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United Kingdom - Russia Policy

The British capital, sometimes known as “Londongrad,” remains a favorite for wealthy Russians to store ill-gotten gains abroad. The use of London as a base for the corrupt assets of Kremlin-connected individuals is clearly linked to a wider Russian strategy and has implications for British national security. The assets stored and laundered in London both directly and indirectly support President Putin’s campaign to subvert the international rules-based system, undermine British allies, and erode the mutually-reinforcing international networks that support UK foreign policy. The size of London’s financial markets and their importance to Russian investors gives the UK considerable leverage over the Kremlin. But turning a blind eye to London’s role in hiding the proceeds of Kremlin-connected corruption risks signalling that the UK is not serious about confronting the full spectrum of President Putin’s offensive measures.

The British government blocked the release of a report about alleged attempts by Russia to affect the result of the Brexit referendum until after the December 2019 general election, citing administrative hurdles. Theresa May’s government has repeatedly accused Russia of trying to affect the result of the 2016 referendum through misleading media coverage and fake social media accounts – though failing to provide any exact evidence. Moscow has strongly rejected the allegations.

Under successive British governments’ “prosperity agenda”, for the sake of swelling the UK economy, foreign capital has been welcomed into the London real estate and investment markets with little in the way of oversight or regulation. The results of an 18-month inquiry by the House of Commons intelligence and security committee into allegations of Russian interference in the 2016 Brexit vote had been expected to become public in early November 2019. The government is keeping the dossier, which has already been approved by the intelligence community, under wraps, saying that it would take six weeks to ensure whether it contains no classified information. The release was re-scheduled until after the 12 December general election, in a move which opposition lawmakers called politically motivated.

The parliamentary intelligence committee report highlighted how President Vladimir Putin’s Russia wields malign influence inside the United Kingdom – and not just through disinformation and deadly spy-craft. The committee’s report also examined how Putin’s agents and allies – and crucially, their money – have infiltrated the business, social and political life of London, and how vulnerabilities in Britain’s legal and commercial infrastructure have made London a mecca for kleptocrats and their entourages the world over.

“Few questions – if any – were asked about the provenance of this considerable wealth,” the report claims. This approach, it continues, “offered ideal mechanisms by which illicit finance could be recycled through what has been referred to as the London ‘laundromat’.” Money of dubious origin arriving there frequently gets funneled into ‘reputation laundering’. By splashing their cash on charitable, cultural and political organizations, dubious characters with links to Vladimir Putin can get a foothold in elite British social, political and business circles.

The UK is a natural magnet for Russians. If they learn any foreign language, it is likely to be English, which comes in handy here. London is a large metropolitan city, similar to Moscow. It has a lot to offer in many respects. London is the capital of finance and business. People trust the British education system and the British court system.

The main country which Russia considers an enemy is the United States of America. Tensions between the two countries has been ongoing for decades, with the Cuban Missile Crisis during the Cold War almost causing a nuclear conflict. Even now, the Russians are being constantly accused of interfering in the US election of 2016. Russia may also consider Britain as an enemy due to their close relationship with the US. During the Ukraine Crisis, both British Prime Minister, David Cameron, and US President, Barack Obama, joined together to criticise Russia for invading Crimea. Also, Russia was on very strained terms with Ukraine since the invasion of Crimea and may even considered them as enemies.

Russia maintains a dialogue with NATO through the NATO-Russia Council, including on Afghanistan, combating piracy, counter-proliferation and counter-terrorism. Meanwhile, negotiations continue between the EU and Russia on a successor to their Partnership and Co-operation Agreement, covering a wide-range of areas including trade and investment, global and regional security and stability, and climate and energy security. The EU and Russia cooperate in a number of areas including justice and home affairs and foreign policy. The overall direction of the relationship is guided by twice yearly summits. Differences with the international community arose following the conflict in Georgia in 2008 and Russia’s recognition of the Georgian regions of South Ossetia and Abkhazia as independent states.

Russia and the UK maintain contacts at all levels to discuss a wide range of bilateral and key foreign policy issues. The State Visit by HM the Queen and the Duke of Edinburgh to Russia in October 1994 was the first ever by a reigning British Monarch. President Putin came to the UK on a State Visit in summer 2003, the first such visit by a Russian leader since 1874. He also visited the UK in October 2005, during the UK Presidency of the European Union. Russian Foreign Minister Sergei Lavrov visited the UK in February 2011.

