Chelsea fans are right to claim hypocrisy over Abramovich sanctioning

For years, the UK has turned a blind eye to overseas billionaires, including Putin-linked oligarchs, buying up English football teams

James Montague
22 March 2022

Chelsea's owner Roman Abramovich has been sanctioned by the UK government |
PA Images / Alamy Stock Photo

Back in 2016, I was on a bus as it toured around some of London's most salubrious neighbourhoods.

I was writing a book called ‘The Billionaires Club’ about the super rich investing in football. I wanted to know: where did all this new money come from? And why was so much of it flowing into the game?

The bus trip gave me some insight into that. It was a ‘Kleptocracy Tour’, hosted by Vladimir Ashurkov, a Russian exile who was the executive manager at Russian opposition leader Alexey Navalny's Anti Corruption Foundation. With Ashurkov as our guide, we viewed the fabulously appointed palaces and opulent mansions bought by the global super-rich using fortunes siphoned from the world's kleptocracies. Russia led the pack: much of its cash had been plowed into prime London real estate. And, of course, into a different kind of prime real estate: football clubs.

There was, among others, Roman Abramovich, the owner of Chelsea FC, and his £125m Kensington palace that used to be the Russian embassy. There was Alisher Usmanov, a former major shareholder in Arsenal who now invests heavily in Everton, and his £50m Hampstead abode. And a 5,380 square foot mega apartment overlooking the Thames and Whitehall Gardens, owned by a company controlled by the wife of Igor Shuvalov, Russia’s former first deputy prime minister and the man in charge of delivering the 2018 World Cup finals. Ashurkov and Navalny had highlighted Shuvalov as a key official in an alleged corrupt scheme involving Abramovich and Usmanov, which appeared to enrich Shuvalov’s own family. At the time, the Russian government said no laws were broken.

London was full of properties, Ashurkov said, that were the “ill-gotten gains of Russian officials or of cronies of the current people in the administration…they bring their money to Britain, they buy property, they buy companies, and with this money comes the corrupt practices that people are used to at home.”

No one really listened until Putin unleashed his vicious war against Ukraine. All three men have now been sanctioned by the British government. Shuvalov is banned from visiting his wife's penthouse. Abramovich's assets have been frozen and Chelsea is being sold by the British government, while the English Premier League has disqualified him from being a club director. And Usmanov is unlikely to ever visit Everton's new stadium, even though his company USM paid £30m just to secure first refusal of any naming rights deal.

But what has been most striking about the news that football is awash with money connected to Putin is that it isn’t news at all. Russia's oligarchs have always hidden in plain sight, with Abramovich both the most secretive and the best known. Since he bought Chelsea in 2003, he has sunk at least £1.5bn into the club, winning 21 trophies, while his connections to Putin and allegations of corruption, have been largely ignored.

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In 2012, Abramovich was being sued by his former business partner Boris Berezovsky, who claimed he was owed billions of pounds. Abramovich won the case, but his lawyers admitted in the High Court that he had made corrupt payments to secure a Russian oil company for $250m in a rigged auction. Ten years later, he sold it to the Russian state for $13bn. But he was still considered a fit and proper person to own a UK football club. As he was after the 2014 invasion of Ukraine, when Navalny had called on Abramovich and Usmanov to be sanctioned. “You can draw up a blacklist of about a thousand people who will no longer be allowed entry into Western countries, and you can do it quietly, without any big announcement, but you have to hit the propagandists of war, the ones who finance the war, the real party of war,” he said in a 2015 interview with the Financial Times. “Usmanov, Abramovich, and their families … If they can’t get to their residences in London or in Switzerland, that will make a difference.”

Then there was the 2018 Salisbury poisoning, when dissident defector Sergei Skripal was targeted with a nerve agent. Shortly afterwards, the British government delayed renewing Abramovich's work visa. He withdrew his application and is now an Israeli citizen. But it didn't impact his ownership of Chelsea.

As Labour MP Chris Bryant told the House of Commons shortly before Abramovich was sanctioned last month, using parliamentary privilege to quote from a leaked 2019 Home Office document: “As part of HMG's [Her Majesty's Government] Russia strategy aimed at targeting illicit finance and malign activity, Abramovich remains of interest to HMG due to his links to the Russian state and his public association with corrupt activity and practices. An example of this is Abramovich admitting in court proceedings that he paid for political influence.”

Only now, as Ukraine burns, has it become an issue. The UK Treasury's Financial Sanctions Notice stated that Abramovich was “a prominent Russian businessman and pro-Kremlin oligarch” who was “associated with a person who is or has been involved in destabilising Ukraine and undermining and threatening the territorial integrity, sovereignty and independence of Ukraine, namely Vladimir Putin, with whom Abramovich has had a close relationship for decades.”

