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Thoughts about the Chagos Islands, Joe Biden and tax havens

One detail that perhaps got lost in the recent UK decision about the Indian Ocean group of islands containing Diego Garcia – taken very fast and over the heads of the Chagos Islands locals (which hardly fits with ideas about decolonisation) – was that President Biden applauded the move. In way this isn’t surprising. Pr. Biden doesn’t particularly like the UK, and like a certain kind of American politician, has a grudge about the old, post-imperial network of relationships and territories that the UK has, or had, around the world. More fool him.

In this transfer and lease deal (which is not, as far as I know, formally signed and there has been no formal debate or legislation about this in Parliament) the UK is transferring taxpayers money in a payment programme to a tax haven (Mauritius). If the Tories had done this, the tax haven angle would have been constantly mentioned.

It seems ironic that Labour, a party not exactly known for its love of tax havens (unless Tony Blair uses one) or such international conduits, feels it is okay to deal with Mauritius financially in this way. Don’t get me wrong, I am for tax havens, and the more of them the better, because they deter otherwise high-tax governments from going crazy when capital is mobile, although as UK finance minister Rachel Reeves is proving, that’s not a solid protection. Tax hikes are likely in the 30 October UK budget. People are leaving.

Biden’s support for what’s happened should give pause, given what a poor President he is on foreign affairs, in my view. Also, he hasn’t made much disguise of his distaste for Brexit and the UK’s independence out of the bloc, and neither did Barack Obama. There’s no enthusiasm from that quarter for the UK to engage in new trade and other deals with countries outside the EU. And Biden’s own recent judgement about foreign affairs is spotty at best: half-decent on Israel and Ukraine, and shockingly inept over Afghanistan, with the rushed departure and loss of billions of dollars of equipment.

Those on the Republican side are, apparently, far less happy about the Chagos islands deal, and the potential risk to security of the Diego Garcia airbase jointly used by the UK and US. They know how porous leasehold deals can be, and have seen that Mauritius has used all legal pressure to change the terms of its independence settlement with the UK of 1968. The US Air Force has used the base in recent conflicts; if it wanted to bomb Iranian nuclear facilities, for example, and do so via Diego Garcia, the situation becomes dicier than it might have been. One has to wonder about the role of China in all this (Chinese money flows through Mauritius.)

This whole saga also shows that if the UK is to pursue a more “blue water” foreign policy in future as it expands trade links with countries outside Europe, particular in Asia, that getting its defence arrangements locked down is essential. And we need to lose our illusions about how special our relationship with the US really is at times.

Daniel Hannan has this excellent overview of just what a shockingly poor transaction the UK has made with Mauritius. Hannan argues that Mauritius has never exercised sovereignty over the islands, a fact that is so shocking it is hard to argue how on earth we reached this point and how the Mauritius government thought it could bully its way ahead on this. However, a future, different UK government should certainly revisit the terms of this deal, and press hard on Mauritius if, for example, that country’s anti-money laundering standards are questioned in future. Time for a bit of nastiness behind the smiles.

It may be too late now to change course on this specific, shabby deal, at least under the current Starmer government. I fear it is. And now there’s speculation about what happens to the Falkland Islands and Gibraltar. The UK has shown itself to be weak. People tend to notice.

13 comments to Thoughts about the Chagos Islands, Joe Biden and tax havens

  • Natalie Solent (Essex)

    It is far less evil in its consequences, but one way in which Starmer’s Chagos deal resembles Biden’s withdrawal from Afghanistan is that the current office-holder is at pains to say “I only followed through on what was started by my predecessor”.

    No one ever makes this claim about something that is going well. It is also strange to see politicians who were elected on how they would be different from their predecessors suddenly say they are powerless to change things.

  • jgh

    Looking at the geography and the history, when Britain pulled out in the 1960s the obvious result would have been for Chagos to be part of the Maldives. How on earth did Mauritius – MILES!!!! away – justify demanding them, and ultimately getting them?

  • Martin

    When this was announced I was suspicious of the claim that the US government would be furious about it, because I doubted the British government would ever dare make a decision like that without American approval. I didn’t forsee per se that the decision was effectively made on American orders. Admittedly, it doesn’t wholly surprise me as Britain is increasingly a vassal state to the US, but they aren’t even trying to hide it now.

    You can validly argue that what Joe Biden isn’t good for America, or at least most Americans, but that’s a different conversation.

  • bobby b

    “One detail that perhaps got lost in the recent UK decision about the Indian Ocean group of islands containing Diego Garcia . . . . was that President Biden applauded the move.”

    Applauded?

    My understanding was that his admin provided the original impetus for the change. As in, do this now please.

  • Barbarus

    Funny how the worst decisions seem to have bipartisan support – apart from the sort of Tories who are usually castigated as extremists, of course.

  • Paul Marks

    Johnathan Peace makes an excellent point at the very start – this hand over ignores the wishes of the Chagos islanders, unjustly removed by Harold Wilson in 1968.

