Londongrad: From Russia with Cash; The Inside Story of the Oligarchs

But there was also palpable tension in the air because of the conspicuous and, to some, menacing presence of the Russian contingent, who attracted frequent nervous glances. When Berezovsky and his colleagues left their seats at the end of the service, the remainder of the congregation moved out of the way to let them pass first.

The local mourners and Sarah’s friends were mostly conventional, middle-class English people who lived quiet, rural lives in the pristine Dorset village of Easton. They were hardly used to the hard Russian faces or the battery of television cameras, photographers, and police that greeted them as they left the church that bright spring afternoon. To the local villagers it must have looked like the cast of The Godfather or The Sopranos had arrived.

Sarah was devastated by her husband’s death, but she was also confused by and concerned about the media attention. ‘Why are there so many cameras here?’ she asked outside the church. ‘I don’t understand.’ A former secretary, Sarah’s life was family, music, friends, the castle, and the English countryside. Stephen had told her nothing about his secret life in London, Gibraltar, and Russia. A lover of James Bond films, Curtis revelled in this covert existence. He compartmentalized his life, mainly to protect Sarah. ‘I don’t want to know,’ she once remarked and would have recoiled from the dark, cut-throat world of the Russian super-rich.

Sarah recognized none of the Russian mourners.‘Who’s this? Who’s that?’ she asked one of Stephen’s colleagues in a state of increasing bewilderment. ‘What on earth was my husband doing with those Russians?’ she asked another friend. Not wanting to worry her, they declined to answer.

After the service the procession escorting Curtis’s body was accompanied by the song ‘You’ll Never Walk Alone’, with Sarah’s soprano voice ringing out the final words as she followed her husband’s coffin. The burial took place in the gardens of Pennsylvania Castle, attended only by family and close friends. Curtis was laid to rest to the strains of the bagpipe melody ‘Highland Cathedral’.

As the guests mingled in the marquee after the burial the atmosphere was tense and apprehensive. Many former clients were anxious to know the identities of the other guests and whom they worked for. ‘It was a weird situation for a wake,’ said a former employee of Curtis’s law firm. ‘People were looking over their shoulders to see who was talking to who. The strange thing was that I knew some of our clients knew each other, but they would not acknowledge each other at the funeral in case they were photographed or associated with other clients. It was very bizarre, almost comical.’ At 9.45 p.m. a spectacular fireworks display erupted over the English Channel.

The funeral of Stephen Langford Curtis brought together an uneasy, unsettling gathering of two cultures: the conventional, light-hearted, understated English middle class and the dark, intense, stern-faced, focused Russian business elite.

Little more than a decade earlier the Russian presence in Britain had been barely noticeable. It would have been rare to hear a Russian accent in a Knightsbridge boutique, a Mayfair restaurant, or even on the London underground, let alone at the funeral of a mysterious, even obscure, British lawyer. There was no sign then of what was to come: the arrival in Britain of a wave of middle-class, affluent Russians. The influx that followed the collapse of communism in 1991 started slowly but by the end of that decade the Russian desire to move to London had reached what one insider has described as ‘fever pitch’.

Although there are no official figures for the size of the London-based Russian and former-Soviet community, it is widely accepted that by 2008 it numbered well in excess of 300,000. This was large enough to spawn four Russian-language newspapers, the glossy magazine New Style, a plethora of Russian networking clubs and internet sites, and a host of Russian social events.

Although by then the Russian community was diverse, most of its members were ordinary professionals who had chosen to live, work, and settle in London. Many had British husbands or wives. It is this group, rather than the oligarchs, who jokingly referred to London as ‘Moscow-on-Thames’. Some worked for international organizations or Russian companies based in London while others had set up their own businesses. Some found jobs as estate agents, in the City, and in retail to target or cater for Russian clients. They mostly came to Britain to escape the crime, political uncertainty, and economic turbulence and were a very select middle-class group compared with the wider Russian population.

