Russia and the west’s moral bankruptcy
Vladimir Putin’s wealth extraction machine could not operate without our connivance
Edward Luce
The Russian foreign ministry in Moscow. Tit-for-tat expulsions of diplomats will, on its own, count for little © AFP
It is often said that Russia is a competitor to western democracy. But that is misleading. The country is run for the benefit of Vladimir Putin and his oligarchic circle. Its regime is a model only to other budding kleptocrats.
Most of the world aspires neither to Russia’s politics nor its living standards. Alas, the west’s chief ideological threat comes from within. Mr Putin’s wealth extraction machine reveals the west’s moral failings. His abettors could not do it without our connivance.
This is especially true of the US and Britain. In contrast to most western democracies, the US and UK permit anonymous ownership. Most democracies legally require the beneficial owner of an asset, such a company or property, to be made known. Not so in the largest English-speaking democracies. Roughly $300bn is laundered in the US every year, according to the US Treasury. Britain and its offshore financial centres take in about $125bn. Most of it goes undetected. The largest foreign share of it is Russian, according to Anders Aslund, a leading specialist on Russia’s economy. Estimates of Mr Putin’s personal wealth range from $50bn to $200bn. Even the lower figure would exceed the gross domestic product of most UN member states. Yet we have taken few steps to disrupt it.
Western expulsion of 130 Russian diplomats certainly looks like action — and is far better than doing nothing. Alone, however, it will do little to disrupt the merry-go-round. Indeed, traditional tit-for-tat expulsions offer an illusion of crisis that suits Mr Putin. It is kabuki theatre Russian-style. Why else would Donald Trump or Theresa May agree to it?
The motivations of the US president and British prime minister deserve scrutiny. The brazenness of the nerve agent poisonings in the UK this month made them impossible to ignore. It was as though Mr Putin left his signature.
Perhaps that was because the UK had done so little to investigate at least 14 suspicious Russian deaths on its soil in the previous decade. Many, such as that of the exiled oligarch Boris Berezovsky in 2013, were written off as suicide. Others were ruled to be from natural causes, such as the 2012 death of whistleblower Alexander Perepilichny.
In many cases, the UK’s Home Office, which was run by Mrs May for six years, dragged its feet. Mrs May refused on national security grounds to release government files to the Perepilichny inquest. This was in spite of the fact that traces of Gelsemium, a toxic plant that induces cardiac arrest, had been found in his body. Those seeking insight into the UK police’s insouciance should read Buzzfeed’s exemplary investigations.
Britain has now been jolted into a display of resolve. Having corralled a show of western unity, Mrs May is looking good. Compared with Jeremy Corbyn, the Labour leader and an habitual Russophile, she looks positively Thatcherite. Yet the expulsions will alter little. A large chunk of the value of London property transactions is estimated to be Russian. Too many London banks, real estate agents and luxury service providers thrive on Russian money.
The US, like Britain, is hospitable to ill-gotten money. But in one key respect America is more deeply compromised.
It is often forgotten that Mr Putin blamed Hillary Clinton for the 2015 leak of the Panama Papers, which exposed the network of shell companies, associates and methods by which he and his friends salted away their money. To give one example, the leaks showed the net worth of Mr Putin’s closest friend, Sergei Roldugin, to be about $130m. Mr Roldugin plays the cello for a living.
Another associate was Mikhail Lesin, Mr Putin’s former senior adviser, and a founder of the television network RT (formerly Russia Today). Mr Lesin fell out with Mr Putin. He was found dead in a Washington DC hotel in 2015. Though his body was severely battered, the US authorities took months to rule the death accidental. Mr Lesin was meant to give evidence to federal investigators the next day.
Is it any surprise Mr Putin has grown so bold? Russia’s attempts to sway the 2016 US election were partly payback for the Panama Papers.
Most of the west has the Russia threat back to front. Russia’s economy is no larger than Italy’s and its military is in disrepair. It is run by an autocrat who dares not release his grip for fear of losing everything. The weapon Mr Putin fears most is transparent accountancy. Tellingly, he stores his wealth in jurisdictions where property rights are secure and the rule of law still holds.
On top of that the west offers a dictator’s bargain: the greed of a system that has lost its moral compass. All that was true before the gift of Mr Trump’s election. How much juicier is it now?
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