UK-Ukraine Credit Support Agreement
(2 years, 11 months ago)
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Baroness Hayter of Kentish Town
That the Grand Committee takes note of the Framework Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Ukraine on Official Credit Support for the Development of the Capabilities of the Ukrainian Navy, laid before the House on 22 November 2021.
Relevant document: 13th Report from the International Agreements Committee (special attention drawn to the agreement)
Baroness Hayter of Kentish Town (Lab)
My Lords, I wish the Deputy Chairman of Committees belated good wishes for her birthday yesterday. I am glad that we were not meeting then and that we took the extra day off so that she could celebrate in style.
This is an opportunity to welcome colleagues back and wish everyone a really happy, healthy and peaceful 2022. If only that peace could spread more widely across the globe. Sadly, today we have to look at an agreement made necessary by the apparent threats by one nation to the sovereignty and territory of a neighbouring independent country.
Those of us who have assembled in the Moses Room today well understand what has been happening on the Ukraine-Russia border, where since October tensions have arisen thanks to the build-up of Russian troops and hardware. That is concerning by itself, but we also cannot fail to note the forced closure of Memorial, which has long been dedicated to recording USSR history and its repressive record. Perhaps nowhere is that record more keenly felt than in Ukraine, where Stalin’s famine, the Holodomor, killed untold millions in the 1930s—cause enough for modern Ukrainians to cherish their independence from Moscow.
The agreement between our Government and Ukraine that we bring to the attention of the House is a credit support agreement to facilitate the development of the Ukrainian navy. It provides the framework for some £1.7 billion in loans to enable Ukraine to buy two British minesweepers, add weapons to existing vessels and work with UK firms to build missile ships and a frigate, as well as some technical infrastructure and support. Such equipment and know-how is for defensive purposes, in recognition of Ukraine’s sovereign right to determine its own borders as well as its relationships with its neighbours and beyond.
The International Agreements Committee, four of whose members will speak shortly and which I have the honour to chair, had no specific comments on this arrangement, but we sought to bring it to the attention of the House for two reasons. The first is that the agreement marks a shift in government policy. Hitherto, the Government had ruled out sending lethal arms to Ukraine, although they have provided military assistance and training. The credit facility under this agreement—loan finance for the purchase of weapons and warships—is therefore a marked change from the original position of non-lethal support, a change that was foreseen in a memorandum of intent of October 2020. Last year, the Government made clear that they consider Russia to be “the most acute threat” to our society, and they cited military aid to Ukraine to boost its capabilities as reflecting the UK’s commitment to Ukraine’s territorial integrity and sovereignty. So in that sense there should be no surprise about this move now, which actions the Government’s intent.
The second reason for bringing this credit support agreement to the attention of the House is fairly obvious: the current stand-off, which we hope remains just a stand-off, between Russia and Ukraine. This potential conflict—within Europe, within the land fought over during the last war, over territory freed from Soviet domination 30 years ago—has ramifications affecting 44 million inhabitants of Ukraine but also beyond its borders for the security of others. Russia’s worries about Ukraine forging closer links with the EU and the West provide no excuse for any deployment of troops on the border, nor for unreasonable demands aimed at NATO. This is no way to do business when diplomatic means are available.
I welcome the phone calls that President Biden has had with President Putin. Such dialogue must continue, but it should not be seen as a reward for or an outcome of a display of military force. This week’s joint statement from the leaders of the five nuclear weapons states is an important reminder of the value of talking, in addition to its precise wording that
“a nuclear war … must never be fought … We intend to continue seeking bilateral and multilateral diplomatic approaches to avoid military confrontations … and … increase mutual understanding … We are resolved to pursue constructive dialogue with mutual respect and acknowledgment of each other’s security interests and concerns.”
Those must be sentiments that we all share.
Although the International Agreements Committee had no substantive comments to make on the particulars of this credit facility, it emphasised that the provision of loans to purchase British weapons and jointly build warships represents an important shift in policy and so should be debated in your Lordships’ House.
Furthermore, given the current risk of conflict, the agreement provides an opportunity for the Government to set out their approach, working with their allies in the EU and beyond, to countering threats to Ukraine’s territory and sovereignty. We therefore welcome the Minister’s presence here today and look forward to his contribution, which will, we hope, detail the Government’s objectives and discussions with both our allies and Moscow. Although the significance of what he will say clearly goes well beyond the remit of the International Agreements Committee, it is right and proper that Parliament hears from our Government on this pressing and present situation.
Lord Astor of Hever (Con)
My Lords, I congratulate the noble Baroness, Lady Hayter, on initiating this important debate. I welcome this framework credit support agreement and believe that it represents an important part of the support which the UK Government are showing for the continued independence of Ukraine.
I have taken a close interest in Ukraine for many years. I was a Defence Minister in the Lords at the time of Russia’s incursions into the Crimea and Donbass regions of Ukraine in 2014. As I said at that time:
“Support to the Ukrainian armed forces is not new; the UK has been providing advice and training support to Ukraine for some time and has well established relationships.”—[Official Report, 25/2/15; col. 1653.]
The recent increase in the number of Russian troops gathering on Ukraine’s eastern border is extremely concerning, as the noble Baroness said, and has prompted our Government to issue a robust warning to Russia that it will face co-ordinated sanctions from the West if it makes any further incursions. The Foreign Secretary’s comments are in lock-step with President Biden’s assurances that Russia will face severe sanctions if it invades its neighbour.
We are facing a very dangerous flashpoint moment. As with any situation that has the potential to lead to war, there is a real need to de-escalate the situation through engagement in dialogue. Forceful and skilful diplomacy is our only chance of calming Russia’s bellicose rhetoric and switching the mood from one of broken trust between the West and Russia to one of respect for boundaries. We must all work towards a new age of improved communication and co-operation, greater openness and responsibility. In considering the available deterrents, such as blocking the freedom of movement of Russia’s funds through western banking channels and other economic spheres, we should involve as much as possible our European neighbours, notably Germany with regard to Nord Stream 2 as well as the United States.
Solutions can come from different directions and take different forms. Understanding the psychology of the Russian leadership—its ambitions and fears and the risks it is prepared to take—in addition to having an experienced and well-represented negotiating team, will be necessary. However, the UK can make a significant contribution in the context of a wider response from the West to help render an invasion of a stronger and well-supported Ukraine a more complicated and troublesome proposition for Russia.
Britain and Ukraine have enjoyed a close relationship since the latter achieved independence in 1991. We are now an important trading partner. In advance of celebrating the 30th anniversary of independence, the two countries signed the UK-Ukraine strategic partnership agreement in the autumn of 2020, underscoring these years of economic ties and shared defence interests. Credit support, which is to be provided pursuant to the framework agreement on the table for consideration, is a way of ensuring that the benefits reaped by this partnership are not wasted but continue to help Ukraine maintain its right to sovereignty and territorial integrity.
Ukraine is a country rich in history and culture, but it has suffered immeasurably from its past enslavement to communism. Notwithstanding independence, nearly a decade of simmering tensions following the illegal annexation of Crimea, economic hardship and, more recently, Covid have made conditions challenging for the population. We must not fall for Putin’s false assertions of feeling threatened by Kiev’s long-held ambition to be part of NATO and the EU.
Much has been achieved through Operation Orbital, which, since 2015, has enabled us to provide non-lethal training to more than 20,000 members of the Ukrainian armed forces. This has come at the same time as the national implementation of necessary defence reforms covering strategic communications and procurement. Recently, the UK has provided personal protective equipment, winter fuel, medical kits and winter clothing for the Ukrainian troops.
