Russian spy poisoning in U.K. soothed by investments
LONDON The row between the United Kingdom and Russia over a brazen nerve gas attack on a former Russian military intelligence officer and double agent living in England has laid bare an uncomfortable truth about the bilateral relationship one that is all about money.
The government of Conservative Prime Minister Theresa May has reacted with outrage to the assault, which her government blames on the Kremlin. But skeptics say that outrage has been tempered and complicated by the vast sums of Russian money that have flooded into Britain’s financial and real estate markets in recent years.
For decades, hundreds, if not thousands, of wealthy Russians have been parking themselves and their assets including what is widely believed to be huge coffers of dirty money in the United Kingdom.
British officials, investment consultants, real estate agents, caterers and interior designers are among those eagerly welcoming the inflows.
There is much to lure Russians to London, said Vladimir Ashurkov, a Russian banker and opposition political figure who was granted asylum in the U.K. in 2015.
“One is its language. If Russians speak a foreign language, then it’s English,” he said. “London is a big city not too dissimilar to Moscow, and there’s already a lot of Russians here. London is the unrivaled center of business and finance in Europe, and the British education system is trusted.”
Last week, Mrs. May said she would create an action plan to retaliate against Russia for the poisoning by a Russian-developed nerve agent of Sergei Skripal, 66, who spied for the British during the 1990s and early 2000s. He and his daughter Yulia Skripal, 33, were apparently attacked while sitting on a park bench in the provincial city of Salisbury and remain in critical condition.
Russian President Vladimir Putin and his aides have strongly denied the accusations, but Mrs. May has kicked out 23 Russian diplomats and promised to crack down on Russian oligarchs who park money in Britain.
That could be a double-edged response, say analysts.
The British government has long been happy to take in its former spies as repayment for their service. It has also welcomed Russian dissidents, a policy it sees as a counter to an anti-Western government in Moscow. London’s financial hub, however, is known for welcoming Russian money from the vast fortunes of Mr. Putin’s close allies, and most don’t believe that will change anytime soon.
“Russia is a skillful and growing threat to the U.K., yet Russia’s elite uses the U.K., like no other country, to legitimate and protect its wealth,” Nigel Gould-Davies, an associate fellow in the Russia and Eurasia program at the Chatham House think tank, told The Associated Press this week. “A whole industry of U.K. financial, legal and related services benefits from this. They are wealthy, well-connected and benefit enormously from Russian custom.”
An estimated 59,000 people born in Russia now live in Britain, government records show.
Rivaling the royals
Mr. Ashurkov, a prominent critic of what he claims are ill-gotten millions of Mr. Putin’s cronies, says some of Russian real estate holdings now rival the British royal family’s palaces.
Mr. Ashurkov, in fact, organizes bus tours around the British capital for fellow activists and journalists to showcase the czarlike opulence that the Russian oligarchy enjoys in London.
“I do it to alert British authorities about dirty money,” he said.
Take, for example, Witanhurst, London’s largest private home, surpassed in size only by Buckingham Palace. The basement alone holds a swimming pool, cinema, sauna, gym, staff quarters and parking spaces for up to 25 cars.
Mystery surrounded the owners of this North London mansion after it was purchased in 2008 for $70.2 million. Ordinarily, it’s a simple process to figure out who owns real estate: pay a fee to the Land Registry, and it will provide the name. But when properties are owned by offshore companies, as Witanhurst and many others are, it’s not so simple.
This ostentatious secrecy has a tendency to get on the nerves of locals. In 2011, town official Michael Hammerson grumbled to the Daily Mail newspaper, “We don’t want limos with smoked windows and men in dark glasses with bulging breast pockets, and the place surrounded by [closed-circuit televisions].”
In 2015, The New Yorker revealed the owner to be Andrey Guryev, the former head of one of Russia’s largest fertilizer companies.
This kind of confidentiality typifies London’s moneyed Russian population, said Mr. Ashurkov, who notes that the Russian investors go to great lengths to protect their anonymity.
“One billion pounds of Russian money is the minimum invested in London property,” said Mr. Ashurkov. “There are at least 100 Russian families living in mansions worth over 10 million pounds. But it’s very difficult to get an exact estimate because so many hide behind offshore companies.”
According to Transparency International UK, almost 10 percent of real estate in the Westminster borough of London is owned by anonymous offshore companies. In Kensington and Chelsea, perhaps the most upscale part of town, the figure is 7 percent. Both of these neighborhoods are favored by the Russian elite.
Illustrious Belgrave Square in Westminster has even been jokingly nicknamed “Red Square” because of the influx of Russian residents.
Many of these Russians expats don’t live in London full time and have portfolios of houses around the globe. Investing in London real estate isn’t a pure vanity project, though. For many watching the political uncertainty back home, England is a seen as a safe bet, similar to buying gold bars. If ever the need should arise for a swift exit from the motherland, many of these oligarchs can escape to London, where their fortunes are secured in the form of well-located bricks and mortar.
William Brown, a London contractor, has worked on a number of renovation projects for Russian billionaires. He won’t reveal the names of his clients, but he said they spend most of their time away from London.
“None of them are here full time. They might be in town just two months of the year,” he said. “Most of the time, there’s no one in these mansions except the butler and security guards.”
Large-scale renovations inevitably follow when a new owner takes over such a grand mansion, which creates a cottage industry that employs thousands of contractors, plumbers and interior designers like Mr. Brown.
“One client had 22 solid-marble bathrooms spending $90,000 per bathroom on renovation costs,” Mr. Brown said. “It’s extravagance like you wouldn’t believe.”
Working on high-end refurbishments for rich Russians in London’s most fashionable ZIP codes pays a lot more than the average project, he said, but the clients can have unreasonable expectations.
“The money is good, but there’s so much hassle,” he said. “Their designers ask for things that are almost impossible.”
Purchasing property of this value contributes significantly to the British treasury. The sale of a house with Witanhurst’s price tag would collect more than $10.3 million in taxes.
That money, often amassed from the selling of state assets when the Soviet Union broke up, has long been directed through London’s famed banks, to be pumped into the country’s property market and spent at the capital’s luxury boutiques.
In 2015, Deutsche Bank estimated capital inflows from outside the U.K. mostly Russia at more than $200 billion over the past three decades. State-controlled Russian companies, including Gazprom, oil producer Rosneft and financial firm Sberbank, all trade on the London Stock Exchange. Russian billionaires have even infiltrated that most hallowed of British institutions: soccer. Oligarchs are significant owners of such premier British soccer powers as Chelsea and Arsenal.
The intertwining of old Soviet wealth into the British economy complicates things. It becomes a tough task for the government to impose sanctions that would target “dirty money” without harming British interests at all levels, from the international banks to the self-employed contractors like Mr. Brown.
U.K. officials are likely not to crack down on assets or trade with Russia, given that Britain’s exit from the European Union is looming and economic growth has been sluggish, analysts say.
Still, Mr. Ashurkov said, all this shouldn’t dissuade Mrs. May from taking action against money harbored in her own backyard.
“Britain would be just fine without a few billion of corrupt money,” he said. “The British economy would not suffer if dirty money went away.”