Earlier than Brexit, London needed to bear the “best financial burden” of the EU sanctions in opposition to Russia | Politics | information


Bank of England Governor Andrew Bailey said he did not expect the EU to open the doors to UK financial services exports after Brexit. He said at a press conference earlier this month, “In terms of equivalence, it’s fair to say nothing has really moved forward.” After months of scramble, new rules for trading were finally agreed on Christmas Eve last year, but barely mentioned financial services in a 1,200-page document: a sector that accounts for seven percent of the UK economy and ten percent of tax revenue.

Without this recognition, London companies will be denied access to the market.

The dire remarks echo the remarks made by Chancellor Rishi Sunak, who recently said that a financial services deal between the two blocs “did not take place” even though the Brexit transition period ended over six months ago.

The UK has recognized EU equivalence in several financial services activities, but these have not been reciprocated in Brussels.

It is not the first time the UK has found itself on a collision course with Brussels on financial services.

While Britain was still a member of the EU, the City of London had to do whatever it could to protect itself.

In 2014, the EU decided to impose sanctions on Russia amid anger over the Kremlin’s support for Ukrainian rebels accused of shooting down a Malaysia Airlines passenger plane and killing 298 people.

Measures included an arms embargo, restrictions on offshore energy exploration and restrictions on Russian banks’ trading in European markets.

The sanctions were intended to stall the Russian economy and convince President Vladimir Putin to give up his support for the separatists in Ukraine.

However, according to Raoul Ruparel of Open Europe, a think tank for EU politics, Great Britain would have borne the “greatest economic burden”.

He said at the time: “Britain will likely bear the greatest economic burden from these sanctions.

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“The financial sanctions are the most advanced and will hit the debt and equity issues of Russian state banks, most of which are done through London.

“The sanctions are said to have a greater impact on Russia than on the EU.

“That probably seems to be the case.

“Russian firms will have to look elsewhere for funding and certain high-tech imports – a difficult, if not impossible, task.”

Banking expert Ralph Silva insisted that Russia’s banks have hurt the West the most.

He said, “This will ultimately harm the city as well as New York because, for the first time, Russians will realize that they can actually live without the global financial services industry.

“[Mr] Putin has been strengthened by the sanctions.

“The Russian public sees him as a protector and if he gets the country through these sanctions he will consolidate his power.”

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The sanctions came when former EU Brexit negotiator Michel Barnier was acting as EU Commissioner for Internal Market and Services.

In 2010 Mr Barnier was asked to clean up the European financial services sector and in the UK he was immediately criticized.

According to a 2010 report in the Daily Telegraph, the main allegation appeared to be that the former French minister was more on the side of then-President Nicolas Sarkozy than on the side of the leaders of the pressurized London financial sector.

As the publication states, “the French were seen as a threat”.

Great Britain’s fears also seem to have been justified.

In a 2011 Financial Times report, EU correspondent Alex Barker noted how the myriad of Brussels proposals had shaken the UK financial community and how ministers saw such measures hurt the sector or curtail UK regulatory powers.

That nervousness reportedly became apparent when then Prime Minister David Cameron groaned that the city was “under constant attack”.

For the former Prime Minister – and a representative of the UK financial industry – the problem was not an isolated issue, but rather a worrying trend.

Anthony Belchambers, executive director of the London-based Futures and Options Association, told the publication at the time, “Bureaucracy, ill-informed tax initiatives, protectionist policies and high ‘pass-on’ costs will hurt the city’s international reach.”

Mr Barnier always dismissed complaints against him as “nonsense”.