The international Crimea Platform keeps us focused on the ugly reality of human rights violations against a background of forced occupation. Containing the military threat in the Azov-Black Sea region is one critical area of interest for the United Kingdom. The framework credit support agreement will offer the UK and Ukraine an opportunity to combine technical and engineering know-how to develop and enhance Ukraine’s naval defence capabilities—something that will be of benefit to both countries on the R&D and economic fronts, in addition to security.
Ukraine’s Ministry of Strategic Industries, recently set up to oversee and update the country’s defence and aerospace sector, aims to create an environment where joint ventures with foreign companies are the norm. This will increase the potential for mutually beneficial innovative projects and the sharing of critical technologies such as automated control systems, rocket and space technology, unmanned platforms and systems to defend the country from cyberattacks. Additionally, the framework credit support agreement contains commitments from both Governments to tackle corruption in international commercial transactions. A sweeping review of anti-corruption methods will do much to encourage investment in Ukraine, a country rich in talent and resources.
Already, the Ukraine Government have worked to implement a number of reforms to make the climate more appealing to international investors, including the deregulation and privatisation of state-owned enterprises, together with land and capital markets initiatives. The UK is already a significant investor in Ukraine.
Talks are set to take place in Geneva, Brussels and Vienna in the coming weeks. Let us hope that all things will be considered, and nothing and no one will be left out of the negotiations, to de-escalate the current situation and provide a way forward for longer-term co-operation and peace.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, it is a pleasure to follow the noble Lord, Lord Astor, who, as we have heard, has great experience in defence from his time as a Minister in the Government, and who has participated in the production of this report as a member of the committee. I include him in my congratulations to my noble friend Lady Hayter for chairing this committee and producing such an excellent report, and to the noble Baroness, Lady Liddell, and the noble Lord, Lord Lansley, who are also members and have distinguished ministerial backgrounds themselves. The Members involved in producing this report have a broad and wide experience in government.
I strongly support everything in the report. We need to do everything possible to strengthen Ukraine’s forces, including its navy, as a contribution to the deterrence— I underline “contribution” and “deterrence”—of any threat of further invasion by Russia. That is what we seek.
Congressman Adam Schiff, chair of the US House Intelligence Committee, has, as a result of his position, a fair insight into what is happening. On Sunday, he said that Russia is “very likely” to invade and can be deterred only by “enormous sanctions”. I agree with him that powerful political and economic sanctions will be needed and should be signalled now, because the matter is urgent. Russia has amassed over 100,000 troops on the border of Ukraine, as we know. As the noble Lord, Lord Astor, said, we also know from their invasion of Crimea and Donbass that they are not easily deterred. Nearly 10,000 people were killed and over 23,000 wounded in that aggression. Over 1.5 million residents of Crimea and Donbass are still internally displaced as a result.
Ukraine’s territorial integrity is not and should not be in doubt. It has been recognised internationally, including by the Council of Europe, the Parliamentary Assembly of the Council of Europe, the OSCE and other international organisations. Russia has also violated the UN charter and all the principles of international law with the action it has taken.
This is immediately urgent. As the noble Lord, Lord Astor, said, President Putin and President Biden spoke last week, and further talks to try to de-escalate the confrontation are scheduled for Geneva on 9 and 10 January, so this is a matter of great urgency.
However, we must accept that any military retaliation by NATO could lead to a disaster of global proportions and consequences too horrific to contemplate. The US, as the noble Lord, Lord Astor, said, and particularly the European Union and the United Kingdom, together must make it clear that there will be an unprecedented level of sanctions against Russia if it proceeds to invade. I am glad to see that the European Union foreign affairs representative is at the border at the moment.
The UK Government need to make it unequivocally and abundantly clear that we support such a move. I regret that there are, understandably, some continuing doubts about that. I fear that we have soft-pedalled on sanctions so far, perhaps because of the level of Russian assets and investments in the United Kingdom, and—I regret having to say this, but it needs to be said—because of Russian donations to the Conservative Party. That kind of thing compromises you and puts you in a difficult position. The Germans may also be somewhat hobbled in their actions because of their dependence on the gas pipeline Nord Stream 2, as the noble Lord, Lord Astor, said. So it is up to us—the US, the UK, other EU countries and the EU Commission—to take the lead.
Here in the United Kingdom, we have seen the ruthlessness of Putin in Salisbury and, most recently, as my noble friend Lady Hayter said, in his disbanding of Memorial at home. We know that he hankers after a recreation of the spheres of influence of the former Soviet Union. Most recently, in his 2021 state of the nation address, he announced his intention to seek a reunified Russo-Ukrainian state. If he is allowed to continue to use the spurious pretence of the defence of Russian speakers in Ukraine as an excuse for invasion, other countries will be in real danger too. Fear has already spread across the Baltic countries where there are Russian speaking minorities—a legacy of Soviet imperialism, which sent Russians in to keep an eye on local people. Other parts of the old Soviet empire, such as Georgia and Moldova, are now being targeted. Those of us who represent this Parliament on the Parliamentary Assembly of the Council of Europe already see the fear etched on the faces of the delegates from those countries. There is a determination and a strength, but we must not be in any doubt that there is also great fear.
If we do not stand firm now, there will be no stopping a new wave of Russian imperialism. However, military intervention in Ukraine is only one danger we face from Russia. The cyber threat is growing and could be even more devastating, including within our borders, with vital services at risk which could cripple our infrastructure and destroy our economy. Russia also seeks to destabilise the European Union as well as NATO, which is why it did all it could to help ensure a vote for Brexit in the European Union referendum and why, closer to home, it now seeks to help break up the United Kingdom so that our position as a permanent member on the UN Security Council would be open to challenge, as would other key roles that the United Kingdom plays.
The real and present problems we have endured over the past two years because of Covid, which we all know only too well, and even the threat of climate change could be relatively mild compared to this threat that we now face. We all need to wake up to this quickly, but I fear that the present Government may have become too compromised to do so effectively. I fervently, passionately hope that I am wrong; perhaps in his reply the Minister will say something to reassure me.
Lord Lansley (Con)
My Lords, I am very glad to follow the noble Lord, Lord Foulkes of Cumnock, and, although I do not wish to lead him, I am sure my noble friend the Minister will be able to reassure him, as I can, that there is no basis for any suggestion that the British Government’s views on Russia, or their policies or attitudes towards Russia, are in any sense affected by donations to the Conservative Party. As a former director of Conservative Central Office, I know that 30 years or more ago we were very clear that donations to the Conservative Party do not buy influence over its policies.
I am very glad to contribute to this debate as a member of the International Agreements Committee and to say how much I appreciate how our chair, the noble Baroness, Lady Hayter, introduced it so admirably and set out the specifics of the report and how we went about our task. I want to say a bit about that. I am afraid I do not bring ministerial experience to match that of my noble friend Lord Astor of Hever. I thought he set out the policy context within which we want to set this debate very well, and that is something I want briefly to touch on.
On the process point, we report under CRaG, which gives us the opportunity to initiate a debate and for this House to look at the issues. We did so because the policy context within which the agreement had been reached, and is now to be ratified in due course, is fast developing and dynamic. Although the explanatory memorandum that accompanies the agreement set outs its content very fairly, neither it nor the agreement itself set out any of that policy context. It is my view, which I hope might also be the view of my colleagues on the committee and in the House, that although the Minister in the other place, Mike Freer, signed the explanatory memorandum, the Department for International Trade, as the lead department, should have recognised its responsibility to set out the policy context in it to enable the House and we as a committee to see what the Government’s intentions were.
