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Opinion
May 25, 2018 www.intellinews.com I Page 20
The UK is struggling to clarify its Russian corruption and sanctions policy
Alex Nice in Moscow
On May 21 the UK House of Commons Foreign Affairs Select Committee published the findings of its investigation into Russian corruption in the UK.
The inquiry is a response to the poisoning of Sergei Skripal, a former Russian military intel- ligence officer, and his daughter in Salisbury
in March. This prompted renewed calls for the British government to include financial sanctions in its response to the attack on UK territory. As experts at Chatham House noted at the time: “For many years, the government has effectively allowed key Russian stakeholders to use the services of the city...for purposes legitimate, ille- gitimate and even illegal. It is time to transform them from a source of advantage to Russia to
a strategic asset for the UK.”
The Committee’s report also engages with the broader policy debate over financial and com- mercial regulation in the UK, which has long been accused of facilitating corruption through soft- touch regulation and weak disclosure require- ments. Excellent investigative work by academics, NGOs and journalists has pushed this issue up the policy agenda.
The case for treating Russian corruption and Russian foreign policy as a single problem is that wealth and power in Russia are fused. The report states that: “There is a direct relationship between the oligarchs’ wealth and the ability of President Putin to execute his aggressive foreign policy and domestic agenda.” As Mark Galeotti of the Institute of International Relations noted, in Russia’s network state, the wealthy are also called upon to finance Russia’s foreign policy
The UK is still grappling with what to do about the Russian cash in London
goals when required. This could include acquiring strategic industries abroad, providing donations to pro-Russian media resources, or loans to sympa- thetic political movements.
The symbiotic relationship between big busi- ness, the political elite and the state in Russia
is indisputable. But with the exception of violent entrepreneurs such as Konstantin Malofeev, a major player in the Donbas conflict, and Yevgeny Prigozhin, the owner of a private military compa- ny, most Russian businessmen spend most of the time trying to build and defend their fortunes, not furthering Russian foreign policy.
If the purpose of financial sanctions is to influ- ence Russian state policy, it may make more sense, at least in the first instance, to target state assets directly, rather than individuals on the periphery of the decision-making process. This would also avoid the problem that, as the report notes, a rule-of-law based state such as the UK cannot order law enforcement agencies to inves- tigate individuals with no basis in evidence, which is often difficult to collect in the absence of coop- eration from the home state.
There remain more direct ways to push back at Russian actions. Several state-owned companies are not subject to sanctions and Russia continues to issue sovereign debt in Western markets. The report briefly considers placing restrictions on sovereign debt, but concludes that this would be ineffective unless coordinated with the EU and US, which it regards as unachievable. Instead, it rec- ommends only that sovereign bond offerings run by sanctioned entities such as VTB be prevented