London's "Laundromat" for Russian Oligarchs: A Complex Web of Secrets and Deals

Strategic Insights -

In the exclusive neighborhood of Belgravia, a stucco-fronted mansion at 5 Belgrave Square, once home to Sir Henry "Chips" Channon, served as a symbol of the UK's welcoming attitude towards Russian oligarchs in 2003. The property, marketed for £25mn, was bought by members of Oleg Deripaska's family, an early sign of the influx of Russian wealth into "Londongrad." This week, as pressure mounts on Russian tycoons following Vladimir Putin's invasion of Ukraine, Roman Abramovich has put Chelsea Football Club up for sale. London has become a preferred investment location for Russian oligarchs over the past two decades, with close to 40 Russian companies floating in London since 2005 and almost 90 equity and debt capital markets deals involving Russian companies raising $34bn since 2010.

Key Takeaways:

  • The UK's lack of rules requiring full disclosure of foreign owners of British property attracted the Russian super-rich, who appreciated the privacy.
  • A 2006 High Court judgment involved Deripaska as the beneficial owner of 5 Belgrave Square, but the title register lists Ravellot Limited, a company registered in the British Virgin Islands.
  • Transparency International has identified £1.5bn of UK property, nearly 150 land titles, bought by Russians with links to the Kremlin or corruption.
  • More than £1bn of those assets are held by companies based in tax havens, making ownership difficult to determine.
  • Governments led by David Cameron and Theresa May faced pressure to crack down on Londongrad after Putin's annexation of Crimea in 2014 and the poisoning of Sergei Skripal in Salisbury in 2018.
  • The Johnson government is seeking to remove barriers to unexplained wealth orders and establish a register for anonymous foreign owners of British property.
  • Critics say the UK sanctions against those deemed to prop up Putin are far less comprehensive than those imposed by other western countries.
  • Labour has demanded to know why Abramovich has not been sanctioned, given his alleged links to the Russian state.
  • City executives are scrambling to understand their full exposure to Russia, and advisory firms are starting to cut their links.

Statistics:

  • £1.5bn Value of London property identified by Transparency International as having been bought by Russians accused of links to the Kremlin or corruption.
  • £1.9mn Labour party estimate of sum given to Tory party by donors who have either 'made money from Russia or have alleged links to the Putin regime' since Boris Johnson became prime minister.
  • 40 Russian companies floated in London since 2005.
  • 90 equity and debt capital markets deals involving Russian companies raising $34bn since 2010.
  • 36 companies with close ties to Russia, including EN+ and Gazprom, suspended trading on the London Stock Exchange.

Sources:

  • Andrew Langton, chair of London estate agent Aylesford International
  • Charles McDowell, estate agent who specialises in buying high-end London properties for clients
  • 2006 High Court judgment involving Deripaska
  • Transparency International
  • FactSet
  • Dealogic
  • UK parliament's intelligence and security committee report
  • House of Commons foreign affairs select committee report
  • Boris Johnson's statement regarding punitive sanctions on individuals and companies with links to the Kremlin