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Britain is Putin’s playground Boris isn't the first PM to put money before democracy

Welcome to Londongrad (Pascal Le Segretain/Getty Images)


February 2, 2022   6 mins

On Monday, Liz Truss warned Russia’s oligarchs that there will be “nowhere to hide” their dirty money in London. Which is pretty weird when you think about it, since the statement includes the implicit admission that the money is already here.

The menace of Putin’s kleptocracy seeped into Britain long before he started stacking up armoured divisions on the Ukrainian border. Yet the money has kept flowing, Britain has kept fencing his cronies’ stolen wealth, and repeated promises to tackle the problem have achieved nothing.

This failure is a national embarrassment, and has fuelled a mess of conspiracy theories: that the Tories are bought and paid for; that the Kremlin has kompromat to keep ministers in line; that the City of London has a special hotline into the heart of parliament.

The real story, however, is far more alarming, but requires some telling, because you can’t understand London’s love affair with Russian money without understanding the story of how the City was reborn as both a financial centre and the engine of our national economy. They are, in fact, the same story.

Once you understand this, you can see why government after government has been so reluctant to drive the oligarchs’ money away. They’re like doctors watching a cancer grow bigger and bigger in a vital organ: operating will cripple their patient, so they leave it in place, even though — eventually — it will kill him. But this choice can’t be postponed much longer. If we want to save British democracy, we need to take a scalpel to a tumour that was seeded all the way back in 1955.

Back then, the Soviet Union had a problem. Its great rival the United States had ended World War Two as the undisputed centre of the world’s economy; if the USSR wanted to trade with the world, it needed dollars. The global financial system was less globalised in those days. In order to secure democratic control over wealth, governments imposed limits on money in ways that are hard to comprehend now. They restricted how much money you could move across borders, for instance, or what interest rates you could charge on loans you made.

That meant that, if you had dollars, you kept them in the United States, where they were subject to the scrutiny of the Federal Reserve. But Soviet officials worried that, if Cold War tensions became more tense, and if their dollars were in New York, the US government might seize them, thus cutting Moscow off from international markets.

The City of London had a problem too, albeit a very different one. Britain was broke, with a huge hangover of debt left from funding its war effort. The capital flows that had sustained financiers’ incomes had shrivelled, and sterling had lost its role as the world’s leading currency. Banks were moribund, and ambitious young Brits preferred to work in academia, industry, or government.

The solution to the two powers’ problems came thanks to two banks: the Moscow Narodny (MNB), which was Soviet-owned but London-based, and the Midland, a scrappy challenger unable to attract the deposits it needed to compete with its more established rivals. MNB lent its dollars to the Midland, which used them to buy pounds, with which it could grow its UK business.

It may not sound like much, but these two banks had invented the most consequential financial invention of the second half of the twentieth century: the Eurodollar. By transacting with dollars outside of the United States, they kept the American currency’s upsides — its strength and convenience — while removing its downside: the heavy hand of the US government.

As sterling declined further, more London banks began to appreciate this new form of currency, which could move across borders unimpeded, could be traded easily, and was completely unregulated. They used pounds for domestic transactions, but kept different accounts for the Eurodollars, which they described with a word borrowed from maritime law to describe something outside the reach of government: offshore. Soon other banks noticed the innovation too, arriving from Japan, from continental Europe and from the United States to take advantage of the new discovery.

The Eurodollar could have appeared almost anywhere, and embryonic versions did appear in Canada, in Switzerland and elsewhere in Europe. But in those countries the governments recognised the threat that footloose currency posed to their sovereignty and snuffed it out. Memories of the Great Depression, and of the misery and war that followed it were still raw, and democratic politicians wanted to make sure they could always put people before wealth.

In the City, however, the Bank of England loved the idea of setting money free, so it did. “It is par excellence an example of the kind of business which London ought to do both well and profitably,” a Bank official wrote in 1963. “If we were to stop the business here, it would move to other centres with a consequent loss of earnings for London.”

At that time, the market was worth around $5 billion. Within four years, it was worth $13 billion. By the end of the Sixties, it was worth $40 billion. That was when other countries started to surrender, to scrap their own efforts to stop their banks from leaving, and the market really took off. Now, it’s the biggest in the world: all dollars are offshore, so are pounds, euros, Swiss francs and — with a few exceptions — pretty much every other currency in the world.

