The Minister for the Cabinet Office and Paymaster General (Michael Ellis)
I beg to move,
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2022 (SI, 2022, No. 194), dated 28 February 2022, a copy of which was laid before this House on 28 February, be approved.
Madam Deputy Speaker (Dame Eleanor Laing)
With this we shall consider the following motion:
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2022 (SI, 2022, No. 195), dated 28 February 2022, a copy of which was laid before this House on 28 February, be approved.
Michael Ellis
The instruments before us were laid under the powers provided by the Sanctions and Anti-Money Laundering Act 2018—also known as the sanctions Act. These instruments came into effect at midnight last night.
As stated by my right hon. Friend the Prime Minister, we have announced the largest and the most severe package of punitive economic and trade sanctions that Russia has ever seen in response to Putin’s pre-meditated, pre-planned and barbaric invasion. We will continue to ratchet up the pressure, working in concert with our allies around the world. We have already imposed sanctions on Vladimir Putin, Foreign Minister Sergei Lavrov, five Russian banks, 120 businesses and a long list of Russian oligarchs. Taken together, this targets assets worth hundreds of billions of pounds. Throughout, we have worked with our allies, including to agree to remove selected Russian banks from the SWIFT system and we have agreed to target the Russian central bank, but we will go further. I want to say to this House that we will continue to stand with the Ukrainian people in their heroic efforts to face up to unbridled aggression and that nothing is off the table.
Chris Bryant (Rhondda) (Lab)
Let me take the right hon. and learned Gentleman back to what he said about the number of individuals who have been sanctioned, as I do not think it is hundreds since this situation in Ukraine—it is eight. It is hundreds since 2014, and that conflation is unhelpful. As I understand it, the Government are finding it difficult to get all their ducks in a row in relation to these individual oligarchs, and the European Union is doing this much quicker. I hope he heard what I said earlier, because I think that that is because the legislative measure used in the EU is more effective in providing legal certainty for the sanctioning body. Why do we not put names of people on our sanctions? There is not a single name on the measure before us. We do this in a very legalistic way and the danger is that Mr Abramovich will have sold everything by the time we get round to sanctioning him.
Michael Ellis
I note what the hon. Gentleman says, but it is not often that people refer to the mechanisms of the EU as speedy. If he says that they are speedier than ours, clearly that is something for the system to look at. But we have a system that we are using at the moment, that has applied and that is what we have to go through. We are acting faster than ever before and we are leading the way in this area.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
Will my right hon. and learned Friend update the House on what action the Government are taking to deal with the loophole that remains Scottish limited partnerships? They remain popular with Russians and Belarusians in terms of being able to invest in property and raise cash in the UK, which undoubtedly goes to support some of the very people we are seeking to stop acting in the way that they are in Ukraine at the minute.
Michael Ellis
I thank my hon. Friend for his question, and of course he is right to focus on those areas in particular, as he has a marked interest in them as regards Scotland. Where these measures are applied, they apply throughout the UK. We always want to look at any areas where he might bring issues to our attention, but these measures apply throughout the UK—
Several hon. Members rose—
Michael Ellis
I want to make a little progress. Last night, we laid new legislation in Parliament on financial measures, including on sovereign debt; a prohibition to limit access to sterling; and a ban on any Russian company issuing securities or raising finance in the UK. That significantly further strengthens our arsenals of sanctions against Russia and it comes alongside increased trade measures, including a prohibition on sensitive “dual-use” items, which could be used by the military, and a ban on a further range of crucial industry goods, from high-tech to aircraft.
Several hon. Members rose—
Michael Ellis
I am going to make a little progress and then I will give way. Sanctions announced by the UK and our allies are already having an impact. Yesterday, the rouble dropped 40% of its value, before closing 25% down; central bank interest rates have more than doubled, from 9% to 20%; international businesses are quickly divesting, as we have been hearing in the media; and the rouble is now trading at about a quarter of what it was when Putin took power. That will have an impact on the institutions that prop Putin up and that prop his cronies up.
