Argument

Boris Johnson’s Russian Oligarch Problem

Britain’s new prime minister has a shaky record in dealing with the Kremlin and its cronies. Here’s how he can fix it.

Boris Johnson stands in front of St. Basil's Cathedral during a visit to Red Square in Moscow on Dec. 22, 2017.
Boris Johnson stands in front of St. Basil's Cathedral during a visit to Red Square in Moscow on Dec. 22, 2017. Stefan Rousseau-Pool/Getty Images

The officer from the National Crime Agency (NCA), Britain’s equivalent of the FBI, was both disappointed and angry when I spoke with him recently amid his country’s political turmoil. “I’m already hearing suggestions that dealing with dirty Russian money isn’t as much of a priority, and it’s likely to be even less,” he said as he drained his second pint. “For a while, I thought we could kick the Russian oligarchs out. Now we might be laying down the red carpet again.”

The United Kingdom has taken a strong line with Russia, especially after the attempted assassination of the Russian military intelligence officer-turned-MI6 asset Sergei Skripal in 2018. It expelled 23 diplomats from the Russian Embassy. It brought in tougher controls on Russians flying in on private jets and more extensive searches of their goods. More quietly, the NCA and intelligence services stepped up their investigations of Russian money coming into the country. Then-Prime Minister Theresa May was blunt in her message to those Russians who wanted to enjoy London’s freedoms and lifestyle while working against Britain for the Kremlin: “There is no place for these people—or their money—in our country.”

Amid the elevation of Boris Johnson to the premiership this week and the seemingly inexorable countdown to a potential hard Brexit—a withdrawal from the European Union without a negotiated deal—Britain’s efforts to get tough with Russian political-business figures may be about to take a big step backward.

It is not so much that there is a belief Johnson will be soft on Russian President Vladimir Putin, despite recent revelations in the British press about his closeness with the emigre Russian businessman Alexander Temerko. (In fairness, Temerko is a complex figure, who has criticized Moscow’s aggression in Ukraine.)

Rather, it is the expectation that a hard Brexit will have a negative impact on the British economy. The Bank of England’s worst-case scenario—which some have criticized as too extreme—even suggested an 8 percent fall in GDP. Many fear that the government will be so desperate for liquidity and inward investment that a “swashbuckling” post-Brexit Britain will be even more open to dirty money and kleptocrats, just as it was after the 2008 financial crisis.

It is hard to know quite what the protean Johnson really thinks about Putin (or, indeed, anyone else). Although the new prime minister has publicly mocked and criticized the Russian president, there are pervasive reports—never quite conclusively denied by the Foreign Office—that during Johnson’s time as foreign secretary, direct oversight of MI6, the foreign intelligence service, was quietly moved out of his portfolio because of his Russian connections.

He is certainly no admirer or crony of Putin’s. Rather, the concern is whether Johnson, having already made campaign pledges that would cost tens of billions pounds and promising to be “the most pro-business prime minister” ever, would be as enthusiastic about choking off the flow of Russian money into London. As mayor of London, after all, he presided over a property boom driven by often-questionable inward investment, and his answer to the problem of dirty money was not to drive it out but simply to tax it.

No wonder the law enforcers are worried. The NCA officer I spoke to, for example, didn’t expect anything as crude as a direct order to leave the Russians be. Rather, he feared there would be a quiet expectation that they were no longer a priority and that “the resources for what are often terrifyingly complex cases would simply dry up.” Given that “the other guys can hire the best lawyers and accountants,” this would be tantamount to giving them a free hand.

One former British intelligence officer who keeps in touch with his erstwhile colleagues was in an apocalyptic mood at the thought of what a Johnson government might portend. “Having Russian oligarchs here, all with their inside lines to the Kremlin, ought to be considered a national security risk, not an economic opportunity,” he said.

The trouble is that the situation is rather more complex than this suggests. Not every “oligarch” is actually an oligarch. Not every rich Russian has inside lines to the Kremlin. And treating them all as toxic does nothing for Western interests.

When is an “oligarch” not an oligarch? Every rich Russian has become an “oligarch,” regardless of their wealth, where they are based, and how they make or made their money. What distinguishes an oligarch from any rich person is, surely, not simply wealth but political power, a level of influence out of proportion even with their wealth.

The original Russian oligarchs were the so-called Semibankirschina, the “Seven Bankers,” who backed and increasingly ran President Boris Yeltsin’s government in the 1990s. Since Putin came to power in late 1999, one of the seven is dead (Boris Berezovsky), two are in exile (Vladimir Gusinsky and Mikhail Khodorkovsky), and four (Mikhail Fridman, Petr Aven, Vladimir Potanin, and Alexander Smolensky) have in different ways adapted to the new realities, in which the rich are rich so long as Putin allows them to be, often by shifting much of their lives and fortunes out of the country.

