Beginning to See the Light: Refugees and Realpolitik

 

‘He goes to sleep by falling down on his face

Sometimes known as the leader of the homeless

Sometimes drunk, man the kid’s always phoneless

Sleepin’ on the street in a cardboard box’

 
Of all the images shown of the war in Ukraine, it is the refugees that tug hardest at the heart strings. These are, or at least, should be, images from the past; masses tightly packed people on a station platform trying to flee, vastly outnumbering the available train space.

Despite these images we have been slow to react, relying, as usual, on rhetoric from No 10 and the home secretary: ‘world-leading’, ‘tailored’ and ‘bespoke’ solutions and innovations.

Johnson, at his grandstanding worst, initially promised to let in 200,000 ‘eligible’ Ukrainians.  ‘Eligible’ is defined as those with direct, immediate relatives, though even this didn’t include the parents of anyone over 18. Only after widespread protest in the House of Commons did Johnson make what he presented as a grand concession, including grandparents

Numbers are increasing so quickly that data is almost instantly out-of-date, however the following serves to highlight the paucity of our actions:
 

• Poland had taken 800,000 refugees, the UK had accepted 50,
• The Home Office yesterday corrected the record to show that 300 visas had now been granted to fleeing Ukrainians, 2.7% of the number of refugees who arrived in Berlin last Friday alone.

 
The scale of excuses is legion; Ukrainians ‘not really wanting to be permanently settled here’, and the need to submit them to official security clearance and biometric data checking. Ukrainians without families in Britain could only get in if they found someone to sponsor them, whatever that means.

This is just the latest example of the Tory’s ‘hostile’ policy towards immigrants which borders on being institutionally xenophobic. The result is shameful, they appear oblivious to the magnitude of the humanitarian crisis happening before us. Whereas, in Europe refugees are being given the unrestricted right of entry.
 

‘the latest example of the Tory’s ‘hostile’ policy towards immigrants which borders on being institutionally xenophobic’

 
The public might have voted for Brexit, some might even be anti-immigration, but what we are reading shows that they care and expect more from our government.

Other than aiding refugees, the only other support we offer Ukraine are economic sanctions. The difficulty here is that rulers such as Putin, who has been the target of severe sanctions for 8-years, become oblivious to their impact. As dissent is ‘banned’ by Putin, sanctions could strengthen his position.

As was found during WW2, sanctions can force an economy to change, emphasising self-sufficiency. This internal transformation can lead to repression.

Sanctions are effectively economic warfare, cutting off Russia from its overseas assets, which become unusable, and preventing them from buying all sorts of critical equipment. The overseas operations of Russian financial institutions have been hobbled and Russian financial institutions expelled from the technical mechanisms of global capitalism. The consequences have been a huge devaluation of the rouble, a doubling of rouble interest rates, potential runs on domestic banks, and the possibility of inflation.

The economic attack is becoming unrestricted. Previously energy, Russia’s main exports, had been exempted so as not to deprive the global economy of supply at a time of rising commodity prices, this is now being reversed.

Sanctions are an extension of the belief that international trade is such a win-win situation that no sane person would ever wage war. The darker aspect is that by cutting a belligerent nation out of international trade the economic and social consequences are such that it would be forced to cease fighting. Sanctions can become a ‘weapon of mass destruction, E.G., the blockade of Germany and Austria-Hungary in WW1 killed hundreds of thousands.

Sanctions can be met with countersanctions, and military threats. Germany, a very much larger economy than Russia, is not only imposing sanctions, but they are also preparing for reprisals by diversifying their energy supply, and to nearly double their defence budget, which would make it very much larger than Russia’s.

Prior to the invasion of Ukraine, Germany’s position was that it would play no part in a war in Europe. Now, hailing a ‘turning point in the history of our continent,’ in addition to the increase in their defence budget, Germany is providing military support to Ukraine. Whereas previously Germany rearming would have sent tremors through Europe and beyond, the reaction of Israeli historian Yuval Noah Harari sums up how the world has changed is just a few weeks; ‘the best atonement’ for Nazi crimes: ‘What we need from Germany is to stand tall and lead.’

Similar decisions are being made in other western power. After spending years contemplating its own decline and decay, the west has rediscovered a pride and purpose. This illustrates that whatever its flaws, and failings, freedom and democracy is preferable to tyranny and oppression.

The EU was founded out of the conviction that the only future for a continent that had been at the centre of two world wars in 30 years was to come together, sharing sovereignty rather than killing for it.
 

‘whatever its flaws, and failings, freedom and democracy is preferable to tyranny and oppression’

 
This was too deep an argument for Brexiters who, trade aside, saw the EU as a source of trivial bureaucracy.  A more farsighted Volodymyr Zelenskiy has requested that Ukraine to join the EU, further endorsing the European stance that the EU has always been about safety and peace. I wonder what our Eurosceptics who pretended the EU was a foreign occupier, referring to it as the ‘EUSSR’, think now?