Bob Seely (Isle of Wight) (Con)
I appreciate all that my right hon. and learned Friend is doing, but we are talking about the cronies and not the institutions as well. The hon. Member for Rhondda (Chris Bryant) is right; I do not see why we cannot just use privilege in this House to name some of the three dozen “dirty oligarchs”. Why can we not use privilege? What law firms and lawyers are holding this up? How much money—how many billions of pounds—will have fled the country by the time we nail these people down?
Michael Ellis
We work with our allies around the world on names. This is an effort between allies; we co-operate and discuss the matters, and officials work on that. The idea is to continue to work with our allies to bring forward further sanctions and press for further collective action to reduce western reliance, for example, on Russian energy.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
I want to pursue the point made by my hon. Friend the Member for Rhondda (Chris Bryant), because 23 people on the EU sanctions list are not on the UK sanctions list. There are some surprising omissions—not just the oligarchs on the Navalny list, but the commanders in chief of the Black sea fleet, of Russian aerospace forces and of the Russian navy, and the Russian Defence Minister. We need a timetable for adding these people to the list. Crucially, I want to draw the Minister’s attention to paragraph 3.1.3 of the general guidance on sanctions implementation, which states:
“The everyday use by a designated person of their own economic resources for personal consumption is not prohibited.”
I would like the Minister to look at how we actually prohibit the use of the mansions, the jets and the economic assets that these people own. I do not just want them frozen; I want them put beyond use.
Michael Ellis
Nothing is off the table. Everything is being considered and is open for consideration. We have rightly taken unprecedented moves, which have been extremely rare in international precedent, if not unheard of, and which go further, in many instances, than what our allies have done. We have led the way in a number of different areas. That is not to say that there is not more still to do. I accept that there is, which is why I say that nothing is off the table.
Several hon. Members rose—
Michael Ellis
Let me make a little progress and then I will give way. The solidarity of NATO is resolute, which is why the UK and our NATO allies have been moving troops to our NATO allied states. We will continue to support the legitimate Government of Ukraine and the people of Ukraine in their self-defence against this attack by Vladimir Putin. Let me reinforce this point: we are going to use every lever under our control to that end.
Dame Angela Eagle (Wallasey) (Lab)
I suppose the frustration is that we have been told for a long time that economic crime and kleptocracy and the proceeds of economic crime are going to be clamped down on, yet very little that is effective has happened. Now we are hearing something similar from the Minister. What is he doing to beef up enforcement to ensure that these sanctions are actually going to bite? We can have the best sanctions in the universe if we are not enforcing them; they need to be enforced, and fast.
Michael Ellis
These powers will have a maximum penalty of up to 10 years’ imprisonment, so that is a “bite” if they are breached.
Robert Jenrick (Newark) (Con)
It seems that the legal test required to sanction an individual is too high, because the Departments responsible are clearly struggling to amass sufficient evidence to meet that test—evidence such that they feel will be able withstand judicial review or legal challenges by the individuals concerned, who understandably will put together a serious legal team to challenge them. Anyone would do that and that is their legal right. What can this House do, through legislation, to assist the Minister and the Government in making that legal bar easier for them to reach? That is the challenge that Members on both sides of the House are raising today.
Michael Ellis
The House is as one on the wish and the need to apply these measures as expeditiously as possible. But of course my right hon. Friend is right to say that we have to do it properly, not least because a number of perfectly legitimate and lawfully acting UK businesses would be affected by these sorts of measures. It is right that they should not be injuriously affected by what occurs. It is right that, when we are imposing sanctions of up to 10 years’ imprisonment for a violation of these measures, we are also cautious in seeing that they are done properly. I can assure the House that we are working through names, but it takes time. There is a high burden of proof and we will work through it.
Mr David Davis (Haltemprice and Howden) (Con)
The reason we co-ordinate with our allies is to make our policies effective. If the process of co-ordination takes so long that people can remove their assets beyond our reach and prepare their legal defences so that we cannot overwhelm them, we are defeating ourselves—we are pursuing headline actions without effect. Surely we should limit the extent to which we delay those things and get on with it straightaway.