It isn't only Russian money that has flooded English football. Billionaires from the US, China, Thailand and beyond have all bought Premier League clubs. Their motivations are often opaque. American owners tend to see the possibility of extracting profit from soccer in the future. Others chase the reputational benefits. A football club gives a kind of benign visibility – on the biggest billboard in the world – that is perfect for reputation laundering, sometimes called sportswashing.

Abramovich never adequately explained why he bought Chelsea. At the time he said he was simply a young guy looking for some fun. Having assets and visibility outside of Russia was also, of course, useful in case you fell out of favour with the Kremlin, as the likes of Berezovsky and Mikhail Khodorkovsky did, and had their fortunes and freedom threatened.

In her book ‘Putin's People’, former Financial Times Moscow correspondent Catherine Belton spoke to Sergei Pugachev, once a member of Putin's inner circle, who claimed the Russian president had identified Chelsea FC as a potential forward operating base for Russian money and influence. “Putin personally told me of his plan to acquire the Chelsea Football Club in order to increase his influence and raise Russia’s profile, not only with the elite but with ordinary British people,” he alleged. Abramovich denied this, and, along with several other oligarchs, sued for libel and data protection breaches. The case, which led a spokesperson for the Index on Censorship to say London’s courts were becoming a place to “quash critical journalism, not only in the UK, but around the world”, was settled out of court when HarperCollins agreed that some information concerning the oligarch had been inaccurate. The book remains on the shelves with corrections.

Staggering hypocrisy

It is those billionaires with state connections that are invariably the most powerful. Manchester City has been owned by Sheikh Mansour, a senior member of the Abu Dhabi royal family and a deputy prime minister of the UAE, since 2008. The club has been transformed into one of Europe's best, as well as a massive advertising hoarding for the UAE, one of the world's least democratic countries. And last year, the English Premier League eventually approved the purchase of Newcastle United by a consortium that was 80% owned by Saudi Arabia's sovereign wealth fund, the PIF. The PIF is chaired by the Saudi crown prince, Mohammed bin Salman (MBS), who, along with the UAE's crown prince Mohamed bin Zayed, has been one of the architects of the ruinous war in Yemen that has taken hundreds of thousands of lives.

US intelligence concluded that MBS was also responsible for ordering the murder of Saudi dissident Jamal Khashoggi. The Newcastle takeover was opposed by Hatice Cengiz, the fiancee of Khashoggi. “I can say that the one incident that has hurt the reputation of Saudi Arabia the most was Jamal’s murder. It has destroyed his [MBS’s] reputation, he’s desperately trying to use these types of deals to repair his image,” she told me.

“Since the murder, many companies and countries don’t want to partner or do business because of the backlash. He wants legitimacy and credibility. Buying a team like Newcastle in the Premier League, in one of the most powerful countries in Europe and the world? You buy legitimacy in the international community. He’s accepted and celebrated for rescuing a struggling team. Everyone then sees everything in a different light.” Mohammed bin Salman strongly denied the allegations that he ordered Khashoggi’s death and the Premier League was convinced that Newcastle United would not be controlled by the Saudi state and approved the deal.

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Sportswashing launders the reputations of thugs and despots, but it also diminishes our democratic institutions

Abramovich's connections to Putin were known for two decades. It appears his money was not welcome only when the reputational cost of doing business with him was too high. And what about the other football clubs that are equally as compromised?

Last week, British prime minister Boris Johnson wrote an article in The Telegraph bemoaning the West's “addiction” to Russian oil. “If the world can end its dependence on Russian oil and gas,” he wrote, “we can starve him of cash, destroy his strategy and cut him down to size.”

Soon after, Johnson flew to Riyadh to meet Mohammed bin Salman – 72 hours after Saudi Arabia executed 81 people in a single day – to beg the country to raise its oil production to plug the gap from the loss of Russian oil. Labour leader Keir Starmer accused Johnson of “going cap in hand from dictator to dictator.”

For now, the days of Russian money in football appear to be over. London's high-end estate agents will no doubt be sad, but a new age of extreme wealth and power investing in the game for political ends is only just beginning.

Order an inquiry into Putin-linked cash in British politics

To: Boris Johnson

We, the undersigned, are concerned at this time of tension with Russia about the influence of Vladimir Putin’s regime in UK politics

• We note that that the Conservative Party received significant amounts of money from Russian donors and their associates, including from people with apparent links to Putin’s government..
• We note that oligarchs and officials from former Soviet republics with high levels of corruption have purchased more than £2bn worth of property in the UK.
• We note that more than 200 Russian millionaires have bought their way into the UK in the last seven years, despite the government’s pledge in 2015 to stop corrupt oligarchs exploiting the system.
• We note that parliament’s Intelligence and Security Committee’s “Russia Report” found that “Russian influence in the UK is ‘the new normal’”.
• We note that the same report recommended that there should be an investigation into Russian interference in the 2016 Brexit referendum, something which has not happened yet.

