How Johnson’s Government is Using Oligarchs In Its Attempt to Rebuild the ‘Red Wall’
Sam Bright and Sascha Lavin explore how the Government is inviting questionable regimes into Britain’s former industrial heartlands
If the second half of the 20th Century and the first 10 years of the 21st represented the age of affluence in Britain and America, the period since the financial crisis of 2008 has been marked by stagnation and inequality.
In the UK, real wages have flatlined while state spending has been retrenched. Unlike the post-war period, when economic growth heralded an era of mass prosperity – a period of enduring abundance – the rising tide of GDP no longer lifts all boats.
With prosperity now in shorter supply, people pay closer attention to the concentration and imbalances of wealth – both in terms of social class and region. This was exposed through the Brexit referendum, with people in ‘left-behind’ areas of the country protesting against their relative deprivation – in terms of education, infrastructure and industry – compared to the UK’s thriving metropolitan hubs.
The architects of Brexit were scorned for predicting that the ‘dividends’ of the project would not be seen for decades, but there is a reason these gloomy forecasts didn’t repel voters in the ‘Red Wall’: people thought that short-term pain was necessary, in order to re-orientate an economy that didn’t serve their interests.
Since the era of deindustrialisation, the status quo has delivered the slow breakdown of pride and prosperity in these places. In their view, at least Brexit promised some light at the end of the long tunnel.
And, if Brexit has shown that raw economic growth is only valuable if it’s accompanied by certain terms and conditions, so has the war in Ukraine. The UK is now desperately attempting to decouple itself from the Russian economy, after the years it spent awarding ‘golden visas’ to Russian oligarchs and allowing Vladimir Putin’s men to exploit our courts.
As Parliament’s Intelligence and Security Committee said in its 2019 report on Russian interference in British politics:
“Russian influence in the UK is ‘the new normal’, and there are a lot of Russians with very close links to Putin who are well integrated into the UK business and social scene, and accepted because of their wealth. This level of integration – in ‘Londongrad’ in particular – means that any measures now being taken by the Government are not preventative but rather constitute damage limitation.”
In other words, even after Russia invaded Ukraine in 2014 and annexed Crimea, the UK was both directly and indirectly fuelling Putin’s war effort. Short-term economic self-interest trumped human rights and geopolitical concerns – the consequences of which are now being felt by Ukrainians suffering and fleeing from genocide, and in higher energy prices on the home front.
However, it appears as though the UK Government is set to repeat its mistakes.
While the assets of foreign oligarchs – including and especially those from Russia – have been used to swell our all-consuming capital, these sources of morally dubious finance are now being channelled north.
Indeed, in a briefing paper obtained by the Byline Intelligence Team, relating to an October 2020 meeting between the Saudi Minister of Commerce, Majid bin Abdullah Al-Qasabi, and the UK’s Minister for Investment, Lord Gerry Grimstone, officials emphasised the commercial opportunities for Saudi firms looking to invest in the UK.
This was portrayed, by the UK officials, as a means of fulfilling the Government’s ‘levelling up’ agenda.
One of the top objectives of the meeting was to “promote the levelling-up agenda and the opportunities in the regions, including for the top Saudi companies their Government wants to see go global as part of their National Companies Promotion Programme”, the briefing paper states.
“There are significant opportunities, including as part of the levelling-up agenda, for star names like Saudi Aramco, SABIC, Saudi Telecoms, ACWA Power and others to come and invest in and grow their global shares/R&D potential in the UK,” it goes on to say – noting that a positive outcome would be to secure a “regional investment visit” from the Saudi administration “in support of the levelling up agenda”.
In mid-March, it was revealed that the Saudi firm Alfanar Group would be investing £1 billion into Teesside to produce sustainable aviation fuel. This followed the announcement in October that Saudi chemical company SABIC would be injecting £850 million into a Teeside chemical plant.
This policy was taken up by the Government’s long-awaited levelling up white paper – setting out the scope of its regional investment project – released in February, which emphasised the merits of foreign direct investment (FDI) into left-behind areas.
“The UK Government’s goal is to maximise the opportunities of its independent trade agenda for UK business,” it said. “Internationally mobile companies are among the most productive, innovative and high investing firms in the UK: UK businesses with inward FDI links were two-thirds more productive than businesses without an FDI link in 2018. However, over half of the UK’s inward investment stock is in London and the south-east.”
The logic behind this was epitomised by former Northern Powerhouse Minister Jake Berry, who told BBC Newsnight: “The key to unlocking levelling up is to bring foreign direct investment into the north of England, so taxpayers in the garden of England or anywhere else in this country do not have to pay for all of it.”
