Are Russian sanctions going to be the beginning of lifting the corporate veil to find RTP- critique

I read yesterday morning that Roman Abramovich has attempted to distance himself from Russia’s Putin, which got me thinking… like all the other oligarchs, is Abramovich in a panic? Where his trying to sell all his property in England and wants to get rid of Chelsea FC quickly so he can take the money and run? Coincidentally, Chelsea FC owes Abramovich £1.55bn too! My gut feeling tells me, there is an element of truth here, despite stating all will go to charity.

Two further things immediately spring to my mind: related party transactions and lifting the corporate veil. Lifting of the corporate veil means disregarding the corporate personality and looking behind the real person who are in control of the company. In other words, where a fraudulent and dishonest use is made of the legal entity, the individuals concerned will not be allowed to shelter behind the corporate personality. Related party transactions take place between two parties who hold a pre-existing connection prior to the transaction. As an external consultant, I see this area growing in terms of corporate UK governance and potential company law changes and even new requirements under an amended IAS 24- related party transaction update by the IASB- just guessing. Watch this space…

Look I’m not trying to “set things right here” but merely to explain my opinion/ observation via an economists lens.

The war between Russia and Ukraine is part of a wider conflict between capitalist powers and the expansionist NATO powers on the other. Neither side in this war stands for the real interests of the people which include living in peace and determining the future of their own society free from outside domination or influence. Putin represents the interests of Russia’s big business oligarchs who profit from (often via the theft of) economic assets and stash their stolen/ illicit wealth in Western and Swiss banks and launder much of their money through cities like London and Europe.

Politically connected Russian firms use related party transactions as a tunnelling mechanism to manage earnings to conceal their tunnelling activities which enrich the political connection. There is thought to be more Russian gold in London than in any other city in the world.

Chelsea mansions that house the families of oligarchs have earned the UK capital the “Moscow-on-Thames” nickname, but on the London Stock Exchange (LSE) too. Under the most extreme scenario, companies operating in the UK, USA and EU – including most of the world’s major financial institutions could be forbidden from any transactions with sanctioned entities. This could mean the indefinite suspension of Russian shares and an inability to issue new debt or shares in London or anywhere else.

During the nineties, companies whose shares were traded in Moscow turned to London to raise money through secondary listings. They range from state-backed oil and gas producers Rosneft and Gazprom, to state-run banks VTB and Sberbank, to independent mining companies such as Nornickel that have no state ownership. These companies are not only crucial to Putin’s Russian economy, they also directly fund a large part of the Russian state. London-listed Russian oil, gas and mining companies paid their government £39bn in taxes in 2020, according to the Guardian newspaper. That revenue is particularly important to Putin, where Russia spent £41.7bn on its military in 2019, 11.4% of government spending, according to the World Bank. In total, 31 Russian companies are listed on the LSE, with a combined market value of £468bn, according to S&P Global. As of today, these shares have been all suspended.

However, none of this justifies the widespread military invasion launched by Putin which will strengthen the hand of Western and Eastern Europe, Britain, the USA and NATO who want to negotiate the settlement problem. At present, big oil and defence companies in the USA, Britain and Western Europe are making massive profits out of this conflict, as wholesale energy prices spiral upwards and out of control.

Sanctions against Russia will make progress difficult; I believe. It will damage the well-being of Ukraine and the rest of Europe including Britain, while making Europe more dependent on energy supplies from either the USA and/ or Middle East. Warmongering rhetoric and sending more military weapons into Eastern Europe, the British government should instead be using its UN Security Council membership to work for peace and a negotiated settlement roadmap for Russia and Ukraine.

I can go on about this because I feel Putin is at fault here, or maybe it’s because I’m more of a Human Rights patriot, who is saddened by the unnecessary death of innocent people-especially young children. Putin, just like Trump (who badged him as a genius, stupid idiot) have lost their bloody mind- seriously. What I see here is history repeating itself where Putin’s mind set is akin to Nazi leader beliefs of sterilisation in the name of racial hygiene, to purify the Russian bloodline and establish internationally their superiority as a nation? Or will this end just like it did for Gaddafi or Saddam Hussain? Looks like this is a game of chess, or Russian roulette (no pun intended) with the barrel held by his own people facing towards the instigator!

Being an external consultant, you may well say to yourself, what does he know about all this politics anyway? And my answer would be, well you got me there.

Dee Singh Kothari is a senior partner in Kothari Partners

Opinions expressed in this article are solely of the authors. The author nor Kothari Partner’s accept any liability for the incorrect use of the source data quoted/ used.

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