- Future of Russian British economic relations
The U.K. announced last week that 23 Russian diplomats would be expelled from the country following allegations of a Russian plot to kill Russian agent Sergei Skripal and his daughter Yulia. Both remain critically ill in hospital. Since March 4 when both were found unconscious on a bench in Salisbury, Wiltshire, the diplomatic crisis has escalated to the extent that bilateral economic relations could be affected. On the one hand, the U.K. government has made it known that the nerve agent Novichok developed by Russia poisoned them. On the other hand, the Russian government denies all claims. Regardless, it seems the U.K. is keen to retaliate against Russia for the attack on its own soil considering the incident a matter of sovereignty.
Some expect the U.K. will penalize Russia through additional financial sanctions by seizing assets with undeclared sources.
Russia has become a more significant import market for British exporters in the last few years, and if Russia retaliates with economic sanctions, extra pressure would be put on the U.K. particularly now at a time of rising economic uncertainty. The total trade volume between the countries has reached $14 billion per annum, but new trade barriers or tariffs could rid the U.K. of an important potential market. It is also significant for the U.K that British oil giant BP has roughly a 20 percent stake in Russia’s state-owned oil company Rosneft. Should Russia potentially expropriate BP’s stake in the company, the future plans for the company would be negatively affected.
On the other hand, many recent leaked reports state that the financial center of London continues to benefit from laundered Russian money. Danske, a Danish bank accused of money laundering shut down Russian accounts after concluding that members of Vladimir Putin’s family and the FSB spy agency were using British companies to funnel cash, The Guardian reported on Feb. 26. The scale of the fraud is unknown but according to estimations, it could be in the region of between $2.2 billion and $3.3 billion in total, based on a pattern of $10 million-plus being laundered daily.
As a result of the diplomatic crisis, it is now advisable that the U.K. tackle laundered Russian money and comply with international standards.