The above points raise serious questions about the extent to which Putin’s administration - or people linked to it - might be able to interfere in British public life.

At a time when Putin’s administration threatens global peace, we cannot simply hope for the best. We call on you to immediately order an inquiry into whether or not money linked to Vladimir Putin’s regime is influencing UK politics.

Drop the excuses and embrace Ukraine

Ukraine’s resilience in the face of Russia’s renewed onslaught has raised questions about what terms they should consider in any eventual peace deal. President Volodymr Zelenskyy’s concession[↗] last week that Ukraine may well not join the North Atlantic Treaty Organisation (NATO) is probably realistic, but also regrettable, as it shows the hollowness of the Euro-Atlantic democracies’ past promises.

Zelenskyy’s team have, however, been adamant that they will not give up[↗] on their country’s bid for European Union (EU) membership. They rightly see joining the bloc as a key aspect of securing a brighter future for Ukraine. It would give the hope of rescuing something positive from the suffering inflicted on Ukrainians. Some may see it as a reward for their heroic stand against authoritarianism, but including Ukraine would also be in the EU’s own interest[↗] as it seeks to define its particular contribution[↗] to European security.

Kyiv is committed to joining the bloc, but the question now is whether the EU and its member states can summon the collective political will to do the right thing, meet the moment, and recognise Ukraine’s candidacy for membership.

Despite some positive signs, it is not certain that they will. Ursula von der Leyen, President of the European Commission, upended two decades of EU policy with a firm endorsement[↗] of a membership perspective for Ukraine on 27th February, asserting[↗] that: ‘they are one of us and we want them in.’ 

Ukraine’s formal application for candidacy immediately attracted support[↗] from the bloc’s Central and East European members. Yet uniform backing was not forthcoming. Italy offered a verbal endorsement but France and the Netherlands, long hostile[↗] to further EU enlargement, gave no sign of changing that stance even in these exceptional circumstances. Germany[↗] remained scrupulously hesitant.

On 11th March, European leaders meeting in Versailles declined[↗] to approve Ukraine’s candidacy for EU membership. Despite repeated pledges to ‘#StandwithUkraine’, and the blue and yellow light shows across the continent, Ukrainians could be forgiven for wondering if they have reached the limits of what is, in reality, ‘solidarity-lite’.

Yet Versailles was not the end of the line. EU leaders referred the decision to the European Commission to pass a ‘technical’ opinion on the request for candidacy, even though the decision remains political. With Ukraine’s future membership likely to feature in any possible peace settlement, EU leaders will soon find the ball back in their court.

Before it gets there, and to make the political decision easier, it is important to understand and refute the arguments – and the excuses – that have been mobilised against recognising Ukraine’s candidacy for membership. 

Refuting arguments against, resisting ‘reflexive control’

A common argument against Ukraine joining the bloc is that it is not helpful to discuss EU membership, a long-term issue, in the midst of a crisis. For example, Mark Rutte, the Dutch Prime Minister, who is among the vanguard of EU leaders providing weapons to Ukraine, asserted[↗] ‘we’re not going to help Ukraine that way’ and argued[↗] instead for a focus on ‘practical support’.

No reasonable observer would deny that Ukraine requires weapons and other aid. Yet if Zelenskyy, who also has some rather pressing concerns to deal with and a fair idea of Ukraine’s needs, includes membership among his priorities and can make time for it, then so too can EU leaders. 

Another objection is that many Europeans fear recognising Ukraine’s candidacy makes escalation of the current conflict, even as far as nuclear war, more likely. This horrific but remote possibility tends to obscure the vanishingly low probability that it would happen – especially as a result of recognising Ukraine’s candidacy. 

Some may point out that Vladimir Putin, President of Russia, used the 2013 EU Accession Agreement[↗] with Ukraine as an excuse (not to be confused with a reason) to lash out. Yet this happened before the EU and its member states started directly arming Ukrainians to better enable them to kill Russian invaders, a significant increase in direct antagonism.

In today’s radically changed situation, recognising Ukraine’s EU candidacy would certainly not please the Kremlin, but nor would it risk becoming a pen stroke heard around the world. We should also understand that spreading fear of taking even such obviously reasonable steps is part of Putin’s strategy of ‘reflexive control[↗]’ which is aimed at getting the Euro-Atlantic democracies to limit their own possibilities for action.

There is a more valid argument to be made against immediate Ukrainian membership of the EU. President Zelenskyy has called for[↗] this – although likely as a negotiating tactic. Some Western Europeans may worry – and some Ukrainians may hope – that immediate membership would lead the EU to become directly involved in the war militarily. This reflects a misplaced faith, on both parts, in the EU’s ‘Mutual Defence Clause[↗]’, which remains aspirational rather than genuinely credible.

