Russian listings on the London Stock Exchange; Russians buying multimillion-dollar homes in Chelsea, on streets called Billionaires’ Row; Russian children in Britain’s most exclusive schools, while their parents shop at Harrods and Asprey; Russians running soccer clubs and newspapers and cellars that sell some of the world’s most expensive wines.
All are purported evidence of a London so in thrall to Russian money that Britain should think twice before agreeing to any ratcheting up of the limited economic sanctions the European Union and the United States have imposed since Russia’s annexation of Crimea. The worry is that London, as a global financial center, might suffer disproportionate collateral damage.
But the data suggests otherwise.
While the contribution made by Russians to London’s prosperity and economic activity is significant, it is not crucial. Conspicuous Russian affluence is misleading because the wealth is concentrated in the hands of a very few. Oligarchs like Roman Abramovich, the owner of the Chelsea soccer club, draw lots of attention. But among the estimated 300,000 Russians living in Britain, few of his compatriots approach his wealth.
“The Battle of Londongrad?†scoffed Raoul Ruparel, head of economic research at Open Europe, a research house based in London. “How vulnerable is the City to sanctions on Russia?†he asked rhetorically, referring to London’s financial district. “Claims that the City of London would suffer major losses in case of financial sanctions against Russia are overblown.â€
Absolute figures for Russian deals and purchases are large, Mr. Ruparel said, “but that’s because London is a huge global financial center, and you need to put numbers in context.â€
Russian influence is said to be felt most in London’s financial markets.
Since the energy giant Gazprom became the first Russian company to list in London 18 years ago, 67 more companies have done so. But together they make up only about 5 percent of the total. They are roughly in line with the nationalities of other companies: 95 are from the United States, 62 from India and 59 from China, according to the exchange.
Russian issuers have accounted for about $50 billion worth of listings on London exchanges over the last decade, representing around a fifth of offerings by value in that period, according to Dealogic, a data provider. But most of that activity took place before the global financial crisis. In 2007, 14 Russian companies got London listings. Last year, there was only one: the bank and credit card company TCS Group Holding.
British banks are not highly exposed to Russia either, said Gilles Moëc, chief European economist at Deutsche Bank. He estimates that they have about $19 billion worth of exposure to Russia, including loans and securities, which represents only about 0.2 percent of their total assets. French and Austrian banks are much more exposed than their British counterparts, he said.
From 2009 to 2013, Britain granted three-year visas to 433 Russians who invested in government bonds worth at least 1 million pounds, or $1.66 million, allowing them to buy residency for £10 million two years later, so long as they held on to the bonds. Only the Chinese came close to the Russians, with 419 receiving such investor visas. While the figure is high, the share of Russians able to afford these visas was just 0.14 percent of the Russians living in Britain.
Lavish lifestyles have also helped form views about stratospheric levels of Russian wealth.
Yevgeny Chichvarkin, who made and lost his fortune in a mobile phone empire in Russia, came to London and, in 2012, opened a luxury wine store called Hedonism Wines in Mayfair. It sells vintage products like Château d’Yquem 1811, a bottle of which set a world record for being the most expensive white wine ever sold, at £75,000.
“Meet the Russians,†a television series that ran here on the Fox network last year, portrayed what it described as a “jaw-dropping†world of unimaginable riches. But among prime London residential property sales, which represent the top 5 percent of the market, only 2 percent of buyers last year were Russian. They spent an average of £4.5 million on their homes, according to Savills, which specializes in luxury real estate. They were far behind buyers from North America, the Middle East, China and South Asia, Savills data shows. Britons, meanwhile, accounted for roughly two-thirds of all the buyers.
To be sure, some businesspeople in London who cater to Russians are worried that the Western sanctions are beginning to chafe. Julia Titova, for instance, has less than a month to go until the start of her Miss U.S.S.R. beauty pageant, which attracts contestants from Russia and 14 other former Soviet republics who are living in London. But some of her celebrity guests and judges from Moscow are waiting for British travel visas, and she is worried they may not arrive in time. She suspects the delay is intentional. “The waiting time is a lot longer than before,†she said.
But the British border agency said the delay was “just a coincidence†related to a change to a local Russian contractor for commercial visas a few weeks ago.
Some schools are anxious too. About 2,150 Russian children were enrolled in British private schools and boarding schools last year, a 25 percent rise from the previous year. But that is only about a third of the number of students from China and Hong Kong, according to the Independent Schools Council.
With the exception of buying property, Russians don’t generally invest in Britain unless there is a plum opportunity, said a tax adviser who serves Russian clients and spoke on the condition of anonymity for fear of alienating his clients. The primary concern of wealthy Russians, he said, is to keep their money as far away as possible from the Russian government and anything that could land them in jail back home. They are less worried, if at all, about the damages caused by Western sanctions, he added.
A British government official reinforced that sentiment. “Being a rich Russian is not sanctionable,†a senior official at the Foreign Office said on the condition of anonymity, in keeping with diplomatic custom. The official, however, emphasized that Britain was acting within the context of the European Union, which has so far sanctioned only individuals it deems to be directly involved in the annexation of Crimea.
British tax levels provide no incentive for Russians to keep and manage their wealth in this country, the tax adviser said. Most assets are squirreled away in offshore bank accounts in places like the Channel Islands, off the French coast, which are part of neither Britain nor the European Union and are therefore beyond the reach of the sanctions.
Fabulously wealthy oligarchs, who made fortunes overnight when the Soviet Union collapsed, “don’t feel comfortable in Russia,†said William F. Browder, the London-based chief executive and co-founder of Hermitage Capital Management, which is registered in the Channel Island of Guernsey and specializes in Russian investments.
“As easy as it was for them to plunder the country,†Mr. Browder said of the oligarchs, “it’s easy for the government to do the same to them.â€
Mr. Browder knows firsthand how sanctions against Russia can boomerang. He was behind the Magnitsky Act, enacted in the United States in 2012, which froze bank accounts and seized assets of 18 Russian officials over their involvement in the detention and death of his lawyer, Sergei Magnitsky, who had tried to expose government tax fraud in Russia.
Mr. Browder was convicted in absentia in Moscow for tax evasion in what was largely seen as a political trial. The American law set off a diplomatic spat with Russia, which retaliated by approving a similar law against Americans accused of rights abuses.
Even so, Mr. Browder said Britain should not shy away from pressing for further sanctions against Russia. “There are a number of professionals in the United Kingdom who feed off Russian blood money,†Mr. Browder said. “But even without the Russians, London will continue as a financial center.â€
