Bringing a peashooter to a gunfight was how one analyst described the UK’s response to Russia’s renewed aggression towards Ukraine. After President Vladimir Putin ordered “peacekeeping” forces into breakaway Ukrainian regions, the US targeted some of Russia’s largest financial institutions and the EU unveiled measures against 351 members of the Russian parliament, as well as Putin’s defense minister and chief of staff. The UK, meanwhile, announced sanctions on five smallish lenders and three Putin cronies already on the US sanctions list. The underwhelming move has done little to improve the UK’s notoriety for being a hub where money and reputations of oligarchs close to the Kremlin can be laundered. More worryingly, such a paltry salvo risks emboldening Putin’s strategy of coercive diplomacy as Europe grapples with its worst security crisis in a generation.
Liz Truss, the foreign secretary, has defended the strategy as escalatory, with more steps available should Russia step up attacks. A generous view may be that Germany’s commendable decision to halt the Nord Stream 2 gas pipeline was intended to be the cornerstone of a co-ordinated initial response from the west. The UK may argue it wants to keep some measures in reserve, and a deterrent is needed against further Russian aggression. But there is far more that the UK could have done to prove its resolve, and should do without hesitation.
Stopping Russia raising corporate and sovereign debt in London is an obvious step, and one Boris Johnson, the prime minister, said is among future measures. But the US already restricted the issuance and trading of Russian sovereign debt in 2019. Not having a parallel response from the UK was a glaring loophole. Meanwhile, Russian companies are shunning London capital markets anyway. Truss has promised to revive an economic crime bill – long promised but shelved multiple times – but only by the end of the year. It would create the most basic defenses, such as bolstering the ability of the UK’s corporate registry to check identities.
There seems to be a reluctance to end lucrative relationships with Kremlin-backed institutions and oligarchs. Russian ties – with UK banks, law firms, public-relations firms, universities, and politicians – were forged with perhaps the best intentions after the fall of the Soviet Union. But in the past decade, when it has become clear what kind of regime Putin has created, too little has been done to reverse course. Unpicking such close links is hard.
Even US officials are reportedly dismayed about the potential of “Londongrad” to derail western efforts. The current Conservative government has come under scrutiny for ties to donors such as the wife of Putin’s former deputy finance minister. But successive governments of all stripes have failed to keep pace with a Russian strategy of bolstering its own defenses against western sanctions – by “de-dollarising” its economy and ramping up foreign currency reserves – while simultaneously undermining the west’s ability to impose swingeing penalties.
The crisis in Ukraine serves as a reckoning on many levels. For the UK, it should be a wake-up call over whom it is willing to do business with. For too long, the country has sold its City advice, education, football clubs and real estate to the highest bidder, with few questions asked. Claimant-friendly libel laws ensure journalists who do ask more searching questions can be gagged. Selling such services to kleptocrats, tycoons and princelings is dubious. Selling them to an adversary is far worse.