Kremlin quietly happy about British reactions to Skripal affair and ‘dirty money’

Analysis: The UK government’s tough-talking on unexplained wealth is not enough to worry the Russian elite

Tthe Kremlin at sunset in Moscow (AFP/Getty)

Cardiff was not the first place that came to mind when businessman Alexei Smatko imagined Britain. No palaces; no Tussauds; no elbows or cold indifference.

But as a processing centre for asylum seekers, it became his reality. He fled here from Russia’s justice system, he says, after being “tortured” by police while in detention. He got to like it: “Cardiff has a beach just like Miami.”

Last year, Smatko broke from his Welsh anonymity to initiate a petition with a dozen fellow businessmen, asking Vladimir Putin to remove charges and allow them to return to Russia. He says his main aim was to overturn “fabricated” charges; residency was a secondary affair. Nonetheless, the list was taken up by one of the minor candidates for president, Boris Titov, who presented it to the Kremlin.

Titov’s pitch was simple: with relations between the UK and Russia at a new low, Russian businessmen were being persecuted. Britain was no longer a safe haven. And as the West ratcheted up the pressure, Russia should welcome home its entrepreneurs.

That was the pitch, at least. Critics of the British approach to Russian money suggest the reality is anything but hostile.

In the year since Titov’s list was compiled, things have certainly become tighter for oligarchs. The nerve agent attack on Sergei Skripal and his daughter in Salisbury, allegedly conducted by Russian military intelligence, was a turning point. Unlike the unsure response of the UK government in the wake of the 2007 Alexander Litvinenko assassination, novichok provoked a robust and coordinated response. Sanctions and the threat of new financial instruments followed.

There have been clear statements of intent. Chelsea’s Roman Abramovich was the most famous of several dozen Russians who – unexpectedly – faced delays in investor visa renewals. Abramovich eventually had to settle for Israeli citizenship, allowing him the ability to travel to the UK, but not work. Others are sitting it out – worried that a judicial review might provoke things further.

Then there was a much-publicised threat to wheel out Unexplained Wealth Orders (UWOs). These are a relatively new sanction that allows the government to seize assets and ask individuals to document the source of their wealth. For a lot of Russians, who made money in the invoice-light 1990s, that may prove difficult. And the consequences are serious enough: ignoring an order can lead to forfeiture of those assets.

According to one widely reported source in the National Crime Agency (NCA), over 140 individuals were under investigation in relation to possible UWOs.

A new report written by former government insider Duncan Allan, published by Chatham House last week, also seemed to echo a new resolve in circles around policymakers.

Calling for a policy of “managed confrontation”, the paper urged Whitehall to put “national security” before profit. That would mean a departure from light-touch financial regulation – and, as Allan himself recognises, away from the past schizophrenia of tough rhetoric and limited action.

But Russian opposition figures say they continue to be frustrated by this disconnect. Financier and Kremlin critic Vladimir Ashurkov, who has lived in London since 2014, scoffs at the idea that anyone in Putin’s inner circle might have become worried by a new hardline approach from the UK government.

“Tell me anything that has materialised apart from the visa problems for Abramovich,” he says. “Is Abramovich worried? No. Slightly annoyed maybe. But it hardly changed his lifestyle. Within a few days he had an Israeli passport.”

Even on UWOs, the direction of UK policy isn’t entirely clear. For all the noise, we know of only three cases currently being pursued by the NCA. The Independent understands a wealthy Russian businessman is involved in one of those cases. But the only publicly disclosed investigation – which involves the wife of a jailed Azeri banker with a predilection for Harrods – is a bizarre first test case.

There is no obvious political dimension to the case. A generous interpretation would say the UK government was making a demonstrative statement so anyone remotely near government circles should worry. There are, after all, many Russian businessmen with stakes in partly state-owned banks. A less generous interpretation would say it was a token gesture that risks reinforcing the image of the UK only talking tough.

Galina Usorova is a lawyer at Peter & Peters Solicitor, one of four or five UK firms that has regularly represented sanctioned individuals. She tells The Independent the quoted figure of 140 investigations was unlikely. In her experience, the UK’s investigative agencies weren’t that well resourced: “A UWO needs cogent evidence. While the test itself is not the highest – requiring reasonable suspicion to be demonstrated to the judge – it still is high enough.”