Some still commuted back and forth from Moscow, by commercial rather than by private jet. Flight SU247 from Moscow touched down at Heathrow on Friday evenings, carrying what its Aeroflot crew called ‘voskresnuy muzh’, which translates as ‘Sunday husbands’. These were transcontinental commuters, a mix of oil executives, bankers, and importers and exporters who had homes and families in London but who worked in Moscow. For them it was a weekly ritual: Friday and Sunday nights on a four-hour flight, weekends in London, and the week in their Moscow office.

Dominating this steady stream of migrants was a tiny but much more high-profile group - the oligarchs, a tiny cadre of privileged insiders who had acquired Russia’s state-owned natural resources and, by the end of the 1990s, had come from nowhere to join the ranks of the world’s super-rich. While some of Russia’s nouveaux riches - billionaires and multi-million-aires - have remained in Russia, most have moved or built a base abroad, shifting their mountain of assets with them. While a few have selected Israel, New York, or Switzerland, most have chosen London. From the millennium, this group scattered its new-found wealth like confetti, helping to transform London into the world’s leading playground of the super-rich, contributing to runaway property prices, soaring profits for luxury goods retailers, and bringing displays of opulence not seen since the 1920s.

Some of the Russian ultra-rich were, through fear of arrest, driven out of Russia and took up residence in London. Others became international super-nomads, living partly in London, partly in Russia, while travelling the globe in their private jets and luxury yachts. Many kept a discreet foot in both camps. Along with the next tier of the Russian rich, the oligarchs were lured by London’s accommodating tax laws, compliant banking system, relaxed lifestyle, unobtrusive City regulations, elite schools, and independent judicial system.

This book tells the story of four Russian oligarchs: Boris Berezovsky, the intense, extrovert fugitive who has plotted against Putin’s Russia from his gilded London base; Roman Abramovich, the wily, reserved owner of Chelsea Football Club whose multi-billion-pound oil fortune came from outmanoeuvring his former friend and now bitter enemy Berezovsky; Mikhail Khodorkovsky, the intellectual who naively believed that he was more powerful than the state and ended up in a Siberian jail; and Oleg Deripaska, the ruthless young pretender and aluminium magnate who rose to become the richest of all of them, helped along by his cosy relationship with Vladimir Putin.

During the course of the 1990s these four men built huge fortunes at electric speed by exploiting the flawed post-Soviet scramble to build a Western-style market economy. Though it was Russia itself that was the source of their personal wealth, it was London that provided the backdrop to the next phase in their meteoric climb up the global rich lists.

For Abramovich, London has helped to satisfy his apparently insatiable appetite for conspicuous consumption. For Deripaska, banned from entering the United States, the capital has been a crucial base for building his diverse and colossal global business empire. Before his incarceration, Khodorkovsky used London to woo the British political and business establishment in his international campaign to transform his tarnished global reputation. For Berezovsky, who has been fighting extradition since 2001, London has provided a refuge from Russian prosecutors who have accused him of alleged tax evasion and fraud, charges that he has strenuously denied.

In contrast to the corrupt, politicized judiciary in Russia, London has also offered legal sanctuary and a fair due process of law. While indicted Russian businessmen have been arrested and detained in Spain, France, Italy, and the United States, Britain has refused to accept any of the dozens of extradition attempts by the Russian authorities, souring diplomatic relations in the process. ‘I think they [Russians] feel that this is a country of law,’ said Berezovsky. ‘They feel that they are well protected here.’1

London has long attracted the extravagantly rich, but the post-millennium wave of foreign wealth was unprecedented. In the decade up to 2008, trillions of pounds of foreign capital settled in the UK. For those who make money out of money, it was a golden decade for tax lawyers, accountants, and bankers. ‘The British have found a new vocation,’ said William Cash, the well-connected publisher who founded Spear’s Wealth Management Survey, the glossy quarterly that chronicles the activities of the super-rich. ‘That is being the financial bag-carriers of the world. Britain’s ruling classes used to own the wealth. Now they’ve become the fee-earning servants, servicing the global financial elite.’2

By 2007, before the devastating impact of the global economic meltdown of the following year, London had displaced New York as the financial capital of the world. It did so by providing an unrivalled tax avoidance industry and a much lighter regulatory touch. After 9/11 and a series of highprofile financial scandals on Wall Street, the US Government passed a new law - the Sarbanes-Oxley Act - which imposed much tougher corporate requirements on the disclosure of information, accountancy procedures, and the process of listing on the New York Stock Exchange. This made New York less attractive to the world’s business rich and London seized its chance. The United States also introduced much tighter visa restrictions for foreign businessmen, which did not compare favourably with the more open UK border controls.

