LONDON—The row between the United Kingdom and Russia over the attempted assassination of a former Russian military intelligence officer and double agent underscores the tricky relationship between Russia and the UK – one that is all about money. For decades, hundreds, if not thousands of wealthy Russians have been parking assets – also dirty money – in the UK as well as themselves, mostly with Brits welcoming the investment.
There is much to lure Russians to London, says Vladimir Ashurkov, a Russian banker and opposition political figure, who was granted asylum in the U.K. in 2015.
"One is its language – if Russians speak a foreign language then it’s English,” he said. "London is a big city not too dissimilar to Moscow and there’s already a lot of Russians here. London is the unrivaled center of business and finance in Europe and the British education system is trusted.”
Last week, British Prime Minister Theresa May said she would create an action plan to retaliate against Russia for the UK poisoning by a Russian-developed nerve agent of Sergei Skripal, 66, who spied for the British during the 1990s and early 2000s. He and his daughter Yulia Skripal, 33, remain in critical condition.
And while Russia has denied the allegations, May has already kicked out 23 Russian diplomats, and promised to crack down on Russian oligarchs who park money in the UK. But that's a tall order, say analysts.
The British government has long been happy to take in its former spies as repayment for their service. It has also welcomed Russian dissidents, which it sees as a counter measure to an anti-Western government in Moscow. The UK, however, is known for welcoming Russian money from the vast fortunes of Mr. Putin’s close allies, and most don't believe that will change anytime soon.
Ashurkov, a prominent critic of what he alleges to be the ill-gotten millions of Mr. Putin’s cronies invested in London’s most glamorous real estate, says some of these homes rival the British royal family’s palaces.
Mr. Ashurkov, in fact, organizes bus tours around the British capital for fellow activists and journalists to showcase the tsar-like opulence that the Russian oligarchy enjoys in London.
“I do it to alert British authorities about dirty money,” he said.
Take for example Witanhurst, London’s largest private home, only surpassed in size by Buckingham Palace. The basement of this stately home boasts a swimming pool, cinema, sauna, gym, staff quarters and parking spaces for up to 25 cars.
Mystery has long surrounded the owners of this North London mansion since it was purchased in 2008 for $70.2 million. Ordinarily, it’s a simple process to figure out who owns real estate in the U.K. – pay a fee to the Land Registry and they’ll provide the name. But when properties are owned by offshore companies, as Witanhurst and many others are, it’s not as simple.
This ostentatious secrecy has a tendency to get on the nerves of locals. In 2011, local town official Michael Hammerson grumbled to the Daily Mail newspaper, “We don’t want limos with smoked windows and men in dark glasses with bulging breast pockets, and the place surrounded by CCTV.”
In 2015, The New Yorker finally revealed the true owner to be Andrey Guryev, the former head of one of Russia’s largest fertilizer companies.
This kind of confidentiality typifies London’s moneyed Russian population, says Mr. Ashurkov, who notes that they go to great lengths to protect their anonymity.
“One billion pounds of Russian money is the minimum invested in London property,” said Mr. Ashurkov. "There are at least 100 Russian families living in mansions worth over 10 million pounds. But it’s very difficult to get an exact estimate because so many hide behind offshore companies."
According to Transparency International UK, almost 10 percent of real estate in the Westminster borough of London is owned by anonymous offshore companies. In Kensington and Chelsea, perhaps the most upscale part of town, the figure is 7 percent. Both of these neighborhoods are favored by the Russian elite.
In fact, illustrious Belgravia Square in Westminster has been teasingly nicknamed “Red Square” due to the influx of Russian residents.
Many of these Russians expats don’t live in London fulltime and actually have a portfolio of houses dotted across the globe. Investing in London real estate isn’t pure vanity though, it is a seen as a safe bet, similar to buying gold bars. If ever the need should arise for a swift exit from Russia, many of these oligarchs can escape to London where their fortunes are secured in the form of well-located bricks and mortar.
William Brown, a London contractor, has worked on a number of renovation projects for Russian billionaires. He won’t reveal the names of his clients, but he says they spend most of their time away from London.
“None of them are here fulltime, they might be in town just two months of the year," he said. "Most of the time there’s no one in these mansions except the butler and security guards.”
Inevitably, largescale renovations follow when a new owner takes over such a grand mansion, which creates a cottage industry that employs thousands of contractors, plumbers and interior designers like Mr. Brown.
“One client had 22 solid marble bathrooms spending $90,000 per bathroom on renovation costs,” recalled Mr. Brown. “It’s extravagance like you wouldn’t believe.”
Working on high end refurbishments for rich Russians in London’s most fashionable zip codes pays a lot more than the average project, he added, but they can have unreasonable expectations.
“The money is good but there’s so much hassle," he said. "Their designers ask for things that are almost impossible.”
Purchasing property of this value contributes significantly to the treasury. For example, the sale of a house with Witanhurst’s price tag would collect more than $10.3 million dollars in taxes.
That money, often amassed from the selling of state assets when the old Soviet Union broke up, has long been directed through London’s famed banks and pumped into the country’s property market and spent at London’s luxury boutiques.
In 2015, Deutsche Bank estimated capital inflows from outside the UK – mostly Russia – at more than $200 billion over the past three decades.
The intertwining of old Soviet wealth into the British economy complicates things. It becomes a tough task for the government to impose sanctions that would target the so-called “dirty money” without also harming British interests at all levels, from the international banks to the self-employed like Mr. Brown, say insiders.
UK officials are likely not to crack down on assets or trade with Russia, given that Brexit is looming and economic growth has been sluggish, say analysts.
Still, Mr. Ashurkov says all this shouldn’t dissuade Mrs. May from taking action against money harbored in her own backyard.
“Britain would be just fine without a few billion of corrupt money," he said. "The British economy would not suffer if dirty money went away.”
An alternative version of this story can be found in The Washington Times.
