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Global Economy

Draconian – or toothless?

At first it sounded good in parliament today, as so often with Boris Johnson: "The United Kingdom is at the forefront when it comes to sanctions against Russia. And our sanctions hit Putin where it will hurt him." He had previously described his package as "draconian". In reality, however, the sanctions imposed by Johnson so far are largely toothless, as Frank Vogl, the co-founder of Transparency International, described today.

So far, the assets of five relatively small Russian banks have been frozen, four of which have already been sanctioned by Washington. A step that shouldn't affect Putin any more than the sanctions against three individual Russian oligarchs that Johnson announced yesterday – three men who have also been sanctioned by the United States since 2018. "The key to real sanctions would be to stop Russian companies from trading in the City of London. But that would lead to massive protests from the London financial sector," said Vogl.

"lukewarm", "half-cooked"

Liberal Democrat MP Layla Moran cited a list of 35 Russian oligarchs who remain active in Britain. The opposition criticizes that they have now been warned by Johnson's "lukewarm step" and now have enough time to get their money to safety elsewhere. Ultimately, Johnson's half-baked step is counterproductive and shows that he has no real interest in taking action against oligarchs at home, since his party is far too closely integrated with them.

In fact, the "Daily Telegraph" reports on massive lobbying activities by Russian oligarchs with offices in London, who reported directly to the Foreign Ministry. The pipeline of Russian money straight to the heart of the Tory party is one reason for Johnson's toothless sanctions, said Ian Blackford, leader of the Scottish National Party in Parliament.

The Tory party is said to have received at least two million pounds from Russian sources since Johnson took office in December 2019. The "Sunday Times" also reported on Sunday about a "confidential advisory board" of influential party donors, who also met regularly with Johnson himself. One of the members of this "advisory board" is Lyubov Chernukhin, wife of one of Putin's former deputy finance ministers.

A question of perception

Johnson only replied today that his party did not receive any donations from Russian oligarchs, only from British citizens. He didn't fundamentally deny the accusation, because most of the Russian oligarchs in London have long had British citizenship, often via the so-called "golden visa," the entrance ticket to British society that the super-rich like to use.

Anyone who invests at least two million pounds on the island can stay and apply for British citizenship. Since 2015, more than 200 Russian multi-millionaires have found their place in London.

This loophole was closed last week by the British Home Secretary. The billions that have flowed into the country from Russia so far can still get to the island, anonymously via letterbox companies.

A painful law on hold

This is Britain's real problem, and it can only be solved with a law that forces company founders to transparently disclose their own identities and the origin of their capital. A bill for this, the so-called "Economic Crime Bill", has existed for many years, but implementation has been repeatedly postponed by the Tories.

British Foreign Secretary Liz Truss said last week that the draft would come before Parliament in this legislative period. Johnson, however, did not want to hear anything more about it and instead stated that the draft would not be presented in Parliament until the end of the year at the earliest. Another promise his government has broken, the opposition said.

And so it remains unclear for the time being whether the Johnson government has any serious intentions at all, beyond good-sounding headlines of "draconian sanctions", to really tackle the close ties between Russian money and the British economy. After the recent parliamentary session, one can seriously doubt this.

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