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Financial Times: Businesses aim to limit the fallout

By Stefan Wagstyl, Catherine Belton and Isabel Gorst
Published: July 18 2007 03:00 | Last updated: July 18 2007 03:00

British business is braced for a possible increase in costs and delays in dealing with Russian officials despite claims from Moscow that the diplomatic dispute will have no effect on commercial life.

They fear they could face extra red tape over everything from tax returns to residence permits and are especially worried about visa applications. The worst affected could be short-term business visitors, who often travel on tourist visas that are easier to secure quickly than business visas.

“That’s exactly where there could be an impact. It may not be an official response but it could just be the tax service or visa officials picking out businessmen just because they are British,” said a leading Moscow-based foreign banker.

However, powerful lobbies in both countries are interested in limiting the commercial impact of the dispute. Since the collapse of the Soviet Union in 1991, the UK has emerged as a favourite destination for Russians for work and play. The Russian embassy estimates 250,000 Russians live in Britain. Other estimates put the figure for Russian-speakers from the former Soviet Union at up to 500,000.

Roman Abramovich, the Chelsea Football Club owner, and Oleg Deripaska, the head of the Rusal aluminium company, top a list of about 10 Russian billionaires with London homes. Hundreds of Russian millionaires have also set up in the UK. But the majority of Russians in London live off more modest incomes in a range of jobs, from labouring to investment banking.

With Russia’s oil-based economy booming, Russian-British commerce is surging. Bilateral trade trebled in the past five years to 2006 to £8bn. Britain was last year the biggest foreign investor in Russia, with $5.5bn (£2.7bn). Meanwhile, London has become Russia’s most important offshore finance centre. Russians are also avid buyers of top-class London property.

Those involved in all this money-making do not wish to see their plans destroyed or distorted by the dispute.

Neil Cooper, Russia director of the Russo-British Chamber of Commerce, says: “Britain is actively investing here and does not want to see, or expect to see, any ramifications from this political dispute.” Or as a Moscow-based British lawyer says: “Too many top Russians have property, money and children studying in England. They don’t want to rock the boat too much.”

However, politics can rarely be kept entirely out of business, especially in Russia. Under President Vladimir Putin, a resurgent state has intervened in the economy, especially in energy. Groups with strong British links have fallen foul of the Kremlin’s policies – notably Shell and BP. Shell was forced to sell control of the Sakhalin-2 offshore gas scheme to Gazprom, the state-run Russian group, while BP’s Russian venture – TNK-BP – was made to give up its interest in the Kovykta gas project in Siberia, with Gazprom emerging as the new owner.

Meanwhile, other European Union members are improving their links with the Russian gas group. Two years ago Germany agreed to co-develop a new Baltic Sea gas pipeline, Italy’s Eni has given Gazprom access to its domestic market in return for Siberian gas assets and this month France’s Total secured a 25 per cent stake in developing Gazprom’s Arctic Shtokman field.

Roland Nash, chief strategist of Moscow-based Renaissance Capital, says: “Russia clearly uses big business to play politics. . . There was clearly an element of politics involved with the Total deal.”

Aside from the Litvinenko affair, Russia remains furious that the UK is a safe haven for key enemies ofMr Putin, headed by Boris Berezovsky, the businessoligarch, and Akhmed Zakayev, the Chechen political leader, who are both wanted on criminal charges in Russia.

Business people have their work cut out urging politicians to defuse tensions.

Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, the business lobby group, says: “Both Russian and British business must explain to their governments that you can’t hold the economy hostage to the political situation.”

Hans-Jorg Rudloff, chairman of Barclays Capital, the investment banking arm of Britain’s Barclays bank, puts it more bluntly: “If governments continue to play with matches, inevitably there will be fire.”

Additional reporting by Isabel Gorst

A risk worth taking, says editor of top-selling expatriates’ newspaper

Natasha Chouvaeva, editor of the London Courier, the top-selling Russian newspaper in the UK, backs the British government in its efforts to try the alleged killer of Alexander Litvinenko, writes Stefan Wagstyl.

“Russians who are living here want to stop this kind of criminal activity happening in future. Even if in the short term the political dispute makes relations between Russians and British people worse, it’s a risk worth taking,” says Ms Chouvaeva, who founded the paper with her husband in 1991.

Ms Chouvaeva says that many of the estimated 500,000 Russian-speaking people from the former Soviet Union living in Britain share her views. “We like your values, your traditions, your education system and your laws. We want to see all this protected.”

Ms Chouvaeva says while a handful of business oligarchs make headlines, many Russians work in a range of jobs – from labourers to specialists in creative design, insurance and banking.

They want to adopt the British way of life but they are “more entrepreneurial” than the average Briton, says Ms Chouvaeva.

As well as editing the London Courier, which comes out twice a month with a circulation of 12,000, Ms Chouvaeva runs a glossy magazine called RussianUK and a website.

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