A year ago today, Sergei and Yulia Skripal were poisoned in Salisbury in a brazen assassination attempt by Russia’s GRU, a military intelligence agency. It was the second time in a dozen years that Russia had carried out a life-threatening attack on a British citizen. Alexander Litvinenko was murdered in an act of nuclear terrorism in 2006. And it was only on Friday that the Department for Environment, Food and Rural Affairs announced that Salisbury had been decontaminated of novichok, the nerve agent used.
The “Salisbury incident” (as the state-sponsored poisoning is euphemistically called in parliament) was a failure not only of the government’s ability to fulfil its most basic duty to keep its citizens safe, but also of its policy toward Russia. That policy, since 2006, had been to treat the country as a lucrative emerging market and to avoid meaningful confrontation. It was based on the erroneous belief that Russia is a democracy, albeit a failing one. Instead, Russia is a kleptocracy, and a succeeding one.
The UK’s response to Salisbury has been robust, in contrast to its scandalously insipid actions following the murder of Litvinenko. Speaking in parliament on March 12 last year, the prime minister said: “There can be no question of business as usual with Russia”. She moved decisively to suspend high-level bilateral contacts and expel 23 “undeclared intelligence officers”. Western allies followed suit. By the end of the month more than 150 Russian spies had been expelled from 27 countries.
Later, based on a detailed forensic investigation, Mrs May announced the poisoning had “almost certainly” been approved “at a senior level of the Russia state”. She gave the names of two Russian suspects against whom the Met had brought charges. European Arrest Warrants and Interpol red notices were issued. Bellingcat, an investigative group, subsequently revealed that the names given by May were aliases and instead gave the Russians’ real identities. They later identified a third suspect too.
All of this is impressive, but symbolic. The UK’s response focused on political, diplomatic and law enforcement measures, and overlooked financial measures. Yet it is the economy where Russia’s hand is weakest – and the UK’s strongest. As a foreign affairs select committee report from last year makes clear, if we are serious about standing up to the Kremlin then we must end our role as a laundromat for illicit Russian money.
True, there has been some progress over the past year. A wide-ranging anti-money laundering law was passed last May and the Home Office announced a review of Tier 1 investor visas in December. But beyond this little else has been done to clean up the financial system.
Unexplained Wealth Orders, which require the foreign mega-rich to explain how they made their money or risk having their property and assets seized, are an important new tool. Two years ago an investigative journalism project highlighted £18 billion of unexplained wealth belonging to Vladimir Putin’s inner circle, mostly hidden in the West. Yet no order has been served so far against Russia’s corrupt elites.
The government has been hesitant to introduce more robust financial supervision, particularly for London’s stock exchange, which has long been a vehicle for Russian companies and oligarchs to raise money in shares and bonds. Last March Gazprom, Russia’s state-owned gas company, issued €750 million of Eurobonds. Shortly afterwards, the Russian government issued $4 billion of bonds. The bookrunner in both deals was VTB Capital, a subsidiary of VTB, a Russian state-owned bank subject to both EU and US sanctions.
Without meaningful financial measures, Putin is likely to conclude that our bark is worse than our bite. Rubles will continue to flow from Moscow to London. The City of London will continue to get rich, as will estate agents, lawyers, accountants, consultants, and the other pin-striped beneficiaries of Putinism. And with this, we will have returned to business as usual with Russia.