House of Commons - Foreign Affairs

Select Committee on Foreign Affairs Second Report

4 Bilateral UK-Russia relationship

92. The state-to-state relationship between the UK and Russia has deteriorated markedly in recent years. The deterioration is particularly notable because UK-Russian political relations became especially close when President Putin first came to office, with former Prime Minister Tony Blair appearing to make a particular effort to cultivate the new Russian leader. In March 2000, in an apparent attempt to steal a march on his international peers, Mr Blair became the first Western leader to meet Putin, when the latter was still only acting President. Mr Clark, a special advisor in 1997-2001 to the then Foreign Secretary, the late Robin Cook, told us that the official UK assessment of President Putin when he came to office was that "he was essentially a liberal moderniser by instinct who may at times be inclined to use slightly authoritarian methods to restore order at the end of what had been a pretty chaotic period of Russia's history under Boris Yeltsin".[219] In 2003, President Putin became the first Russian leader to pay a State Visit to the UK since 1874.

93. However, these early expectations were not maintained. In more recent years, there has been a string of irritations in the bilateral UK-Russia relationship. Until the UK took steps against Russia in July 2007 in connection with the investigation into the death of Alexander Litvinenko, discussed further below, concrete incidents of aggravation in the UK-Russia relationship came from the Russian side. Some incidents fit into what Mr Clark called a "pattern of unofficial and deniable acts of hostility towards UK interests".[220] For example, the UK Ambassador in Moscow has been subject to harassment by the pro-Kremlin nationalist youth organisation 'Nashi'. Actions against the BBC World Service and British Council are outlined separately below.

94. Other incidents have included the accusations made by the Russian Federal Security Service, the FSB, in January 2006 that diplomats in the British Embassy in Moscow were engaging in espionage via the use of an imitation rock which allegedly hid electronic equipment. The FSB further accused the Embassy of using NGOs to which it was providing financial support for espionage purposes.[221]

95. In Russia's March 2007 foreign policy review, the UK is singled out from other major West European EU Member States. Germany, France, Spain and Italy are mentioned as "leading states of Europe" with which "[t]he principles of European life are being formed in cooperation […] on an equal basis." By contrast, the UK is identified as "an important, though complicated partner". The foreign policy review goes on:

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Mr Clark described the UK-Russia relationship as now "thoroughly frosty".[223]

96. Our witnesses suggested three possible reasons for Moscow's growing irritation with the UK. The most important, namely the arguments surrounding the asylum and extradition status of individuals in both countries, is dealt with separately below. The second, namely the UK's activism in the field of democracy and human rights promotion in Russia, was discussed in Chapter 3. The third factor mentioned by our witnesses was the UK's relationship with the US. Dr Allison suggested that when President Putin came to office, "the UK had particular advantages, which encouraged Putin to seek a close relationship. Britain […] was then viewed as having access to the United States and, potentially, influence over its policy in a way that no other European country had."[224] Since the early part of Putin's presidency, Russia has, on the one hand, become increasingly critical of the US and outspoken in opposition to its international policies, for example in President Putin's February 2007 Munich speech.[225] According to Mr Clark, Russia sees the UK as playing a "supporting role in upholding" US global dominance, and is therefore increasingly aligned also against London.[226] Similarly, according to the CSRC, "It may be that Moscow sees the UK as too closely aligned to Washington to be an attractive partner."[227] On the other hand, Russia is now more sceptical of the UK's ability to wield any influence over the US in any case. Dr Pravda told us that "Moscow sees Britain as very close to the US yet of little use as a source of influence on Washington."[228] We conclude that the UK's relationship with Russia has been impacted negatively by London's stance vis-à-vis Washington. We recommend that the Government should seek to improve its relations with Russia without damaging its relations with the US.

Russian émigrés in the UK

97. The most serious source of tension in the UK-Russia bilateral state-to-state relationship arises from the growing Russian émigré community in the UK, now thought to number perhaps 400,000. The Russians who live in the UK include a number of individuals who left Russia for political reasons or who are otherwise at odds with President Putin's rule. The continued protected presence of these individuals in the UK acts as a permanent irritant to the bilateral relationship.