This business model did not stop there. Our financial professionals looked for countries whose governments were imposing limits on wealth that its owners found onerous, and undercut them. In the Cayman Islands, Americans found a ready haven for all the money they didn’t want to pay taxes on, and this once-obscure turtle-fishing archipelago is now a world class financial centre. In the British Virgin Islands, tycoons from China and criminals from Latin America found cheap, opaque shell companies to hide their ownership of assets behind. And in Britain itself, generations of oligarchs — from the oil-rich countries of the Gulf, from the ex-colonies of Asia and Africa and, of course, from the post-communist countries of Eastern Europe — found a warm welcome.

What we offer them is a haven: not just a tax haven, but an everything haven. They can buy property here and they don’t need to tell anyone about it, because they can hide their ownership behind a shell company. They can manage their liquid wealth here too, either in a discreet bank or a boutique private office. They can send their children to one of our world-class schools, buy their art at one of our auction houses, and meet their friends at a ritzy restaurant while their wives and/or mistresses shop at Harrods (because, let’s be honest, these oligarchs are pretty much all men).

If a business rival complains about them, they can settle the dispute in our commercial court, thanks to our world-leading legal sector. And if they want to keep an eye on how their adopted country is run, they can dine with a minister for not much more than they’d spend on a holiday. They can buy anything in London and, thanks to the way politicians have starved our enforcement agencies, no one with the power to do anything about it will ever know if the wealth was honestly acquired.

Politician after politician has stood up in parliament to insist there is no place for dodgy money in London. But then the lobbying starts. Every one of these sectors — finance, law, estate agencies, auction houses, education — starts arguing for exceptions and loopholes, and nothing gets done. In 2014, for example, after it was revealed that specific shell structures called Scottish limited partnerships had been used to launder money stolen from Moldova, politicians from the Scottish National Party campaigned for the law to be tightened. Not only did this not happen, but the Treasury actually deregulated the structures further, so as to protect the competitive advantage of the City.

This is a supercharged version of that same business model cooked up by Moscow Narodny and the Midland back in the Fifties. It is reliant on British regulations, enforcement and oversight being weaker than those of other countries, so wealth comes here, and we can earn fees from it. It is not just oligarchs that benefit from our offshore services, but corporations too: the City earns fees from any wealth, whether honestly or dishonestly acquired.

The risk is obvious. If it isn’t enough that Britain is depriving other countries of money they need, and driving down levels of tax and regulations everywhere by providing a haven for the wealthy, we are also acting like a giant Florida for an magnified version of Al Capone’s gangsters, and giving them a playground from which to threaten the world. We are privileging the interests of the few over the wishes of the many, whether those happy few are evil, naughty, or just publicity-averse.

This is not a revelation. Multiple parliamentary enquiries have revealed the seriousness of the problem in recent years, including the Intelligence and Security Committee’s (ISC) 2019 probe into Russian wealth in the UK. Truss should be commended for saying she will do something, but let’s wait until the laws are on the statute books before congratulating her. After all, Boris Johnson battled to prevent the ISC’s Russia Report being published at all — and that is not the action of a man looking to put democracy before money.


Oliver Bullough is a journalist and author from Wales. He has lived and worked throughout the former Soviet Union. His latest book is Butler to the World.

OliverBullough

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Scott S
Scott S
2 years ago

Reading articles like this make me laugh, I’d cry if not. When I hear the likes of Johnson and Biden banging on about ‘Leveling Up’, or ‘Equity’, they are pointing at everyday folk, who need to straighten themselves out and make allowances. Real ‘Leveling Up’ means going after these people, not putting the squeeze on the middle classes or the lower middle classes, it sickens me to the stomach, it really does. I just don’t trust western elites at all, they preach from the bell towers while all the time taking dodgy back handers and carrying on with their ultra privileged lives. Like most people, I’ve known this sort of behavior goes on, but with everything seemingly so under scrutiny at the moment, it really highlights the hypocrisy that is boundless in all reaches of society, from millionaire footballers, desperate to play at the Qatar World Cup, while wearing rainbow boot laces to odious politicians who say they are ‘healing countries’ while demonizing half the population and Universities pulling down staues of slave traders who lived centuries ago, while taking vast sums of money from the CCP, or ‘hard done by’ princes, who actually believe a life of huge wealth and privilege is a burden..The list is almost endless….Its a desperate situation that needs to be sorted out, but I think people get so caught up in the moment, with stories like ‘partygate’ that this bigger picture is totally missed.

