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22 March 2022

British greed for dirty money emboldened Putin’s Russia

Before Britain pats itself on the back too generously for supporting Ukraine, it must not be forgotten how well the UK has served oligarchs, kleptocrats and criminals.

By James Bloodworth

Amid the rush to denounce Russia for its bloody invasion and occupation of Ukraine, a fresh light has been cast on Britain and its relationship to dirty money. While Britain has behaved admirably in providing military support for Ukraine, it seems fair to say that the country has been rather less upright in its dealings with the region’s oligarchs.

As Oliver Bullough writes in his latest book Butler to the World (2022): “when dictators want somewhere to hide their money, they turn to Britain. When oligarchs want someone to launder their reputation, they come to Britain.”

Do not let the retrospective promises of a “crackdown” on the dirty money that swishes around London conceal the fact that politicians have had many years to tackle the problem, and done sweet zilch about it. Successive governments have acquiesced in London’s reconfiguration as the home of dodgy cash. How else to explain the endless drip of stories now emerging about the cosy relationship between Conservative MPs and Russian and Ukrainian oligarchs?

Of course, this is not purely a Tory problem (though the Conservatives do seem to be the worst offenders, perhaps because they’ve been in power for so long). During the dog days of the previous Labour government it was the former business secretary, Peter Mandelson, who accepted the lavish hospitality of a Russian oligarch aboard an £80m yacht.

While today it is Tory MPs making the headlines, New Labour did much to inculcate the spirit of the past four decades, even if it did at least make a concerted effort to restore dignity to society’s losers. It was once said of Margaret Thatcher and Tony Blair that, whereas the former believed in privatisation, the latter just liked rich people.

A similar disposition is observable all around us. As Tony Judt writes in his final book-length polemic Ill Fares the Land, “there is everywhere a striking propensity to admire great wealth and accord it celebrity status.”

Yet, as new oligarch-Tory party links are unearthed, the uncritical adulation of wealth for its own sake is incredibly unhealthy for a society. Judt quotes the father of classical economics, Adam Smith, to make the same point: “the disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect, persons of poor and mean condition… [is] the great and most universal cause of the corruption of our moral sentiments.” Smith evidently had a better grasp of politics than many of his contemporary disciples.

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But Britain’s status as a place where crooks can invest and launder their ill-gotten gains is about more than “moral sentiments”. As the New Statesman has written, the UK has rolled out the red carpet for oligarchs and plutocrats because it collectively decided in the 1980s that it would become a country that sells things.

Not British products to be sure – poor levels of productivity mean the UK cannot produce enough exports to pay its way in the world – but its eminent companies and strategic industries. The country sold off the “family silver”, few questions asked, to the highest bidder. And in the process it opened the country up to people with lots of money who wanted to dodge the consequences of their actions.

Today, the country’s football clubs are in the hands of oil-rich Saudis, and the next generation of nuclear power stations are being built by the Uyghur-crushing Chinese Communist Party. Meanwhile, hundreds of billions of pounds are laundered through the British banking system every year by some of the worst people on the planet. If this model of laissez-faire capitalism is the “end of history” – the zenith of human potential – then I think we should all ask for a refund.

But then, the rich and powerful have always been accorded a different standard of treatment to almost everybody else in the UK. It took the Conservative government just 18 months to claw back the £20 “uplift” in Universal Credit payments introduced at the start of the Covid-19 pandemic, a move predicted to push 840,000 people into poverty – including almost 300,000 children. Such “tough decisions” are justified on the basis that Britain must repay its Covid debts. Yet as a country, the UK loses around £35bn a year of tax through non-payment, avoidance and fraud – a figure that dwarves the £6bn it would cost to make the Universal Credit uplift permanent.

Of course, countries around our (globalised) world face significant challenges when it comes to making the wealthy pay their way. But Britain is in a more convoluted position than most in that it maintains a network of tax-friendly overseas territories. Indeed, Britain inflicts a $68.2bn annual tax loss on other countries by allowing the rich to squirrel away assets in its overseas territories, such as the British Virgin Islands.

Perhaps the UK should be a little more sanguine when it comes to trumpeting how it is standing “side by side” with Ukraine in its hour of need. As a Russian anti-corruption campaigner told me recently, if Britain had cracked down properly on dirty Russian money following the 2014 annexation of Crimea, today’s full-scale invasion of Ukraine might have been avoided because Vladimir Putin would feel less emboldened by the West’s inaction.

Even the word “inaction” isn’t quite accurate. As a country, the UK has for many years opened its doors to individuals who have stolen and plundered from the people of Ukraine and Russia. This has left them at the mercy of corrupt leaders and autocrats who have sought to wipe away the humiliation and chaos of the 1990s by restoring a largely mythical concept of national greatness.

It is morally right that Britain should be sending weapons to Ukraine to aid its people in their fight against the Russian invaders. But before patting itself on the back too generously, perhaps the UK should see this as recompense. It is Britain, after all, that has – as Bullough puts it – behaved as a “butler” towards the oligarchs, kleptocrats and criminals that have inflicted so much damage on Ukraine and Russia.

[See also: Britain’s second empire: how London became an oligarchs’ playground]

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