By Tom Bergin and Brenda Goh
LONDON, March 6 Britain's Office for National
Statistics says as many of the country's residents were born in
Mauritius and Cyprus as in Russia.
The fact British newspapers haven't coined Mauritian or
Cypriot equivalents to "Londongrad" and "Moscow-on-the-Thames"
to describe the capital underlines the special social and
economic impact Russians have had on Britain in the past decade
and a half.
The importance of Russia to British businesses means the
cost of imposing tough sanctions against Russia after its troops
took control of Crimea could be higher than British Prime
Minister David Cameron is willing to pay.
"Amidst all the calls for action on Ukraine, there will be
voices cautioning on the need to look more at interests closer
to home, and to weigh them in the balance" said Nicholas Redman,
Senior Fellow, at the International Institute for Strategic
Soviet-born billionaires occupy three of the top five slots
in The Sunday Times newspaper's Rich List, Britain's most read
ranking of wealth, and are prolific buyers of trophy assets such
as 100 million pound ($170 million) mansions, soccer clubs and
newspapers such as London's Evening Standard.
One of London's most visible Russian oligarchs, Roman
Abramovich, spent 59 million pounds to buy Chelsea Football Club
in 2003 and the Daily Mail newspaper calculated last year he had
spent 713 million pounds on players since then.
Abramovich bought a mansion in Kensington Palace Gardens -
also known as Billionaires' Row - for 90 million pounds from
hedge fund manager Pierre Lagrange in 2011.
More Russians have received special "Tier-1 investor visas",
whose award is tied to investing at least 1 million pounds in
British assets, than citizens of any other country since the
visas were introduced in 2008, Home Office data shows.
Such links have been a boon to Britain's real estate agents,
luxury goods purveyors and more importantly, its strategically
important financial and professional services industries.
Some British allies including France and Poland have vocally
backed economic sanctions on Russia if it does not pull back its
troops from Ukraine. President Barack Obama has imposed an asset
freeze and travel ban on those involved in the Russian military
intervention in Crimea.
Cameron has warned Moscow it will pay "significant costs"
but an official document unwittingly exposed to a photographer's
lens this week suggested London opposed trade sanctions and
shutting its financial capital to Russians.
The Foreign Office declined to say what role, if any,
commercial interests were playing in Britain's approach to
sanctions but analysts said they were a key factor.
"We've got more to lose than the Americans. [U.S. Secretary
of State John] Kerry is happy to push for sanctions because it
won't cost them as much," said Ruben Lee, CEO of financial
markets consulting firm Oxford Finance Group.
Analysts predict that Cameron will at most back token
measures such as visa restrictions on a small number of senior
Russian officials, rather than bar a wider range of possibly
Kremlin linked billionaires.
"When someone says 'I'm coming to see my lawyers who I pay 5
million a year to and stay in my 10 million pound house in
Surrey,' are the British government really going to refuse a
visa?," said Andrew Wordsworth, partner at London-based risk
consultancy GPW, which has Russian clients.
Bodies responsible promoting the City, as London's financial
district is known, such as the Corporation of London and the
British Bankers Association, said they were unaware of any data
which quantified how much London's banks, lawyers and
accountants make from Russian clients.
However, Lee said the City was a fulcrum of Russia's
international capital raising and, consequently, took in a big
chunk of the associated fees.
When it comes to raising debt, those fees amounted to almost
$300 million annually in recent years, according to Thomson
London has also become the location of choice for Russian
companies seeking to sell shares to foreign investors. Seventy
Russian companies are listed on the London Stock Exchange,
spokeswoman Alexandra Ritter man said.
Overall, companies from Russia and former Soviet states have
raised $82.6 billion in London in the past two decades.
The New York Stock Exchange has only two Russian companies,
spokeswoman Sara Rich said, although that number excludes a
handful of companies with strong Russian ties.
Britain also has a significant share of the Russian private
wealth management market, according to a December report from
the City Of London Corporation.
Related professionals such as accountants, consultants and
lawyers have also benefited richly from Russian business in
recent years. The Law Society Gazette estimated last year that
as much as 60 percent of the Commercial Court's work involved
parties from Russia or former Soviet countries in 2012.
"Russian disputes are big business for the London legal
market," said Ben Holland, partner in the international
arbitration practice of law firm Covington & Burling LLP.
The highest profile Russian legal case involved businessman
Boris Berezovsky's $6 billion claim against Abramovich for
damages related to a stake in oil company Signet and other
assets. Berezovsky lost and was forced to pay 35 million pounds
of Abramovich's costs. Total costs were over 100 million,
British media said.
OPEN FOR BUSINESS
British companies are also among the most prominent
investors in Russia - BP's <Bp. l> 20 percent stake in
state-controlled Rosen is the largest foreign
investment in the country's oil and gas industry.
But some analysts said British reluctance to impose
sanctions against Kremlin interests wasn't simply related to
concerns about the safety of such investments or that its banks
may lose Russian clients, but fear of the broader message this
might send to other customers.
London is much more of an international financial centre
than New York, which can rely on a massive domestic market to
Michael Maine, co-founder Of consultancy at Z/Yen, which
compiles a quarterly ranking of financial centres that London
top, said the City's reputation for welcoming money from
emerging markets was crucial to its business model.
British business fears that if Cameron aggressively backs
action against Russia, it could spook investors from China and
other increasingly important markets, who may fear they could be
in the firing line in future.
"The more pressure can be brought to bear behind the scenes
or via the financial markets, rather than by overt governmental
intervention, the happier the UK authorities will be, because
they won't want to scare off other people," said Lee.