Last edited 2 years ago by Scott S
Ian Moore
Ian Moore
2 years ago
Reply to  Scott S

You hit the nail on the head with the comment of the middle class being squeezed. I was in a youtube rabbit hole while on the bike trainer at home, a video came up about the “billionaires row” of extremely expensive, empty apartments, which were basically a tax avoidance scheme that is the tip of the iceberg of the problems driving up house prices and stifling supply. Anyway, the conversation moved on to a discussion with an awful estate agent who made a very astute comment in amongst the rubbish he was spouting. He correctly identified that the people who ultimately suffer are the lower to upper middle class, those who work in other words and pay “normal tax”. The rich avoid tax, the poor don’t contribute overly much and are net receivers of tax and those in the middle pay the tax.

Scott S
Scott S
2 years ago
Reply to  Scott S

Says the person with the double barrelled name….haha.

Last edited 2 years ago by Scott S
SULPICIA LEPIDINA
SULPICIA LEPIDINA
2 years ago
Reply to  Scott S

You forget that most deadly crime: HKLP!

Ferrusian Gambit
Ferrusian Gambit
2 years ago

There are some omissions and inaccuracies here.

First of all this was not just Britain but the City whole economy of Europe that started this. After WW2 devastated European economies needed dollars to buy capital to rebuild given their own industrial bases had been destroyed. The US, more out of an interest to avoid communist goverments emerging than altruism, flooded Europe with dollars, these were the seed of Euro dollars. You need to look at the Bretton Wood agreement and its arrangements including dollar-gold convertibility (pre-Nixon shock) to see why these arrangements were necessary. Arrangements the UK has to agree to because of the country spaffed its Victorian nest egg twice in the massive outlays of WW1 and WW2. The real story is the collapse of British (and European) economic and financial clout due to WW2 and decolonisation. Banks just did what they needed to survive.

Second, the story of the origin in more confused. There is evidence in the late 40s that the new Chinese comminist government moved US dollar reserves to Paris for similiar reasons the Russians. This never emerged as a major market because, despite Paris once being a major financial market pre-WW2, after the war the kind of socialistic financial controls the author salivates over strangled the market in its nascency and made France a backwater in terms of non-governmental business investment and economic influence.

Third, the deal between Narodny and Midland was a one-off. It only became a systemic policy by the BoE *after* Suez in 1957. Previously British finance mainly worked on the basis of the Sterling area, investing and loaning money in the colonies and informal “colonies” under British economic influence like Argentina and Chile. The US action in 1956 caused a run on the pound. The loss of revenues from the control of Suez canal meant both the British pound and French franc lost even more their relevance in the ledgers of international traders, as they had no need of it. The BoE, in allowimg the Eurodollar market to expand was just trying to make the best of a bad situation caused by the collapse of the imperial financial system post-WW2 and trying to stop Britain sliding into even more ignomy and economic humiliation. These Eurodollars would make the US’s trick in 1956 hard to pull off again, restoring some autonomy in British foreign policy (see later actions in Aden/South Yemen) and the US govt’s own unreliability and strict regulation in foreign ownership at odds with their new role was thier Achilles’ heel if which the UK would have been mad to have not taken advantage. It was a way of coping with the move from a sterling dominated international trade system to a dollar one, whilst keeping our financial and business connection with the empire alive. The controls on money in the 50s weren’t because of ‘democracy vs wealth’ or any such rabble rousing nonsense but the profound crises of imperial decline, a strange thing for the author to see so rosily. These controls would have been as unthinkable in the 19th century at the height of British imperial splendour too. These actions were an attempt to take the blunt edge of what Charkes de Gaulle and later Barry Eichengreen called the US’s exorbitant priviledge of controlling the internation reserve currency that gives them control over foreign governments through potential capital crises, that increases the return on their foreign investments and means they are have less limits on how much national debt they can accumulate. Advantages the British government had in the 19th century. (As a side note this is why Wilson’s devaluation of sterling in 1968 was, economically a squib. The Sterling area was already dead in the water after Suez, by 1968 it mainly consisted of sentimentally important but economically unimportant reserves which soon shifted out and were probably going to do so anyway.)

