The president of the Russian Federation Vladimir Putin reckons that the current conflict between Russia and the Great Britain is a “mini-crisis” that can be easily overcome. “I think Russian-British relations will develop normally. It is necessary to balance one's actions with commonsense, to respect the legal rights and interests of partners. I'm sure we will overcome this mini-crisis, too", Putin said during his trip to the city of Saransk, the capital of the Republic of Mordovia, where he went jointly with the president of Finland Tarja Halonen and the prime minister of Hungary Ferenc Gyurcsány to participate the first international festival of the Finno-Ugric Peoples.
Earlier Britain's ambassador to Russia, Sir Anthony Brenton was summoned to the Foreign Ministry and told that four members of his staff had been declared personae non gratae. That was a “mirror” response of Russia to the expulsion of four Russian diplomats from the UK. Now Britain envoys must pack and leave within ten days. Besides that the RF Foreign Ministry announced that Russian officials would not request Britain visas, but Russia also would not issue new visas for visits by British officials. Besides that Russia took one more, quite a strange step, having halted counterterrorism co-operation with the Great Britain.
The ministry spokesman Mikhail Kamynin said, that all measures were a proper answer on London’s provocative and hostile actions, and that they were "targeted, balanced and the minimum necessary". London was extremely disappointed by Moscow’s demarche and named the decision “completely unjustified”.
The United States took in this dispute Britain’s part. “We support the UK's extradition request and believe strongly that the Russians should do the right thing here and respond to it favorably and comply with it,” deputy State Department spokesman Tom Casey said yesterday. As to Russia’s decision to expel Britain diplomats, Mr. Casey said: "Unfortunately, that kind of political tit-for-tat kind of debate doesn't deal with this real question here, which is ensuring what the UK has a right to, what Mr. Litvinenko's family has a right to, which is justice for the crime perpetrated against him.'
U.S. Secretary of State Condoleezza Rice also backed Britain in its diplomatic standoff with Russia, urging the Russian authorities to comply with the U.K. extradition request. “A terrible crime has been committed on British soil, and Britain has to find the perpetrators and bring them to justice,'' Rice said in an interview with British TV channel Sky News. “Russia should honor the extradition request and cooperate fully”, she added.
It should be reminded, that the current diplomatic war was caused by official refusal of the RF General Prosecutor’s Office to hand over to the Great Britain a businessman, former KGB officer Andrei Lugovoi, accused of poisoning of Alexander Litvinenko. Russia explained the refusal by the Constitution that banned extradition of citizens of the Russian Federation. The Great Britain that has no Constitution considers that to be nothing but a pretence; and expressed itself in such a way that it was Russia’s problem, since in the center of London a national of the UK has been killed, so the murder had to be found and face trial. In the result London expelled four Russian diplomats and imposed visa limitations for Russian officials. Such a demarche could be explained by attempt of the new Britain premier minister Gordon Brown to indulge indignant public opinion. Besides that, a negative image of Russia played a significant role in the case, since the West must suppose that there are no other ways of discussing with Moscow.
From the very outset it was considered that the diplomatic conflict would not concern the main thing – business relations between Moscow and London, i.e. the confrontation was supposed not to go beyond rhetoric and would not have serious consequences. Yet, according to Alexander Shokhin, President of Russian Union of Industrialists and Entrepreneurs, the Russian-Britain crisis can force many Russian companies to leave the London Stock Exchange and have an effect on activities of state-run companies.
In his interview to RIA Novosti channel Alexander Shokhin expressed some doubts that reciprocal politic measures are reasonable. “If we keep on answering the Britain symmetrically, it will be a sort of politic ping-pong that can seriously tighten relations between two countries or even return them to the Cold War period”, - he said. In other words, Russia should find an asymmetric answer and the RUIE head offered it immediately.
"If events develop in this way, Britain's trading floors -- traditionally favoured by Russian companies, including state-run companies -- will start losing ground," he said. "Continental exchanges will obtain an opportunity to attract Russian companies to their bourses."
If this turns out to be the case, he predicts that the London Economic Forum will be closed soon and Davos will become the main floor. And if continue Shokhin’s consecution, in perspective one should forbid going there also.
Statements of the RUIE head seem too vague and conjectural but they reflect one quite significant policy trend, i.e. Russian financial power wants Russian companies to trade in Russia. Thus, tension in Russian-Britain relations that till the being time caused anxiety only to diplomats now becomes rapidly a mean of solution of numerous questions that not concern foreign policy just as it is.
It should be noted that even before the current row Moscow dropped quite obvious hints to the business directed at the London market. For example, in May Russian authorities de facto forbade big business participation in the Economic Forum in London. It is said that some businessmen who had gone to the London Forum, were not let to the one in St. Petersburg.
It is not so simple to persuade companies to leave the London Stock; and it is unlikely that somebody will seriously try to do this, but such admission is quite a disturbing warning. Earlier Moscow was proud of transparency of Russian business, its conformity with the best (i.e. London) standards. However equivocal diplomatic rows (can the Britain justice receive a guard suspected of killing another one) can bring to life a strange monster called Rosneft delisting.
Out of the frying pan into the fire. One of the reasons that makes London market so attractive for Russian big private business is additional insurance. If a company trades on the foreign (i.e. London) market, it can be hardly just taken away by the authorities. Public or private ban on stock floatation in London (in fact there are few financial centers in the world comparable with London, maybe New York - and that’s all) means moreover impossibility to secure the business in such way. That must be agreeably to siloviks in its own way.
Besides that, according to Shokhin, British firms may start facing difficulties with tax authorities and regulators and that inspections may become more frequent. He explained that, perhaps, audits would become more frequent and under broadly equal conditions, some British companies may fail to win tenders. He didn’t need to say that. Gazprom has already withdrawn from Royal Dutch Shell (Great Britain and the Netherlands) control under the most attractive project Sakhalin-2. That’s a good example that manifests selectivity alongside with observance of obligations. Just that sort of activity described Shokhin, quite cynically but exactly. The message is quite clear: who cares about the law when in Russia business functions by the rules of the underworld. And, evidently, the West is to talk with Russia correspondingly.
In the interview to polit.ru an expert of the “Finam” company Semen Birk told that Russian business elite as well as politicians estimate negatively the position of the Great Britain, so that can cause certain steps.
“Expulsion of diplomats is not the end”, he said. “But if UK business follow exceptionally the principle of profitability, Russian one can take politicians’ part and suspend floatation in London”. At the same time, Birk noted, expenses that have already been incurred must be enough; so securities will continue circulating and there won’t be any delisting. According to the expert, further liquidity can increase, that concerns both Russian and European stocks. In Birk’s opinion, redirection at New York is not likely inasmuch as it is extremely expensive.
Alexei Smyvin, an analyst of OAO "Investment Company "Evrofinansy", reckons that statements of Shokhin are just the next move in the politic game between London and Moscow and suggests not ot get worried. In his opinion, Russian business will respond only when the president takes a tough stance and implies that the business must leave London.
“Vladimir Putin appealed not to tense relations with such significant strategic partner like the Great Britain. Besides that before making conclusions one should wait for announcement of the Ministry of Foreign Affairs and Britain’s retaliations” – claimed Smyvin.
“Delisting is considered to be an extreme measure, that is obviously unprofitable for both parts”, said the analyst.