AKHMED ZAKAYEV

98. Mr Zakayev was the chief negotiator and envoy of Chechnya's separatist former President, Aslan Maskhadov. Mr Zakayev came to London in 2002. In 2003, a UK court rejected a Russian request to extradite Mr Zakayev to face criminal and terrorist charges, on the grounds that the extradition request was politically motivated and that if returned to Russia Mr Zakayev might well be tortured. Mr Zakayev was subsequently granted asylum in the UK.

99. The FCO told us that:

The granting of asylum in the UK in 2003 to Akhmed Zakayev […] has caused significant tensions in the UK-Russia relationship. Representatives of the Russian government have accused HMG of double standards and of harbouring terrorists. HMG continues to assert the importance of the rule of law and independence of the judiciary. Mr Zakayev was granted asylum after due assessment by the relevant authorities of his case and of the UK's obligations under the 1951 UN Convention on Refugees and domestic law. A grant of asylum does not imply support from the UK Government for an individual's views, activities or statements.[

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BORIS BEREZOVSKY

100. Boris Berezovsky was one of the so-called 'oligarchs' who rose to wealth, prominence and power under the rule of former Russian President Boris Yeltsin. Mr Berezovsky was still influential at the time of the handover from Mr Yeltsin to Mr Putin, but he then fell out spectacularly with the new President. Facing fraud charges, Mr Berezovsky went into exile in the UK in 2000. In 2003, Russia sought to have Mr Berezovsky extradited back to Russia. However, Mr Berezovsky was granted political asylum on the grounds that the charges against him were politically motivated, and the extradition proceedings were discharged. Mr Berezovsky is currently being tried in absentia in Russia on fraud charges.

101. In January 2006, Mr Berezovsky told a Moscow radio station that he was planning a coup against President Putin. The then Foreign Secretary, the Rt Hon Jack Straw MP, publicly warned Mr Berezovsky that his asylum status could come under review if he incited violence or terrorism abroad.[230]

102. On 13 April 2007, The Guardian published an interview with Mr Berezovsky in which he said that there was a "need to use force to change [the Russian] regime". According to Mr Berezovsky, "It isn't possible to change this regime through democratic means." Mr Berezovsky answered in the affirmative when asked if he was effectively fomenting a revolution.[231] Mr Berezovsky subsequently issued a statement saying that he did not advocate or support violence. Mr Berezovsky's interview prompted a fresh extradition request from Russia, and an investigation by the UK authorities. On 5 July, the Crown Prosecution Service (CPS) decided that no case should be brought against Mr Berezovsky, as he was likely to be able to prove that he had expressed support only for non-violent action.[232] However, Russia has charged Mr Berezovsky with conspiring to seize power.[233]

103. In July 2007, shortly after the UK had announced that it was taking measures against Russia in connection with the Litvinenko case, the Metropolitan Police confirmed that they had arrested a Russian in London on 21 June on suspicion of conspiring to murder Mr Berezovsky at the London Hilton.[234] Acting on information provided by the UK authorities, Mr Berezovsky had left the UK for some days while his suspected would-be assassin was apprehended. Having tailed him from his arrival in the UK, the Metropolitan Police apprehended the suspect and handed him over to the immigration authorities, who revoked his visa, deported him for visa violations and banned him from returning to the UK for 10 years.[235] The police handed the suspect over reportedly because they lacked evidence of the suspect's involvement that would have stood up in court.[236] Mr Berezovsky accused President Putin of being behind the alleged assassination attempt.[237] Russia's Ambassador to London, Mr Yury Fedotov, said that the possibility of Russian state involvement in the alleged murder plot was "excluded".[238]

104. We recommend that in its response to this Report the Government should volunteer more information surrounding the apprehension and deportation from the UK in June 2007 of the Russian individual suspected of planning Mr Berezovsky's murder.

