Spotlight on Russian ties to British establishment as sanctions bite

  1. Oleg Deripaska was center of political storm in 2008
  2. Anti-corruption activists say Russian oligarchs influence UK politics
  3. "It's all in the political will" - campaigners say anti-corruption enforcement under-resourced

Russian aluminum tycoon Oleg Deripaska is one of the individuals most heavily affected by the recently announced U.S. sanctions on Russian business interests. A high-profile ally of Russian President Vladimir Putin, with links to the British political class, Deripaska is part of what anti-corruption activists say is an unhealthy relationship between political interests in London and Moscow.

A meeting on the Greek island of Corfu attended by two high-ranking members from either side of the UK political establishment caused a political scandal in 2008. Peter Mandelson, a Labour party peer (a member of the House of Lords) and then-Business Secretary, and then-shadow Chancellor George Osborne met on a luxury yacht.

Mandelson was later accused of using the trip to undermine Prime Minister Gordon Brown and offer favors to the yacht’s owner. Osborne was accused of trying to solicit donations from the owner. Both denied the accusations vigorously but said they had met the owner several times previously. The yacht belonged to Deripaska.

Now, Deripaska is reportedly the worst hit of members of Putin’s inner circle placed under sanctions by the U.S. Treasury Department on April 6. The measures were announced as part of the ongoing political crisis sparked by an attack on a former spy and his daughter in an English city. The United States said it was acting to counter a “range of malign activity around the globe,” including undermining elections and assisting the Syrian government.

“Russian oligarchs and elites who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities,” said the statement.

According to Bloomberg‘s billionaire’s index, Deripaska’s net worth fell from nearly $8 billion to just over $5 billion in a few days after the announcement.

In announcing the sanctions, the Treasury Department said Deripaska “has been investigated for money laundering, and has been accused of threatening the lives of business rivals, illegally wiretapping a government official, and taking part in extortion and racketeering.  There are also allegations that Deripaska bribed a government official, ordered the murder of a businessman and had links to a Russian organized crime group.”

Anti-corruption activists see web of Russian influence

The Anti-Corruption Foundation, a Russian investigative group headed by Alexei Navalny, the most high-profile Russian opposition leader, has accused Deripaska of corruption. They told the UK’s Serious Fraud Office Deripaska’s accommodation (on a luxury yacht) of Russia’s Deputy Prime Minister Sergey Prikhofko may have breached anti-bribery laws.

Vladimir Ashurkov, who works for the Anti-Corruption Foundation from London, where he sought political asylum in 2014, told WikiTribune the legislation to tackle the flow of illicit Russian money in London already exists, but law enforcement agencies have been too under-resourced to enforce it.

Ashurkov thinks Russian oligarchs such as Deripaska “influence the political establishment for the purpose of the British authorities turning a blind eye to the flow of corrupt money from Russia.”

“It’s all in the political will,” said Ashurkov. “For years our organization has been bringing cases of corruption to the attention of the authorities and we never got any response or traction.”

“The size of this influence is difficult to measure but I’m sure such effect is taking place,” said Ashurkov, who suggested that much of this influence is indirect, such as through investment.

Deripaska’s links to British politicians are well publicized. EN+, Deripaska’s main company, was one of the companies sanctioned by the U.S. Treasury last week, along with subsidiary Rusal.

Conservative peer Lord Barker was named chairman of EN+ October 2017, shortly before it floated on the London Stock Exchange. Unnamed sources told the Financial Times Barker is not prepared to step down following the sanctions.

Deripaska also still has links to Mandelson, whose PR firm Global Counsel was retained by EN+ (FT, may be behind a paywall).

Global Counsel and Barker did not respond to inquiries.

Deripaska is not alone in connecting with the UK parliament’s upper house. Among the other connections, cross-bench peer Lord Sidelsky is a non-executive director of oil company Russneft, and Lord Myners is a director of telecoms group OJSC MegaFon, which is owned by the oligarch Alisher Usmanov, a major shareholder in London’s Arsenal Football Club.

Analysts expect UK to stay in line with Washington

A Kremlin spokesperson responded to the volatility of the financial markets on Monday, saying it was “emotional fallout” from the sanctions announcement, and the market would correct itself.

Other market observers are less confident, particularly since the U.S. government warned there will be “consequences” for British banks helping the listed entities in a way that undermines the sanctions.

Per Hammarlund, a strategist at Swiss private bank SEB Group, told WikiTribune the full implications of the sanctions are not yet clear.

“I expect the UK, Germany, and France to abide by and assist U.S. efforts to enforce the sanctions,” said Hammarlund.

Due to the size of the entities under sanctions, Hammarlund warned that smaller bankruptcies could be seen when financing for non-essential subsidiaries dries up, “the cost of which may have to be borne by the local government or banks.”

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