The Government wants to see progress with Russia on areas of difference with the West. Discussions with Russia on issues such as Kosovo, the Conventional Forces in Europe Treaty and ballistic missile defence will continue to be difficult. The Government will continue to engage with Russia both bilaterally and in the range of multi-lateral fora we have at our disposal. The Government will continue to pursue the UK’s interests vigorously, not allowing Russian pressure to deflect the UK from key issues of principle.

In the years immediately following the Bolshevik Revolution, the Soviet leadership assiduously pursued diplomatic relations with Britain, the archetypical "imperialist" power, as part of its efforts to win recognition as a legitimate regime. After World War II, the Soviet Union perceived Britain as an "imperialist power in decline," especially after Britain relinquished most of its colonies. Nevertheless, Britain remained an important power in Soviet eyes because of its nuclear forces, influential role as head of the British Commonwealth, and close ties with the United States.

In general, Soviet relations with Britain had never been as important a component of Soviet foreign policy toward Western Europe as have been relations with France (especially during the de Gaulle period) or with West Germany (especially during the Brandt period). Several reasons for Britain's lesser importance existed. Unlike West Germany, Britain is not subject to Soviet political pressures exerted through the instrument of a divided people.

Much smaller than its French counterpart, the British Communist Party exerted less influence in electoral politics. The British economy has also been less dependent than that of other West European states on Soviet and East European trade and energy resources.

In December 1984, shortly before Gorbachev became general secretary, he made his first visit to London. Prime Minister Margaret Thatcher declared that he was a leader she could "do business with," an assessment that boosted Gorbachev's stature in the Soviet Union and abroad. This assessment was repeated upon Thatcher's visit to the Soviet Union in April 1987. Under Gorbachev's leadership, the Soviet Union renewed its attempts to persuade Britain and France to enter into strategic nuclear disarmament negotiations, which as of 1989 they had resisted.

Relations between the UK and Russia (2003 was their 450th anniversary) were transformed after the collapse of the Soviet Union. There are frequent contacts at all levels to discuss a wide range of bilateral issues and key foreign policy issues. The State Visit by HM the Queen and the Duke of Edinburgh to Russia in October 1994 was the first ever by a reigning British Monarch. President Putin came to the UK on a State Visit in summer 2003, the first by a Russian leader since 1874. President Putin also visited the UK in October 2005, during the UK Presidency of the European Union. The fact that the UK was the second largest investor in Russia and trade had increased 30 percent over the years 2005-2008, coupled with Russia's one-billion dollar investment in Britain, could underpin a more productive relationship across the board.

Relations between Russia and the UK were strained in the aftermath of the murder of Alexander Litvenenko in November 2006 and the closure of the British Council in St. Petersburg and Ekaterinburg in January 2008. The UK co-operates with Russia where it is in its interests to do so. High-level contacts have increased in the last year, in pursuit of shared interests on the global economy, energy and climate security, and international stability – although bilateral differences remain. President Medvedev and Prime Minister Brown held talks in July 2008 and President Medvedev visited the UK in April 2009 for the G20 Summit.

The UK has substantial investments in Russia, and was the largest investor in Russia in both 2006 and 2007. In turn, Russia is the UK's 12th largest export market, with over 1000 UK companies operating in Russia in 2008. Russia enjoys a historically strong performance in the field of engineering, financial services, ICT, power and energy and sports and leisure infrastructure. Over the past few years, trade between Russia and the UK has increased significantly. Exports of UK goods were valued at £4.1bn in 2008, an increase of 46% on 2007 figures. Russia's potential would be enhanced further if it pushed through a range of institutional and economic reforms necessary to complete the transition to a stable, rules-based economy.

DFID’s bilateral engagement with Russia started in the early 1990s, initially supporting Russia’s transition to a market economy. After 2002 the focus shifted to a set of policy issues based around the Russian government’s administrative and social reforms. Over the period 2001 – 2006, over £50m was allocated to support this. In addition, there were annual contributions of between £2-3 million for humanitarian operations in the North Caucasus.

DFID closed its bilateral aid program March 2007, a sign of Russia’s strong economic growth since 2000 and its position as one of the richest Middle Income Countries. As a G8 member and an emerging donor, Russia had the potential to play a major role in global poverty reduction. DFID’s program in Russia worked through the World Bank and the EBRD across three main areas: building Russia’s aid management capacity; supporting public administration reforms; and promoting energy efficiency.