For moneyed Russians London also provides logistical advantages: the flight from Moscow is just four hours, while south-east England enjoys a ring of airports with facilities for private jets. According to James Harding, editor of The Times, ‘From London it is possible to work a normal day and talk to Tokyo in the morning and Los Angeles in the afternoon. A businessman can get on a plane from Moscow and be in central London in five hours, from Bombay in seven, even from Beijing in nine. This is one of the reasons why over the past twenty-five years London has turned itself into an international marketplace while New York has remained essentially a domestic financial capital.’3

However, tax remains the primary factor. ‘New York is obviously very stable, but most of the other big centres of wealth management would have questions over them’, said David Harvey of the Society of Trust and Estate Practitioners whose members unashamedly help wealthy families pay as little tax as is legally possible.‘Tokyo’s gone through a period of depression, Singapore is relatively new, and Germany was until recently a tax-heavy jurisdiction. If you’re looking to avoid tax legally, you’re as well going to London as anywhere else.’4

The UK boasts an unrivalled tax-avoidance industry - and an abundance of highly paid accountants able to devise complex ways of hiding an individual’s wealth. In 2007 the International Monetary Fund ranked London alongside Switzerland, Bermuda, and the Cayman Islands as ‘an offshore financial centre’.

Most countries have required their residents - including wealthy foreigners - to pay domestic taxes on their worldwide income and capital gains. In the UK foreigners can claim they are ‘domiciled’ abroad even though they may have lived in Britain for years and have British passports. Under this rule, ‘non-domiciles’ would only pay tax on their UK income and not on overseas income, usually the bulk of their earnings. Furthermore, by purchasing property through offshore trusts, foreign buyers could avoid both capital gains tax when they sell and most of the stamp duty usually paid at the initial purchase.

For a Russian billionaire living in London, his earnings from his homeland have been tax-free in the UK.‘There is one reason above all why these people are coming to London and that is the tax law,’ said Natasha Chouvaeva, a London-based Russian journalist. Although this advantage was partially reduced in 2008 when, following a mounting media and public outcry, the government introduced a £30,000 annual levy on non-domi-ciled residents, it was an inconsequential sum for the superrich.

The origins of the oligarchical influx lie in the privatization of Russia’s vast and valuable state assets in the 1990s, an explosive process that enriched the few, opened up a huge gulf between rich and poor, and enraged the Russian people. A World Bank report in 2004 showed that, in effect, thirty individuals controlled 40 per cent of the $225 billion output of the Russian economy in its most important sectors, notably in natural resources and automotives. The study concluded: ‘Ownership concentration in modern Russia is much higher than in any country in continental Europe and higher than any country for which data is available.’5

Little of this unprecedented accumulation of wealth has been invested in Russia in business or charity. Rather, most of the money has been secreted abroad, with billions of dollars hidden in a labyrinth of offshore bank accounts in an array of tax havens, from Switzerland and Jersey to the British Virgin Islands and Gibraltar. Much has ended up being deposited in and managed by British banks. Stashed away, it has been almost impossible to trace. Despite attempts by Russian and British law enforcement agencies, little of it has been recovered and requisitioned back to Russia.

Russia is where the money originated, but it has not been a comfortable place to spend it - too many people pointing fingers in Moscow restaurants, too much scrutiny by the tax police, and the constant fear of assassination. The Russian rich cannot go anywhere without bodyguards and bullet- and bomb-proof cars. Even wearing bespoke suits attracts attention. But in the UK or Europe they have been able to go mostly unrecognized and can relax, spending their gains without fear of censure or of being called to account. After buying their multi-million pound town houses and country estates, they have indulged their sybaritic lifestyles, cruising in St Barts, skiing in Gstaad, and shopping in Knightsbridge.