Unlike the UK, the EU is emphasising actions rather than words, accepting its need to cut its reliance on Russian energy, and is planning to issue bonds to finance defence spending and energy reform to counter. The funds will be spread across the Union to counter the effects of its previous energy-security miscalculations. This is another step towards European financial mutualisation.

Whilst the EU’s monetary and fiscal policy to support this change has risks and consequences, the central bank has the experience gained over the last 10-years of monetary experimentation to manage the process. In addition to monetary support, there are the costs of a severe attritional economic war with Russia. Europe is proposing to deal with this by phasing out the bulk of Russian energy this year. Europe can emerge much stronger, and more united as a result.

When it comes to sanctions the next names on the list are the so-called oligarchs. In the past they may have enjoyed access to Putin, and possibly had the ability to influence him, that seems to be in the past. Instead, he terrorises them with a mix of extortions, bribes, imprisonment, and attempted murder.

If anything, the oligarchs have more influence in London. Johnson has long been a fan; as mayor of London he called these luxury properties a ‘thrilling inward investment’. He toured Malaysia to help sell empty properties at Battersea Power Station and dismissed any critics as ‘gloomadon poppers’.

Now, Johnson seems determined to humble some of them. But how? Confiscate private houses, fine their owners for being Russian, expel them from the country? Even our xenophobic doesn’t punish people for their nationality.

On Monday, the House of Commons passed in 1-day the government’s economic crime (transparency and enforcement) bill, some 4-years after it was originally drafted. Suddenly it became top of the governments to-do-list. The bill, we are told, will enable even harsher action against people linked to the Russian government. As usual Johnson was all bluster and soundbites, proclaiming that the bill will ‘continue to tighten the noose around Putin’s regime’.

Among its other measures, the bill will:
 

• Create a public register of the owners of overseas interests that buy and sell property in the UK, to lift the veil provided by shell companies.
• There will be reforms to the system of unexplained wealth orders that will supposedly allow the UK authorities to seize criminal assets without the need to prove criminal activity, and
• A new specialist ‘kleptocracy cell’ in the National Crime Agency to pay close attention to issues around sanctions.

 
Like all things Johnson the bill isn’t the sum of its parts. Whilst the government had previously suggested that judicial restraints on its power ought to be swept away, it now insists that, for fear of legal action, any serious moves against certain Russian individuals may take months – even as France, Germany and Italy seize Putin associates’ yachts.

Plans to insist on better checks on records filed at Companies House are still not ready and will only surface in further legislation.

As Oliver Bullough wrote, the bill does not, as the home secretary, Priti Patel, insisted, show Britain’s determination to root out Vladimir Putin’s ‘mob of oligarchs and kleptocrats’. Instead ‘it demonstrates ingrained complacency towards dirty money that is so complete it begins to resemble complicity’.

Bullough cites several examples as to how oligarchs can legally avoid the provisions of the bill.

One is by creating an offshore company, owned in equal shares of 16.67% with five close relatives. None of the shareholders reach the 25% ownership level required to count as the person of ‘significant control’.

Another is to own your company via a professional corporate trust provider, who will act as a nominee, and thus be named in your place on the ownership documents.

If in doubt, oligarchs can just lie. There are no checks on the information that the shell companies’ owners declare, therefore they could pretend they didn’t own the property. This is the same loophole that for decades has led to British-registered companies with falsified ownership being used to hide the ownership of billions upon billions of pounds laundered out of Russia.
 

‘If in doubt, oligarchs can just lie’

 
The National Crime Agency, our equivalent of the FBI, central to the bills’ enforcement, has suffered real-terms funding cuts over the last 5-years, therefore there are question marks over its ability to act. This new bill does limit the costs that targets of unexplained wealth orders can claim back from the NCA after an unsuccessful filing, but that just restricts how much money it can lose; it doesn’t give it any new resources to fund investigations.

There are numerous reasons to doubt the governments’ commitment to these actions as being nothing more than an opportunistic way of distracting attention away from ‘Partygate’. Remember that?

In 2016, when Scottish MPs drew ministers’ attention to the flaws in the rules around Companies House, and how they had allowed the so-called Moldovan Laundromat to wash dirty cash through Edinburgh-registered limited partnerships, the government’s response was to deregulate further, so as to protect the competitiveness of the City of London.

As Susan Hawley, the executive director of Spotlight on Corruption ⁽¹⁾, said ‘The trouble is that they’ve been obsessed with opening-up and making Britain the easiest place in the world to do business. And that made them complacent.’