It is not simply a commercial transaction, important as the potential business opportunities in the United Kingdom are, at Rosyth and elsewhere; it is even more important politically, diplomatically and geopolitically. It is not only important but welcome—I do not have any dispute with it; it is a very helpful step in the process of giving Ukraine access to all its sovereign rights, including enhancement of its naval capabilities, as the programme is intended to do. Frankly, we are not the only ones doing this—the United States is enabling it to buy US patrol boats, and Turkey is apparently building a corvette—and it is important to recognise that this naval component is an essential part of what Ukraine lacks in terms of its inherent right to self-defence. For example, there is a significant risk that without this kind of enhancement of its capability, it will lose effective access to the Sea of Azov and some of its coastal territory. That is not an acceptable position for it to be placed in as a sovereign country. It is therefore very important that we do it.
The noble Lord, Lord Foulkes, was correct to suggest that the essence of what President Putin in Russia is aiming to do is reassert a sphere of influence. That does necessarily mean that he wants further acquisition of territory, although we should never forget that there is not a status quo here; there is an illegal annexation of Crimea and separatist control of parts of the Donbass. That is not acceptable. We are in a position where de-escalation, valuable as it is, does not mean that we are able easily to move to what one would regard as an acceptable long-term situation; there is a question mark over what de-escalation really means. There is not a “normal” here, because the territorial integrity of Ukraine has been not only threatened but already fundamentally abridged.
We need to be clear that de-escalation does not mean backing down; it does not mean giving concessions to Russia as a process of trying to return to some kind of status quo. Far from it—what de-escalation means is requiring the de-escalation of Russian threats, because there would be no issue if no further Russian threats were being made. It is interesting in that context that Russia seems to think that the response to this is to make exaggerated demands. They will back down. There are good reasons to think that Russia will not invade Ukraine. The costs and consequences, including domestically inside Russia itself, would be dramatic and unacceptably damaging for President Putin. He may well not want to do it, but he may well want to demonstrate that he has secured concessions and victories as a consequence of it, but we should not give him any of that.
NATO has been very clear about its position. Ukraine has been an enhanced opportunities partner since 2020. The summit in June last year reiterated the Bucharest declaration about the long-term possibility that Ukraine will join NATO. I do not think there is a timetable or prospect of that, but we absolutely should not forgo Ukraine’s rights, or the position that NATO has already taken, in response to threats from Russia. It is very important for us to have a continuing account from Ministers of the Government’s approach, which this debate affords, and that there is no moment, I hope, when we say, “Oh well, Russia has backed down and the troops have moved off. It’s all right then”, because it is not all right: Ukraine does not have access to its own territory and does not have the possibility of asserting its sovereign rights throughout its territory. We should be alongside Ukraine in maintaining pressure to secure that, and this agreement enables us to be a partner to Ukraine in a significant area of its defence capability. I therefore welcome the agreement.
Baroness Liddell of Coatdyke (Lab)
My Lords, I am delighted to follow the noble Lord, Lord Lansley, and that very good analysis of the situation in which we find ourselves at the moment. I pay tribute to the chair of the International Agreements Committee, on which I serve, for bringing this debate to the House. With both the noble Lord, Lord Astor, and my noble friend Lord Foulkes, we have looked at the broader issues that surround what might be going on in the mind of President Putin.
It is important that this House has a chance to debate this intervention, because the clock is ticking, and quite loudly, at the moment. It is not really our job on the International Agreements Committee to comment on geopolitical issues, but frankly you would have to be on a desert island not to be able to appreciate the extent to which there is a threat to peace from the activities of the Russian President. To have 100,000 soldiers on the border with Ukraine is terrifying, particularly to the people of Ukraine who have suffered so much. Yet President Putin has laid the blame for this at the door of NATO encroachment. He omits mention of the annexation of Crimea and what has happened with the military conflict in the Donbass, where fighting continues. Some of the most recent figures are even greater than those quoted by my noble friend Lord Foulkes; I think they are talking now about 13,000 deaths in the Donbass because of the conflict there.
Alongside the UK, as the noble Lord, Lord Astor, has pointed out, a number of other countries have activated military training, and 22,000 Ukrainian troops have benefited from UK expertise. About two weeks before Christmas, the Ukrainian Government warned that Russia could invade the country in the next few months. Indeed, their Defence Minister said in early December that the most likely time could be at the end of January 2022, about three weeks from now. A US intelligence document, revealed in the Washington Post, stated that up to 175,000 troops was the likely deployment by the Russians.
The agreement that we are discussing today will not alleviate that immediate problem with Russian aggression, but it will help in the future, giving Ukraine the benefits of world-class vessels and training, as the noble Lord, Lord Lansley, has pointed out. Our own Government have gone on record with the view that threatening and destabilising behaviour is unacceptable and will have costs.
Giving Ukraine the capability to manage more effectively through a UK-trained naval service is a welcome development. I live in the middle of shipbuilding land in Scotland. I live on the banks of the River Clyde and I see military vessels going up and down it regularly. I therefore have a grasp of the extent to which we, not just in Scotland but in other parts of the UK, are a world-leading country, and we want to pass that knowledge on.
The enabling of Ukraine to purchase two minesweepers and retrofit UK weapons systems to existing weapons, and of specified UK contractors to work with Ukraine to build eight missile ships and a frigate, is also a welcome recognition of our capabilities in shipbuilding. It fills the gap in our access to the Black Sea which the noble Lord, Lord Lansley, talked about and it is a way of mitigating future aggression by Russia. As the noble Lord, Lord Astor, pointed out, this initiative builds on Operation Orbital, which is non-lethal training, as the noble Baroness, Lady Hayter, pointed out, and capacity building. That, as we learned in November 2019, has been extended to 2023. In August 2020, the Secretary of State also announced that the UK would lead a maritime training initiative to help the Ukrainian navy to work more closely with international partners.
We look forward to continuing to negotiate the position with Ukraine to agree the specific financial arrangements around the agreement. I say to the Minister that it would have been of use to have had information in the Explanatory Memorandum on the other countries that have similar agreements. Perhaps the Minister can rectify that, either by a letter if it is confidential or perhaps in his response today. I support the noble Lord, Lord Lansley, in his request for knowledge of the policy context that backs the agreement. It makes sense to have a get-out clause in relation to corruption in international transactions. Not all people around are good; you can get bad people around as well.
The new arrangement with Ukraine is a step change away from the decision not to make lethal weapons systems available, but it is a direct consequence of the escalation prompted by Russian activity. In the recent integrated review of security, defence, development and foreign policy, the Government made clear that they consider Russia to be
“the most acute threat to our security”
at every level, from the mobilisation of troops to cyber activity, as the noble Lord, Lord Foulkes, has mentioned.
The upcoming meeting between NATO Ministers to discuss the Ukraine situation is very important. Perhaps the most important part of it is to underline again and again that the territorial integrity of Ukraine and the belligerence that has been shown make it imperative that there is unity within both NATO and the EU in relation to Ukraine.
In preparation for next week’s meeting between President Putin and President Biden, the Russians outlined their demands, as the noble Lord, Lord Lansley, pointed out: a ban on NATO expansion, and no offensive weapons near the Russian border. Can President Putin not see that the aggression shown to the now independent countries of northern Europe caused 14 central and eastern European countries to join NATO between 1999 and 2020? They look to Article 5 of the NATO agreement to give them protection. I also worry slightly that part of President Putin’s plan is to wrong-foot President Biden, and it is very important that we keep a weather eye on that.