The majority of Ukrainians know that, for them and other Europeans, the question of who can and will do the defending in Europe has been answered by the current conflict – and it is not the EU. Moreover, this is actually a non-issue given that immediate membership is absolutely not on the cards. Most Ukrainians know that too, but support from their partners matters most in their hour of need.

Unlike NATO membership, which is about mutual defence, EU membership is about a better life and a brighter future. Being in the EU thus has to mean something definitively better than what Ukrainians have had before. They know this would not come through a mere declaration that, like the wave of a magic wand, would change their country at a stroke, but rather through the hard work required to meet the ‘European standards’ that EU membership requires across the spectrum of governance.

Excuses, not reasons

Recognising candidacy does not, of course, mean instant membership, yet the two are often conflated by opponents of Ukraine’s EU perspective. This conflation becomes particularly pernicious when it is used to argue that Ukrainian membership is not ‘realistic’ – and therefore we should avoid raising false hopes by granting the latter when we have no intention of honouring the former.

As various experts[↗] have noted, this is disingenuous because it is self-referential. Membership would only be unrealistic if EU leaders refuse to grant it – despite Ukraine doing the hard work to meet the bloc’s requirements.

This rejectionism is often justified by reference to voters’ concerns and the supposedly ‘toxic’ nature of enlargement for Western Europeans. Beyond lingering chauvinism or ‘xenophobia[↗]’ towards Central and Eastern Europe, famously seen in previous hostility to the ‘Polish plumber[↗]’ that played a role in French and Dutch voters rejection of the EU Constitution in 2005, it is hard to understand what drives this supposed toxicity.

It is true that Dutch voters rejected[↗] an enhanced ‘association’ package for Ukraine (far short of membership or candidacy) in 2016, even after 196 of their citizens had been murdered[↗] by Putin’s cronies in the country’s eastern occupied territories. More recently in Germany[↗], there have been occasional dog whistle references to Ukrainians’ ‘excessive’ or ‘hyper’ nationalism that supposedly conflicts with EU values. Yet, if EU membership is incompatible with nationalism, someone better tell the citoyens of France who, like people across Europe and around the world, still[↗] cleave strongly to their nationhood.

Moreover, in the febrile atmosphere since the threat of conflict exploded into war, attitudes are shifting fast. Many Europeans now recognise that we owe a debt to Ukrainians and think it should be paid, in part, with a membership perspective. A poll[↗] conducted across a thousand adults in each of France, Italy, Germany, and Poland from 3rd to 7th March (but only released after the Versailles meeting) showed that 71% supported Ukraine’s bid. Even in France, 62% were in favour.

While von der Leyen may have been criticised[↗] in some quarters for raising unrealistic expectations, she seems to have better read the European public’s mood than some of her fellow leaders. Some may object that this support may not last, others that in practice Ukraine would not be able to make the reforms needed to meet EU standards, rendering this goodwill moot.

In reality, this is another flimsy excuse. The European Commission is responsible for overseeing accession processes. Its president, like the Central European leaders whose countries went through those processes two decades ago, understands the practical realities this entails. Unlike Ukraine’s current ‘partner’ status, candidacy would give both parties a strong incentive to ensure that the necessary reforms are really made. The EU cannot afford a member that doesn’t meet its ‘European standards’ and Ukraine is eager to learn how to do so.

European values, the EU’s value and Britain’s role

This learning process, however, is not a one-way street: Ukraine’s current struggle has a lot to teach current EU members about European values[↗] and how to defend them. Ukrainians know that the road to membership will be long. For now, as Petr Fiala, the Czech Prime Minister, argued[↗], Ukrainians mainly need to know that they belong. EU leaders should provide that assurance – and make their most telling contribution to European security – by seizing the moment and endorsing Ukraine’s candidacy.

Non-EU states have a role to play here as well. It was long suspected that the United Kingdom (UK) supported widening the EU to prevent itself getting sucked into a deeper Union. Brexit definitively dispels that motive here. The UK should use its influence with key allies like the Netherlands – and, if possible, Germany and France – to encourage them to overcome their objections to Ukraine’s EU candidacy. At the same time, British actors should not be afraid to acknowledge both the value of and conviction behind Ukraine’s EU aspirations. Rallying other countries that support Ukraine’s struggle for freedom behind this cause is a worthy way to give meaningful substance to the aspirations of ‘Global Britain’.

Dr Benjamin Tallis is a Practice Fellow at the Hertie School’s Centre for International Security in Berlin, Germany.