For their wives it has been heaven. ‘London is a metropolis,’ said Olga Sirenko, who edits a website for Russian expatriates. ‘It is fashionable. It has all the boutiques and the culture. Moscow doesn’t have that kind of chic.’ Aliona Muchinskaya, who has lived in Britain since 1991 and runs her own PR company, says that Russians now dismiss Paris as being ‘too dowdy and villagey’. London, by contrast, is ‘bustling and busy with its restaurants and nightclubs. Russians can hire Rolls-Royces and private jets more easily here.’

On arrival in London the first port of call for the affluent, socially aspiring Russian was to the estate agent, notably Savills, Knight Frank, or Aylesford. Deals were cut at high speed: no mortgages, just cash. In 2006 one-fifth of all houses sold for over £8 million went to Russians. For properties over £12 million, the figure was higher still. But Russians have been extremely selective in location, not merely restricting themselves to the golden postcodes - SW1, SW3, W1, and W8 - but only to certain streets and squares within them. Owning a British country property is also prestigious. Again, their choice of location has been very specific: St George’s Hill and Weybridge and Wentworth Park, both in Surrey.

The next decision for the oligarch seeking to emulate the British aristocracy was which top boarding school to send their offspring to, for a British education is another motivating factor for moving to the UK. Public schools generally offer high academic standards and a secure, friendly environment. In Moscow, by contrast, kidnapping is a constant and real fear. While London’s elite estate agents set up offices in Moscow and St Petersburg to woo ultra-rich buyers, British public schools, colleges, and universities have also sent their senior teaching staff to Russia on recruitment drives.

By 2008, it was no longer surprising to find Russian students at British schools and top universities, whether it was Abramovich’s teenage daughter at an independent all-girls’ school in London or foreign minister Sergei Lavrov’s daughter at the London School of Economics. School numbers soared from 2000 and some Russian parents started to seek schools where there were no other Russians. The fees - up to £30,000 a year - may not have been a problem, but old habits died hard. A headmistress of one top girls’ public school told the story of a Russian whose daughter had failed the entrance exam and who offered her a suitcase full of cash. He promised to pay for anything - a new gym, classrooms, a swimming pool. ‘Things don’t work like that over here,’ said the bemused headmistress. At another top school a parent asked permission to land his helicopter on the cricket field when visiting his child.

While most Russian children eventually return home, an English education is regarded as a commercial benefit. ‘I know that some oligarchs only hire students with a Western education,’ said Boris Yarishevsky, president of the Russian Society at the London School of Economics.6 This also extends to politicians. ‘I know people whose fathers occupy really high positions in the Russian government and I know they study in London,’ he added. ‘I don’t think that they would want me to give out their names, though.’7 It is quite possible that one day Russia - like many African and Middle Eastern states - will elect a President who has been educated at a British private school.

The UK has long been a haven for Russian exiles and dissidents. Anti-tsarist radicals flocked to London in the early twentieth century and Revolutionary Congresses were held here every two years. At the 1907 Social Democratic Congress the New York Times reported that an arrest warrant had been issued for one notable attendant, Vladimir Ilyich Lenin: ‘A Famous Rebel in London. Lenin Will Be Arrested if he Returns to Russia - Real Name Ulianoff ’ ran its headline. Lenin was not a permanent exile but visited the city six times between 1902 and 1911. At Seven Sisters Church in Holloway, north London, he met workers whom he described as ‘bursting with socialism’, while the area around Whitechapel and other parts of the East End swarmed with radicals. During one of his trips Lenin saw Hamlet at the Old Vic and visited Speaker’s Corner and the National Gallery. It was at the British Museum in 1902 that he first met Leon Trotsky, who had just escaped from Siberia.