However, other areas and countries nearby are in some difficulty. Finland and Sweden have had additional cause for concern for 30 years. These fiercely independent countries have come closer and closer to NATO. They, too, fear the limitations on democratic and independent states. At the moment, it does not look likely that Ukraine, or even Finland or Sweden, will join NATO, but who knows what the outcome will be if Russian expansionism continues? In 2016, Sweden and the Finns signed host nation support agreements with NATO, which offer alliance forces access to Swedish and Finnish territory in the event of a military emergency.
The noble Baroness, Lady Hayter, alluded to the disbanding of International Memorial, which was a way of putting right some of Joseph Stalin’s atrocities. What are we playing at here? Are we trying to go back to the Russia that was the land of Joseph Stalin?
I was in Russia at the time of the fall of communism. I had only ever seen tanks in museums; I had not seen them go down shopping streets. It was an eye-opener for me. The shops’ counters were empty. The only way of totting up how much you had bought was with an abacus—and this was only 20 years ago. I was there for a defence symposium organised by the University of Edinburgh. I was doubly shocked that there was no food. All people had to eat were tomatoes and cucumbers. I have not eaten a cucumber since then because a week of eating cucumber was a bit too much, frankly.
I was outside the Russian White House when Boris Yeltsin addressed the Soviet Union and the world. I was excited to be at the heart of something like that; it was a world-breaking opportunity. However, when I looked around, the assembled crowds seemed less than impressed. There was an air of cynicism and “So what?”. I asked the interpreter who was with me about it. He shrugged and said, “They are all the same. We are just pawns in their power games.” That is what is happening here. I have thought about that a lot over the past week.
We need to see Russia play a much more positive role in the modern world, and not just in a world that glorifies Stalin and the suffering of the Russian and Soviet people. Putin seeks to rebuild an empire. Why can he not concentrate on improving the prospects of the people in his own country? Let us hope that common sense and humanity are in the minds of the negotiators on all sides in the next few days. Our assistance in helping Ukraine to develop a world-class navy will come too late for the putative conflict, but let us hope that it will give security to protect the Ukrainian people in future. They deserve a break; let us see if we can give it to them.
Baroness McIntosh of Pickering (Con)
I am delighted to follow the noble Baroness. I want to take this opportunity to congratulate the noble Baroness, Lady Hayter, and her committee on securing this debate at such a timely pass, particularly in view of the threat, referred to by many, of the 100,000 Russian troops on the Ukrainian border.
In my humble opinion, Ukraine is very exposed at present. It also has ambitions; my noble friend Lord Astor referred to the fact that it still wants to be attached to NATO and the European Union. I hope that we can open a door to it at some point in future.
I endorse entirely the report’s conclusion that the agreement before us represents an important sign of support for Ukraine and its territorial integrity. I welcome the fact that the provision of credit set out in it is to purchase British weapons systems and jointly build warships. I also welcome, as the noble Baroness, Lady Hayter, expressed so eloquently, the fact that this represents a welcome shift in UK government policy.
Given the present heightened risk of conflict, I agree that the agreement should be considered in the context of the UK and NATO’s commitment to Ukraine. I welcome the opportunity of this debate to discuss the issues before us.
I confess that I have no recent experience of Russia, but I was a Member of the European Parliament for 10 years. I pay public tribute to my erstwhile aide during one of the elections who, I am sure, secured my majority and the election. Whether it was 36,000 on the first occasion or 3,600—you will notice there was quite a shift—I was delighted to be returned and to serve on two occasions.
At that time, when I was MEP for north-east Essex and, eventually, north Essex and south Suffolk, Essex County Council had negotiated a close working arrangement with the council of the city of St Petersburg. As will not have escaped noble Lords’ notice, a rather lesser-known Putin was strongly associated with the city of St Petersburg then. I took two delegations of small and medium-sized businesses to a number of countries within the European Union and, owing to the close relationship that Essex had, to St Petersburg. That culminated in a major conference, hosted by Essex County Council in its chamber, of an equal number of Essex and Suffolk businesses, and Russian, Czech, Slovak and Hungarian businesses. I was delighted to have the opportunity to host that but, since then, have not had any close experience of Russia—until last autumn.
This echoes the concerns raised by the noble Lord, Lord Foulkes, who I consider a noble friend, about the growing number of cyberattacks on our key infrastructure in this country. I pay tribute to my noble friends Lord Grimstone and Lady Vere for the interest they took then; however, I am sad to report that, in spite of the issues that I and a number of others raised, a company that I will not name—but one well known for its transport links in North Yorkshire—and, I imagine, a number of other transport firms that were also subject to this cyberattack had all their systems closed down for six days. It could have effectively shut down those businesses for ever.
I was appalled that we do not have a fast response to such cyberattacks in this country. I am told that the relevant authority, the National Crime Agency, was informed and I read subsequently that my right honourable friend the Secretary of State for Defence is minded to create such a response in Lancashire, in the next two years, to respond to these attacks. But it is evident where the money is raised. I think £140,000 in ransom was raised from this one attack. Perhaps a better-known one is FatFace, as it is common knowledge that the clothing company paid a ransom of millions.
It is unacceptable that companies in this country are effectively funding hostilities by the Russian state, whereby it can pay 100,000 troops to line the Ukrainian border to threaten Ukraine and, possibly, to proceed through Ukraine to the European Union, were they to penetrate further and fulfil the threats they pose.
In welcoming the agreement today, I take the opportunity to pose two specific questions to the Minister. I echo the comments from the noble Lord, Lord Foulkes: the Government and the EU need to set out today what our response would be were Russian troops to cross the border into Ukraine. Obviously, we receive millions of pounds from Russian businesses and individuals into UK business banks. The source of that money then has to be checked to ensure that there is no money laundering. We receive that because we are a very open economy. However, we need to express today what our response would be. So my first question is: what would our response be and when are we going to make our response known?
Secondly, could the Minister explain why we are allowing the cyberattacks to which the noble Lord, Lord Foulkes, and I have referred? I have first-hand experience of the grief and distress caused to one particular company that I am aware of, and others are now in the public domain; I have mentioned FatFace, which suffered two years ago. It is unacceptable in this day and age that we are wilfully exposing our companies to this sort of cyberattack and this form of ransom. To me, it was unacceptable for the Foreign Office simply to say, “It is best that the ransom is not paid”, without giving them any assistance over how the cyberattack could be shut down to save the business. It is interesting to note that insurance is available for such a cyberattack, but if you do not have the insurance before an attack then you will certainly not get it after an attack has happened.
Therefore, I ask my noble friend Lord Grimstone what our sanctions would be against an invasion of Ukraine but, more importantly, domestically, what rebuttal will we have against these increasingly hostile cyberattacks, which go to fund the Russian state at this time.
Lord Risby (Con)
My Lords, it is a great pleasure to follow on from my noble friend. If there is any idea that her stellar electoral performances during her political career had anything whatever to do with me, noble Lords will have heard from her speech that that is complete nonsense. We have heard some outstanding speeches today. I particularly thank the noble Baroness, Lady Hayter, for introducing the debate in such an excellent way, summing up the core of what we are here to discuss.
One of the defining moments in post-war Europe came when a number of former Soviet-bloc countries, having embraced democracy after so many years of terrible hardship, formally joined the EU in 2004. This was unanimously agreed by our Parliament and it was my privilege to help to facilitate that from the Opposition Front Bench in another place. During the passage of the legislation, one ambassador in particular, from Poland, constantly said with great prescience: “Do not forget about Ukraine. They need our help.” It was a message that stuck with me, and for many years I have chaired the British Ukrainian Society.