Department for International Trade (DIT) records show that the Government has been holding a series of meetings in recent months with sovereign wealth funds and foreign investment companies, about directing their resources to the UK.
DIT records for the final quarter of 2021, for example, show that ministers met with the Saudi National Bank, the Kuwait Investment Authority and the Qatar Investment Authority to discuss ‘investment opportunities’ in the UK. All of these institutions are majority owned by their respective governments.
In March 2021, the UK’s Office for Investment and Abu Dhabi’s Mubadala Investment Company – owned by the Gulf state – also signed the UAE-UK Sovereign Investment Partnership (SIP), with the UAE pledging to invest £10 billion in technology, infrastructure, healthcare, life sciences, and renewable energy in the UK.
Mubadala invested £1.1 billion between March and September 2021, while holding a series of meetings with UK ministers, seven in total, over a six month period from February 2021.
FDI is clearly important to the economic growth of a country. It is a dangerous myth – one perpetuated by Donald Trump in the US and some Brexiters in the UK – that a nation is able to be prosperous and entirely self-sufficient.
However, Putin’s war in Ukraine has shown the need to more closely align our economic and geopolitical interests – not allowing our commercial centres to be bought and compromised by the actors of hostile states.
The UK’s recent economic reliance on autocracies has been justified, politically, under the notion that liberal capitalism will calm the worst excesses of these regimes. However, in practice, integration has not led to moderation.
While Foreign Secretary in 2017, Boris Johnson said “we want to encourage Saudi Arabia down the path of reform and modernisation”. Yet this did not stop the Kingdom from murdering Washington Post journalist Jamal Khashoggi at its consulate in Istanbul less than a year later – at the behest of Crown Prince Mohammed bin Salman.
Just a few days before Johnson visited Riyadh in March this year, the Saudi regime executed more than 80 people, confirming the concerns of Amnesty International late last year, that accused the Saudi Government of launching a “relentless crackdown” on dissidents.
Saudi authorities “have brazenly intensified the persecution of human rights defenders and [have] stepped up executions over the past six months,” Amnesty said.
Qatar and Kuwait don’t have a clean slate, either, in terms of human rights abuses. More than 24,000 workers have suffered from human rights abuses on the projects devoted to the football world cup set to be held in Qatar later this year, while the Guardian reported last year that 6,500 migrant workers had died during the course of construction.
Human Rights Watch said in its 2022 report on Kuwait that authorities continue to restrict free speech and prosecute dissidents – including criminalising speech deemed insulting to the emir, its ruling monarch.
These are archetypal oligarchies, with state power and wealth amassed among a narrow band of influential families. The ruling Al Sabah family of Kuwait is estimated to be worth $360 billion, the House of Saud $1.4 trillion, and the House of Thani in Qatar some $335 billion.
Inviting investment from bodies attached to these families is therefore fundamentally different to encouraging the construction of a new factory by a Japanese car company or a German pharmaceutical giant. Unlike the German and Japanese firms, the sovereign wealth funds of Qatar, Kuwait and Saudi Arabia have political interests as well as economic ones.
The question is therefore whether we want our infrastructure and our economy to be reliant on countries that do not share our core values – states that are perpetuating abuses in the present day, regardless of the crimes that they may commit in the future.
This is an issue agitating the Conservative Party – but largely focused on the case of China.
There was a Conservative rebellion after the Government decided to allow a role for the Chinese tech company Huawei in the construction of the UK’s 5G network – a backlash that forced a Government U-turn. This is an ongoing concern, continuing this week with the takeover of Newport Wafer Fab – a semi-conductor supplier – by Nexperia, a company with links to the Chinese Communist Party.
“We are, seemingly, handing over critical security infrastructure to overseas companies with well-documented links to the Chinese state,” Conservative chair of Parliament’s Foreign Affairs Committee, Tom Tugendhat, has said in response – with his colleague Iain Duncan Smith calling the sale “ridiculous”.
However, perhaps due to financial self-interest – the Conservative Party has raised substantial amounts of cash from foreign oligarchs in recent years – it hasn’t lifted its gaze beyond the corrupting influence of investment linked to the Chinese state.
As a result, the Government is actively incubating new versions of Londongrad – creating silos of foreign states in the former industrial midlands and north. Following the lead of the capital, these areas are becoming safe havens for the wealth of oligarchs and an insurance policy for foreign governments seeking geopolitical leverage against Britain and the West as a whole.
Boris Johnson recently spoke of the “freedom” sought by Brexit voters – in comparison to the convictions of those repelling Putin’s aggression in Ukraine. It seems unlikely that these voters had foreign economic dependence in mind, when they plumped for Johnson’s project.