105. Mr Zakayev and Mr Berezovsky are only the two most high-profile figures whom Russia has tried and failed to extradite from the UK. Other cases involve, for example, executives of the Yukos oil company. Professor Bowring told us that, on coming to office in June 2006, Russia's new General Prosecutor had announced that he intended to re-launch 16 extradition cases in the UK, including that of Berezovsky.[239] In a written answer in September 2007, the Government said that Russia had made 29 extradition requests to the UK since 2001, none of which had been granted.[240] In subsequent correspondence with a Member of our Committee, the Government appeared to clarify that multiple extradition requests might have been made for single individuals, and that the number of discrete requests made by Russia since 2001 was 13.[241]

106. Russia's extradition requests to the UK are failing despite the fact that Russia is designated by the UK as one of those 'Category 2' states under the 2003 UK Extradition Act which is not required to provide prima facie evidence when submitting extradition requests. Professor Bowring told us that there was "genuine incomprehension" on the Russian side regarding what is involved in making a successful extradition application to the UK.[242] In November 2006, the Crown Prosecution Service signed a memorandum of understanding with its Russian counterpart to allow the Russian side to consult directly with the UK in the process of preparing extradition requests.[243]

107. Commenting on the impact of asylum and extradition issues on the UK-Russia relationship overall, the FCO told us that:

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According to Mr Clark:

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108. Although we regret the difficulties that contested asylum and extradition decisions are causing in the bilateral relationship, we support the Government's insistence on the independence of the legal process regarding Russian extradition requests to the UK. We recommend that the Government continue to offer assistance to Russia in the preparation of extradition requests to the UK and in the development of the country's judicial system in accordance with principles of independence and professionalism.

109. The deadlock surrounding bilateral extradition issues is conducive neither to improving the UK-Russia bilateral relationship nor to advancing the interests of justice in either Russia or the UK. We recommend that the Government invites its Russian counterpart to renegotiate extradition arrangements between Russia and the UK, in an endeavour to satisfy the considerations of courts in both the UK and Russia which are charged with interpreting human rights obligations and Russia's constitution in the light of extradition requests.

THE LITVINENKO CASE

110. Alexander Litvinenko was a former operative of the Soviet-era KGB and its successor, the Federal Security Service (FSB). In 1998, while a serving FSB officer in Russia, Litvinenko claimed publicly that he had been given instructions to kill Mr Berezovsky. Facing criminal charges over his accusations, Litvinenko left Russia for the UK in 2000 and was granted political asylum. In 2002, Mr Litvinenko was convicted in his absence in Russia and given a jail sentence. In the UK, Mr Litvinenko was in the pay of Mr Berezovsky and part of the circle of anti-Putin Russian figures loosely gathered around Mr Berezovsky in London. Although little known in wider UK circles, Mr Litvinenko published increasingly outspoken attacks on the FSB and the Putin regime through anti-Putin outlets. Mr Litvinenko's most famous published claim was that the FSB was responsible for the Moscow apartment bombings in 1999 which President Putin used to justify the second war in Chechnya.[246] In 2006, Mr Litvinenko received UK citizenship.

111. On 1 November 2006, Mr Litvinenko met two Russians, Andrey Lugovoy, a former FSB agent, and Dmitry Kovtun, in a London restaurant. Mr Litvinenko fell ill the same day and was admitted to hospital. On 23 November, Mr Litvinenko died from poisoning with the radioactive agent Polonium-210. In a deathbed statement released in Mr Litvinenko's name after his death, Mr Litvinenko accused President Putin of being responsible for his murder. This accusation is supported by Mr Litvinenko's family and friends, including Mr Berezovsky.

112. The UK police, including anti-terrorist officers, conducted an investigation into Mr Litvinenko's death. UK officers visited Moscow in order to conduct interviews. On 22 May 2007, the Crown Prosecution Service (CPS) announced that it wished to charge Andrey Lugovoy with Mr Litvinenko's murder.[247] The UK authorities therefore presented to their Russian counterparts a formal request for Mr Lugovoy's extradition to the UK.

113. On 9 July, the UK authorities received their Russian counterparts' formal rejection of the UK's extradition request. The Russian authorities pointed to the fact that Article 61 of the Russian constitution bars the extradition of Russian citizens. States parties to the European Convention on Extradition, such as Russia, are able to maintain constitutional bans on extradition of their nationals in this way.