Finally this market was relatively niche until petrodollars flooded in with the OPEC crisis of the 70s leading to Eurodollar banks swelling. As OPEC raked in huge numbers of dollars for theor cartel and didn’t trust the US it went where thry did trust it. This situation speaks more to the failures of the international trade system in oil, the intersection of geopolitics of Israel and the geographic location of the main oil reserves. This was an unintended consequence of what the BoE did in the 50s. If we’d had a stronger business base in the late 70s and early 80s we coukd have taken advantage of the influx to invest in industry. But decades of socialist nationalisations and trade unions strangling the business market meant the investors went into other sectors of the economy, Thatcher’s surgery was too late and just encouraged the sectoral shift as the dsmage was done. With proper investment the UK could have kept its position as an industrial power like Germany seeking advantage in high quality and well designed products. But investors weren’t willing to grant use of that bounty because of the business environment at the time. (I know for example of a small steel works in Sheerness that was invested in the 1970s only on the condition the bolshie steel unions of the time were not involved).

The article is quite a tendentious and one-sided account of the history.

Last edited 2 years ago by Ferrusian Gambit
SULPICIA LEPIDINA
SULPICIA LEPIDINA
2 years ago

Slightly baffled by second sentence of third paragraph. Starts “There is evidence
..”
.”

Ferrusian Gambit
Ferrusian Gambit
2 years ago

The missing word was Chinese. The Chinese moved their dollar holdings from the US to France in the late 40s.

Last edited 2 years ago by Ferrusian Gambit
SULPICIA LEPIDINA
SULPICIA LEPIDINA
2 years ago

Thanks!

Katharine Eyre
Katharine Eyre
2 years ago

Wow, very interesting comment. I do not know anything about this issue so it is good that people comment and provide further information/another side to the story.

Martin Bollis
Martin Bollis
2 years ago
Reply to  Katharine Eyre

Seconded, great comment

SULPICIA LEPIDINA
SULPICIA LEPIDINA
2 years ago

From Britain’s point of view doesn’t this malaise go back a little further?
By late 1916 we were on the cusp of bankruptcy, not only having to fund our own war but that of our somewhat unreliable ‘allies’.*

The former PM Lord Balfour was thus despatched to New York to grovel at the feet of Paul Warburg & other ‘Bankers’ to exhort them to keep supporting us, even to the point of the US joining the War. After all if victorious, the Kaiser was hardly going to ‘pay’ our bills.

Thus by 1918 we were in a dreadful financial position, and completely unable to fund the so called ‘Land fit for heroes’.** Despite generous US debt rescheduling in 1934, we have been “living beyond our means” ever since. It is now a great British tradition, in effect a fool’s paradise!

(* Notably France, Russia & Italy.)

(* Lloyd George. Exact quote: “ make Britain a fit country for heroes to live in”.

Jonathan Story
Jonathan Story
2 years ago

Look. The only European country that paid its war debts was GB. Germany didn’t: Hitler binned them. Then the allies binned WWII debts for Germany. France didn’t have any debts to bin in WWII. The UK finally repaid WW debts in the early 2000s.
We paid for WWI
We paid for victory in WWII.
We paid the French for liberating them by joining the EEC in 1972 which was organised as nothing more than a gigantic reparations machine to feed French agriculture: in 1972, when Heath joined, 95% of the EEC budget was for farming. UK food prices lept 50%. The House of Lords voted massively to join: wonder why? About 6,000 people own most of the UK. They voted to repeal Prime Minister Peel’s 1845 Fee trade Act- cheap food for the workers. The idea was food security.

Last edited 2 years ago by Jonathan Story
Ethniciodo Rodenydo
Ethniciodo Rodenydo
2 years ago

Vey interesting comment

Bill W
Bill W
2 years ago

Thank you very much for that. I used to work in the bond markets and was always told the Eurodollar market was a product of US deficit financing, particularly during the Vietnam War, so thanks again for your wider historical insight.