I unreservedly endorse the credit support agreement. Since Ukraine’s independence in 2001, despite many positives, the country has endured huge difficulties. In 2014, as a consequence of the actions of a very corrupt President by, in effect, rejecting the EU association agreement on offer, Russia invaded and annexed Crimea and in effect took control of Donbass, in part to destroy the Ukrainian economy, which failed, and to cause, successfully, massive human internal displacement. Since then, the road for Ukraine has often been very lonely.
The framework agreement signifies, but in a wholly practical way, the changed perceptions. The current role of this country in supporting Ukraine is exceptional and hugely appreciated. I particularly support the strengthening of the mutual naval capabilities central to the agreement and the importance of the Black Sea strategically. Whoever controls the Black Sea can project power more easily into the eastern Mediterranean and thus on to the Suez Canal. Russian domination of the Black Sea—as part of its so-called near abroad, it is blocking the Sea of Azov—has grown since its annexation of Crimea. Historically, our total commitment, as a maritime power, to maritime law and the freedom of the seas is fundamental, hence the underlining of this by Royal Navy vessels as the Black Sea risks becoming an anarchic environment with Russian domination.
Providing financial assistance to the Ukrainian navy will, as per this agreement, help Ukraine rebuild and bolster its naval capacity and deter further Russian aggression. The new naval bases, the training of Ukrainian naval personnel and the Sandown-class mine-counter- measure vessels will make Ukraine more confident. We are, in effect, empowering a regional partner in the spirit of our integrated review, which is committed to an open international order. NATO has responded, but I hope that we build on and enlarge the existing Three Seas initiative, if we take the logic of this agreement forward, and develop a Black Sea forum, building on our international Crimea platform. There are two specific reasons for this: to send a clear signal to Moscow and to help create a collectively agreed environment for the development of the huge energy resources in the Black Sea, especially when Russia uses energy for political purposes. I should add that Turkey is the key to this. I hope we can use our good relationship to take this forward. I can say categorically that our role in pursuing these themes has been clearly acknowledged and appreciated by the Ukrainian Government.
I also note the role of UK Export Finance in this. Its scope and financing have been massively increased, even to the extent of being able to access funding for the purchasing of British goods and services by foreign Governments or businesses. My noble friend Lady Meyer is the Prime Minister’s trade envoy to Ukraine, which is a very welcome step. Kiev has become a hugely successful technological hub.
President Putin’s obsession with NATO spreading eastwards reflects a total failure of Russian diplomacy. In the past, interest in Ukraine in joining NATO was minimal. His aggression has caused a surge in support for NATO membership. He has, bizarrely, written comprehensively about Ukraine and Russia being joined at the hip, but that hip is now irredeemably broken, so this is the time to be robust, as this agreement makes clear. However, in Kiev there is a sense among many that the EU has been insufficiently supportive this far. Nord Stream 2 has had very negative consequences for Ukraine. The position of the United States, a major military supplier, has now hardened in the light of a possible invasion by Russia. As has been mentioned several times, we look forward greatly to the discussions that will take place, which I hope will break this logjam and move away from the aggression hovering over Ukraine at this time.
I end on this note: the fruits of the bilateral policy we are examining have been assisted by the key role of our ambassador in Kiev. I have seen for myself the role that she has played. At a time when two major powers on the world stage do not share our values, the role of the FCDO in key post-Brexit activity is essential. As one of the Prime Minister’s trade envoys, I have observed with admiration the role of our embassies and what they do with very limited resources. I look forward to my noble friend outlining further how we and like-minded allies can work together to show our rejection of the aggressive undermining of the territorial integrity of a democratic European country.
Lord Purvis of Tweed (LD)
My Lords, it is a pleasure to follow the noble Lord, with his great experience and knowledge from his role within society, but also in the context that he provided for. When the noble Baroness, Lady McIntosh, referred to his support in the campaigns with a majority of 36,000 or 3,000, I was not quite sure which one he was responsible for, but his modesty in his contribution masked that.
The Minister has an unenviable task today because, as the explanatory memorandum to this agreement indicates, this is an agreement from the DIT, but within the scope of negotiations within the Ministry of Defence and the FCDO as the parent body for the strategy. I agree very strongly with the noble Lord, Lord Lansley, that this is an opportunity to hear what the Government’s strategy is. I suspect that the Minister will focus more on export finance, but I hope that he will be able to touch on some other areas; I have full confidence that he will.
Like others, I thank the noble Baroness for bringing this debate to us. I have said on a number of occasions and repeat today that the International Agreements Committee is of great importance to this House, because it often highlights some of the details of agreements that are beyond the understanding of mere mortals such as myself. It also provides a broad sweep on an issue such as this, which has great significance both for Ukrainians and the UK at home. It has been interesting to hear a number of comments, including from the noble Baroness, Lady McIntosh, and the noble Lord, Lord Foulkes, highlighting that we at home have a stake in this also. Therefore, our support for Ukraine is very important. I will have a number of questions later—I think the Minister would be very disappointed if I did not—on some of the technicalities of the arrangement that we will have.
I have, like others in the debate, visited Ukraine on a number of occasions. I was there shortly after Euromaidan and saw the still-charred buildings after the demonstrations. It is a country that is both vulnerable but outward-looking. With our more recent history with Ukraine, it is important to re-emphasise that. Our approach to that area also has the sweep of history from the Victorian times. The noble Baroness, Lady Liddell, talked about the role that the Scots have played there. It is not just current: I read a fascinating biography a few years ago of Thomas Gordon, who was a unique character. He was a military commander in the Royal Scots Navy then, after the union, the Royal Navy. Then Peter the Great poached him to help to establish the Russian navy—so the Scots have been everywhere, as we always say.
As the noble Lord, Lord Foulkes, indicated, there is a competing historical narrative and, in many respects, it is hard to see a way through it. On one visit to Kiev, it was made very clear to me that we have to understand Putin’s approach: he sees Kiev as the mother of all Russian cities. He does not believe that there is a Ukraine; he believes that Kiev and Ukraine are part of Russia and that Ukrainians are Russian. That is a sweep that he takes but, as the noble Lord, Lord Foulkes, indicated, since independence, Ukraine is an internationally recognised sovereign state with borders that we agree with, and we will help to support those areas of the boundary. However, as the noble Lord, Lord Lansley, has indicated, it is not easy to see how this can be reconciled as long at Putin has this narrative approach.
As the noble Baroness, Lady Liddell, indicated, we have 13,000-plus casualties in an area where there is not peace. This is not a case of maintaining peace within the region. As Jeremy Quin, the Defence Minister, indicated at the international Crimea Platform, which the noble Lord, Lord Astor highlighted, it is a case of restoring peace: the de-occupation of Crimea and its peaceful return to Ukraine as part of the Crimea Platform. It was very welcome that a UK Minister was at the inaugural Crimea Platform.
Part of the ambition is also to prevent further human rights violations. On a visit that I made to Kiev as part of Parliamentarians for Global Action, we raised the difficulty for Ukrainians to seek recourse for human rights abuses as part of the conflict. Russia has been blocking the proper reporting of human rights violations that have taken place and continue to take place within that area.
Therefore, it would be helpful if the Government could indicate, as has been asked, what the UK’s overall approach is. We know that three sets of discussions are taking place. There is the French and German initiative, with Jens Plötner, the envoy of Olaf Scholz, and his French counterpart Emmanuel Bonne travelling there at the moment. There will be NATO discussions, and Josep Borrell is also seeking a role for the European Union. However, I do not think any of us is so naive as to think there is any unanimity among certain members of the European Union.