 Britain’s World

 

Climate Change Cannot be the Only Driver of Europe’s Energy Policy

22 March 2022

Amid much fanfare, in February 2015, the EU launched its flagship proposal for an EU Energy Union. Occurring less than a year after Russia’s annexation of Crimea, the EU’s response was a sweeping vista of energy diversification based on a unifying internal energy market and greater energy efficiency. Spooked by the fear of being cut off from Russian gas supplies and a spike in the oil price to over $110 a barrel, the EU proposed speedy, resolute action.

Indeed, in 2014 the then Polish Prime Minister Donald Tusk argued that ‘regardless of how the stand-off over Ukraine develops, one lesson is clear: excessive dependence on Russian energy makes Europe weak.’

2022, unfortunately, is telling a similarly sorry story.

Remarkably, seven years and one ongoing Russian military invasion later, the EU’s Energy Union remains a pipe dream. Europe is still addicted to Russian gas and has not appreciably reduced its dependency since 2015. And this addiction (45% of total gas imports in 2021) is crippling the EU’s ability to conclusively weaken Putin’s energy-resourced war machine.

In 2015, the Juncker Commission pushed energy diversification high on the institutional agenda, but this prescience wasn’t shared by national capitals. And given the scale of Gazprom’s current gas grip on Europe – 12 European countries are dependent on Russia for at least 80% of their gas supplies– it’s clear that the EU’s proposals have failed miserably.

In truth, this was a political failure driven by two factors. First, the collapse in energy prices from late 2014 (largely driven by global oversupply). This easing of price pressures lulled European leaders into a false sense of energy security aided by the rapidness of Russia’s Crimea takeover.

For all the official protests at Russian expansionism, most national governments focused solely on business as usual with their Russian suppliers. Germany’s embrace of the Nord Stream 2 pipeline is the worst kind of example.

The second was the emergence of climate change ambition as the sole driver of national and European energy policy. The race to cut carbon emissions and place the EU as the world’s leading environmental bloc resulted in Brussels overlooking important strategic concerns. Risks such as security of supply and overdependence on Russia as an energy producer were blithely ignored as Europe’s climate ambitions expanded.

The result is an EU that – incredibly – continues to send billions of euros to Russia for gas and oil supplies notwithstanding the ongoing devastation of Ukraine. Energy supplies remain exempt from EU sanctions. Germany, as Chancellor Scholz recently noted, has no intention of quenching its thirst for its energy imports from the Kremlin.

So while the EU has reheated its 2015 proposals and waxes lyrical about diversifying gas supplies from everywhere but Russia, expanding gas storage facilities, increasing energy efficiency, and being a climate change champion – its poorest members in Eastern Europe remain hopelessly exposed to Russia’s whims.

This is an exposure that will persist for many more winters to come.

In this context, member states like Poland, Latvia, and Bulgaria should actively seek two key revisions to Europe’s climate change agenda. Revisions that reflect post-Ukraine realities. 

First, the countries that are most dependent on Russian energy supplies should be granted derogations to continue operating coal powerplants as they build up their renewable energy capabilities. Even Europe’s Green Deal Tsar, Commission Vice President Frans Timmermans, acknowledges this prospect. This will help them reduce their existing dependencies, thus ensuring political autonomy and collective security.

Second, the EU as a whole needs to give states in central and eastern Europe more flexibility in deciding their short-term energy mix. This is the only solution to helping them keep their lights on (and factories powered) while simultaneously reducing dependencies on Russian gas.

And this mix will, for many countries, include significant dollops of nuclear power. Consistent with the EU’s recent taxonomy on sustainable activities, nuclear can provide a generational transition to achieving zero carbon economies. When it comes to gas, the cornerstone of the old Energy Union proposals – greater cross border interconnection – can help link up countries with excess power supply to their needy neighbours.

Back in the heady days of 2015, Commission Vice President Maroš Šefčovič argued that the Energy Union was the “only way to transcend the so-called contradiction between ‘competitiveness’ and ‘decarbonisation’”. But Šefčovič and the EU fatally misdiagnosed the problem.

The real contradiction isn’t between economic growth and combatting climate change. As the ongoing horrors in Ukraine illustrate, the real dilemma is about the EU having the political courage to implement an energy policy that serves and protects all its members equally. 

Decarbonisation will remain a key priority for the EU in the long-term. However, it is time to concede that you can’t accomplish a successful European Green Deal without first achieving security of supply and price predictability.

Climate change cannot be the only driver of Europe’s energy policy.

 

The Future of the Russian Economy – Echoes of 1918?

15 March 2022

The recent downgrades of the Russian economy have increased the prospect of the Kremlin defaulting on its foreign debts. Tied to international sanctions and the retreat of foreign investment from Russia, there is much speculation about the prospects of a reeling Russian economy.

