "The British elite have a hedge-fund mentality. They don't produce anything but live off annuities they take on foreign money, including from Russia," he claims.

In these conditions, imposing sanctions that would weaken The City is out of the question. On March 3, Hugh Powell, deputy national security adviser, revealed this by accident, as he was on his way to meet Prime Minister David Cameron at 10 Downing Street. The memo he was holding was photographed, and amongst other things, it said that London's financial center should not be closed to Russians.

The discovery left Ben Judah infuriated. "As long as the United Kingdom continues to launder money, it will remain a partner to Russia."

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Geopolitics

Italexit Ramp? Why Giorgia Meloni Is No Real Threat To European Unity

After far-right politician Giorgia Meloni emerged as the top vote-getter in Italy's election, the question on everyone's lips is what will her relationship be with the European Union. The risk of her pushing for an Italian exit from the EU is slim.

Interviewing Giorgia Meloni with an image of outgoing Prime Minister Mario Draghi

Stefano Stefanini

-Analysis-

ROMEGiorgia Meloni has unquestionably earned the trust of Italians. But now she will have to work on earning the trust of the rest of the world, especially the world to which Italy belongs: the West and Europe.

Italy cannot afford political isolation, economic self-sufficiency or cultural marginalization.

"Italy first" does not represent the national interests. Not for an Atlantic, European and Mediterranean middle power that belongs to organizations scattered around the globe — a dense network of interdependencies and ties on which our security and well-being depend.

New leaders are often given a trial period on the international scene. Not so for Meloni, who will get to the prime minister seat with the Russian-Ukrainian war at the center of Europe and a pressing energy emergency.

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