A new generation of the Russian ultra-rich has arisen, largely wealthy thanks to government contracts and patronage. Some, like the Rotenberg brothers, Boris and Arkady, long had personal ties to the president, with whom they sparred at judo. Others, such as the metals magnate Oleg Deripaska, have cultivated such ties—because money isn’t the real currency of Russia so much as political power. Igor Sechin, the head of the state oil company Rosneft, is one of the most feared and influential figures in Russian business but doesn’t make it onto the Forbes list of the 25 richest Russians. No one would want to call him a “minigarch” or “demigarch,” though.

What does “Kremlin-linked” mean? Most businesspeople for whom this is claimed do not have any strong ties to Putin. However, they may be called on or volunteer to perform some services as a price for their continued prosperity. This was well demonstrated in the report produced by U.S. special counsel Robert Mueller, which reported interviews with Aven in which he offered to try to explore contacts with the incoming team of U.S. President Donald Trump.

Others are much more closely connected with the Kremlin’s geopolitical agenda. The nationalist minigarch Konstantin Malofeev, for example, is under sanctions for his role in financing operations in Crimea and the Donbass, and he is widely regarded as the initial driving force behind an ill-fated anti-NATO coup attempt in Montenegro. This is not a case of a businessman forced to do some small favors for the state but one actively pitching disruptive opportunities.

There are equally huge variations in businesspeople’s active and lasting connections with the darker side of Russia: organized crime and the intelligence and security services. It was impossible to make money, especially in the 1990s, and not have some kind of relationship with criminality, just as today a degree of corruption and even occasional favors to the spooks are unavoidable. The question is, again, whether this is a matter of regrettable necessity or something they eagerly embrace, and whether old mob ties appear to still bind. When Deripaska was sanctioned in the United States, for example, it was not just for his widely known close connections to Putin but also the U.S. Treasury’s assessment of the validity of sustained allegations of criminal alliances and activities, charges he denies.

Finally, it’s worth considering the effects if all rich Russians and their money are treated as equally problematic. In effect, that would be doing Putin’s work for him. His new legitimating narrative is that the West has an unrelenting and undiscriminating hatred of Russia and Russians. On a more pragmatic basis, he has for years been trying to encourage or enforce “deoffshorization”—forcing rich Russians who move their money out of the country precisely because they don’t trust the state to bring it back home.

The U.S. government already faced derision for its simplistic list of potential Russian oligarch targets associated with the 2017 Countering America’s Adversaries Through Sanctions Act, which proved to be simply the top 96 billionaires of Russian heritage copied from the Forbes list. Brexit Britain risks going the other way, being too open to Russians bringing not just questionable funds but also Kremlin influence.

So perhaps this is an opportunity instead for the U.K. to try to explore some new classifiers for wealthy Russians—some new ways of, to be blunt, identifying and labeling the people it and the West as a whole need to be most worried about. There are at least three categories that stand out. First, there are the apolitical rich, who can essentially be considered businesspeople operating in a difficult environment, whose activities abroad are largely confined to charity, making more money, and narrowly defined lobbying linked with legitimate commercial interests. From such Semibankirschina survivors as Potanin and Fridman to newer stars such as the tech investor Yuri Milner, they will not challenge the Kremlin, but they aren’t its cheerleaders either.

There are the Kremlin clients, in effect more civil servants than real businesspeople, who manage industries and sectors for the government. Figures such as “Putin’s chef” Evgeny Prigozhin, under sanctions for his role in Crimea and accused of running both the infamous troll farms that supposedly interfered in the 2016 U.S. elections and the Wagner mercenary army, prosper by doing whatever the Kremlin requires of them rather than being truly independent actors in their own right.

Were Sechin not close to Putin, he might be considered one of these. However, he is instead one of the exalted people who have genuinely close connections with power but also a degree of autonomy arguably making them especially problematic in the West—I call this group Kremlocrats. They trade utility to the Kremlin for privilege and profit not so much because they have to, but because they choose to, whether out of ideological commitment such as Malofeev or pragmatic interest such as Deripaska.

It is possible to do business with Russians and still remain secure. And it is possible to demonstrate that the West is not anti-Russian, but anti-Kremlin and anti-kleptocrat. What’s needed is just a bit of nuance—though nuance, of course, has never been Boris Johnson’s strongest quality.

Mark Galeotti is a senior associate fellow at the Royal United Services Institute in London and an honorary professor at the University College London School of Slavonic and East European Studies. Twitter: @MarkGaleotti

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