The Strange Nature of Britain’s Interests: Russia, Oligarchs and Currency Union

econ_russiachart10_405After the extraordinary analysis by Peter Jones in the Scotsman, we prefer this, by John Warren. Like Vitol, like NHS privatisation, like Tony’s Cronies, like Osborne’s economics it’s a case of Follow the Money …


Following Russia’s military action in the Crimea, in London the City Index has claimed that the British government “wittingly leaked” its initial thoughts on sanctions against Russia to the media; thoughts which contained the policy statement that the “UK should not support for now, trade sanctions … or close London’s financial centre to Russians”. Notice also that the “for now” refers to trade, but perhaps not to closing London’s financial centre to Russians. On such ambiguities are interests silently exploited. The photographs revealing this “blunder”, which appeared perhaps unsurprisingly in the Daily Mail Online, are illustrative of the choreography; creating the dizzyingly improbable thought in the mind of the reader – does nobody in Whitehall have the wit to possess a briefcase?


Meanwhile in a quite different world, British diplomatic outrage and political indignation at what the Foreign Secretary claims is the greatest threat to Europe of the 21st century, and that virtually all politicians insist should lead to some form of “sanctions” against Russia, find themselves, equally unsurprisingly, trumped by the interests of the City of London; which possesses special inviolable rules of supererogation, ensuring that British policy on any subject, first and last, will always serve the City’s interests. Somehow we are not supposed to see through the incongruity of the dysfunctional hiatus between the two lines of Government ‘thought’; or should we instead merely observe the unexpected sight of the two cynical masks Britain presents to the world, revealed candidly for what they are – realpolitik at its most cynical – through an over-deviously concocted blunder?


The reasons for the reluctance to apply tough economic sanctions to Russian interests in London are not hard to find. Both Russia and the Oligarchs have large assets in the UK, through Western banks, through the Russian acquisition of strategic assets in London, and particularly in the London property market, over a number of years; for example, and merely to provide one illustration, freezing these assets could prick the London property bubble on which so much British Government hope of economic recovery rests. Meanwhile BP owns 20% of Rosneft, the Russian energy giant (worth $800m to BP in annual dividends alone). Some analysts suggest that the £billions of mainly London assets are not critical to the British economy, but if that is true it merely highlights the disproportionate influence of the City and of anything it perceives as affecting its interests, over British Government and State policy. This should also be seen in the context of the Osborne Dogma that in the ongoing negotiations with the EU over Britain’s continued membership Europe must give highest priority to “Cast-iron legal protection for the City of London”. In Scotland we might think it more appropriate if we could have cast-iron legal protection from the City of London (as the EU contemplated with its financial transactions tax), as it was the City that, ever since Big Bang (1986) has gone on inexorably to ruin Britain’s financial system and bring the Credit Crunch down upon as all; a fact that should be burned forever in our collective memories.


Jeremy Warner puts the best, succinct City of London case for offering the Russian Oligarchs special treatment, in the Daily Telegraph (4th March), “Britain thrives on an ‘open economy’ model. It would be shooting itself in the foot by sequestrating the Russians”: and to make the underlying position abundantly clear, he claims perhaps a little too presumptuously, that as “we all know, financial markets can be amoral places. I don’t mean in the sense that they are filled with rogues and thieves, but only that concern for the rights and wrongs of any situation is not what drives them”. Oh, well that’s all right then: but we have now entered a world of sophistry in which the purpose is to provide the illusory form of wisdom and sound regulation, but in which the ‘open economy’ substance remains intact, conveniently to be interpreted with cavalier self-indulgence – anything goes.
It is a delusion of Boris Johnson’s that London’s alleged “success” (forget the Credit Crunch, nothing to see here) is a function solely of the genius of London, a solecism that is gullibly swallowed wholesale by the BBC and other metropolitan television media almost daily, in what has become their endless celebration of London’s grotesque appetite for narcissism; in fact this “success” relies principally on factors that are far simpler, cruder, manipulative, self-serving and ruthless: a financial regulatory and legal system whose genius is that it manages to be simultaneously both Byzantine and limp, allowing a system that looks robust and wise but in which given sufficient wit, ingenuity, or even at a pinch low-cunning, almost “anything goes” – as illuminated by the banking, mis-selling (£40 billion of fines in banking alone so far, but representing a far larger scale of underlying transaction turnover) and other scandals still being endlessly, perhaps unfathomably worked through to the distress of the whole country’s finances; and as the Ukranian crisis illustrates, throwing a light on the kind of business routinely attracted to London, and the nature of its increasingly louche reputation. London is attractive to Oligarchs not because it is clever, but because it is a regulatory soft-touch. It is very attractive to Hedge Funds not because it is sophisticated but because the technical rehypothecation regulation is nugatory. We may combine these features of London with the fact that beneath the glib rhetoric, the UK is in sum a scam-ridden economy, presided over by successive Governments that are quite obviously the creatures of the City; and, knowing their proper place in the grander scheme of things ‘British’, Governments that have consistently directed almost all Britain’s resources of people and treasure; whether public or private, directly or indirectly, but inevitably and universally, to London.


