Russian Officials Hit "Londongrad" Money Laundry, But Their Own Assets Are In British Offshores

March 15, 2010 (LPAC)—On Feb. 27, Russia's Deputy Prosecutor General Alexander Zvyagintsev blasted the role of Britain in harboring Russian fugitives from justice, especially those wanted for financial crimes. "No wonder so many of them call the British capital 'Londongrad'," Zvyagintsev told the government daily Rossiyskaya Gazeta, "These are not just small pickpockets, but figures with substantial funds." Zvyaginstev cited the UK's loose asylum laws (which have also been a factor in another of London's nicknames: "Londonistan," haven for terrorists) and the City of London's status as the premiere world financial center, which provides ways for criminals to conceal their ill-gotten profits.

If shadow-economy profits were the only issue, a straight- forward law enforcement approach could make headway. What Zvyagintsev didn't go into, however, is a much bigger elephant in the room: the huge portion of the Russian economy which has been melded into the global hot- and fake-money flows of the London- centered Inter-Alpha group and related financier interests. This occurred, thanks to the takeover of the Russian government in 1991 by a London-trained clique, including the late Yegor Gaidar and Anatoli Chubais, today CEO of the state-owned tech firm Rosnano.

At a meeting on attracting foreign investment to Russia, held earlier this year, President Dmitri Medvedev lamented that as much as half of "foreign" investment actually comes from Russian companies, which have their legal registration offshore. This is one of the reasons why Russia's top four foreign investor countries last year were Cyprus, the Netherlands, Luxembourg, and the UK, in that order.

A March 3 article in the St. Petersburg newspaper Nevskoye Vremya reported that, "by conservative estimates, 90% [NINETY percent] of Russia's major [privatized] companies belong entirely or partially to offshores." The article cited a number of famous cases in point: the Alfa Group of Mikhail Fridman and Pyotr Aven is registered through companies in Gibraltar, Luxembourg, the British Virgin Islands, and the Netherlands; Oleg Deripaska's Basic Element, the holding company for Rusal (aluminum), the GAZ auto complex, and a major insurance company, is registered through a holding company in the British Crown dependency called the Bailiwick of Jersey, which holding company, in turn, belongs to a firm registered in the British Virgin Islands; Roman Abramovich's Yevraz steel empire is registered as a Cyprus company; the NLMK steel complex, property of Russia's richest man, Vladimir Lisin, is run through the offshore Fletcher Holding Ltd.; and Victor Vekselberg's Renova is registered in the Bahamas.

In his book The Anatomy of Russian Capitalism (English edition, EIR News Service, 2007), Prof. Stanislav Menshikov detailed how this pattern developed, with the ill-got fortunes of the 1980s Gorbachov "perestroika" era passing over into still more ill-got fortunes of the 1990s Gaidar-Chubais privatization. It was profitable for the newly minted "oligarchs" to keep their money off shore, avoiding various Russian taxes. Nevskoye Vremya quotes the London-intimate Finance Minister Alexei Kudrin, a junior member of the Gaidar-Chubais clique and one of its members still in power, covering for these practices: "Our budget loses from optimization (tax evasion -NV editors) through offshores, but it's not illegal." At the same time, the same Kudrin is cutting funding to Russian Railways and other national infrastructure projects, in pursuit of his avowed goal of outdoing the European Union's Maastricht conditionalities by a factor of three: Kudrin wants Russia's budget deficit to be no greater than 1% of GDP.