But although President Putin is a self-proclaimed scholar of economics, the economic implications of invading Ukraine for the Kremlin will have little in common with the chaos of the 1990s (or Russia’s last default in 1998). In fact, prolonged conflict in Ukraine resulting in a continuation of sanctions against Russia by key global economies makes 1918 a more relevant comparator.

Then, as now, Russia was experiencing soaring interest rates, a collapsing currency, foreign exchange controls, roaring inflation, military conflict and increasing international isolation. The overall economic consequences for the Russian population at large was uniformly devastating, a factor exacerbated dramatically by the domestic policies undertaken by the newly established Communist authorities (who had seized power in November 1917).

It is sometimes incorrectly assumed that Russia’s participation in the First World War (fighting alongside Britain and France) directly contributed to its economic collapse beginning in 1918. But this is only partially true. In fact, up to 1917, Russia had financed its enormous war efforts without radically compromising the living standards of its population. The decline of average incomes in Russia between 1914 and 1917 (about 20%) was less than that evident in the German and Habsburg Empires.

The decades up to 1918 also witnessed Russia becoming a viable investment location for capital from Western Europe, particularly France. By the time Russia exited the war (through the Treaty of Brest-Litovsk in March 1918) the Kremlin’s debt to its war allies totalled over $3.5 billion, or well in excess of 125% of its GDP. By 1917, Russia was very much part of the global trading economy.

Yet, it wasn’t even the Communist seizure of power in November 1917 that ultimately ensured Russia’s isolation from the international financial community. Rather, it was the Communist decision in February 1918 to repudiate all international debts contracted by both the previous Tsarist regime (up to March 1917) and the Provisional Government of March-October 1917. Not only were debts defaulted on, but all assets of foreign investors in Russia were also seized by the state.

For Russian leaders like Lenin and Trotsky, the 1918 repudiation was the long held realisation of their 1905 Financial Manifesto which declared that:

“Foreign capital is going back home. ‘Purely Russian’ capital is also seeping away into foreign banks. The rich are selling their property and going abroad in search of safety. The birds of prey are fleeing the country and taking the people’s property with them”.

The economic impact arising from the debt default of 1918 cannot be underestimated. It convinced western economies of the unreliability of Communism as an economic model (notwithstanding French disbelief at the loss of their investments), encouraged Western support for anti-Kremlin “White” forces in the Russian Civil War, led to a blockage of the Russian economy, and resulted in the isolation of Russia from the world’s markets for much of the following decade.

For the Russian population, the debt default contributed to a downward economic spiral of almost unimaginable proportions. From 1917 to 1919, output per head in Russia halved. The Kremlin’s attempts to centralise industrial and agricultural assets resulted in famine-like conditions appearing in some regions in 1920, and again during the early 1930s. All the while, the Russian government was still engaged in expensive, large-scale military campaigns against its many foes, including in Ukraine.

The events of over a century ago provide important lessons for the prospects of the Russian economy in 2022. 

Firstly, Russia defaulting on its foreign debt will only serve to increase its international isolation. It will presage a wider move towards nationalising all foreign-held assets in Russia, as the Kremlin will seek to centralise many more key sectors of the Russian economy to sustain the war effort.

Second, living standards in Russia will decline as long as Russia remains internationally isolated. Although not approaching the levels of decline evident in 1919–20, it is likely that 2022 will bring a double digit contraction of the Russian economy. However, it must be noted that even with only limited support from states like China, the Kremlin will likely be able to continue to operate on a more enclosed, war-like footing for the medium term.  A footing which prioritises the “war effort” over the production and availability of many consumer goods.

Third, a Russian debt default in 2022, as in 1918, will not have any direct systemic impact upon the global financial system, due to the relatively limited size of Russia’s foreign debt. With a debt to GDP level of less than 30% in 2021, and a limited exposure to foreign currencies (a policy implemented by Russia after its invasion of Crimea in 2014), the Russian economy can continue to operate in greater autarkic conditions for a considerable period; albeit with a continuous decline in its population’s living standards.

The danger is not in the direct impact of a Russian default, but rather in its potential contagion to exposed sectors, like banking and aviation. The exposure of French and Italian banks to Russian default is estimated at $50 billion. Irish aviation companies’ exposure to Russian airlines exceeds $4 billion alone. Like in 1918, international investors in Russia face a very uncertain future, allied to huge disconnection from existing business models.

In 1905, the Communist Financial Manifesto began with the words “the government is on the brink of bankruptcy. It has reduced the country to ruins and scattered it with corpses”. More than a century later, President Putin seems intent on bringing those terrible words to life.