114. Russia has offered to put Mr Lugovoy on trial in Russia, if the UK were to hand over the evidence it has amassed against him. The Government has categorically rejected this option, on the grounds that Russia could not guarantee a fair trial. The Government has also rejected the possibility of trying Mr Lugovoy in a third country, an option which would in any case still run up against Russia's ban on extradition of its nationals. [248]

115. On 16 July, the new Foreign Secretary, David Miliband, announced the UK's response to Russia's refusal to extradite Mr Lugovoy in a statement to the House.[249] Mr Miliband called the Russian position "extremely disappointing". Mr Miliband claimed that Russia had given "no indication of any willingness to work with [the UK] to address" the difficulty represented by the Russian constitution. Mr Miliband said that Russia's position suggested "that the Russian government has failed to register either how seriously we treat this case or the seriousness of the issues involved". Mr Miliband pointed out that, given that Russia sought freer movement for its people across the EU, it would need to reciprocate with a commitment to cross-border judicial cooperation. The Foreign Secretary announced that the UK would:

expel four Russian diplomats from the Russian Embassy in London;
review the extent of the UK's cooperation with Russia;
suspend negotiations with Russia on visa facilitation and tighten other visa arrangements with Russia; and
discuss with EU partners the need for EU-Russia relations to take UK concerns on the Litvinenko case into account.

Mr Miliband said that the UK measures aimed to: advance the judicial process; "bring home to the Russian government the consequences of their failure to cooperate"; and "emphasise [the UK's] commitment to promoting the safety of British citizens and visitors". In his statement, Mr Miliband suggested that the UK was taking a tough view because the manner of Litvinenko's death put many hundreds of other people at risk, and in order to signal the UK's determination to protect its Russian community.

116. In his evidence to us two days after the Foreign Secretary announced the UK measures against Russia, the Minister for Europe stressed that the Government was not striving for a "macho response" to the situation but had announced measures that were "precise", "considered", "measured" and "targeted".[250] Mr Murphy said that it was not the Government's intention for the measures taken against Russia to affect official cooperation in other areas of mutual activity, such as anti-terrorism, non-proliferation or climate change,[251] or to prompt, for example, business disengagement and disinvestment.[252] Mr Murphy said that the UK's "relationships with Russia are strong".[253]

117. On 18 July, the Presidency-in-Office of the EU issued a statement on behalf of the Union expressing "disappointment at Russia's failure to cooperate constructively with the UK authorities" and urging "urgent and constructive cooperation by the Russian Federation on this matter […] which raises important questions of common interest to EU Member States."[254] The EU statement reportedly took longer to emerge than the UK would have liked, with the Presidency unable to find consensus straight away and some Member States preferring to leave the issue as a bilateral one.[255]

118. On 19 July, Russia announced its response to the UK measures. Russia too expelled four UK diplomats, and imposed restrictions on visa issuance for officials which paralleled those introduced by the UK. Moscow also said that the UK measures made "continued Russian-British cooperation impossible in the fight against terrorism".[256]

119. In further evidence to us on 12 September 2007, the Minister for Europe reported that the UK had made no changes to the measures announced against Russia in July, and remained committed to them. The Minister did not report any progress in securing Mr Lugovoy's extradition. However, the Minister confirmed that a planned visit to Russia in July by the Minister of State for Energy, Mr Malcolm Wicks MP, had gone ahead and had been "constructive". The Minister said it was clear that "Russian Ministers and officials have a continuing desire not to allow the very strong disagreements that we have with Russia on specific matters to contaminate a genuinely important strategic partnership."[257]

120. In evidence to us on 10 October, the new Foreign Secretary picked up on the disjunction between strong UK-Russian ties in some areas and major disagreements in others. Asked to assess UK-Russia relations, Mr Miliband said that "there is a paradox at [their] heart [….] at the moment".[258] He went on:

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121. Two of our witnesses responded to an invitation to submit supplementary written evidence following the implementation of the UK measures against Russia. The two witnesses disagreed about the wisdom of the UK's steps. While he recognised that the UK "had to take some kind of action to underline the seriousness of the Litvinenko affair",[260] Dr Averre felt that the expulsion of diplomats was hasty and overly blunt. In Dr Averre's view, the expulsions risked creating the impression in the Russian political elite that Russia was "beyond the pale of respectable international society", and that the UK was in fact responding to the difficulties being experienced by UK energy companies in Russia.[261] Dr Averre felt that it might have been better to wait, in order to conduct a full review of UK relations with Russia, and in order to achieve a general consensus among EU leaders about how to deal with a more assertive Russia.[262]

122. Mr Clark felt that the UK measures were "reasonable and proportionate".[263] Mr Clark drew attention to the dangerous and costly nature of the crime, the need to "put down a marker" as regards UK attitudes to the possible import into London of violent disputes within the Russian community, and to the strong suspicion that elements of the Russian state were in some way involved in Mr Litvinenko's death.[264]