How does the UK see the approach that the EU is seeking under the French presidency? The French presidency is seeking strategic autonomy for the EU, acting increasingly independently of NATO. Are we approaching the discussions regarding Ukraine purely through NATO or do we have a bilateral strand on diplomacy? I commend our embassy in Kiev, but it would be helpful to know what the strategic approach is. The integrated review highlighted the concerns for us at home in the UK, but it was very light on how we will drive forward or work. Do we see ourselves working with France and Germany, in particular, in this approach? Has the Prime Minister spoken to Olaf Scholz since Christmas? I know that he spoke to the Ukrainian president before Christmas, but it would be helpful to know.
On the situation at home, over the break I reviewed the annual report of the Intelligence and Security Committee of Parliament, which it published just before Christmas. Of the Russia report, the committee stated:
“The Report questioned whether the Government took its eye off the ball with regard to Russia, because of its focus on counter-terrorism. The previous Committee found that until recently the Government had badly underestimated the response required to the Russian threat and is still playing catch up … in particular in response to the call for new legislation to provide the intelligence Agencies with the tools they need to tackle the intelligence challenges posed by Russia.”
That highlights the very point made by the noble Baroness, Lady McIntosh, with regard to our capability here at home, while we are also debating the capability of Ukraine itself to defend its own integrity and borders.
So the agreement that we are discussing is part of an overall approach. As has been highlighted, the United States is providing 10 mark VI vessels at its own expense. Another four boats will be paid for through a foreign assistance programme and there are others that can be purchased. What is the Government’s assessment of this agreement, as far as the overall Ukrainian requirements and capabilities are concerned? I do not know, because no contextual element is set out as to whether it is a significant proportion of what Ukraine considers to be its naval defences or whether it is simply a future add-on. While the explanatory memorandum sets the deadline for granting credits under the agreement to be no later than 31 December 2024, when do the Government estimate some of the capability under this agreement being on stream? It is clearly not an agreement that will meet the current needs of Ukraine; it is obviously longer term, so when do the Government estimate some of the procurement being completed? We debated in response to a Statement just before Christmas some of the horrific delays in military procurement, so this is not new. What is the Government’s current estimate?
Moving to some aspects of the export finance agreement itself, the latest UKEF annual report said that defence represents 10% of its liabilities, which currently stand at £1.24 billion. This is likely to more than double the defence proportion of all UK Export Finance liabilities. There is a question about whether arms manufacturers require public insurance, rather than bringing out insurance for themselves. I tend to think that arms manufacturers, compared to others that wish to export to Ukraine, may have a greater capability to seek market insurance for any of their contracts rather than to seek that credit from the taxpayer. Before carrying out this agreement, did the Government assess the taxpayer insuring arms companies and whether there was a market failure for arms companies obtaining that insurance themselves?
The noble Baroness, Lady Liddell, highlighted the good point that there is a lack of wider context about the scale of export finance. That annual report says that the £1.24 billion is made up of an agreement with Qatar for £1 billion and an agreement with Indonesia, so this is now likely to be the biggest export finance agreement for the defence industry. If the businesses operating under it are going to be in partnership with Ukrainian businesses, can the Government estimate the likely breakdown in the proportion of manufacturing? The press statement on the agreement suggested that it would all be UK-manufactured. The explanatory memorandum in the agreement highlights that it simply requires
“at least 50% UK content.”
That could be just 50% plus one, as far as this is concerned so, again, the UK taxpayer will be subsidising insurance for Ukrainian manufacturing. I am not necessarily against that in principle, but a business case would have helped to indicate why it is important.
My final question on export finance is that, if the Government now believe that defence taking a much greater share of export finance guarantees will be a major strand of their policies going forward, it would help to know what kind of financing clarity is in place. As the committee highlighted, there was a lack of certainty on the specific contracting in the finance arrangements that are likely to be put in place. Of course they will be negotiated but, as it stands, when we ratify this agreement, the borrower will be the Government of Ukraine, who will enter into credit agreements with UK Export Finance and
“a bank or consortium of banks guaranteed by”
UK Export Finance, but what is the Government’s preferred route? This could set some considerable precedents. As I said, I am not opposed to this in principle, although I have question marks over why our defence industry should have special treatment.
This is my final point. Given the agreement that was announced in October 2020, the Government had already agreed export finance to Ukraine of £2.5 billion. Is this over and above that or part of the export finance for Ukraine that was already announced? As was indicated, the export finance for Ukraine that was previously announced included defence, but also agriculture, infrastructure, energy and healthcare. If this £1.7 billion is part of that £2.5 billion, there is not much left for some of these other critical areas. Can the Minister say whether this has now increased the total UK export finance to Ukraine to £4.2 billion or if it is still £2.5 billion?
I hope, as others have indicated, that tension in the area will not escalate. The international Crimea Platform is a good basis for further work. I hope we will see the talks make progress, because the vulnerable people of Ukraine deserve stability and peace.
Baroness Chapman of Darlington (Lab)
I begin by paying tribute to my noble friend Lady Hayter for the work that she and her colleagues on the committee have undertaken in considering the new agreement with Ukraine, and for bringing their report to the Committee’s attention. As others have said, it is helpful to have this opportunity to hear from the Minister on issues relating to Ukraine that are clearly of deep concern.
The agreement is of course welcome. However, nobody believes that it is sufficient to meet the pressing and immediate needs that we have heard outlined so well this afternoon. Can the Minister therefore provide us with some milestones for this agreement specifically? It would be useful for the Committee to have an understanding of the answers to the many questions asked by the noble Lord, Lord Purvis of Tweed, specifically on the issue of local content. It is important that we secure public support for the measures that the Government are taking now and as we move into the future because we do not know what is going to happen. Obviously, defence industries are a key employer in this country so it would be interesting to know how local content will be assessed. We have seen many instances in the past, not so much in defence but perhaps in the energy sector, of local content being agreed at the time of procurement but then being found, when the situation is subsequently examined, not to have been delivered.
The build-up of Russian troops on the border is deeply alarming. Like many others—including, I am sure, the Government—we are gravely concerned about the risks of conflict and the risk of miscalculation. Despite what is being suggested by the Russian Government about our intentions and desires for Ukraine, we are absolutely clear and steadfast in our support for Ukraine’s sovereignty, independence and territorial integrity. It is for the people of Ukraine to determine their own political destiny, not Europe, not the US, not NATO and certainly not Russia.
We need to be crystal clear that any attempt to undermine Ukraine’s territorial integrity any further will be met with a strong, consistent and resolute response. At this stage, can the Minister say anything more about what measures are being considered and whether the Government are minded to signal any specific steps imminently? Diplomatic and economic measures are clearly most effective when undertaken multilaterally. With this in mind, it is worth restating that the Labour Party has an unshakeable commitment to NATO. We support steps taken with our NATO allies to strengthen their security and pursue defence co-operation with wider allies in response to growing threats.
Can I take this opportunity to press the Minister on the implementation of the Russia report? As I said on procurement, the Government may need public support for further steps in future. Money laundering and illicit finance cannot be tolerated in the UK or our overseas territories. If we do not deal with this, we will be seen as a soft touch for corrupt elites sustaining the Putin regime.
