Margaret Hodge: ‘Close the loopholes that let dirty Russian money breeze into Britain’

The suspicious death of the anti-corruption campaigner Alexi Navalny is yet another reminder that Russia is ruled by a criminal elite willing to resort to murder when their power is challenged. Navalny exposed their greed and corruption, and for that he paid with his life.

Navalny also shone a spotlight on the flow of Russian dirty money and goods into Britain. For years, Britain has rolled out the red carpet to Putin’s cronies, just so long as they brought their ill-gotten gains with them. We have become the jurisdiction of choice for Russian illicit wealth. Like many of our allies, Britain also became reliant on Russian oil.

The brutal invasion of Ukraine two years ago brought this all to a head. The Government was compelled to draw up an unprecedented raft of new sanctions to isolate the Russian economy, punish Putin’s inner circle, and banish their dirty money from Britain. But the Government’s approach is flawed and ineffective.

Take our continuing relationship with the Russian oil industry as a case in point.

Despite Ministers placing sanctions on crude oil exported from Russia, refined Russian oil products continue to be imported every day. This is because crude oil is first exported to third countries – namely India and China – which remain happy to trade with Russia. There it is refined, only to  be re-exported to our shores.

This shocking loophole led to £563 million of refined oil products being imported into Britain last year. Creating big profits for the Kremlin to spend on the shells, tanks and rockets that have been terrorising the Ukrainian people for two years. Oil profits are an essential source of income for the Russian government, and there is currently a pipeline of cash making its way from Britain to Russia.

Britain is not the only bad actor here. Both the United States and Europe are also importing refined oil products. According to an investigation by CNN, approximately $6.6 billion of refined oil imports flooded into these economies in 2023. Political leaders in London, Washington and Brussels have all offered no end of solidarity with Ukraine. And yet British, US and EU sanctions have categorically failed to take on the Russian oil industry by leaving this loophole wide open. Closing it, if that is what the Government wants to do, wouldn’t be all that hard: just enforce a blanket ban on oil products made from Russian crude oil being bought and sold in Britain.

Our Prime Minister must wake up to the underhand tactics being used. Firms – such as the oil giant Rosneft – have been doing everything in their power to evade sanctions and continue with business as usual. Since the start of the war, Russian oil companies have established a ‘dark fleet’ of cargo ships charged with transporting sanctioned crude oil to third countries. These vessels are usually owned by a murky shell company, enabling the ships to avoid international scrutiny. These same ships then perform dangerous and illegal ship-to-ship oil transfers at sea, making it much more difficult to monitor the final destination of Russian oil.

Russia’s ‘dark fleet’, that analysis suggests has grown to more than 560 ships, is a criminal enterprise on a global scale. By continuing to add to demand and by failing to properly enforce our own sanctions, the UK is propping up what amounts to an organised crime network.

Transparency is the key to all this. We must lift the lid on the shell companies that own these ships. According to a New Statesman report, these companies are deliberately set up in secretive jurisdictions – likely including Britain’s network of offshore tax havens – so that the true owners can be hidden from public view. Six years ago, Parliament legislated to introduce ‘public registers of beneficial ownership’ in our tax havens so that we can identify who owns what, follow the money and end decades of corporate secrecy. But the Government has failed to implement legislation agreed by Parliament. This is a scandal for many reasons, not least because this long overdue transparency measure might just help to sink the ‘dark fleet’.

But that’s not all, British-based insurance firms have continued to cash in on underwriting the cargo ships that transport Russian oil. Since sanctions were imposed, Britain has emerged as the top insurer of these vessels, underwriting around a third of Russian oil transported by sea. Insurance firms in the City of London should have nothing to do with the trade of sanctioned Russian oil, and yet they are operating as professional enablers by insuring Russian oil exports. The Government must close the ‘insurance loophole’ as soon as possible. If insurance brokers are able to breezily sidestep sanctions, then our entire sanctions regime is worthless.

Alexei Navalny repeatedly described those ruling Russia as running a ‘mafia system’. Russia’s sanctions-busting oil industry is perhaps the biggest racket of them all. Without firm action, the flow of dirty money and oil will continue, Britain’s sanctions regime will crumble, and the barbaric war in Ukraine will rumble on. is the UK’s leading digital-only political website, providing comprehensive coverage of UK politics. Subscribe to our daily newsletter here.