123. Both Dr Averre and Mr Clark drew attention to the fact that Russia's response to the UK measures was relatively restrained and did not escalate the situation.[265]

124. We conclude that the Government was correct to send a strong signal regarding Russia's refusal to extradite Andrey Lugovoy. We recommend that in its response to this Report, the Government detail as far as possible the considerations which led it to take the specific measures announced on 16 July 2007, and the discussions which it has had—if any—with its Russian counterpart about possible ways of working around Russia's constitutional ban on the extradition of its nationals. We further recommend that in its response the Government update us on any practical impact that the UK and Russian measures are having on government-to-government cooperation, on progress in the UK's review of cooperation with Russia, and on its discussions with EU partners on including issues arising from the Litvinenko case in the EU-Russia dialogue.

BBC World Service

125. The BBC World Service has a large operation based in Moscow, in conjunction with staff working for other parts of the BBC. The World Service's Russian Service accounts for 45 of the roughly 80 staff at the BBC's Moscow bureau.[266]

126. As regards television, BBC World is available in 1.8 million homes and over 13,200 hotel rooms in Russia. Audiences for the BBC's online content continue to grow. The World Service told us that the BBC's Russian site is unique in its market in offering a mix of text, video and audio. The Russian Service is one of six World Service language services recently to have launched a broadband video offer.[267]

127. Radio is currently the most problematic platform for the World Service in Russia. BBC World Service radio in English is available at peak times on short wave, and in three major cities (Moscow, St Petersburg and Ekaterinburg) on medium wave. In Russian, the BBC World Service is again carried in the three cities on medium wave. However, Russian Service programming was taken off the two stations previously broadcasting it on FM—Radio Leningrad in St Petersburg and Radio Arsenal in Moscow—in November 2006. The halt coincided with news of Mr Litvinenko's poisoning, but the World Service pointed out to us that the Russian authorities had said that the two stations had failed to amend their licences to allow them to take external programming. An earlier FM partner for the BBC had already lost its licence in 2005. In April 2007, the BBC launched a presence on its own FM licence for the first time, in the form of Bolshoye Radio, in Moscow. Bolshoye Radio was a joint venture with Voice of Russia, the international arm of the Russian state broadcasting network. However, in August 2007, Bolshoye Radio was also obliged to stop broadcasting BBC content, or lose its licence.[268] In its evidence, submitted before the ending of BBC broadcasting on Bolshoye Radio, the World Service suggested that its operations were being affected by the tensions in UK-Russia bilateral relations.[269] The problems with FM broadcasting are affecting audience figures for BBC World Service radio in Russia.[270]

128. In his evidence to us in September, the Minister for Europe told us that the Government continued to believe that the "World Service […] should be allowed to broadcast and go back on air" on FM.[271] However, the FCO also noted the need to strike a delicate balance, between the results that can be achieved through diplomatic intervention on behalf of the BBC on the one hand, and, on the other, the danger of encouraging the misperception that the BBC is an arm of the UK Government.[272]

129. In its evidence, the BBC World Service reported on a wide range of innovative and high-profile programming which it has been delivering in Russia on important topics, many of which receive less coverage in the Russian media.[273] The BBC is being affected by the poor general climate for journalism in Russia, but it appears to have a particular problem in securing official comment, especially in English. The FCO told us that, "[g]iven the decreasing plurality of print and broadcast media [in Russia] over the last few years," it "believes that the BBC World Service plays an important role […] as an authoritative source of independent news."[274]

130. A former BBC journalist, Mr Sergei Cristo, expressed to us his concerns that the World Service's Russian Service is too careful of upsetting the Kremlin in its news coverage.[275] Mr Cristo's evidence largely echoed the charges made in correspondence with the BBC and in the press by a group of prominent UK-based Russians. Mr Cristo attributed what he saw as the Russian Service's editorial bias to the World Service's strategy of broadcasting in Russia through state-owned media. In Mr Cristo's view, this strategy "inevitably puts the Corporation's reputation for impartial news at risk"[276]—and leaves the BBC vulnerable to being taken off air.[277]