Part of this ‘opening-up’ was the policy of ‘golden visas’ which survived > 25-years,

The thinktank Chatham House reported that between 2008 and early 2015, ‘checks that were carried out on applicants were the sole responsibility of the law firms and wealth managers representing them’. During that period 23% of applications came from Russia.

Last year it was estimated that in the 11 years up to 2019, only 9% of golden visa applications were rejected, compared with 42% of requests for asylum.

This isn’t only a Tory failing, in 2006, the same year that the Putin critic Alexander Litvinenko was murdered in London, the city’s then-mayor Ken Livingstone said that he wanted ‘Russian companies to regard London as their natural base in Europe’, and his office established a small department aimed at attracting Russian money to London.
 

‘mayor Ken Livingstone said that he wanted ‘Russian companies to regard London as their natural base in Europe’’

 
5-years later, David Cameron went to Moscow and told his audience that Britain was open to their money as a matter of design. ‘The whole point about trade is that we are baking a bigger cake and everyone can benefit from it and this is particularly true, perhaps, of Russia and Britain. Governments need to remember that businesses don’t have to invest in our country – they choose to. And we need to help them make that choice. It means minimising the burden of regulation so that business and entrepreneurship can flourish.’

Late last year, Boris Johnson addressed a Global Investment Summit at the Science Museum in South Kensington, and when told that the people in the room represented $24tn of wealth, said: ‘I want to say to each and every one of those dollars: you are welcome to the UK and you have come to the right place at the right time.’

Whilst welcoming dirty money was not the intention, it was the almost inevitable by-product of this open-armed welcome.

Overcoming our policy of ‘openness’ and willingness to take money from anyone and anywhere is a mammoth cultural shift, one that is at odds with an ingrained culture that has developed from Thatcher onwards.

Johnson has never seen this as a threat. Previously he dismissed the intelligence and security committee’s warnings about Russian interference as the moans of ‘Islingtonian remainers’.

If one act sums this up it was the granting of a peerage to Evgeny Lebedev in 2020. Yes, he might, own the Evening Standard and the Independent, but he is still the Russian son of a KGB officer. Mercifully, he has not voted yet or made a single contribution in the chamber.
 

‘it’s about doing the right thing’. Shame no one told the government that!’

 
I couldn’t let the moment pass without honouring the late, great Shane Warne, who’s delivery to Mike Gatting was one of the most astonishing sporting spectacles I can remember.

Less noticed was the passing of Australian wicketkeeper, Rodney Marsh. He was a great keeper and batsman, and like Warne played the game the ‘aussie way’, hard but fair. An example of this was in the 1977 Centenary Test when England’s Derek Randal was given out for 161, caught behind by Marsh. Only Marsh didn’t think so, as Randall ‘walked’, Marsh informed the umpire that he hadn’t taken the catch cleanly, and called Randall back.

That’s what people mean when they say, ‘it’s about doing the right thing’. Shame no one told the government that!
 

‘Hate and war

The only things we got today

An’ if I close my eyes

They will not go away’

 
Notes:

1. A British charity that monitors the UK’s role in the intersection of criminality and power in the UK and across the world

 
Another erudite contribution from Philip this week against a horrific and fast-moving backdrop; I’ve taken a slightly different tack this week in sharing his pre-amble which neatly frames his thinking and explains the conclusions and opinions he shares in the article.

‘As with last week I have tried to not focus on the war per se and have tried to see it from a domestic perspective.

We start with refugees. Our response has been predictably pathetic. Words, slogans, and nothing! Europe puts us to shame.

Europe is an interesting case in point, the war seems to have reunited the states and, I think they will emerge stronger, and with a greater global presence. By comparison we will still be legends in our own imagination.

Sanctions must be included, however, there is a risk that in the short-term they could make Putin stronger. Over time the economic strangulation could result in such an outpouring from the Russian population that he goes the same way as the Tsar.

In addition, the war isn’t going well, he has a largely conscript army who don’t know and likely don’t care what they are fighting for, whereas the Ukrainians both know and care.

As an enhancement of our sanctions package, we have rushed through legislation which, 4-years after it was drafted, has suddenly become urgent. It has more holes than a colander, and I am sure will only result in more fees for the law firms of choice to the oligarchs.

It all smacks of tokenism. Posturing, big words, all spin aimed at pushing “partygate” out of the public’s consciousness. He can even blame the cost-of-living crisis on Putin, too. Putin is being such a servant to the government that a knighthood or peerage must be on the cards.

We end with Shane and Rod Marsh, both played the game in the right spirit and did the right thing; more than I can say for the government.

Lyrically, we start with the Beastie Boys “Johnny Ryall” a rap about homelessness, and finish with The Clash, “Hate and War”’. Enjoy!

@Coldwar_Steve
 

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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