Wednesday, April 5, 2017

The Wealthy Russians Who Call the United Kingdom Home

by Nomad

In a time when war-torn refugees coming to Europe and the UK are looked upon with skepticism, fear, and dread, there's been very little discussion of the economic migration of the wealthy class from Russia.

The Good Life and the Illusion of Safety

It's not what you'd call new news. In 2012, CNBC reported
Wealthy Russians are moving to London is such large numbers that local commentators have coined the term “Londongrad.” Roman Abramovich, the Russian multi-billionaire who owns the Chelsea Football Club is the highest-profile rich Russian in Britain, but he is only one of ten Russian billionaires living there, while an estimated 1,000 Russian millionaires now call London home.
The reasons for this exodus, according to attorneys and real-estate agents in London who deal with the Russian rich, is the attraction of the stability and the refined culture of London life.

But something else: the relative safety of not being poached by the mob or arrested by the police. As Reuters reported that same year.
Leaked secret diplomatic cables from the U.S. embassy in Moscow once described Russia as a "virtual mafia state", and London has long been the chosen destination for Russians seeking refuge from trouble at home.
If the jet-set of Russia came to the UK looking for safety, they might have come too late. The problems arrived even before they did. 
[C]oncerns have been growing in recent years that Britain might be turning into a playground for Russian mobsters as gangland violence seems to be spilling over Russian borders.
Assassinations of whistleblowers, like Alexander Perepilichny, Alexander Litvinenko, Mikhail Lesin have shown the emigres abroad that no place is safe if you dare to cross the red line.

Adios Oligarchs

A recent report claimed that levels of inequality in Russia have reached unprecedented heights. Far worse than even in the US. A full one-third of the country's wealth is concentrated in the hands of just 110 super-rich people.

In a different report by the Russian Academy of Sciences, the number of dollar millionaires in Russia increased by 10% in 2016. Experts noted that this rate is higher than in most regions of the world, including Europe, Asia and America. 
"For comparison: in general, the number of dollar millionaires in the world increased by only 3% compared to 2015, and in Europe, even decreased by 4%," the study says.
Here's another chart to show the same thing from an alternative angle.

President Putin has learned to keep watchful eyes on any rising political ambitions of the rich and powerful inside that country. He has had plenty of reasons too. 
Early in his presidency, Putin learned a lesson: unless tightly monitored, the super wealthy 1% could not be trusted.
Limiting the oligarchs' political involvement proved difficult. As more people grew richer, some were inevitably tempted to expand their activities beyond business.
Putin has never hesitated to go after anyone he saw as a threat to his regime. This was one reason of the many reasons that, when the opportunity was available, rich Russians left without looking back. 

Two years later, the UK Guardian revealed the knock-on effects of the influx of Russian cash on the London housing market. Citing a Financial Times (£) report, the article explains:
well-to-do Russians – and Ukrainians too – "are trying to shift more cash into London property ... amid indications that eastern European oligarchs are using the capital’s housing market to conceal their assets from international sanctions".
At the time, there are thought to be 300,000 Russians living the Putin-free good life in the UK. Oligarchs abroad, like the Russian middle-class, also distrust Russian banks.
Like the current US president, the average Russian thinks paying tax is a crime.
And if they can get the money out of the country to a safe haven like the UK, they will. Few rich Russians keep their money in roubles, and the cash flight out of Russia is enormous – alarming even, for an economy that is now stuttering.
What is Russia's loss is, say many whose livelihoods are tied to the Russians in the UK, the economic gain of the United Kingdom. The doors to the wealthy were flung open. The International Business Times reported in late 2014, 
The number of Russians given "tier 1 investment visas", which are granted to those who invest at least £2m in the UK, is 69% higher in 2014 than over a comparable period in 2013.
 International politics had something to do with that.  
A total of 169 of the visas were granted between January and September, with a steep increase occurring after after the West imposed sanctions on Russia following its annexation of Ukraine, reports the Sunday Times.
CNN explains a bit more about the visas investment visa program which some would call a loophole.
The permits were issued to foreigners with at least £1 million ($1.6 million) to put into British investments including government bonds, share or loan capital for local companies. The threshold was raised to £2 million ($3.1 million) in November. Visa holders can apply for permanent residency after five years.
In effect, the UK is steadily draining Russia of its tax income and its bank stability one immigrant at a time.

According to one 2013 report, Russia has lost up to 1 trillion roubles (or $17 billion) a year in tax evasion schemes. A further $39 billion left the country illicitly in 2012.

This month, the Guardian reported that banks such as HSBC, Royal Bank of Scotland, Lloyds, Barclays and Coutts could have been involved in withdrawing funds from Russia. Britain’s high street banks processed nearly $740m from a vast money-laundering operation run by Russian criminals with links to the Russian government and the KGB - now called Federal Security Service of the Russian Federation (FSB).

In total, according to the publication, about vast sums passed through 17 British financial organizations in 4 years. Analysts estimated that the amount withdrawn from Russia in the period from 2010 to 2014, can range from $20 to $80 billion.

The Norm or the Exception?

And yet, in 2016, the Guardian pointed out that not all might be what it seemed when it comes to the cash benefits of the Russian influx.
Documents from the Panama Papers revealed that at least one Russian oligarch and oil magnate Alexander Zhukov had imported his anti-tax philosophy to his new home. Having become a British citizen in 2001 replete with a British passport, Zhukov reportedly had had long periods in which he did not pay British tax. Ironically, Zhukov is also the father-in-law to the aforementioned Roman Abramovich.

Residing in London since 1993, Zhukov already had a somewhat shady past even before he became a British subject. In 2001, Zhukov was arrested in Sardinia and spent six months in an Italian prison He was suspected of being engaged in arms smuggling from Ukraine to the states of former Yugoslavia. That didn't stop him for being awarded citizenship in the UK that same year.
Ironically, only a few days ago, Abramovich's nephew (or maybe cousin), Arkady Borisenko, has himself run afoul of the tax authorities back in Russia.

How common is this practice of evading taxes? Is Zhukov the norm or the except when it comes to Russian multi-millionaires and billionaires living in the UK? 
It's hard to know because, unlike the refugees from Syria or Iraqi, nobody seems to mind. Perhaps all that trickling down tends to seal the lips of anybody in a position to look into the matter.

In this short film, we take a peek at the wealthy Russians who call London home.