131. In response to the allegations about its Russian Service, the World Service told us that "The complaints submitted have been investigated and answered in detail, and found to have no substance."[278] We also reported on the World Service's response to these allegations in our Report on the FCO Annual Report 2006-07, where relevant evidence was published.[279] In that report, we quoted BBC World Service Director Nigel Chapman as telling our inquiry into the FCO's Annual Report that the World Service had been "painstakingly through the observations and criticism in the letter [from the critics of the Russian Service], but the team could find no justification for them".[280] We concluded that we could find "no evidence to support claims that the BBC Russian Service was weaker than the main BBC news. However, we agree that the development of a partnership with the international arm of a Russian state broadcasting network puts the BBC World Service's reputation for editorial independence at risk."[281] We agree with the Government that the BBC World Service provides a valuable source of independent news, especially in Russia's current media climate. However, we also conclude that partnerships with state broadcasters could be seen to undermine the BBC's independence. While recognising the difficulties of the current Russian media scene for the BBC, we recommend that the World Service pursue an independent FM broadcasting licence and that it seek to improve and expand its medium wave transmissions, in order to reduce the Service's dependence on FM broadcasting through Russian partners.

British Council

132. The British Council reported to us a rich programme of cultural events, educational links, and English language examining which it was implementing in Russia. However, the Council also reported "an increasingly difficult operating environment".[282] For example, owing to the sudden imposition of a licence requirement, the British Council no longer engages in direct language teaching in Russia. Like the BBC World Service, the British Council told us that it believes its difficult operating environment results in part from the deterioration of the UK-Russia bilateral relationship, along with—in this case—the Russian authorities' growing general suspicion of foreign NGOs operating in Russia.[283]

133. The British Council is currently operating in Russia under a cultural agreement signed in 1994. The outdated nature of this agreement and the failure to negotiate a replacement helped to leave the British Council vulnerable to the raids on it carried out by the Russian authorities in 2004. The British Council has now been registered for taxation since that date and told us that it had "settled outstanding tax issues with the authorities". The British Council is nevertheless being subjected to a further tax inspection.[284]

134. The FCO told us that negotiations on a new Cultural Centres Agreement have been ongoing for nine years, involving the FCO and the British Embassy in Moscow, working closely with the British Council. Following negotiations in January 2007, a text has largely been agreed, but Russia remains reluctant to guarantee consent for the British Council to establish centres outside Moscow of the type which it already runs.[285]

135. As a result of the difficult operating environment it faces in Russia, the British Council told us that it was changing the model for its work there. In future, the British Council will work increasingly through partner institutions, rather than directly with the Russian authorities—although even partner institutions are coming under pressure to withdraw from work with the British Council.[286]

136. Further to its decision to change its operating model in Russia, the British Council informed us in October 2007 of its latest steps there.[287] The British Council has decided to transfer its network of nine small regional centres to local partners, by the end of 2007, and to support these centres' subsequent operation through partnership agreements. The British Council itself will retain only its three major offices, in Moscow, St Petersburg and Ekaterinburg. The British Council told us that its regional centres in Russia "are now sufficiently established that they no longer need to be run by the British Council itself."[288] Although the British Council's decision may in part reflect the difficult environment it has faced in Russia, the Council told us that it is introducing similar changes across Europe, and that they also reflect efficiency considerations.

137. We reported on the operations of the British Council in Russia in more detail in our Report on the FCO's Annual Report 2006-07. In that report, we welcomed "the successful activities the British Council has been able to carry out in Russia, against a background of obstruction from the Russian authorities." We recommended that in its response to that Report, the Government "set out what representations it has made to Russia to urge it to conclude a Cultural Centres Agreement as soon as possible".[289] We are deeply concerned about the termination of British Council English language teaching in Russia, and the difficult environment that the British Council has faced in Russia in recent years. We recommend the FCO does all it can with its Russian interlocutors to secure conclusion of a new Cultural Centres Agreement as soon as possible.