We failed Palestinians and people of Kashmir, Imran tells OIC meet

Says West did not take the OIC seriously as Muslims were a “divided house”

Web Desk Updated: March 22, 2022 16:11 IST

Imran Khan (right) at the OIC meeting | Official Facebook account

Pakistan Prime Minister Imran Khan on Tuesday repeated his oft-stated charge that India was attempting to change the demography of Jammu and Kashmir. He was speaking at the opening of the 48th meeting of the foreign ministers of members of Organisation of Islamic Cooperation (OIC).

Radio Pakistan quoted Imran as saying “India is also changing the demographic structure of the occupied territory [Jammu and Kashmir] in complete contravention of the fourth Geneva Convention. He said India is doing so by bringing settlers from outside.” Imran described this change of demography as a “war crime”

Imran questioned the OIC's record on key issues such as Jammu and Kashmir and Palestine. “We have failed both the Palestinians and the people of Kashmir. I am sad to say that we have been able to make no impact at all,” Imran was quoted as saying by Dawn.

He said the West did not take the OIC seriously as Muslims were a “divided house”. Referring to Jammu and Kashmir, Imran said no action was taken against India after abrogation of Article 370 in 2019. He said “nothing happened because they (India) feels no pressure. They feel we can just [pass] a resolution and then [go] back to our usual business,” Dawn reported..

Imran also argued Muslim nations had not acted to stop the narrative of 'Islamic terrorism', which went unchecked after the 9/11 attacks. Imran referred to the shooting at a mosque in Christchurch, New Zealand, in 2019 and claimed it was a result of stereotyping of Muslims into “moderate” and “radical” categories.

“Once that happens, how is the man in the street in Western countries, how is he supposed to differentiate between a moderate Muslim and a radical Muslim? Hence, this man walks into a mosque and shoots everyone he could,” Imran was quoted as saying by Dawn.

Pakistan Foreign Minister Shah Mahmood Qureshi also spoke of the Kashmir issue. “The Muslims of Palestine and the Indian Illegally Occupied Jammu and Kashmir (Pakistan's name for J&K) are still reeling under abominable subjugation. For the last seven decades, they have struggled to achieve their inalienable right to self-determination,” Qureshi was quoted as saying by Dawn.

Qureshi claimed more than two-thirds of the world's refugees came from five countries— Syria, Afghanistan, South Sudan, Myanmar and Somalia—most of which have substantial Muslim populations.

The two-day meeting of the OIC foreign ministers will focus on the theme of “building partnerships for unity, justice and development”. Forty-six of the 57 OIC member states are being represented at the ministerial level.

ECB Says Climate Efforts Haven’t Been Derailed by War in Ukraine

Nicholas Comfort, Bloomberg News

(Bloomberg) -- The European Central Bank’s efforts to tackle the fallout from climate change haven’t been derailed by turmoil from Russia’s war in Ukraine, according to an official.

“Does it influence our agenda? I think so far not,” Irene Heemskerk, head of the ECB’s climate change center, said on Tuesday. “We’re still moving forward with our plans and of course if there needs to be adjustment made, we’ll do so, but for now it’s really on top of our agenda.”

The ECB is pushing euro area lenders to prepare for potential losses from climate change and is holding a detailed stress test this year. The central bank has also committed to take account of its impact in its monetary policy framework.

Speaking at a conference organized by German finance lobbies, Heemskerk said that while she “felt a bit reluctant to talk about climate change when people are dying not so far from our homes,” authorities “shouldn’t lose sight of this other crisis that we have looming on our horizon and is already here today.”

Russia’s invasion of Ukraine has “opened discussions on Europe’s energy independence and the possibility of speeding up the transition toward a low carbon economy,” said Heemskerk, who reports to ECB President Christine Lagarde.

“This jump, this transition would likely cost us more in the short run due to a rising demand and the constrained supply of key materials and energy sources, but it highlights the crucial paradox in the price we have to pay to fight climate change,” she said. “We know that even if a green transition involves cost and investment, inaction will be far costlier in the long run.”

©2022 Bloomberg L.P.

Boardrooms with more women deliver more

 on climate, says Arabesque


Federica Urso and Simon Jessop
Tue, March 22, 2022, 

A boardroom is seen in an office building in Manhattan, New York City, New York

LONDON (Reuters) - Companies with more women on their boards are more likely to be on track to meet global climate goals, analysis by investment research and asset manager Arabesque showed on Tuesday.

The study, the first to address the topic, found the most diverse 20% of the world's 1,000 biggest companies were more aligned with a goal of capping global warming at 1.5C (2.7 Fahrenheit) above the pre-industrial average by 2050.

Hitting that target is crucial to avoid irreversible damage to the planet, U.N. scientists say.

Across the group, including Britain's FTSE, Italy's MIB, the S&P 500, France's CAC, Japan's Nikkei, Germany's DAX and the Nordic OMX, 75% of the more diverse firms were in line with 1.5C.

