From Russia with Loot - Spear's Magazine

From Russia with Loot

The gas and oil that flow through snaking pipelines from Russia reach Europe with a great deal more ease than another native commodity now struggling to leave the Bear: its high-net-worth citizens.

Although it has never been easier for Russians to make money and build a business, keeping it in a turbulent society is a wholly different matter. It is no surprise, then, that half of all Russians want to emigrate and that thousands find their way to Britain and beyond every year. The course of emigration, however, never did run smooth.

Russian HNWs – currently, there are 136,000 of them – do not lack reasons to leave. As Kamal Rahman, a specialist UK immigration lawyer and partner at Mishcon de Reya, says, a wealthy Russian can think, ‘While I may be in vogue now and my business is my business now, I may not always have this money’.

The fear of nationalisation, geopolitical uncertainty, state and corporate corruption and a rule of law more honoured in the breach – these all drive out those whom new president Dmitry Medvedev should be most desperate to keep in order to power new industries and increase the national wealth.

There are plenty of positive reasons for Russians to emigrate to Britain, of course. ‘The main reason that they’re coming to the UK,’ according to Sarah Cormack of Withers, ‘is lifestyle. It’s to do with the opening-up of Russia and the wealthy having wider horizons, being more aspirational and better educated.’ Enticements for emigrants include sending their children to Eton and Westminster, the hunting and riding scene, London’s rich cultural and social life, as well as all the business opportunities afforded in a mature financial scene.

The processes of emigration to Britain and America are drawn out and tightly regulated, but both governments have devised methods which work in favour of HNWs, using the cause (business acumen) and effect (money) of their success. Even with these golden routes, though, full emigration (up to the assumption of new citizenship) takes five years in both countries and is far from guaranteed.

The British route is by application for what is known as an investor visa. No Russian can come to Britain, even on holiday, without a visa, but instead of a standard Big Ben-and-Harrods tourist pass, the investor visa carries quite stern conditions, but does bring rewards. This is where the money comes in: £1 million, or approximately 46 million roubles, must be spent in Britain.

‘£750,000 must be invested in UK government bonds, gilts or equities,’ says Mrs Rahman. ‘You can’t just buy a house,’ she says, for the equivalent and claim you’ve invested in property. The remaining £250,000 can be spent on property, or put in a bank, or invested in a minor Monet. The key, says Mrs Rahman, is that ‘your portfolio must be over a million pounds at all times’.

Even if you are in possession of the requisite roubles, the fate of the escape attempt from Moscow to London is determined in the most unlikely of locations: a former industrial powerhouse of north England, Sheffield, once renowned for producing coal as fast as Russia now does oil. After an application has been made to a British consulate in Russia, six to eight weeks later, it reaches Sheffield. Quite why it should take so long in a broadband world is a mystery, but a decision is usually made within a week. If successful, the British consulate in Russia can stamp the passport and you can board your jet.

The investor-visa holder is given the right to temporary residency in Britain for two years, which can be renewed for three more, ‘if they’ve done what they said [running their business] in the appropriate manner,’ Mrs Rahman says, and have maintained their portfolio above the minimum level. ‘At the end of the five years, they can apply for indefinite leave to remain,’ she says, gaining a grant of settlement that entitles them to permanent residency. Home Office figures show that 1,380 Russians gained grants of settlement in 2006, but the department could not provide a breakdown by personal wealth.

Despite the many reasons for Russians wanting to come and live in Britain, Mrs Rahman says that the Government enforces one ‘prohibitive’ requirement. The Home Office demands that those on investor visas stay in the country for more than nine months a year, which is not something that HNW businessmen with global lifestyles are accustomed to. ‘If they reduced it to three months, we’d get a flood of Russians.’ They could increase the money to £5 million and people would gladly pay. As a work-around, wives and children are often sent to Britain so that the husband can move freely and apply for citizenship after his wife has gained it.

David Lesperance, an expert in HNW immigration issues, agrees that the issue of physical presence is a major consideration when developing strategies for clients and their families. ‘We will often come up with a plan which involves several jurisdictions and has short-, medium- and long-term elements,’ he says. Sometimes this involves planting one school-age child in one jurisdiction that requires a great deal of physical presence in order to maintain residence or qualify for citizenship. While they attend school, they also meet the presence requirement.

America does not make immigration, even for HNWs, a simple matter, although there are two possible routes. Paul Samartin, who practises US immigration law at Laura Devine Solicitors, says that although emigration there may be desirable, ‘it’s not really that practical. US immigration is probably one of the most complex in the world.’ The big problem is they have about twenty categories of visa, each with a tight cap. Even the guarantee of a job is not sufficient for a visa.

The first procedure for HNWs to emigrate to America – as in Britain – involves investing capital in the country. According to Paul Samartin, the Immigrant Investor Program requires that ‘if you invest over a million dollars [approximately 24 million roubles] into a business, as long as it creates ten jobs,’ you can be granted visa EB-5, which confers two years’ residency. (In economically deprived areas, the amount is reduced to $500,000.)

You do not need to found a new business, nor must the jobs be created by the time of the application – it is enough that a business plan makes clear that it will be established within two years. To make the process simpler, you can just pour $1 million into a government-approved Regional Investment Centre, which creates jobs for you. If the first two years go well and you stay out of trouble, you can get a three-year extension, and if those years are equally successful, you can apply for a green card for permanent residency.

Despite this simple-seeming scheme, the rules are ‘onerous’, according to the Alliance of Business Immigration Lawyers, and this is revealed in the figures. Despite 10,000 EB-5 visas being made available every year, in 2005 only 346 people were granted one. This was at least a sharp rise from the 64 granted in 2003. One of the principal problems with getting an EB-5 visa is that the American government has to be convinced that the money is legitimate, and while HNWs’ wealth may well be unimpeachable, a wider suspicion of national corruption hangs over it. Added to this, a green card means American taxes, which are considerably less favourable than Russian ones.

The alternative method is, in practice, easier to obtain and can be just as long-lasting, even if it is not technically permanent; it also avoids a green card and concomitant taxes. Visa O-1 is available for ‘persons of extraordinary ability’, who can demonstrate national or international acclaim as an artist, scientist or businessman. This visa gives you three years’ residency, as long as you have a job offer in America, and can be extended indefinitely, annually. Awards, big-business deals and newspaper clippings can be used in support, but it is clearly a more nebulous category. Despite this, nearly 30,000 people were admitted on this basis in 2005, which is 90 times more than the number of EB-5 visas issued.

President Medvedev was thrown off his cheerful course at a G8 press conference when a journalist presented him with the fact that 50 per cent of the middle class wanted to emigrate, citing social stability and personal safety worries. This figure, drawn from a survey by a respected Russian statistical organisation, led Medvedev to an earnest defence of the increasing opportunities available in Russia and of the government’s efforts to fight corruption.

He seemed shocked, and with good reason: if half of the middle class wants to leave, the proportion of HNWs who have their eye on an outbound flight is surely considerably higher.



 

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