Non-state relations

138. At the non-state level, the bilateral relationship between the UK and Russia has intensified markedly in recent years, across a range of fields:

Trade flows remain small as a share of each state's total but are rising rapidly. The CBI told us that the rate of trade growth rose in 2006 for the sixth successive year. UK exports to Russia were worth £1.9 billion in 2006, and imports from Russia £3.6 billion.[290]
In 2006, the UK was the largest foreign investor in Russia. UK firms invested $5.5 billion in the country in the first nine months alone. On a cumulative basis, the UK is the largest foreign investor in the energy sector—owing to major investments such as those of BP into the joint venture TNK ($6.75 billion) and Shell in the Sakhalin II plant ($5.5 billion)—and the fourth-largest foreign investor overall. Over 400 UK companies have investments in Russia, across a broad range of sectors.[291]
Russians are an increasingly prominent presence in the UK economy. Corporate direct investments remain relatively few; they include GAZ's acquisition of the Birmingham-based van producer LDV in 2005,[292] Gazprom's 2006 purchase of Pennine Natural Gas, a supplier to non-residential customers, and Kuzbassrazrezugol's involvement in the Hatfield colliery and power station project.[293] However, Russian firms are increasingly listing on the London Stock Exchange (LSE) and participating in other London financial markets. The CBI told us that Initial Public Offerings in London by Russian firms were worth over $4 billion in 2005 and could have risen to as much as $20 billion in 2006.[294] The Russian state may also become a player on the LSE, as it plans from 2008 to invest a proportion of its oil-derived stabilisation fund into foreign stocks and shares.[295]
The UK's Russian community, which as we have seen has grown noticeably, is having a tangible impact in UK schools, retailing and culture, the property market and football.[296]
Travel between the UK and Russia is also up. Visa applications to the UK from Russia are rising by around 20% a year.[297] In 2006-07, the UK's Moscow post received 128,261 applications for UK visas, 5% of worldwide applications.[298] Russians constitute the fifth-largest national group requesting UK visas.[299]

139. Flourishing UK-Russia non-state ties, especially in the economic sphere, do not exist independently of a supportive official framework. For example, the CBI commended to us the support provided to UK business delegations in Russia by the British Embassy in Moscow, and the briefings and other assistance provided by the FCO to UK business in Russia more generally.[300] Particularly in the context of recent difficulties experienced by UK firms in the Russian energy sector,[301] the CBI welcomed the decision to reinvigorate the UK-Russia Intergovernmental Steering Committee on Trade and Investment,[302] and the establishment of the UK-Russia Energy Forum during a visit to Moscow by the then Secretary of State for Trade and Industry in February 2007.[303] On that occasion, the Secretary of State took with him the most senior CBI delegation ever to visit Russia. Russia is a priority country for trade and investment activity under the UKTI Global Strategy, and the British Embassy in Moscow delivers a range of projects on best practice in the economic and business spheres as part of its Economic Governance programme, under the Global Opportunities Fund.[304]

140. The deterioration in UK-Russia diplomatic relations which has occurred in 2007 appears to have had only a limited impact on non-state ties, although UK business representatives in Russia would prefer to see the resolution of any tensions that might make them and their businesses more vulnerable. The CBI regretted that "Recent political tensions between the UK and Russia have caused frustration in the business relationship and have adversely impacted on the level of Russian participation in some bilateral business fora."[305] The most notable example of the latter occurred when several senior figures withdrew at the last minute from the Russian Economic Forum in London in April 2007, reportedly on instructions from the Kremlin, although purely domestic Russian factors may also have played a role.[306]

141. Despite the deterioration of UK-Russia relations at the highest diplomatic level, several witnesses stressed that they continued to experience quite different attitudes to the relationship in their day-to-day work at people-to-people level. For example, Professor Bowring told us that "there is a deep reservoir of respect and affection for the UK"[307] and said that he felt there was "still considerable mileage" in the kind of exchanges of information and experience that he had been involved with in the field of the rule of law and the justice sector in Russia.[308] Similarly, the British Council reported to us a "continuing appetite amongst influential publics for strengthened relationships between the UK and Russia."[309] According to the British Council, "In contrast to the mistrust of the Russian authorities, there is nevertheless still a high level of interest in partnerships with the British Council at an institutional level, and for engagement at an individual level."[310] Even in the dealings of Russian partners with the UK Government, Dr Monaghan in particular was keen to stress that "we have a significant amount of engagement […] that is reasonably positive."[311] UK-Russia engagement of this type is ongoing in areas such as military cooperation and cooperation against organised crime, as well as in areas such as the security of WMD materials which are touched on elsewhere in this Report.[312] We recommend that the Government continue to foster people-to-people contacts as a potentially effective way of improving UK-Russia relations and bringing mutual benefits in the longer term.