Tuesday, 1 March 2011

The U.K. vacillates on Mubarak money

The Daily Star
Tuesday, March 1 2011
By Michael Glackin

Fresh from savoring post-Hosni Mubarak Egypt first hand, the British prime minister, David Cameron, offered the Arab world a mea culpa for what he called the United Kingdom’s “double standards” in supporting autocratic governments in the region.

Cameron lamented that past governments “faced a false choice” between British interests and values. The U.K.’s interests, he said, will now lie in “upholding our values, in insisting on the right to peaceful protest, in freedom of speech and the Internet, in freedom of assembly and the rule of law.”

Unfortunately, while the prime minister was impersonating a statesman, he was also busy being a salesman. He touted the virtues of British defense companies – whose executives accompanied him across the Middle East – even as equipment and arms sold to Moammar Gadhafi by the U.K. were being used to murder peaceful protesters attempting to assemble freely in Libya.

So it was probably just as well that Cameron inserted a few of his own double standards into his speech. For while stressing democratic values, he also insisted that he respected the right of leaders to manage reform at their own pace.

This double standard is essential. For the following day Cameron was in Qatar – a country with no political parties and where the last election was held more than 40 years ago – presiding over the signing of a $3 billion gas supply deal between Qatar and the British group Centrica. The Qataris also sounded Cameron out about the possibility of investing in government-owned British banks.

What passes for Qatar’s political system is a long way short of what Cameron is enthusiastically calling for in Egypt. Qatar is not Libya of course, but then again neither, despite its many appalling aspects, was Mubarak’s Egypt. The simple difference is that the Qatari royal family’s relatively benign autocracy retains a much firmer grip on power than Mubarak could manage after 30 years. The great 19th-century statesman Lord Palmerston famously said that Britain has no permanent allies, only permanent interests. That remains the hallmark of Cameron’s policy. Values are measured in hard cash.

In fact every aspect of the British government’s current reaction to events in the Middle East is riddled with double standards. Take the cash piles dotted around the globe by the Mubarak family and the Gadhafi government. Witness the speed with which the U.K. and the European Union reached agreement to freeze the assets of ousted Tunisian President Zine al-Abedine Ben Ali and his cronies. France has confirmed receiving an Egyptian request for similar action against Mubarak family assets. The U.K. has also received an Egyptian request, but will not  confirm which assets Cairo wants frozen. It matters little since neither Paris nor London has acted on the requests, even though the Washington-based Global Financial Integrity estimates that around $57 billion in illicit assets left Egypt between 2000 and 2008.

Bizarrely, Switzerland, banker to many a despot in the past, moved with commendable speed to freeze the assets of President Hosni Mubarak, his family, and his former ministers. The Swiss will now assess whether the money came from illicit activity.

Mubarak has close ties to London’s financial community through his son Gamal. Gamal owns half of Cyprus-based Bullion Company, which owns London-based investment fund Medinvest Associates, which Gamal helped set up in 1996 before leaving in 2001. Medinvest, Egypt’s first private equity fund, invested in Egyptian companies and public-sector organizations during the large scale privatization of the Egyptian economy undertaken by Mubarak in the 1990s. Gamal also has an 18 percent stake in EFG Private Equity, a subsidiary of London listed Egyptian investment bank EFG-Hermes.

But rather than act unilaterally and freeze these assets as the Swiss have, the British government is keen to secure agreement with the European Union. Why? Insiders at the U.K.’s Serious Fraud Office and Serious Organized Crime Agency, which investigate financial crime, say they have made inquiries and can act quickly if the go-ahead comes from the politicians. But for the U.K. to act alone requires proof of wrongdoing. Unlike Switzerland, the U.K. is not prepared to freeze first and ask questions later. In contrast, an EU decision to freeze the assets requires no such proof, merely agreement among European leaders.

Government officials insist that this is the speedy route. However, there may be another reason why the U.K. wants to pass the hot potato to the EU. Egypt has also asked that the assets of Ahmed Ezz, an Egyptian politician and owner of London-listed Ezz Steel, Egypt’s biggest steel company, be frozen. The main charge against Ezz, who insists he is innocent, is that he took control of a state-owned steel company illegally during the privatization program thanks to his links with Mubarak’s regime.

A similar charge could be leveled at some very rich Russians currently residing in London – the so-called oligarchs. Their fabulous wealth, speedily acquired and taken West during the chaotic privatization of Russia’s heavy industries during the country’s transition to a market economy, is largely attributable to connections to corrupt politicians. And it may explain why the U.K. is so reluctant to start freezing assets on that basis, when it is allowing billionaire Russians to enjoy the fruits of what many would argue are similarly ill-gotten gains. Far better to wait for the EU to act, allowing the U.K. to avoid setting what would be an awkward precedent.

Meanwhile, Libya’s cash is even easier to trace than Egypt’s. Moammar Gadhafi’s investment vehicle for Libya’s oil money, the Libyan Investment Authority, has stakes in commercial property across London. It is also the fifth largest shareholder in Pearson, which owns Penguin Books and publishes The Financial Times.

It seems bizarre to expect the U.K. to be capable of coordinating an international no-fly zone over Libya or sanctions on the country, or to take any action to stop the bloodshed, when it can’t even implement a standard financial transaction without passing the buck to the EU. Standards, even double standards, clearly aren’t what they used to be.

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