Last edited 2 years ago by Bill W
Hugh Marcus
Hugh Marcus
2 years ago

The last bit of your comment mentions the 70s & 80s. Maybe we should note that thanks to the antics of the left of the Labour Party & Union Barons, Britain was on a 3 day week with the rubbish piled on the streets. It had a junk credit rating & was being baled out by the IMF. Before anyone comments, I’m not some Thatcherite fan boy. Just pointing out the truth.

Howard Gleave
Howard Gleave
2 years ago

I always regard the comments as an integral part of the article itself, often, as here, greatly contributing to an understanding of the full facts.

Jonathan Story
Jonathan Story
2 years ago

Yes. Its worth remembering that the UK emerged from WWII as an industrial great power. There were plenty of improvements to make, all of which poijnt to a huge upside. They were nearly all to do with worker productivity and management. The disaster was a comination of two things: nationalisations and failure in trade union reform. The latter was within easy reach as the TUC oversaw implementation of the very successful trade union reforms in Germany. Without such legislation, the years from 1950-1970 saw the UK swept from world markets in heavy industry: steel, chemicals, shipbuilding, cars. As the author points out very correctly, Thatcher’s reforms came far too late.
The author of the main article too makes a major error. The prime international vehicles for trade as late as 1956 were sterling and the franc. It was the introduction of MidEast oil prices in the mid-50s, and a double price floor on world markets, that prompted-with State Department promotion- dollarisation of the world trade system.

Last edited 2 years ago by Jonathan Story
J Bryant
J Bryant
2 years ago

There’s an interesting article in today’s edition of Unherd about the trend among some men to undergo vasectomies because they don’t want to bring children into what they view as a doomed world.
I would argue most western societies are undergoing the national equivalent of vasectomies (perhaps orchidectomies might be a better analogy) by their renunciation of their own cultures and achievements and the willful curtailment of growth in view of the supposed climate catastrophe. Our societies are increasingly stagnant and infertile.
Meanwhile Putin is plotting the rebirth of the old Russian empire or something like it, and Xi is busy (and more successfully) pursuing a similar course in China. Those countries are vigorous and alive however much we might dislike the ruling regimes.
So we’ll go right on selling arms to third world countries and allowing foreign oligarchs, and various types of crooks, to launder their assets in the west and otherwise stimulate our ailing economies.
The west’s stagnation and self-loathing isn’t free. It must be funded somehow.

Last edited 2 years ago by J Bryant
Galeti Tavas
Galeti Tavas
2 years ago
Reply to  J Bryant

Bryant – how could you forget the Pharma/Medical industrial Complex?

“The west’s stagnation and self-loathing isn’t free. It must be funded somehow.”

It is cool how it is funded. The Central bank, in collusion with the Treasury and Politicos, creates $ Trillions out of air as Debt which goes to the wealthy – and so finally ends up with 38 $ Trillion National Debt. So what to do – it could never be paid off – so it sends out 3 $ Trillion as stimulus cash wile reducing productivity (both by Lockdown – for your health). Thus many more $ chasing an even reduced amount of goods and services = Inflation, now 7% – 15%, depending who you believe.

Next you keep Interest Zero.

The debt then inflates away.

Only the problem is is also inflates away the working peoples savings, wages, and pensions – anything which is not an appreciating asset. (The wealthy have their $ in appreciating assets or Hedge funds, so it does not hurt them.) THUS Inflation is a stealth TAX on the Working people, as it ‘Steals their purchasing power’ to inflate away the debt. Cool. The gov gives the Billionaires more Billions of borrowed money, then creates inflation to inflate that debt away, and also it inflates away the workers savings and pensions too – and so the money re-distributes its self from the Workers to the Wealthy. Really cool.

This is the method being used now. Normally a ‘Recession’ is used to redistribute the money from the workers to the wealthy – but that is another story.

chris sullivan
chris sullivan
2 years ago
Reply to  Galeti Tavas

what is going to happen in 2022/3 tho- can all the corrupt ‘balls’ be kept in the air ??

Sam Brown
Sam Brown
2 years ago
Reply to  J Bryant

The Russian eonomy is vigorous and alive? The other one has bells on …go on ….

