Insight: Where is Russian wealth in the UK?

The UK has long been the destination of choice for Russia’s new class of super-rich, but establishing the extent of their investments on these shores is a notoriously difficult undertaking.

Official UK government data indicates that Russian nationals have more than £27bn invested here. One estate agency, Aston Chase, estimates that in London alone, they own around £8bn worth of property, business, and other investments.

In light of Russia’s ruthless invasion of Ukraine, such questions have assumed even greater urgency amid efforts to isolate those oligarchs with links to Vladimir Putin’s regime.

Of course, the vast majority of Russians in the UK have no links to the Kremlin. Indeed, they include some of Putin’s most outspoken critics, such as Mikhail Khodorkovsky.

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But there are billions of pounds tied up in UK assets which are owned by Russians who are either close to Putin, or who have been accused of corruption.

A long-held fear is that those assets could directly and indirectly support Putin, and now he is waging an increasingly brutal war on a European democracy, those fears are more acute than ever.

Identifying those assets is complicated, not least because wealthy Russians have been investing here for the best part of 30 years, attracted by light touch regulation, a robust legal system, and buoyant capital and property markets. Or, to put it more succinctly: safety, security, and secrecy.

Successive UK administrations have also offered abundant incentives, starting with John Major’s government and its investor visa scheme. During Gordon Brown's premiership, a new visa programme proved even more generous, allowing those with £2m of investment funds and UK bank accounts to live here, before applying to become a permanent resident after five years.

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Chelsea owner Roman Abramovich is one of the most high profile Russian investors in the UK. Picture: PA

For those willing and able to bring in £10m or more to the UK, a fast track scheme saw the wait cut to just two years. It proved to be a roaring success, with around 3,000 successful applicants between June 2008 and April 2015, of which approximately 700 were Russian millionaires.

So where has the money gone? The vast majority is tied up in property, but it has also gone into sporting institutions, luxury vehicles, artworks, private school fees, and donations to universities and cultural institutions.

Here is a breakdown of the most visible Russian wealth in the UK, and where it has gone.

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PROPERTY

It is perhaps impossible to know just how much UK property is owned by Russian interests, but the sum is considerable.

According to Transparency International UK, around £1.5bn of property has been purchased by Russians with links to the Kremlin, or who have been accused of corruption.

The overwhelming focus of their investment, unsurprisingly, has been concentrated in London. Nearly a third of that total (£430m) is based in the City of Westminster, with a further £283m held in the well-kept streets of Chelsea and Kensington.

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The properties in question have become symbols of the excess of Russia’s oligarchy, with sprawling mansions complete with private swimming pools and art collections the order of the day.

The true figure, however, is obscured by the UK’s insipid financial reporting standards and the commonplace practice of utilising offshore entities in big value transactions.

Like many major investors in the UK, wealthy Russians and their networks of lawyers, accounts, advisors, and other professional enablers, have made extensive use of British Overseas Territories and Crown Dependencies, which have long been exploited to hide the flow of funds around the world.

According to Global Witness, in the ten years to 2018, seven times more money flowed from Russia to British Overseas Territories than had gone directly to the UK, amounting to around £68bn.

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Indeed, Transparency International, close to half (£830m) of the £1.5bn UK property purchased by Russians with connections to Putin, or who have been accused of corruption, is ultimately held by companies in British Overseas Territories or Crown Dependencies.

It also identified 2,189 entities registered in Overseas Territories or Crown Dependencies which were used in 48 Russian money laundering and corruption cases involving upwards of £82bn.

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Duncan Hames, the organisation’s director of policy, suggested the sheer volume of assets held by opaque offshore companies mean such numbers were probably only the “tip of the iceberg”.

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He explained: “These figures highlight Britain’s continued role as a global hub for suspicious and illicit wealth, from Russia and elsewhere.”

One thing is certain - the way in which property data is collated means official figures about Russian owners of property should be distrusted, given they are inherently flawed.

In England and Wales, for example, there were just 1,127 Land Registry titles registered to individuals with a Russian correspondence address last year, but that does not take into account properties owned by companies.

