United Kingdom: In bed with Russian oligarchs

The sanctions the European Union imposed on Russian officials this week are at best “a limited response” to Russia’s Crimea grab, said The Daily Telegraph in an editorial. Fewer than two dozen officials are to be denied visas and have their foreign assets frozen. Of course, Russian President Vladimir Putin “can have expected nothing less,” and evidently he sees it as “a price worth paying.” That’s because Putin and his cronies already moved their money back home, said Brian Whitmore in RFERL.org. “In all likelihood, Putin has been preparing for something like the Crimea intervention for some time.” Last year, he ordered officials with investments abroad to repatriate their fortunes, presumably to make Russia “less vulnerable to Western pressure.” The small group of mostly KGB veterans who make up Putin’s inner circle and decided to invade Crimea “don’t hold foreign assets.”

But there is still a vast amount of Russian wealth in the U.K., said Nick Cohen in The Observer. It will remain untouched by the sanctions, and that’s hardly surprising given how dependent on Russian billions the British economy has become. Three of our top five richest residents are “Soviet-born billionaires.” Russian oligarch Alexander Lebedev owns several major British newspapers, including “the satirically titled Independent,” and Roman Abramovich owns Chelsea Football Club. Russian money, much of it dirty, flows through our banks, generating millions of pounds in banking fees. Our court system is the oligarchs’ preferred venue for suing one another, showering British lawyers with millions of pounds in legal fees. And it goes on and on: The luxury art market, the London property market, and British private schools are all awash in Russian money.

Yet going after the individual Russians who invest in Britain wouldn’t hurt Putin anyway, said John Gapper in the Financial Times. Instead, “the most effective means of inflicting pain on Russia would be financial, not personal: denying support for its banks and making Moscow take the strain instead.” State-controlled Russian banks are poorly capitalized and rely on interbank funding. Cutting off that funding would force Russia’s central bank to fund them even as it is trying to prop up the ruble. This option would cause some pain to London banks. “But if it does not hurt, it probably will not work.”

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

One thing is clear: The sanctions enacted this week didn’t hurt a bit, said Larry Elliott in The Guardian. The ruble and the Moscow stock market actually went up after the sanctions were announced. And you can’t blame Britain alone for being unwilling to take a hit in order to punish Russia. Just like London, Manhattan, too, glitters with Russian wealth. Germany needs Russian gas more than ever, because it abandoned nuclear power in the wake of Japan’s Fukushima meltdown. And a struggling France can’t afford to scrap its lucrative defense contracts with the Kremlin. All across the West, “there is no real appetite for a tougher approach” to Russia—and “Putin knows that.”