D Glover
D Glover
2 years ago

Excellent Article. I’ve been amazed at how quickly the Barry Gardiner story has fallen from view.
Gardiner is a Labour front-bencher. He has apparently been bought by the CCP for over half a million pounds. He employed the son of a Chinese agent in his office. I would have thought that that was a bigger story than Boris’ birthday cake but no, it’s gone.
Gardiner says ‘Ms Lee “gained no political advantage for the Chinese state from me”’
Blimey, I wonder what they thought they were buying, then.

SULPICIA LEPIDINA
SULPICIA LEPIDINA
2 years ago
Reply to  D Glover

Correct, Gardner should have been Impeached, but then so should Blair*. Both make Boris‘s misdemeanours look trivial.

(* The Butcher of Iraq. 1953-)

Scott S
Scott S
2 years ago
Reply to  D Glover

Gardiner is one of many UK elites enthralled by the CCP. I recommend you read ‘The Hidden Hand’, by Clive Hamilton and Mareike Ohlberg. I would also advise looking into the 48 Group Club.

Andrew F
Andrew F
2 years ago
Reply to  Scott S

Yes, required reading for members of China fun club on this and other forums.

Allison Barrows
Allison Barrows
2 years ago
Reply to  D Glover

But we’re told tales of Chinese-bought politicians are “conspiracy theories” . . .

R Wright
R Wright
2 years ago

I lost faith in his system when i realised that due to government sponsored tax dodging (‘planning’) my father and his small business paid more tax in a year than Starbucks.

Last edited 2 years ago by R Wright
Kiat Huang
Kiat Huang
2 years ago

Bloody hell, that is a good article. Is there any reason to doubt the veracity of the facts as laid out? It is a damning indictment of The City as a giant money laundering operation cum playground for the super-rich, with the government as willing landlords/enablers. It’ll take a while to clean up the place, so better start now.

SULPICIA LEPIDINA
SULPICIA LEPIDINA
2 years ago
Reply to  Kiat Huang

Don’t despair!
Remember that classic City adage “ My word is my Bond”.
Or perhaps those wonderful words of the late Lord Clive*
“Mr Chairman, I am astonished at my own moderation “.

(* of India.)

Galeti Tavas
Galeti Tavas
2 years ago

OK – anyone out there actually understand banking? I do not, but think I do, sometimes, and my understanding of the Eurodollar is also something much weirder than the link in the article. Tell me how wrong I am.

So money is created by Banks loaning it into existence – as Banks do not have money to cover the loans, it is just created when they loan it – this is fact, and how all money is created. The new (collateralize, so good)Loan is made, entered on the Asset side of the Ledger – Then the debt is entered on the Liability side of the Banks Ledger – and it all balances. Then $$$ must be paid – – say a house is bought, $100,000 loaned into existence, the debt swapped to the bank who also gets the check for the just created $100,000, and is later bundled into a Mortgage Backed Security and sold on…. As the money is paid back the debt reduces, and the money goes back to non-existence – into ‘Money Heaven’. The bank makes its money off fees, and ‘Margin’.

The world works off USA $$, I think 65% of every transaction internationally takes place in Dollars. USA could not/did not create this many Dollars – Instead……

An Offshore Bank makes a loan in USA Dollars, it Just loans them into existence outside USA, in a Non-USA Bank!. The nation/Corporation getting the loan now has $$$$$ which never were from USA – they are Eurodollars, but also are real USA Dollars, pretty much – and can move anywhere a $ moves – but not Made in USA. There are Trillions of these, the world needs them to hold so much international debt – and savings, and payments.

Anyway – you want to run shady money out of GB? Then what will it do to make a living? I know it totally corrupts the Government and Banking – but in USA the politicos are just as corrupt. Hunter, China Billions, and the ‘Big Guy’ is a story just building up Big now – Pelosi and insider Trading – just how Political Business is conducted. They are not into politics as a Public Service – but for Power, Status, and $$$$$$. Insider trading , being on Company Boards, Speaking Fees, Introductions for envelopes full of $ is how politicians make their actual money.

Eurodollar University (which I have not watched much) https://www.youtube.com/c/EmilKalinowski – it gets too esoteric for me – and when Jeff Snider joins him, it really gets tough…

SULPICIA LEPIDINA
SULPICIA LEPIDINA
2 years ago
Reply to  Galeti Tavas

Perhaps we should return to the traditional terminology?
They are Moneylenders not Bankers, and they inhabit Counting Houses not Banks.