There is some concern whether UWOs were necessarily the best instrument to increase pressure on the Kremlin.

Alexei Smatko suggests a policy targeting the Russian financial elite would have a side effect of telling him where hidden assets are based. Many rich Russians choose not to declare their real income – not so much to avoid taxation at home, since Russia boasts one of the lowest income tax regimes in the world – but to avoid their assets being seized in hostile actions. British moves to target the elite may thus paradoxically benefit the Kremlin, he says.

And then there is the short circuit of UK justice – the prohibitive cost of mounting a robust defence. The truth is that those in the inner circle of Vladimir Putin’s court would have little problem paying the £700 or £800 an hour for lawyers. Those with anything less than a spare £300,000 in their bank accounts would be wise not to challenge.

“People separated from power often have to give up everything to fight legal cases,” says Usorova.

Nowhere is this more obvious than in extradition orders – often the most political of instruments the Russian state uses against its citizens. They have been used not only against ordinary criminals, but also enemies of the regime more generally. And the strange thing is that British courts have been agreeing extradition requests even after the Skripal affair. Many Russian exiles complain that the Home Office does not appear to be interested in getting to the bottom of “difficult cases”.

“There have been a handful of successful cases since Skripal,” says Usorova. “The courts are still prepared to rely on diplomatic assurances given by the Russian government, though ultimately many requests are then turned down on the grounds of Article 6 violations, ie: absence of the right to a free trial.”

Many exiles baulk at the idea of accepting Russian state assurances on safety. Even before the macabre Salisbury operation, the fear was abundant.

Alexander Abramov, a former government official now based in Brighton, says he has been hounded by the Kremlin ever since resigning from an influential resources committee early in Putin’s second term, in 2007. A UK court rejected one extradition attempt, but hostile Interpol orders continued. He was arrested once again in Munich in late 2017, and was released only shortly after the Skripal poisoning this year.

I wanted to scream: ‘Do you not understand there are no discussions in Moscow? That the Kremlin is intent on using your legal niceties against you?’ 

Marina Litvinenko 

Abramov says the charges the Russian state brought against him in absentia – signing off on an inflated building contract – are politically motivated.

“I could see the security services creeping around the resources I once controlled, and then around me,” he says. “I remember telling my boss, Vladimir Rybkin, that things would get worse for him.”

Rybkin died in Moscow in March, 2016, after falling from a window.

There was no evidence that this death was anything other than a suicide. But in other cases things are not so certain. In March this year, Nikolai Glushkov was found dead in London, with evidence suggesting strangulation. Friends say Glushkov was due to give evidence against Aeroflot executives while defending a fraud case in London. He headed a 2016 extradition list published by the Russian embassy in London.

Glushkov was an associate of Boris Berezovsky, the controversial oligarch who died in similarly suspicious circumstances in 2014.

There are perhaps a half dozen similarly dubious deaths of Russian exiles in Britain over the last few years. While there is no proof of direct Russian state involvement, the pattern has been enough to instigate calls for a parliamentary inquiry.

Yevgeny Chichvarkin, a mobile-phone tycoon who fled to London in 2009 after selling his business under duress, says vulnerable exiles understand there is little hope police can protect against a state hit.

“The police in England are very good, but they can’t protect against everything,” he tells The Independent. “Every week we see lots of robberies in Chelsea. If they can’t stop the street criminals, what hope do we have against state assassinations?”

The assassination of Alexander Litvinenko in 2007 led to a police review for Russian exiles living in England. Another urgent process has been under way since the attack on Sergei Skripal and his daughter this year.

Most exposed Russians have been contacted by British law enforcement, and offered additional security measures like live phone tracking. And the most exposed have been placed in hiding.

But Alexander Litvinenko’s widow Marina says that the UK’s understanding of the new risk posed by the Kremlin does not go far enough. At heart, she says, is a fundamental cultural difference as to the way the British and Russian government conducts business.

Britain still seems intent on a soft, diplomatic, business-like approach, she says, while Russia dismisses such diplomacy as “weakness”. She recalls watching UK government representatives diligently taking notes at the launch of the Duncan Allan report in Chatham House.

“I wanted to scream: ‘Do you not understand there are no discussions in Moscow? That the Kremlin is intent on using your legal niceties against you?’”

As long as the discussions on what to do with Russia and its dirty money continue, says Marina Litvinenko, the Kremlin will be happy.