By Joshua Chapin, FT
On a day when British Prime Minister Theresa May expelled 23 Russian diplomats, city bankers were busy preparing paperwork to issue billions of dollars in Russian bonds.
A few hours after May took the retaliatory action to poison a Russian double agent in Salisbury, Gazprom issued $ 750 million worth of bonds in London. The next day, the Russian government issued bonds worth $4 billion in London.
“Business as usual?” The British Embassy in Russia wondered.
For many Russians living in Britain, the answer to this question is not conclusive. Recently, they have been exposed to the severe consequences of the cooling of London-Moscow relations, the strengthening of right-wing elements in both countries, and hostility to the Russian elite in the British capital.
The city’s lawyers, the accountants, the private bankers, the security advisors and real estate developers, and many others who have padded their bank account by providing business services to wealthy Russians feel a sense of nervousness.
Some are convinced that the crisis will pass because the business is booming for both sides.
Last year, Russian bonds were issued in London at a record high, despite the sanctions imposed after the annexation of the Crimea in 2014. Today there are 57 Russian companies listed on the London Stock Exchange, more than anywhere else outside Moscow.
“We have always provided banking services to everyone,” a security consultant who works with Russian clients told Financial Times.
“That’s what we do. The Russians are only the last in a long line of rich foreigners, from the robber barons who came from America in the 19th century, through Greek shipping lions to Chinese princes.”
Russian money also found its way to parliament, with Oleg Deripaska as the latest example. He is an oligarch who is close to Russian President Vladimir Putin and has had a hard time obtaining a US visa.
To manage his energy empire, Deripaska hired the former Energy Secretary of the Conservative Party Greg Barker and the company of Peter Mendelson, one of the most prominent Labor politicians. Other senior government officials also won desirable positions in Russian companies controlled by oligarchs close to the Kremlin.
Last week the Conservative Party was also accused of receiving more than £3 million in donations with a “Russian connection” since 2010. Some politicians believe that everything is about to change.
“I think the government is beginning to get the message,” Chris Bryant, a member of the Labor Party, who heads a committee that works to tighten oversight of the flow of Russian money into the kingdom told FT. “We have to do a house check.”
In the 1990s, the thriving city was a magnet for the rich from around the world. Britain then spread a red carpet to Russia’s wealthy, many of whom made their fortune by taking over assets privatized after the collapse of the Soviet Union.
A crucial moment was when then-prime minister John Major began issuing visas to foreigners who invested £1 million in Britain, an amount that has since risen to £ 2 million. It was a small price to pay in exchange for wealthy Russians who were eager to take advantage of the legal defenses offered by London, the private schools and the “gentle” regulation in City.
According to the International Transparency Organization, a quarter of the investor visas distributed by Britain in 2008-2015 reached the Russians for a total investment of £729 million.
Much of this money has found its way into luxury real estate. For example, the estate of Roman Abramovich, the ultimate oligarch, in the area known as the Avenue of the Oligarchs.
It is a private driveway in the Kensington Palace Park, which is also home to the ambassadors, where heavily armed police are patrolled.
Abramovich, who made his fortune from gas assets, announced his arrival in London in 2003 with the acquisition of the Chelsea Football Club.
“A dark tycoon from the Siberian steppes,” was the most flattering term he had ever received. “Today he is considered a decent British businessman,” says Roman Borisovich, a former senior insurance executive who is currently working against corruption in Russia through his ClampK.org group.
Abramovich’s neighbor in London is Sir Len Blavatnik who gave Oxford University the largest contribution in its history and whose name is on the new wing of the Tate Modern Museum.
According to the International Transparency Organization, Russians are responsible for about one-fifth of British assets with a total value of £4.4 billion purchased through “suspicious capital.”
Buyers do not necessarily live in their properties, says the organization. These are people whose British property serves as a safe haven for the money they spend from their homeland.
“Who else can afford One Hyde Park?” Notes Natasha Semyonova Bateman, whose company, Exxon UK, helps Russians emigrate to Britain. The intention is for the £ 1.15 billion ultra-luxury real estate project set up by entrepreneurial brothers Nick and Christian Candy and has attracted strong demand from Russians.
Bateman also tells about Russian streaming to private schools in the UK, “provided they look like Harry Potter.”
Now there are those who fear that this era is nearing its end, and perhaps even ended. “The world has changed,” says Gary Hersham, a London real estate agent who is considered a “king” in the Russian arena.
In the fourth quarter, the Chinese ranked first in the list of UK visa applicants, with 24 visas versus 16 Russians. Even before the recent crisis, Hersham saw how Russian money was coming out of the British real estate market and he expected that trend to continue.
“Once we received 20-30 requests a week,” he says. “Today we’re lucky if you get one, two. In my opinion, we will see mainly the sale of assets by Russians,” he added, noting that the Kremlin presses the rich to return.
“They received clear messages such as, ‘What’s wrong with the education system in Russia?’”
For some Russians living in London, most of whom are not oligarchs or necessarily Putin’s fans, the current crisis is a painful wake-up call.
“It’s humiliating,” said Olga Wyskova, who has been living in London since 2002, on “poisoned tea” jokes that are widely used to her. “It’s hard when you’re being ridiculed and said your money is dirty,” added her friend Anastasia Gunn.
They have already heard stories of friends traveling regularly between Moscow and London, and recently detained by the UK customs authorities. Tourist guide Mr. Borisovich, who conducts bus tours between the oligarchs, does not believe that leaving the wealthy Russians will necessarily harm London.
According to him, people like Abramovich and Deripaska belong to nomadic tribes. A large part of their money is held in tax havens like Cyprus and the British Virgin Islands, and apart from football clubs and special philanthropic activities, they do not tend to buy or invest in British business.