Accessibility links

Breaking News

Three Men, One Yacht, And A Big Scandal

Peter Mandelson's return to British politics has been rocky, to say the least.
Peter Mandelson's return to British politics has been rocky, to say the least.
Two top British politicians. One super-rich Russian oligarch. A $150 million yacht in the Mediterranean. Stir up these ingredients and feed them to Britain's chatty press and what do you get?

A major scandal, that's what.

And that is exactly what happened when word leaked out that George Osborne, the opposition Conservative Party's chief spokesman for finance, and Peter Mandelson, a top Labor politician, met Russian aluminum tycoon Oleg Deripaska in August aboard his yacht.

The scandal began with questions over whether Mandelson, who served as EU trade commissioner from 2004 until October 3, had given Deripaska's business interests preferential treatment on aluminum tariffs.

Now Osborne -- a man tipped to be Britain's next chancellor -- is facing allegations that he solicited an $80,000 contribution from Deripaska for the Conservatives' campaign fund.

Both men deny any wrongdoing. But according to Michael Binyon, a foreign affairs specialist with the British daily "The Times," the revelations could prove to be a major embarrassment for both men and their respective parties.

Binyon says that if it's true Mandelson "made his decisions on aluminum tariffs as a result of his talks with Mr. Deripaska, that would certainly be considered inappropriate and in fact illegal. Then he would have to face questions about his past record, which would be embarrassing for a serving member of the Cabinet."

He adds that it "would be extremely embarrassing for the Conservative Party" if Osbourne sought an illegal political donation from Deripaska.

Political Fallout

Nathaniel Rothschild, a fund manager and banking heir, helped arrange the meeting on the yacht and others Osborne had with Deripaska on the Greek island of Corfu.

Rothschild became angry when he learned that Osborne had been spreading gossip about Mandelson's relationship with Deripaska, which made its way into the British press.

In a letter published in "The Times" on October 21, Rothschild revealed that Osborne was also present on the yacht and, together with a Conservative Party fundraiser, Andrew Feldman, had solicited a campaign contribution. "Not once in the acres of coverage did you mention that George Osborne, who also accepted my hospitality, found the solicit a donation," Rothschild wrote,

Osborne confirms meeting Deripaska. But both he and Feldman deny seeking a contribution. That in itself would not be illegal; but accepting an overseas donation would.

Deripaska, the one person who could definitively reveal the truth, is not speaking publicly on the matter. Deripaska, who lost more than $16 billion in the recent financial crisis, is apparently preoccupied with his own finances.

"He doesn't say very much in public. He's worried about his own finances, which have lost a lot of value in the recent financial turmoil," Binyon notes. "He's not even saying whether or not he is going to seek help from the Russian government with the debts that he has to repay very swiftly. I think he's got bigger things on his mind at the moment."

The scandal will likely reverberate throughout British politics. It has the potential to undermine efforts by the Conservatives under their leader David Cameron to appear less elitist to Britain's working-class voters.

It could also exacerbate fissures within the Labor Party between allies of Prime Minister Gordon Brown and former Prime Minister Tony Blair. Mandelson, a Blair ally, was brought into the government by Brown as part of an effort to heal divisions with Blair's allies.

Asked in Parliament about the Osborne claims, Brown said on October 22 that they deserved further investigation. "This is a very serious matter indeed and I hope it is investigated by the authorities," he said.

RFE/RL's Russian Service contributed to this article

RFE/RL has been declared an "undesirable organization" by the Russian government.

If you are in Russia or the Russia-controlled parts of Ukraine and hold a Russian passport or are a stateless person residing permanently in Russia or the Russia-controlled parts of Ukraine, please note that you could face fines or imprisonment for sharing, liking, commenting on, or saving our content, or for contacting us.

To find out more, click here.