It does not befit the tone of this debate to start throwing around accusations about political donations but, while we have this opportunity, can the Minister comment on the Aquind interconnector between France and Portsmouth, which is funded by Russian money—I appreciate that it is not Russian state money—and could potentially be a critical part of our infrastructure? It is a cable that will transfer electricity from France to the UK and will, I believe, also be a data cable. There will be significant concern about this, not least among the people of Portsmouth. I believe that a decision about it is imminent, so it would be useful if the Minister could comment on it if he is able to. If not, it is perfectly fine for him to write to me.
We cannot consider these issues without mentioning the Nord Stream 2 pipeline. We should guard against energy dependency in Europe that could disrupt the unity that we need when we consider Ukraine. Can the Minister update us on any discussions that he is having on that topic with our European neighbours?
My noble friend Lady Hayter reminded us— powerfully—of the historical context. Many noble Lords have spoken of their deep concern about the potential for conflict in Ukraine. This is a dangerous flashpoint moment requiring forceful and skilful diplomacy, remembering that that is most effective when achieved with our international friends and allies. It is clearly in the UK’s best interests to play our part. The Government have our support in this agreement, and we would be interested in hearing what they intend to do next on this issue that is of such great concern across all sides of the House.
The Minister of State, Department for Business, Energy and Industrial Strategy and Department for International Trade (Lord Grimstone of Boscobel) (Con)
My Lords, I join other noble Lords in thanking the noble Baroness, Lady Hayter of Kentish Town, the esteemed chair of our International Agreements Committee, for having secured this debate and for providing the opportunity to debate this important subject. I thank her and the committee for its recent report scrutinising the framework agreement between HM Government and the Government of Ukraine. It is a particular pleasure to have my noble friends Lord Astor and Lord Lansley and the noble Baroness, Lady Liddell, who have served with such distinction on that committee, speaking today.
In line with the thoughts of my noble friend Lord Lansley and the noble Lord, Lord Purvis of Tweed, I am happy to put the agreement into its wider, proper context. The United Kingdom remains firmly committed to Ukraine’s independence, sovereignty and territorial integrity, and the framework agreement is a key illustration of that commitment. We cannot but be concerned about the recent reports of growing aggression from Russia towards Ukraine, with additional forces being amassed on its borders. As noble Lords would expect, we are monitoring the situation closely and are deeply concerned by the pattern of Russian military build-ups on the border of Ukraine and of course the illegally annexed Crimea.
We call on Russia to uphold the OSCE principles and commitments that it freely signed up to and which it continues to violate through its ongoing aggression against Ukraine. We have made it clear to Russia, and will continue to do so, that any military incursion into Ukraine would be a severe strategic mistake and would have a severe cost in response. I say that unequivocally in direct answer to the comments made by the noble Lord, Lord Foulkes of Cumnock. In answer to the noble Baroness, Lady Chapman, and others, including my noble friend Lady McIntosh, I hope they will appreciate that now is not the time to go into the detail of what our response would be and it would be inappropriate to do so, but I assure them that those matters have been worked through and thought about extremely seriously.
Lord Foulkes of Cumnock (Lab Co-op)
Can the Minister confirm that among the sanctions that the Government are looking at are financial and economic sanctions and travel restrictions and that they are considering targeting Putin himself, his henchmen, the oligarchs and specific sectors that will harm Russia’s economy, so that there can be no doubt that they will be dealt with severely?
Lord Grimstone of Boscobel (Con)
My Lords, I can confirm that a whole range of sanctions and matters are being considered, but I hope that the noble Lord will accept that to give details of them today would not be a sensible thing for Her Majesty’s Government to do.
Lord Foulkes of Cumnock (Lab Co-op)
I accept that, but can the Minister just say that the kind of actions I have just mentioned are included in and have not been excluded from the options being considered by Her Majesty’s Government?
Lord Grimstone of Boscobel (Con)
My Lords, I think I would like to rest on saying that a whole range of sanctions and other options are under consideration.
I was also asked about co-ordination with allies. I think the noble Baroness, Lady Hayter, referred to how important it is to have full co-ordination with our allies. I can confirm that the UK, the US and our European partners, with which we are in constant dialogue, share a common assessment and are deeply concerned. We are unwavering in our support for Ukraine’s territorial integrity, and we will continue to support it in the face of Russian hostility. I will write to the noble Lord, Lord Purvis, and my noble friend Lady McIntosh in more detail about our contact with allies and on other matters that have come up; for example, my noble friend’s point about cybersecurity.
Noble Lords will have seen that the primary focus of the agreement is on the UK’s provision of support for the Ukrainian naval capabilities enhancement programme—UNCEP. This programme will enable the UK and our industry partners to provide extensive and valuable support to bolster Ukraine’s defensive naval capabilities. As my noble friend Lord Risby recognises, this is important—in passing, I want to thank my noble friend for his services as a trade envoy and for his kind comments about Her Majesty’s ambassador in Kiev. The framework agreement represents a continuation of previous discussions between the UK and Ukraine on its naval development, including the memorandum of intent signed aboard HMS “Prince of Wales” in October 2020 and the memorandum of implementation signed aboard HMS “Defender” in June 2021.
Let me be clear—I think it is important to make this point—that the benefits from the framework agreement are not just for Ukraine and are not solely about regional security, hugely important though that is. The UK’s contribution to UNCEP is consistent with and supportive of some of our key objectives at home. One of the components of UNCEP support will be the design and construction of eight new P50U missile craft, some of which will be built by Babcock in its sites at Rosyth on the Firth of Forth, an area which is well-known to the noble Baroness, Lady Liddell. This work will secure highly skilled engineering and shipbuilding jobs, supporting one of our key industrial sectors as well as contributing to the Government’s levelling-up agenda.
I assure noble Lords that our support for Ukraine as an independent state should not be interpreted as the UK being adversarial towards Russia. While we are providing a range of support to Ukraine, that support is essentially defensive in nature, as the noble Baroness, Lady Hayter, recognised. As the noble Lord, Lord Foulkes of Cumnock, said so perceptively, it is a deterrent; we should emphasise that important aspect. We do not want to undermine Russia, far less attempt to encircle or threaten it. What we want is for Russia to reverse its long-term build-up of forces on or near the Ukrainian border. In doing so, we are not challenging Russia’s sovereignty, which of course does not extend to Ukraine, but supporting that of Ukraine. I emphasise that point to noble Lords.
I note that the committee considered that the provision of UKEF support for the UNCEP represents a “step change” in government policy, given previous statements about not providing “lethal aid” to Ukraine. I should point out—this is more than just a technicality—that the framework is not about the provision of aid to Ukraine; it is about facilitating commercial arrangements. Although it is true that UKEF will itself lend some of the funds to the Government of Ukraine to finance the contracts with UK suppliers, the premium will be charged commensurate with the risks being taken on and the OECD’s commercial interest reference rate will also be charged on the loan. I believe that UKEF support for defence contracts should not be considered a step change but more a continuation of our long-standing approach to support Ukraine.
Our support for Ukraine is important because Ukraine matters, not just as an independent country wanting to enhance its defence capabilities but because of the opportunities it offers. As my noble friend Lord Astor of Hever noted, the UK was the first EU member state to recognise Ukraine’s independence, on 30 December 1991. It was on 10 January 1992, nearly 30 years ago, that UK-Ukrainian diplomatic relations were established. Since its independence, Ukraine has achieved huge advances in freedom and democracy, and our relationship has never been stronger. If we can support Ukraine to become a democratic, free-market success story, we will not just have strengthened international security, we will also have created valuable opportunities for UK businesses. Although much progress has been made on reform, further action is needed for Ukraine to continue along its Euro-Atlantic path and attract further foreign investment. I assure noble Lords that the UK continues to work with Ukraine on the necessary reforms to help it fully realise its potential.