Michael Ellis
I am so pleased that my right hon. Friend says that, because that is exactly what we are doing. The greatest expedition is being applied to this matter.
The legislation follows the made affirmative procedure, as set out in section 55(3) of the Sanctions and Anti-Money Laundering Act 2018. I know the hon. Member for Rhondda (Chris Bryant) is familiar with that and supported it strongly in this House both in 2018 and before. The legislation follows the process of that Act, so I have no doubt he will support it. These statutory instruments amend the Russia (Sanctions) (EU Exit) Regulations 2019 and, as my right hon. Friend the Prime Minister announced, the powers they contain will prevent Russian banks from accessing sterling.
This is a significant and new measure for the United Kingdom. Russian banks clear no less than £146 billion of sterling payments into and out of the United Kingdom’s financial system every year. Without the ability to make payments in sterling, designated banks will not be able to pay for trade in sterling. They will not be able to invest in the United Kingdom. They will not be able to access the UK’s financial markets. This measure matches the power the United States already has to prohibit access to the US dollar, and shows our joint resolve with our American allies to remove Russia from the global financial and trade system. Around half of Russian trade is denominated in dollars or sterling.
Neale Hanvey (Kirkcaldy and Cowdenbeath) (Alba)
The objective of sanctions is to limit the escalation of hostilities. I hope we are able to effect that through these measures, but does the Minister not accept that the list exists in some form, as has already been referred to, and the hon. Member for Rhondda (Chris Bryant) has already outlined a remedy? Surely it is not beyond the wit of man for us to come together to make these sanctions work and avert an escalation of hostilities?
Michael Ellis
That is what we all want to do. These measures will work; the reality is that they follow the mechanism outlined in the 2018 Act.
Several hon. Members rose—
Michael Ellis
I must make some progress. Around half of Russian trade, as I have said, is denominated in dollars and sterling. We have already used the power to designate Sberbank, the largest Russian bank, and the same statutory instrument prevents the Russian state from raising debt here and isolates all Russian companies. I emphasise that again, because here we are going further than many of our allies, who have picked out a number of companies that they think may be closely connected with Putin.
With this statutory instrument, we prevent the Russian state from raising debt here and isolate all those Russian company—by the way, there are about 3 million of them. They will now be prevented from gaining access to UK capital markets. This measure goes further than those of our allies and bans all Russian companies from lucrative UK funding.
Sir Oliver Heald (North East Hertfordshire) (Con)
Does my right hon. Friend agree that the banking measures provide an immediate ban? The effect is that if there are debts owed that should be paid into Russian banks, they will not be. That creates an immediate economic shock and plays an important role in doing so.
Michael Ellis
My right hon. Friend is certainly right that it creates an immediate economic shock. That is why the effect on the interest rates and on the rouble is as we have already seen: within hours, the shock to the economic system is significant.
Russian businesses listed in London have a combined market capitalisation of more than £450 billion, or nearly half a trillion pounds. That is the money we are talking about. It includes some of Russia’s largest state-owned enterprises, and the Kremlin is hugely reliant on those tax revenues. Banning them from raising debt in London will further increase—massively so, I submit—the burden on the Russian state. Global giants such as Gazprom will no longer be able to issue debt or equity in London. In the past seven years, Russian companies have raised £8 billion on UK markets. That ends today.
The second piece of legislation will ban exports to Russia across a range of items, including those on the dual-use list and other goods and technology critical to Russia’s military-industrial complex, including its maritime and aviation sectors. It will also ban a range of technical and financial services related to such items. By enacting this measure in alignment with the United States, the European Union and other partners, we will collectively cut off much of Russia’s high-tech imports. Those include critical high-end technological equipment such as microelectronics, telecommunications, sensors and marine and navigation equipment. It will blunt Russia’s military-industrial and technological capabilities, it will gradually degrade Russia’s commercial air fleet, and it will act as a drag on Russia’s economy for years to come.