That too is how many wealthy Russians with holdings in Scotland operate. Vladimir Lisin is a case in point.

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The billionaire, named on the US Treasury’s so-called ‘Putin list’ in 2018, bought Aberuchill Castle estate near Comrie for a reported £6.8m in 2005.

The purchase was made via a firm called Forsetborne Limited, which according to the offshore leaks database - maintained by the International Consortium of Investigative Journalists - is registered in Cyprus.

The shares in Aberuchill Management Limited, once owned by a private asset management company called La Generale D'Investissement Et De Gestion SA SPF, based in Luxembourg, are now held by Cypriot trust.

Such an arrangement is not necessarily unusual, and it is in no way illegal, but it shows the difficulty in establishing exactly who owns what.

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Mr Lisin, in any event, is one of at least four Russian billionaires with estates in Scotland.

The others are Boris Mints, who owns the Tower of Lethendy in Perthshire via a Cayman Islands firm; Yuri Shefler, who acquired the shareholding of the company that owns Tulchan Estate in Grantown-on-Spey, and now runs it as a luxury private members’ club; and Yevgeniy Strzhalkovskiy, the son of a KGB colonel, who owns Knockdow House in Argyll.

STOCK MARKET

As part of the UK response to Putin’s aggression, trading in all 36 Russian companies listed on the London Stock Exchange (LSE) has been suspended. These include some major names, such as the state-owned energy giant, Gazprom, and, the state-controlled banking behemoth, Sberbank, which is already subject to sweeping sanctions.

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David Schwimer, the exchange’s chief executive, said the decision had been based on sanctions and the ability to run an orderly market. “Suspensions are driven by those decisions, so if we see any other securities affected by sanctions then similar actions will take place,” he explained. “This is a very complex and fast-moving situation and we are working closely with regulators across all parts of our business.”

Yet other firms with ties to Russia and its oligarchs have not been impacted, by virtue of the fact they are incorporated in the UK. They include the FTSE-listed steelmaker Evraz, which counts the newly sanctioned billionaire, Roman Abramovich, among its major shareholders.

The awkward truth is that the influence of Russian firms is more widespread than many assume, and they have helped the LSE consolidate its status as one of the world’s leading capital markets. For example, the exchange hosted the high-profile flotation of Russia’s state-controlled VTB Bank, one of the principal targets of economic sanctions against Moscow.

Such actions have given the Russian entities security and international credibility, and allowed some figures close to Putin to burnish their reputation, as well as receive millions of pounds in dividends. The fact that Russia has, until recently, been able to issue new sovereign debt on global markets, has hardly helped matters.

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Indeed, such decisions have led to searching questions over the complacency of UK regulators in ensuring that the financial system here cannot be used to bypass sanctions.

Take another flotation handled by the LSE - this time, the EN+ Group, a big energy and mining player which, at the time, was controlled by Oleg Deripaska, once regarded as Putin’s favourite industrialist. En+ in turn held a controlling state in Rusal, a Russian aluminium firm whose products have been used for weapons manufacturing, according to previous versions of its own website.

The flotation raised around £1.5bn from London investors, allowing EN+ to repay a £1bn loan to VTB, which at the time was subject to US sanctions. The Financial Conduct Authority, which decides which companies are allowed to float on the LSE, said there were no issues raised during its consultations with authorities, but US security officials expressed incredulity at the fact it was allowed.

On Friday, Mr Deripaska was named as one of seven Russian oligarchs subject to a fresh wave of UK sanctions. That announcement came just days after EN+’s long standing chairman announced his resignation. His name? Lord Barker of Battle, perhaps best known as the energy minister in David Cameron’s government.

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POLITICS

Lord Barker is not the only prominent member of the Conservatives to be questioned over his Russian ties. According to an analysis by Labour of disclosures filed with the Electoral Commission, donors who have made money from Russia or Russians have given significant sums to the Tories or individual constituency associations since Boris Johnson became prime minister.

Labour puts the sum at nearly £1.9m, but others believe the figure is higher still. The SNP’s Ian Blackford, for example, believes the amount is closer to £2.3m.