After the 1917 Revolution, relatively few affluent Russians fled to London - only 15,000 by 1919. Far more moved to the Slavic states, to Berlin, and to a lesser extent to France and China, particularly Shanghai. Those who did arrive in Britain were a mix of aristocrats and middle-class liberal intellectuals, notably the family of the philosopher Isaiah Berlin who arrived in 1919 and settled in the Surrey town of Surbiton. ‘I am an Anglophile, I love England,’ Berlin once reflected. ‘I have been very well treated in this country, but I remain a Russian Jew.’8 Other descendants of this first wave of Russian immigration include the actress Dame Helen Mirren (born Ileyna Vasilievna Mironov), winner of an Oscar for The Queen, and the Liberal Democrat leader Nick Clegg.

During the Cold War there was always a sprinkling of new Russians coming to London. Some were dissidents fleeing the gulags; others were high-level KGB defectors who ended up rubbing shoulders in London with White Russians - mostly the offspring of those who had fled Russia after 1917. The latter lived mostly quiet lives, spoke good English, and were largely Anglicized. The 1991 Census recorded 27,011 residents living in the UK while claiming the former Soviet Union as their place of birth. Most of them would have been Russian.

The collapse of the Eastern Bloc in the late 1980s had a dramatic impact on the pace of Russian arrivals, unleashing a new and unprecedented wave of migration from Russia and former Soviet and East European states. In 1991 the British Embassy in Moscow issued barely 100 visas - to a mixture of those working for Russian companies, students, and Russians who had married Britons - while only one Russian living in the UK was granted citizenship. Even by the mid-1990s, Londoners would have started to become aware of the occasional unrecognizable foreign accent in a shop or in the street - those Russians who did come congregated in a few favourite restaurants and nightclubs - but otherwise the early arrivals remained largely anonymous. Gradually that trickle turned into a flood. By 2006, the number of Russian visas issued had soared to 250,000, while the number granted citizenship in that same year had risen to 1,830. Berezovsky has likened the twenty-first-century Russian wave to the influx of nineteenth-century Russians to Paris. ‘It used to be that Russian aristocrats spoke French and went to France,’ he said. ‘The modern Russian speaks English and feels more comfortable in England.’9

The early Russian migrants - mostly professional middle class but by no means wealthy - were joined within two or three years by a quite different stratum of Russian society. These were what their countrymen dubbed ‘the new Russians’, and they started to arrive between 1993 and 1994. This is the group that was beginning to make money, though not on the same subsequent scale, out of Boris Yeltsin’s economic reforms, the easing of restrictions on private enterprise, and the first wave of privatization. They were a mix of state bureaucrats, entrepreneurial hustlers, Kremlin insiders, and former KGB officials; others were members of emerging Russian-based criminal gangs.

This group of ‘new Russians’, who were always outnumbered by ‘ordinary’ Russian migrants, were by and large not coming to London to settle down. They came on short-term tourist or business visas, to attend a conference or a business meeting, or on shopping and spending trips. As one Russian already living here who knew some of them put it, ‘At this time there was no real dream to come and settle in London. It was difficult to get a permanent visa except illegally, work permits were scarce, and most of this group could make much more money in Moscow than in London. They had money and came here for a week or two at a time to burn it.’

During the 1990s, Britain gradually eased its entry regulations. Tourist and business visas became easier to acquire. Especially welcomed by the authorities were those with money. Anxious to encourage investment from abroad, the government bent the rules to encourage the arrival of the super-rich. ‘Essentially, if you are coming to the country with money to spend, you’re very much welcomed with open arms,’ said John Tincey, Vice-Chairman of the Immigration Service Union, in 2007.10

In 1996 the Conservative government of John Major introduced a new ‘investor visa’ for those wanting to make the UK their main home and able to invest at least £1 million in the country. Of this at least £750,000 had to be invested in either government bonds or UK-registered companies. Those investing in this way were, after five years, allowed to apply for permanent residency and eventually UK citizenship. Only one other country in the world - the United States - operated such a scheme (though with a much lower entry fee) and a number of wealthy Russians took advantage of the rule. All they needed to do was meet the investment cash criterion.

The process of seduction worked. The Russians, along with the super-rich of other nations, poured into Britain. As Forbes magazine described it in 2006: ‘London attracts the elite of the world’s rich and successful. It can lay claim unchallenged to one title: it is the magnet for the world’s billionaires.’11