The Department for International Trade and Her Majesty’s Treasury will offer advice and guidance to UK businesses affected. Consular staff will continue to support British nationals in Russia as well as those in Ukraine, and I take this opportunity to commend our consular staff in those places.
Chris Bryant
The Minister said earlier that all these measures come into force immediately. Why on earth does the Government measure allow VTB Bank, the second-largest Russian bank, 30 days for clients to be able to remove their assets? I do not even know what the metaphor is in terms of horses and bolts and having already escaped, but this seems preposterous.
Michael Ellis
I do not think the individuals involved will consider it a weak measure; on the contrary, I think they will consider it a draconian measure, which is exactly what it is.
Dame Margaret Hodge (Barking) (Lab)
I want to return to another point and perhaps help the Minister a little bit, because we want to get at the companies, but we also want to get at the individuals—we need to get at both. We have been lax, and I hope he will accept that across this House we think the Government should take more action on individuals. May I suggest that, rather than going through the lengthy legal due diligence that he says is constraining his ability to act against individuals now, he could use the legislation we have on unexplained wealth orders, where the assets of individuals are impounded and it is up to the individuals to prove that they got them legitimately, rather than our waiting to see whether there is a case? Take the assets away and leave it up to the individuals to demonstrate to us that those are legitimate assets with no connection to Putin.
Michael Ellis
I am grateful to the right hon. Lady for mentioning unexplained wealth orders, because that is another thing that this Government have done in order to have the desired effect that she mentions.
In response to the hon. Member for Rhondda, the reason for the 30 days is to have a wind-down on certain measures to allow UK businesses to close their affairs. That is its purpose. It does not enable designated persons to move money within that 30-day window; it is designed to help UK businesses, which will of course also suffer as a result of these measures.
In addition to these two statutory instruments, we are further strengthening our sanctions package by bringing in shipping measures, imminently, and a prohibition on financial services relating to foreign reserves exchange and asset management by the Russian central bank. These will be before the House for consideration soon.
Russia’s aggression against Ukraine is part of a long-term strategy. If we give ground now, or try to accommodate illegitimate Russian concerns, the Russians’ strategy of aggression would not end. We are concerned that they might not stop at Ukraine; instead they might be emboldened. President Putin’s focus would simply potentially move on to the next target. That we cannot have. The UK has therefore been at the forefront of the response in terms of financial aid, aviation measures, lethal aid and sanctions, including on SWIFT.
Acting in concert with our allies, our measures will deliver a devastating blow to Russia’s economy and military for years to come. Co-ordinating with our partners, our sanctions will reverberate through Putin’s regime. We must remain absolutely firm in our response. We must rise to this moment and we must stand with the people of Ukraine. I am determined that we will continue to support them in that choice, and I commend these regulations to the House.
Michael Ellis
With the leave of the House, I will close this debate. The last three hours have shown us that the House stands united. It has shown us many things, but one of those is that we speak as one in support of Ukraine. Everyone I have heard in this debate, and I have been here almost the whole time, has welcomed these messages. I am grateful to Members who have contributed—there have been insightful and timely discussions—and I will try to address and respond to some of the important questions they have raised.
I emphasise that nothing is off the table. The measures we have taken have already had a hugely significant impact, but we are exploring what more we can do. We are consulting our allies to that end; in this interconnected world, it is crucial that we act as one where we possibly can. I cannot speculate on future designations; that would be inappropriate for many reasons—not least, as many have said, that it might warn individuals whom we would not wish to warn in advance. However, it is thanks to the leadership of the Prime Minister and the Foreign Secretary that we have seen the most significant impacts. I want to address some of these points.
It has been said, for example, that the United Kingdom’s position has not been in tune with that of Europe. On the contrary, our position has been a leading one as far as the European Union response is concerned, but this is not a competition. Many Members have said that more can be done, and I accept that. However, the United Kingdom has placed an asset freeze on VTB, the second largest bank in Russia—an enormous institution—and we have done that along with the United States. The United Kingdom has banned sterling clearing with Sberbank, the largest bank in Russia. The United Kingdom has banned all Russian companies—over 3 million of them—from issuing securities and raising debt. The European Union has done none of those things, but we are focusing on high-impact measures.