Russia reacted to Britain’s 23 June 2016 vote to exit the European Union with a mix of pleasure, understanding and concern. Some Russian politicians celebrated the Brexit, taking aim at the EU and its Western allies. Senior Russian lawmaker Alexey Pushkov, saw Brexit as reflecting a "crisis in the EU governance model" and calls it a "personal failure" for President Barack Obama. Obama, and other Western leaders, had urged Britons to vote to stay in the 28-member regional grouping.

The Kremlin’s efforts to disrupt European unity and Russian state media’s fomenting of euroscepticism have led many analysts to conclude that Moscow favors the Brexit choice. "Nobody wants to feed and to subsidize weaker economies, provide for other states, for whole nations — this is an obvious fact,” said President Vladimir Putin in comments explaining why he understood the Brexit vote. “People are dissatisfied with the decision of the security issues that have sharply deteriorated in the face of strong migration processes. People want to be more independent."

The Kremlin viewed the Brexit as weakening both the EU and the Euro-Atlantic alliance with the United States, said Ilya Kravchenko, an expert for the Russian International Affairs Council. “Moscow tends to view Brexit as an anti-American act,” he told VOA by email. “Because Britain is seen in Russia as a ‘Washington trumpet,’ and with today’s referendum result, can change its position on key issues, which as of yet, include sanctions and Ukraine.”

Some Russian officials raised hopes that without Britain’s strong support for sanctions against Russia in the EU, the punitive measures over its actions in Ukraine might be softened. Moscow Mayor Sergey Sobyanin said that “without Britain, the EU will have no one so zealously upholding Russia sanctions."

British ministers and their Kremlin counterparts threatened further reprisals after retaliatory expulsions of diplomats in response to the the poisoning of former Russian double agent Sergei Skripal in Britain, an attempted assassination Britain accuses the Kremlin of orchestrating. Britain blamed the attack on Russia, triggering the expulsion of more than 150 Russian diplomats from Western countries. Russia vehemently denies any involvement and has responded by expelling the same number of diplomats. With Anglo-Russian relations plunged to their lowest point since the Cold War, British financial advisers in Moscow had expected to encounter Russian clients anxious about Britain mounting a retaliatory financial crackdown on Russian money invested in London. British Prime Minister Theresa May has promised to go after the financial assets in Britain of wealthy Russians connected to the Kremlin.

Part of the reason is Britain has been reluctant in the past to use existing legislation to probe too deeply into the origins of Russian money spent in Britain, fearing it might lead to an exodus of Russian cash from the country. Moscow investors also believe Brexit-mired Britain is going to need Russian money even more in the future and chasing it out risks frightening super-wealthy investors from other countries.

Several states, including Italy and Greece, appear eager to shield their ties with Russia and wanted to water down the assessment that Russia is highly likely to have been behind the attack. Officials from Greece and Italy worry the British accusation has not yet been proven.

The Foreign Affairs Committee of the House of Commons slammed the government on 21 May 2018 for "turning a blind eye" to the role London's financial center plays in laundering the proceeds of Russian corruption. The result is that it helps the Kremlin finance its aggressive foreign policy. "The use of London as a base for the corrupt assets of Kremlin-connected individuals is now linked to a wider Russia strategy with implications for the UK's national security," said the committee. It added that failing to act sent a message that "the UK is not serious about confronting the full spectrum of President Putin's offensive measures."

According to the committee, Russian money hidden in British assets and laundered through City of London financial institutions damages the government's efforts to take a tough stance against Moscow's aggressive foreign policy. " These assets, on which the Kremlin can call at any time, both directly and indirectly support President Putin’s campaign to subvert the international rules-based system, undermine our allies, and erode the mutually-reinforcing international networks that support UK foreign policy".

"The scale of damage that this 'dirty money' can do to UK foreign policy interests dwarfs the benefit of Russian transactions in the City," said committee chairman Tom Tugendhat.

On 16 July 2020, Dominic Raab (Secretary of State for Foreign and Commonwealth Affairs) stated "the Government has concluded that it is almost certain that Russian actors sought to interfere in the 2019 General Election through the online amplification of illicitly acquired and leaked Government documents. Sensitive Government documents relating to the UK-US Free Trade Agreement were illicitly acquired before the 2019 General Election and disseminated online via the social media platform Reddit. When these gained no traction, further attempts were made to promote the illicitly acquired material online in the run up to the General Election."

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Page last modified: 08-03-2022 19:38:02 ZULU