    The Chagos islanders do not wish to be ruled by Mauritius – many hundreds of miles away and a puppet state of the People’s Republic of China.

    So Mr Biden, or whoever controls him, welcomes this take over of wide areas of the Indian Ocean by the People’s Republic of China (we get to “keep” the military base – but it will be made untenable), his “welcome” does not astonish me.

    Even before his mental decline Mr Biden was in the pocket of the PRC – as are both K. Harris and Tim Walz.

    Indeed the Communist Party Dictatorship of the People’s Republic of China bought these people easily – it was not much of an effort.

    No great corruption of innocence – more just driving around looking for street walking politicians.

  • Paul Marks

    Barbarus – now we are out of office, Westminster Conservatives are telling Conservatives “out in the sticks” (like myself) that they all share our “extremism” (our belief in national independence, opposition to “Woke”, Frankfurt School Marxist, attacks on Freedom of Speech, and-so-on).

    Odd as I do not remember these people coming to my aid, or to the aid of friends of mine, when we were under attack by “Central Office” for their masters the BBC and the Guardian newspaper.

    Still one must forgive (if not forget) – if they now are truly against such things as the Environment Act (which mandates Net Zero – for the United Kingdom, without any real commitment from the People’s Republic of China – which produces ever more C02) and the Equality Act (with all its implications for Freedom of Speech – and-so-on) then it would be churlish not to welcome their support.

  • BlindIo

    It should also be noted, apropos of nothing, that the Government of Mauritius has close links with the CCP. Bought and paid for, you could say. Biden is a big fan of the deal you say? Huh.

  • Johnathan Pearce

    Yes.

    Several Caribbean islands are in the same position.

    China is playing a long game. They can scarcely believe their luck in all this.

  • Johnathan Pearce (London)

    It is also strange to see politicians who were elected on how they would be different from their predecessors suddenly say they are powerless to change things.

    Starmer, remember, is a fan of the EU, and of that generation of politicians at ease with interpolating EU directives into UK law, and further, he’s very comfortable with going along with establishment thinking on certain topics. Another angle is a certain anti-colonialist mindset that says any example of UK reach beyond its shores, particularly if it is a legacy of when the Royal Navy patrolled and controlled the seas, is somehow evil, or at least needs to be justified beyond normal bounds. The fact that the Chagos Islands’s inhabitants are screwed on this deal makes no difference to Starmer, David Lammy and others: they don’t get bothered by such trivia – it is all about looking and feeling good. Never mind the benefits of this base for global maritime and land-based security, or whether this disrupts alliances and so on. Or even if a beneficiary of it is a tax haven. As we have seen, Starmer and the other chuckleheads in office seem quite at ease with money and the good life, because they think they are protected by a forcefield of moral righteousness.

    This is, as Hannan writes in the linked article, a form of student union politics, and intensely destructive of good government. It is the posture of a supercilious, but not terribly bright, 20-year-old who enjoys annoying his parents about their old-fashioned views, their patriotism and habits. Unfortunately, this mindset is now dominant in Higher Education, much of the Civil Service, and parts of the corporate world.

    Three months of this lot. Three months. Hard pounding, gentlemen, as Lord Nelson said at Trafalgar.

  • Snorri Godhi

    Anybody knows what the position of the Indian government is on this?
    Looking at the map, it seems to me that India has about as good a claim on the Chagos Islands as Mauritius — and India could give them military (and nuclear) security that Mauritius cannot give.

  • Paul Marks

    Snorri – they are quietly horrified, but there is not much they can do.

    Johnathan Pearce – no agreement was signed by the last government, so this is one of those rare cases (rare at least in modern Britain) where elected politicians could have made a difference, could have said “no” to official and international bodies.

    But they did not – so that is another part of the world fallen to the People’s Republic of China Communist Party Dictatorship.

    And yes you are correct – leftist attitudes now dominate all British institutions, public and private.

  • Johnathan Pearce

    Snorri, according to a variety of articles, India has pushed for the transfer of the Chagos Islands to Mauritius. There is a large ethnic Indian population in Mauritius, and the jurisdictions are close in their relationships. Many affluent Indians go there on holiday (as do South Africans, by the way.) So there is a sort of affinity there. A lot of rich Indians use Mauritius to put their money offshore.

    https://www.firstpost.com/explainers/how-india-quietly-pushed-uk-to-return-chagos-islands-to-mauritius-13821944.html

    Of course, India does not get on well with China, at all. So maybe a bit of shrewd diplomacy from the UK might have headed this off, by pointing out that there was no reason for the UK to abide by some court on this and point out that Mauritius has never had sovereign control over the islands and that the 1968 agreement needs to be honoured. The UK could also have explained that the Diego Garcia base, free of any potential Chinese interference, was beneficial to India by it being in UK hands and open to the US.

    Unfortunately, I think India likes to play games – see how it resisted Russian sanctions and has been happy to play both sides in various disputes. Even so, India’s frosty relations with China mean that it would have been open to the UK keeping the Chagos Islands and so forth.

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