Arabesque said it gave each company a diversity score by looking at data like board diversity and diversity targets, and a temperature score after checking if the company's climate plans were on course to support the goal.

Barbara Krumsiek, Arabesque board member and former chief executive at asset manager Calvert Investments, said the data showed a strong correlation and backed up academic studies on the issue.

"So far all the data I'm seeing reinforce the original premise that diversity and environmental performance are linked," Krumsiek said.

Conversely, 37% of the firms in the least-diverse 20% of companies were headed towards a worst-case 2.7C trajectory or above, and most did not disclose any meaningful data, the research showed.

"For investors, lack of disclosure should be a red flag," Krumsiek said.

The data from companies underpinning the analysis was collated in the ESG Book, a digital source of sustainability data backed by some of the world's top investors, regulators and companies.

The data showed mixed progress on diversity between 2017 and 2021. Almost all companies analysed had committed to diversity policies but far fewer set concrete diversity targets, Arabesque said.

In Britain, 54% of companies in the FTSE 100 now had diversity targets, an increase of just under a quarter from 2017, while the percentage of the biggest U.S. companies having concrete targets almost tripled over the period to 47%.

Italy's top companies had the lowest percentage of diversity targets, at 35% but rising by a fifth since 2017, while Germany went backwards, with 80% of firms having a target, against 83% in 2017.

(Editing by Edmund Blair)

UK

B&Q and Screwfix staff to get pay rise as DIY boom continues

Demand for energy-saving kit and the shift to working from home are driving sales, says Kingfisher boss

Pay for B&Q workers will increase by 6.5% to £9.80 an hour. 

USD $13.08

Photograph: Paul Faith/PA


Sarah Butler
THE GUARDIAN

Tue 22 Mar 2022 

The owner of B&Q and Screwfix is handing workers a pay rise as the company’s boss forecast that demand for energy-saving kit and the shift to working from home would keep fuelling the DIY boom.

Pay for B&Q workers will increase by 6.5% to £9.80 an hour while Screwfix is increasing minimum staff pay by 5.4% to £9.70 an hour from 1 April, putting both chains just ahead of the new legal minimum of £9.50 which starts next month.


Their parent company, Kingfisher, is the latest retail firm to announce a significant pay rise for workers, amid heavy competition for staff, the increase in the legal minimum wage and a strong rise in sales and profits.


Screwfix lands in hot water over radiator refund


The retailer announced pre-tax profit of £1bn for the first time in the year to 31 January – a third up on the previous year and a threshold passed by only a handful of UK retailers ever – as sales rose almost 7% to £13.2bn, fuelled by a burst of home improvement during pandemic lockdowns.

Families refitted spare rooms as offices or space for adult children and refurbished gardens for outdoor entertaining to reduce their Covid risk.

Thierry Garnier, the Kingfisher chief executive, said he expected the DIY boom to roll on amid “strong supportive trends” including more working from home, a relatively strong housing market and “a lot of demand for energy saving” because of higher gas and fuel prices.

“Home improvement is not a bad place to be in a crisis,” he said, adding that trading since the year end had been resilient with sales up 16% on pre-pandemic levels with strong orders for kitchen makeovers.

He said he hoped the government would put forward new plans to help support families to install more energy efficiency measures to offset higher gas and electricity bills caused by a global surge in energy prices. “UK homes are relatively poorly insulated,” he said.

B&Q is to test a service that will “diagnose and fit energy efficiency solutions”, such as insulation and heating management tools, to cater to demand, while Screwfix is selling solar panels and heat pumps.

The group is opening 80 more Screwfix outlets over the coming year, up from 70 over the past year, with the aim of reaching a total of 1,000, up from about 790 at present. It is also experimenting with franchise outlets in the Middle East and expanding an online DIY marketplace, which will enable brands to sell direct to B&Q customers.

However, Kingfisher said it would be cutting costs by trimming the size of 40 stores in the UK and France by up to 30% over the coming decade, including four B&Q stores this year, and by installing more self-checkouts and self-scanning systems. Despite the pay rise, the group’s hourly pay rates sit below those of many rival retailers including Aldi, Lidl, Marks & Spencer & Sainsbury’s.

Garnier warned that inflation would continue to dog the market throughout 2022 with a constant challenge from the cost and availability of shipping containers, while suppliers were struggling to keep pace with demand for garden products and building materials.

Despite the problems, Garnier said availability of products was now at about normal levels ahead of the busy Easter season and about half the group’s products were now own-label, offering a cheaper alternative to well-known brands.

The group has removed some Russian-made products from its shelves but had no direct impact from the war in Ukraine after selling its Castorama chain there in 2020. Garnier said Kingfisher’s businesses in Poland and Romania continued to trade strongly despite the war in their eastern neighbour.