“Call a spade a spade” as we used to say in
those halcyon days, as I’m sure you remember?

SULPICIA LEPIDINA
SULPICIA LEPIDINA
2 years ago

What an absolutely splendid caption photograph!
Putin looking like a cross between Vlad the Impaler & Genghis Khan and Blair the demented buffoon.

Well done.

Jeff Butcher
Jeff Butcher
2 years ago

I wish I understood economics better. How did the post-war British banks get the dollars in the first place to ‘sell’ to the Russian banks if the onus was on the Federal Reserve to keep its currency ‘onshore’? And how did Soviet Russia get hold of the Sterling it needed?

Graham Stull
Graham Stull
2 years ago
Reply to  Jeff Butcher

I’m guessing the British banks used the trade relationship between the US and the UK to buy dollars for sterling. The Russians could obtain sterling by trading with any countries within that currency area – for example, a great many Ladas were sold in Ireland and paid for in sterling, which Ireland could exchange pound for pound with the Bank of England.

Jeff Butcher
Jeff Butcher
2 years ago
Reply to  Graham Stull

Thank you for this

Dermot O'Sullivan
Dermot O'Sullivan
2 years ago
Reply to  Graham Stull

That sentence about Lada sales is not true.

Graham Stull
Graham Stull
2 years ago

No? I learned to drive in a ’77 Lada, on the Naas duel carriageway.

Graham Stull
Graham Stull
2 years ago
Reply to  Graham Stull

But maybe that only came in later. I can’t really speak for the 50s, as I wasn’t around. It was only an example that came to mind…

Andrew F
Andrew F
2 years ago
Reply to  Graham Stull

Yes, it came later. Lada was a copy of Fiat 124 whereas Poland got licence to produce Fiat 125.
It was all part of opening of markets in Soviet Block to consumer goods in early 70s.
Poland really wanted to manufacture Volkswagen but for political reason choice was narrowed to Fiat and Peugeot.
Soviet pressure to help out Italian communists (then strongest in Western Europe) won the contest for Fiat although Peugeot (304? Not quite sure, it was so long ago) was better car.

Nicky Samengo-Turner
Nicky Samengo-Turner
2 years ago

How staggeringly naieve? Just what is ” dirty money”? It is a concept conveniently invented by The US to protect the Dollar, IRS and US Government Bond market.

Britain needs overseas investment, cash deposits and investment instrument purchase because it strengthens our economy, and provides jobs, investment, and ultimately money for our Treasury and capital markets…It is going to go somewhere, so why not here? Just who are we to judge the morality of the origins of cash, when ” non dirty” money can do exactly the same? In any event, the US Treasury Securities are a perfect ” money laundering” instrument, which can be used to transfer money anonymously: how many US Govt bonds are bought using this ludicrous, artificial term ” laundered money”?…

D Glover
D Glover
2 years ago

It is going to go somewhere, so why not here?

In a word, morality.
What else separates us from racketeers and pimps?

graemecr
graemecr
2 years ago

Given the number of factual errors about the origins of the Eurodollar market, I did not bother reading the rest. Midland Bank were not the founders. At the relevant time, they were making a ground-breaking move, for a traditional clearing bank, into hire-purchase. It was Kleinworts and Schroders who started things up and it was BOLSA and, especially, Warburgs who got the ball rolling. I cannot help but imagine that the rest of the article is equally sloppy and inaccurate

Colin Elliott
Colin Elliott
2 years ago
Reply to  graemecr

It is.