The degree to which the British Government will turn itself inside out to reconcile the Russian incursion into the Ukraine, with the transparent desire of London not to upset Oligarchs should illuminatingly be contrasted with George Osborne’s idea of an appropriate British Government approach to Scotland’s proposal for a currency union; a country which  has shared with the rest of the UK (rUK) a four-hundred year common monarchy, three hundred years of a shared Parliament, a common history through two world wars, and the joint expenditure of vast amounts of blood and treasure to serve their past interests together: all this is to be rewarded by Osborne dismissing it all airily out-of-hand, without recourse to negotiation or common-sense, simply because Scotland wishes to change the substance of the relationship, but reach a new and close understanding with its closest neighbour and friend, a wise compromise on sovereignty in the interest of both Scotland and rUK through a responsible currency union. Clearly what Scotland lacks is not a joint history of long and loyal cooperation, or an unwillingess to embrace budgetary control (would the UK even understood the concept), but possesses an insufficient number of aggressive, buccaneering, billionaire Oligarchs who want to own Knightsbridge. In a perversity of judgement, Scotland may therefore safely be treated with greater insolence and contempt than Osborne would dare to treat a Russian Oligarch. The only conclusion to be drawn from this bizarre Osborne thesis is not that the British Government policies towards Russia and Scotland are almost eccentrically inconsistent or inexplicable, but that the British Government policy on currency union is simply false; a transparent fake.
The fundamental rule of realpolitik and of negotiation is quite simple: look to what people do, not to what they say. Look at action after the event, not rhetoric before the event. Look at comparable situations where they are negotiating and their interests are at stake, and discover how they act, especially when their real interests are in play; like the current example of Russia, the Oligarchs and the City of London: the gap between British political rhetoric and reality is an abyss. The instinctive but only too predictable British approach to Russia and the Oligarchs tells us all we need to know about rUK’s real approach to realpolitik post the referendum, because Britain has a long history to be read, and capable of being understood: Britain is predictable. Osborne’s no currency union proposition is a mere pre-emptive negotiating ploy, safely launched before the negotiations commence, and crudely intended to induce Scots to vote ‘No’: it will not survive a Yes vote.

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  1. Marian says:

    Excellent article!

    London is the world capital of banking fraud. Pretty much every financial scandal of the past 20 years has had its main component in London, because it has the least regulated banking environment. This is very important for the US, because America outsources its own fraud to London, just as it outsources its labour to China. The JP Morgan and UBS traders who lost billions, were both London-based and Lehman Brothers went through the UK as did AIG.

    Tony Blair was the first prime minister in this country’s history who knew that going into Downing Street would act more as a resumé builder than a way of serving the public. He has become fabulously wealthy with the contacts he made as prime minister. Blair personifies the move, in the UK and the US, away from representational democracy and towards control by bankers. It is since New Labour that you have the rise of these incredible scandals: so you have HSBC involved in multimillion-dollar Mexican drug-laundering and Barclays involved in rigging Libor.

    19th century French political theorist and economist Frederic Bastiat once warned: “When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”

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