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The United Kingdom Divided against Itself

The now infamous diplomatic spat between the United Kingdom and the Russian Federation has illuminated a clear divide between two groups in Europe: those who have willingly blinded themselves to the recent conduct of the Kremlin in the name of energy scarcity and excessive greed for profit, and those who are determined to put a spine Europe’s relations with Russia as it relates to rule of law and civil norms.

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The tug of war between these two camps has cast a harsh light onto the obsequious and complicit behavior of British firms and their less than transparent dealings with Putin’s political machinery. Opportunists such as BP on the one hand continue to grasp the mantel of corporate social responsibility and environmental sustainability, while at the same time they shrewdly sacrifice the interests of the British public by seeking to curry favor with the Kremlin at any cost. Mr. Putin is well aware of the panicky state of London’s bankers, and has artfully played his disaggregation game in both the timing and the overall handling of the British dispute to maximum effect. A message for the financial community: stop worrying, everything will be just fine. Nobody shoots their own fence. As documented by the OECD, the rise of Russia’s corporate state, driven by the FSB-dominated Kremlin, has brought unparalleled corruption and startling inefficiencies. This resource nationalist trend is accompanied by a parallel crackdown on basic freedoms and a growing intolerance for even the mildest dissent. It is thanks to the enthusiastic Western investment banks who lend to Rosneft and Gazprom without consideration of political risk, morality or rule of law, that the state is able to keep Russian society under such an iron grip. In light of the cataclysmic historical shift taking place before our very eyes, the British dispute over extradition becomes pregnant with significant geopolitical meaning. As Gordon Brown lays down the line and tries to show that he is a man who stands behind his words, one hopes that it is not all just for show. Unfortunately, as we have so far seen, the United Kingdom is not yet prepared to deal with the threat of Putin’s Russia until it can put its own house in order by clearly committing to the fundamental values and principals of corporate governance, rule of law, and transparency. But with such an overwhelming obsession over next quarter’s earnings tugging away at approval ratings, bold statements on corporate social responsibility are reduced to interior decoration, and PM Brown’s strong stance will likely fade away as a temporary political stunt. So as the United Kingdom remains divided against itself and abandoned by its friends in the EU (thanks to the Portuguese), the “mini-crisis” is going to find itself filed away as yet another chapter in the Russian playbook as a case study in the vainglorious reassertion of a superpower. Not a tragedy, but certainly a grave disappointment of opportunity lost.