Nicky Samengo-Turner
Nicky Samengo-Turner
2 years ago
Reply to  graemecr

Actually Credit Suisse White Weld, then First Boston

Colin Elliott
Colin Elliott
2 years ago

This article over simplifies, and part of the reason is to score a political point, one regularly pushed by Labour and others.
‘The City’ is not a homogenous monolithic organisation. I used to work in it. It consists of a great number of businesses, of many sizes and in many types of business. It’s defined primarily by location, but not necessarily, since the same businesses may have branches or back office elsewhere in the country, or elsewhere in the world, indeed, they may very well be foreign owned, or the shareholders may live anywhere.
It’s quite likely that ‘dirty’ money flows through it, because it is one of the major financial conduits of the world, and money may enter after being laundered, or, in the past, without sufficient explanation.
Although it is handy for critics to imply Russians use ‘the City’ alone to lodge their money, it’s not true; they crop up all over the world.
Furthermore, a ‘Russian oligarch’ may be a Putin chum, but may well be the opposite, and in danger of his or her life or freedom. It is difficult to tell if such money was honestly come by, because they came by it outside our jurisdiction, and even the actions of the authorities in such places cannot be relied upon.
We have excellent company and land registration systems, but they developed in a world which was more honest and trusting, and it has taken time to attempt to strengthen them, but anyone aware of recent changes in the regulations will know that it is happening, if maybe too slowly. Personally, I still think there’s a way to go, and we should seriously be considering a national ID system, to which I was opposed up until about 15 years ago.
Unlike many countries, we allow any foreigner to buy any property, and they weren’t even subject to CGT on residential property until 2015.
Finally, does anyone not remember Labour’s attitude when it was in power? Was not Mandelson a frequent guest on Deripaska’s yacht?

Last edited 2 years ago by Colin Elliott
Iris C
Iris C
2 years ago

A very interesting article.
However, the Russian oligarchs who came here with their wealth twenty-five years ago when Russia was in turmoil are probably now British citizens, and are thus able to invest their money anywhere they want, like other nationals..

Anna Rycroft
Anna Rycroft
2 years ago
Reply to  Iris C

The Oligarchs came to Britain 25 years ago, before Putin’s rise to power. They took with them the wealth released by Perestroika- Russian wealth held captive for 70 years, and necessary for the rebuilding of Russia, sans appendages. The Oligarchs are mentioned at the beginning of this article, basically as a lure to get you interested,are neither Putin’s nor Russia’s friends .They have impoverished their homeland and enriched the West- Putin would like the money back and honestly I can’t see why not. The tax rate is max.13% in Russia. Big deal.

Iris C
Iris C
2 years ago
Reply to  Anna Rycroft

I agree with everything you say. I was just pointing out the difficulty of holding them to account now.

Hugh Marcus
Hugh Marcus
2 years ago
Reply to  Iris C

Everyone wants something done about the Oligarchs, except the ones who pour their money into football clubs 😉

James Joyce
James Joyce
2 years ago

Interesting and informative article.
Perhaps it would have been nice to include China, and their influence, though I understand China is not the point of the article. But wasn’t some Chinese lady running around Parliament for years, dispensing favours, picking up checks, a sort of free-lance goodwill ambassador, willing to lend a helping hand to those corrupt enough to take it? Her son employed at the top level of government?
Democracies are for sale. The sickening story about the empty luxury flats reminds me so much of NYC, where these flats owned by the rich and super-rich are empty almost the entire year.
Some years ago, the most expensive real estate ever sold in NYC –about $100mm if memory serves–was bought by a 19 year old Russian student. Do I need to add that her father was an oligarch? I was totally in love with that girl….But at least that flat was occupied, though sadly, not by me.

Liam O'Mahony
Liam O'Mahony
2 years ago

And you accuse Iteland of being a tax haven for the multinationals (which we’renot btw)! Sure even if we were we’d be in the ha’penny place compared to London: uer ‘avin’ a larf mate!!!

Nicky Samengo-Turner
Nicky Samengo-Turner
2 years ago
Reply to  Liam O'Mahony

You should be- tax havens benefit the entire population

Hugh Marcus
Hugh Marcus
2 years ago
Reply to  Liam O'Mahony

Ireland is only transparent enough to reduce the tax rate to encourage inward investment. The others criticise because they didn’t think of it first. We have SF politicians in Belfast who shout constantly about ‘Tory cuts’ yet are behind a move to reduce the North’s corporation tax to equal Dublin’s. How very marxist of them 😉

Nicky Samengo-Turner
Nicky Samengo-Turner
2 years ago

We need more of this money, not less! The phrase ” dirty money” to anyone with a scintilla of knowledge of capital markets and asset management is meaningless piece of propaganda, used by taxation authorities and The Left… a bit like the term ” racism” it has no definition and is what any one wants it to be and mean: as I have said here before the US Treasury Bond markets is hypocracy “in extremis”, with the IRS chasing tax dodgers, and the US T bill being an excellent tool for dodging the ” dirty money” zealots… Once again the ignorance of the interweb populus drives this staggering ignorance