Either way, the donors include industrialist Alexander Temerko, the financier, Lubov Chernukhin, and the telecoms magnate Mohamed Amersi. There is no suggestion of wrongdoing on their part, and all have strenuously denied any suggestion that they, or indeed their bank accounts, are subject to the Kremlin’s influence.

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But the connections between such donors and high profile politicians has been a source of growing anxiety for some time. In 2020, in the wake of the long-delayed publication of the intelligence and security committee’s Russia report, the ties between the Tories and their Russian-linked donors were laid bare.

Some six members of the cabinet and eight junior ministers, it emerged, had accepted donations tied to Russia, as did two of the party’s MPs, who also happened to sit on parliament’s intelligence watchdog committee.

But the situation in Ukraine looks set to bring extraordinary pressure to bear on any party or politician to reject any such donations in future.

It is perhaps telling that in the days after Putin’s forces began unleashing hell, the Westminster Russia Forum, a lobbying group with close links to a number of Tory MPs, was disbanded.

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Foreign Office minister Amanda Milling has defended donations made to the Tories by people of Russian origin, insisting it is “wrong and discriminatory to tar them with the same brush” as those allied to Putin’s regime.

“There are people in this country of Russian origin who are British citizens,” she said. “Many are critics of Putin.”

That may be true, but the growing political pressure means any future donations will come under intense scrutiny, particularly during the ongoing conflict in Ukraine, and there are calls for the Tories to donate the money in question to Ukrainian charities and other good causes.

As Labour’s Dame Margaret Hodge argued: “Until the Conservative party does that, they will have no credibility at all in the argument on fighting corruption.”

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OTHER INVESTMENTS

Property and politics are not the only channels through which Russian oligarchs have poured money into Britain.

Significant sums have also gone to storied institutions up and down the country, among them leading universities, top flight football teams, and prestigious art institutions.

Vladimir Potanin, one of Russia’s richest men, gave £3m to an Oxford college, while Dmitry Firtash, a Ukrainian billionaire who has close ties to Moscow, donated more than £6m to Cambridge, allowing it to establish a formal Ukrainian studies course.

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But some of Scotland’s ancient universities have also benefited from money tied to Moscow.

The University of Edinburgh received the vast majority of the funding for a new Russian department from a foundation founded on the back of a decree by Putin himself; nearly £254,000 was donated by the Russkiy Mir Foundation to bankroll the Dashkova Centre.

Such may seem inconsequential, at least compared to the millions that are lavished on luxury properties, but they are a means of laundering reputations and projecting soft power.

The same is true of the money that has gone into amplifying pro-Moscow voices via the likes of Kremlin-backed broadcasters, RT, and Sputnik.

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Sport, too, has been a means of projecting soft power, with several oligarchs having sizable financial interests in the beautiful game. Two of them - Alisher Usmanov, the Uzbekistan-born billionaire whose firm has a sponsorship deal with English Premier League side, Everton, and Roman Abramovich, the owner of Chelsea - are now subject to sanctions. Now, the latter side finds itself unable to sell even a single replica shirt through its club shop.

In the art world, Petr Aven, who was placed on the EU sanctions list last week, and described as “one of Vladimir Putin’s closest oligarchs”, has been a major supporter of the Royal Academy.

He has lent artworks to numerous institutions around the world, and became a trustee of the academy’s charitable arm in 2014. Three years later, he supported an exhibition focused on revolutionary Russian art.

However, Mr Aven has since stepped down from that position, and the academy has returned a donation he made towards a Francis Bacon exhibition.

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Another institution, the Tate, is also facing calls to end its association with VIkror Vekselberg, the founder of a Russian energy conglomerate, who has been the target of US sanctions since 2018.

He is an honorary member of the Tate Foundation in recognition of past donations, and has been described as one of its most valued supporters.

The exodus of Russian investment is also expected to have a significant impact on private schools. According to the most recent Independent Schools Census, carried out in 2021, some 2,327 Russian children attend fee-paying schools across the UK.

The changing political winds mean it is likely further Russian investments in the UK will be exposed and targeted. What has been a decades-long relationship of mutual convenience has, in the space of just a few weeks, changed irrevocably.

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