Mr. Johnson, What Will the UK Do on Russia?

At this year’s Munich Security Conference, the West’s leaders were united in threatening exceptionally damaging sanctions on Russia and its economy should President Putin launch an attack on Ukraine.

Johnson’s escape act?

Boris Johnson, the UK Prime Minister, did his best – by virtue of a rousing speech – to make his domestic “party gate” troubles forgotten, at least momentarily.

The interesting question is what, rhetoric aside, Mr. Johnson and the Tories are willing to do on Russia.

Let’s look beyond Germany

Internationally, the German government has been in the crosshairs for quite some time for its stubborn pursuit of the Nordstream 2 pipeline. Germany has been criticized for good reason.

But what about the UK government and its determination at long last to act very firmly against Russian business interests?

The UK holds important keys

The United Kingdom has been a favorite haunt for the Russians, especially since the U.S. demonstrated repeatedly in recent years that it has no hesitation in imposing sanctions.

If past experience is any guide, then Putin may well be concluding that Boris Johnston’s bluster is as toothless as that of his predecessor, Theresa May, when she announced anti-Russian actions in March 2018.

All capabilities, really?

Following the attempted assassination by Russian agents in Salisbury, in February 2018, of former Russian spy Sergei Skripal and his daughter Julia, Mrs. May told the House of Commons on March 14, 2018, that 23 Russian diplomats were being expelled.

She declared the government will: “bring all the capabilities of UK law enforcement to bear against serious criminals and corrupt elites. There is no place for these people – or their money — in our country.”

Will the UK’s crass commercialism win out again?

But on that same day, Gazprom, the largely Russian state-controlled energy giant, raised UK £750 million in bonds in the London market. Gazprom today has more than $40 billion of outstanding bonds and notes in Western currencies.

As the UK parliament’s Foreign Affairs Committee noted in a report thereafter: “The ease with which the Russian government was able to raise funds in London despite the strong measures that the Government took in the wake of the Salisbury attack raises serious questions about the Government’s commitment to combating Russian state aggression.”

Oligarchs act – by moving their money

Russian oligarchs who might fear actions against by the UK and U.S. authorities have not been sitting idle.

As Messrs. Biden and Johnston have been blasting out sanction threats, they almost certainly have moved more of their cash into their secret Swiss and Austrian bank accounts or into other safe havens – or even back to Russia.

Effective sanctions

The United Kingdom could nevertheless impose sanctions that would do damage to the Russian economy.

In the event, Boris Johnston would face howls of protest from some of the most powerful and well-connected leaders of British finance. Prominent lawyers and members of the political establishment would join their protest.

Going after corporations

The key is to go after major corporations. UK sanctions should go directly to the core of UK ties to Russian businesses in the natural resources and the financial sectors.

These measures would have a far greater impact on the Russian economy than token gestures against some prominent Russians that own luxury properties in the poshest parts of London.

No Russian access to UK financial markets

Sanctions could include a total prohibition on all financial institutions operating in the UK from participating in the primary market for ruble or non-ruble denominated bonds.

The same goes for trading in all equities, for all public and private sector entities whose prime assets are based in the Russian Federation.

Unmasking Russia’s web

This would include, for example, London Stock Exchange listed companies such as PSJC Gazprom, and EN+, the giant aluminum company, which is chaired by former UK government minister Lord Barker of Battle. It has long had ties to Oleg Deripaska, Russian oligarch and close Putin associate.

The prohibition could also cover, for example, Letter One (L1), the UK headquartered energy investment company whose chairman is Lord Davies of Abersoch, and whose co-chairman and the company founder is another Putin pal, Mikhail Fridman. He controls Russia’s Alfa Group of banking and investments companies.

Security concerns above commercial ones?

Hitting the largest Russian corporations that have affiliated companies across the world, starting with those that have operations in the United Kingdom, would demonstrate that Johnston’s government is indeed placing security concerns above commercial ones when dealing with Putin.

President Biden is betting that Boris does the right thing. In contrast, Putin may be expecting the Brits to fail again to follow their sharp rhetoric with concrete actions that do real damage.

Editor’s note: Frank Vogl is also the author of “The Enablers: How the West Supports Kleptocrats and Corruption Endangering Our Democracy” (Roman & Littlefield, November 2021).

Hompage phot0 credit: Arno Mikkor