As the Foreign Secretary said last month, we believe that trade is the key to unlocking countries’ potential through new opportunities for investment and job creation—in this case, those advantages accrue both to Ukraine and across the United Kingdom. It was with that in mind that HM Government agreed to increase the amount of support available through UK Export Finance for projects in Ukraine to £3.5 billion. If I may, I will let the noble Lord, Lord Purvis, know the full details of that and some of the other points he raised on the UKEF agreement.
UKEF, a great organisation and the oldest export credit agency in the world, has a mission to ensure that no viable UK export fails for lack of finance or insurance, while operating at no net cost to the taxpayer. I clarify, again for the noble Lord, Lord Purvis, that it is not insurance to exporters; it is government-supported lending to Ukraine. I can also confirm that the defence sector does not get any special treatment within the facilities given by UKEF.
Over the last five years, UKEF has provided almost £29 billion-worth of support for UK exports and exporters. I should also add—I know that noble Lords may be concerned about the safety of taxpayers’ money—that UKEF employs a robust risk management framework, as evidenced by the low number of claims on which it has had to pay out in recent years, despite the challenges recently posed by the pandemic and other shifts in the global economy. I can assure noble Lords that UKEF rigorously follows OECD standards and takes all reasonable precautions to avoid supporting transactions that might be tainted by corruption. How important it is to make sure that these standards are maintained and strengthened.
The importance of the framework agreement in this context is that it resolves what had appeared to be an impasse. Before the framework agreement was signed, Ukraine’s national rules governing procurement precluded it from requiring a specified portion of the goods or services that are the subject of a contract to originate from a certain country. Meanwhile, understandably, UKEF’s own rules require that a minimum level of such goods or services be identifiable as UK content before it can provide financing support to a contract. However, Ukrainian law permits for exceptions to its general rule to be granted, but this must be documented through a legally binding government-to-government agreement that is subject to regulation by international law. Hence the framework agreement that we are discussing today enables UKEF to consider the prospective support for the UNCEP, with its mutual benefits for both parties.
Although the effect of this framework agreement will be to enable UKEF to support the UNCEP, which is so important—I stress that again—to enhancing Ukraine’s defence, it is also expected to be the first of a number of framework agreements that will help British exporters access opportunities to trade in Ukraine across trade sectors in addition to defence procurement. I can confirm to the noble Baroness, Lady Liddell of Coatdyke, that this is the first agreement of this sort to be entered into by UKEF.
We know that there are good opportunities in the energy infrastructure sectors for UK exporters. There are opportunities in the field of nuclear energy, which could be worth up to £250 million over four years. Let me say that without the support of UKEF contracts like this will not be able to proceed.
In conclusion, I hope that noble Lords agree that, taking all these factors into account, the framework agreement represents a valuable addition to our range of international agreements, and one that will be of significant benefit to both parties. I thank again the noble Baroness, Lady Hayter of Kentish Town, and the International Agreements Committee for giving us the opportunity to debate this important agreement in advance of its—
Baroness Chapman of Darlington (Lab)
Before the Minister resumes his seat, I wanted to press him on the Russian-backed interconnector across the channel. He has not mentioned it. Maybe he intends to write to me; I just wanted to be clear about that.
Lord Grimstone of Boscobel (Con)
I thank the noble Baroness for that intervention. I was going to conclude by saying that I would write to her on that. I hope that she finds that acceptable.
I thank your Lordships again for this debate. I think that we should all look forward to the likely ratification of this agreement later this month.
Baroness Hayter of Kentish Town (Lab)
My Lords, I seem to be almost the only person who has not been to Ukraine. We have heard from so many Scots, but may I say that there was a Welshman who went there —this is not a shaggy dog story. If anyone has not seen the film “Mr Jones”, I recommend it; he was indeed a Welsh journalist who was in Moscow and went to Ukraine during the period of the worst of the famine. It is an extraordinary film. Unfortunately, it came out just before the first lockdown and almost nobody saw it because all the cinemas closed, but I do recommend it.
I thank all speakers for their contributions. As noble Lords will have gathered, my noble friend Lady Liddell and the noble Lords, Lord Astor of Hever and Lord Lansley, who are on the committee, are the intellectual backbone of the work that we do. It has been particularly good to hear from them today. I had not realised that my noble friend Lady Liddell had watched the tanks when they were on the streets, and now today still watches the military ships go by. These things are not in a faraway land of which we know nothing; they really are very close to us.
To have the particular expertise and input today of the noble Lord, Lord Astor, having been not just a Defence Minister but one at a crucial moment, is really important. There has obviously been universal consensus underlining—indeed, insisting—what we should do to support the territorial integrity of Ukraine as well as the need to send a very clear signal to Moscow of our determination to be behind those words, and that we do not share the view, to use the words of the noble Lord, Lord Purvis, that Kiev is the mother of all Russian cities. It is indeed the mother of all Ukrainian cities, and long may that continue. It was also said that we must not give Putin any advantage from his sabre-rattling. As my noble friend Lady Chapman said, it is for the Ukrainians to decide their own future, and that really brings us all closer today.
It is of course not just of interest to them. As the noble Lords, Lord Lansley and Lord Astor, said, access to the Sea of Azov is vital to Ukraine, but its free movement in the wider Black Sea area is also in our interest. I think the noble Lord, Lord Risby, also emphasised this. We of course welcome someone with the expertise of chairing the Ukraine-British agreement speaking today.
The noble Baroness, Lady McIntosh of Pickering, my noble friend Lord Foulkes and others reminded us of the hostile acts that go beyond “normal” warfare, particularly in the cyber area. This is, as the noble Baroness, Lady McIntosh, said, of commercial importance but it is also important for our own infrastructure and military. I am not sure that the Minister quite addressed that point, but maybe there will be future occasions for us to discuss this. The noble Lord, Lord Purvis, set out some of the ongoing discussions taking place. I am pleased that the Minister reiterated that we are speaking to our allies—I am glad he used that word—in Europe as well as NATO, I hope on a bilateral as well as multilateral basis.
One issue that I would like to leave with the Minister on behalf of the committee is that, as our committee members in particular have said—the noble Lord, Lord Lansley, to begin with, and then the noble Baroness, Lady Liddell—it is important, when we look at these agreements in our committee, that it is within the military, the diplomatic and sometimes the wider economic context into which the agreements fall. It would be appropriate if the Explanatory Memorandums reflected the Government’s position on those contexts within which the various agreements fall. I am not sure that my colleagues know it yet but we are about to get the AUKUS agreement—that is, the USA, the UK and Australia—and it is important that that is also put within the broader context.
I just make a personal point that maybe goes much broader. The Minister went on to say, I am sure quite rightly, that this is good for our skill base and for our shipbuilding, but that should be just a bonus, an added extra, not the thrust, desire or reason behind the agreement. It happens to be good for us but that must never be the reason why we do any of this.
I am grateful for the debate that we have had. I particularly welcome, as I am sure we all do, the Minister’s reaffirmation of our support for the Government of Ukraine and his confirmation that we are working with our allies and doing everything we can to make sure that this stand-off reduces and that we do not give Putin anything for having done it. I am sure he is not very popular at home; he had 100,000 of his troops spending Christmas away from their families on the border of Ukraine. I doubt he got any brownie points there and he certainly has not done so here, and that is the message that should go back to him. I beg to move.