Frozen assets are not a slush fund that he can dip into because he’s too weak to tell British taxpayers they have to pay for a war doesn’t want to end
Ian Proud was a member of His Britannic Majesty’s Diplomatic Service from 1999 to 2023. He served as the Economic Counsellor at the British Embassy in Moscow from July 2014 to February 2019. He recently published his memoir, “A Misfit in Moscow: How British diplomacy in Russia failed, 2014-2019,” and is a Non-Resident Fellow at the Quincy Institute.
Cross-posted from Ian’s Substack “The Peacemaker”
Licensed under the United Kingdom Open Government Licence v3.0.
I didn’t authorise the UK sanctioning of Roman Abramovich in March 2022, but I did authorise over 800 other designations of Russian individuals and firms, while I was still at the Foreign Office. I have no connection with the oligarch, nor do I support Chelsea. But I am alarmed by Keir Starmer’s threat to take him to court over the disposal of the proceeds from the Blues’ sale. This appears illegal and doomed to fail.
On 17 December, Starmer stood up in Parliament and said, “my message to Abramovich is . . . the clock is ticking, honour the commitment you made and pay up now. If you don’t, we’re prepared to go to court so every penny reaches those whose lives have been torn apart by Putin’s illegal war.’
Abramovich was sanctioned by the UK government on 10 March 2022. Under the Russia (Sanctions) (EU Exit) Regulations 2019 all of his assets in the UK were frozen and remain so to this day. He was also subject to other restrictive measures including a director disqualification (i.e. he cannot operate as a director of a UK firm such as Chelsea) and a travel ban.
The practical impact of sanctioning Abramovich was to tip Chelsea into a short-term cash crunch, because the football club’s (i.e. Abramovich’s) assets were frozen. Chelsea’s spending became tightly regulated by a licence issued by the Office for Financial Sanctions Implementation (OFSI) at the Treasury. This forced Abramovich to divest his assets which he did in May 2022 when the club was purchased by a consortium led by Todd Boehly. The proceeds of the sale have been frozen ever since.
Clearly, the sale proved the technical effectiveness of the UK sanctions regime at that time. Liz Truss as Foreign Secretary had made it her quest to close ‘Londongrad’, the catch-all term for very high net worth Russian oligarchs who had parked their money in Britain. Forcing Abramovich to sell Chelsea, which he purchased in 2003, was undoubtedly a feather in her cap in terms of how it played out in UK press coverage.
Yet sanctions policy is governed by law not spin.
With pressure to rid Britain of the taint of Russian money building after the war in Ukraine started on 24 February 2022, Abramovich no doubt saw the writing on the wall and announced his decision to sell the club on 2 March.
In doing so, he pledged to donate “all net proceeds from the sale” to the “victims of the war in Ukraine”.
It was and appears to remain Abramovich’s intention that while much of the money would go to Ukrainian victims of the war, some might also go to victims in other countries, including in Russia.
When he made this announcement, UK lobbyists immediately urged the British government to insist that the funds only go to Ukraine, expressing fears that some money may end up with Russian victims of the war, including former Russian armed forces personnel. It is this pressure which has undoubtedly led the government to take the position that it has.
Yet, Abramovich was not legally required to sell Chelsea nor to donate the proceeds to good causes. His moves appear driven, more, by a desire to insulate the Club from financial disruption and philanthropy.
That’s why Starmer’s pronouncements appear little more than virtue signalling; advancing what he sees as a moral crusade to punish a wealthy Russian under the spurious guise of upholding UK sanctions law.
Yet British law has nothing to say about how Abramovich disposes of his assets and the British Government has no role in the discussion of how they are disposed of. For now, those assets remains frozen and Keir Starmer is seeking to unfreeze them so they be sent in entirety to Ukraine without Abramovich’s consent.
While freezing Abramovich’s assets had a legal basis under the Russia Regulations 2019, attempting to strong-arm him into sending frozen assets to Ukraine is illegal.
Sanctions are not intended to be permanent. It is still far from clear when the Ukraine war will end, but should a peace agreement be sealed and held to, it is conceivable that UK sanctions would be lifted in the future. Should that happen, Abramovich would one day again have access to his capital, including the proceeds from the Chelsea sale, and be free to use it as he pleased.
Of all the oligarchs, Abramovich was most active in supporting efforts to end the Ukraine war, even attending the failed Istanbul peace talks in March and April 2022. His offer to give the Chelsea proceeds to a charitable cause was consistent with his peace efforts but was not legally binding.
It was also unique, as no other sanctioned oligarchs who were previously based in the UK have offered to do the same.
The UK has frozen over £25 bn in Russian assets since the war started; the government does not have the powers unilaterally to send those funds to Ukraine as that would amount to theft. Had the similarly sanctioned oligarch Mikhail Fridman chosen to sell Holland and Barret in 2022, which was owned by his investment firm Letter One, the government could not have insisted that the proceeds be sent to Ukraine in the form of vitamin supplements and health-improving nuts.
The government now issuing a licence to allow for the Chelsea billions to be sent to Ukraine does not impose any requirement on Abramovich to use that licence. The sanctions licencing system exists to allow designated persons to access their frozen assets to meet essential costs. Mikhail Fridman famously complained that the freezing of his assets forced him to ask the government for money ‘to use taxis and buy food’.
The licencing system isn’t designed to provide a slush fund for the government to support good causes overseas. Licences are requested by the designated person and their legal representatives.
This case boils down to two broad themes, neither of which reflect well on the embattled Starmer.
First, a tug of war between what seems right and what is legal. With Ukraine critically short of money – even after Europe’s mega-loan – sending them the Chelsea billions may feel like the right thing to do, but is illegal.
Second, this is another attempt to use sanctioned assets to cover the unsustainable cost of Ukraine’s failing war and so avoid asking British taxpayers to shoulder the burden, at a time when ordinary people are struggling to pay their bills at Christmas.
On the second, the Europeans have already died on a similar hill through their failed attempt to expropriate Russian sovereign assets held in Euroclear. Keir Starmer should ditch his performative threats as legal action against Abramovich would most likely fail if, that is, the UK still has an independent judiciary.
If Starmer wants to waste another pile of British cash in Ukraine, then he should do so and put himself before the court of public opinion. He won’t, though, as he’s weak, deeply unpopular and runs from hard choices faster even than Santa’s sleigh on Christmas Eve.
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