It was mentioned that we need to target those listing on the London stock exchange. We have, as I say, prevented 3 million-plus Russian companies from listing on the London stock exchange. As the debate has been going on this very afternoon, I can tell the House that we have designated the Russian Direct Investment Fund and its chief executive officer, Kirill Alexandrovich Dmitriev. That has occurred this afternoon.
One Member—I think it was my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami)—asked about delisting existing securities. Although nothing is off the table, delisting existing securities could harm the investments of people in the United Kingdom without having any impact on those who originally issued them. That is why our measures are forward looking, including to prevent the raising of funds by all Russian companies.
The right hon. Member for Barking (Dame Margaret Hodge) mentioned Companies House, as did a number of other colleagues. As the right hon. Lady may know, the Business Secretary has announced a White Paper on corporate transparency and register reform, greatly increasing the information available. We are legislating for reform of limited partnerships law, new powers to seize crypto-assets, reforms to help businesses share information on money laundering, a register of overseas entities and a requirement for foreign owners to reveal their identities, so work is massively in progress in that regard.
Various colleagues asked about designated persons and their substantial assets. I emphasise that the asset freeze criminalises dealing with the economic resources of a designated person, so were UK nationals and firms to go on to deal with those designated persons, they would be committing a criminal offence, the sanctions for which are considerable.
I was asked about Crown dependencies and overseas territories. I understand that designations made under the regulations will apply automatically in the Crown dependencies. There may be a small lag in terms of the overseas territories, but I am happy to write to Members about that. We will check that position, but we are speaking as one, as are so many allies around the world. The Government agree that more enforcement resource is necessary. One or two colleagues mentioned that from the Labour Front Bench, and the point is accepted. That is why the Prime Minister announced a new National Crime Agency kleptocracy cell, targeting sanctions evasion. We are also introducing the Economic Crime (Transparency and Enforcement) Bill today to reform unexplained wealth orders, removing key barriers to their use by the NCA.
I was asked about a shipping matter by my colleague on the Opposition Front Bench, the hon. Member for Cardiff South and Penarth (Stephen Doughty). UK Government Ministers have now signed legislation banning all ships that are Russian owned, operated, controlled, chartered, registered or flagged from entering British ports. That was effective from 3 pm this afternoon.
The position as far as the Donbas is concerned is that the Foreign Secretary has been clear that we will put these measures in place and extend measures applying to the Crimea, Donetsk and Luhansk regions. On insurance, it will be prohibited to provide insurance or reinsurance to or for the benefit of designated persons in relation to controlled goods and technology.
On guidance, we have already issued statutory guidance, and the Office of Financial Sanctions Implementation will be issuing further Russia guidance in due course. As to further banks, the Foreign Secretary has set out her intention to apply an asset freeze to all Russian banks, and I mention the wind-down period of 30 days, which a couple of colleagues also mentioned. The wind-down on certain measures is to allow UK businesses to close their affairs in an orderly fashion. I understand that the same process is taking place under the United States regulations and the European Union regulations. We are all acting as one here. It does not enable designated persons to move money. A request was made about a ban on state debt, which it was said applies in the European Union but not in the United Kingdom. That ban is in the regulations, which are in force now.
As far as the general position is concerned, the House will know that there has been a movement around the world to act in support of Ukraine. That is being led by this Government. It is being led in the field of lethal aid and financial aid, and it was led in the field of aviation sanctions and in the field of sanctions generally. As I mentioned in my opening speech, Her Majesty’s Government are determined to continue to work in close co-ordination with our allies to deal a devastating blow to the Putin regime and undermine its ability—his ability—to wage war in Ukraine. This House’s support for these regulations sends a clear, indefatigable message to the Kremlin and the people of Ukraine. I commend these regulations to the House.
Question put and agreed to.
Resolved,
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2022 (SI, 2022, No. 194), dated 28 February 2022, a copy of which was laid before this House on 28 February, be approved.
Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2022
Resolved,
That the Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2022 (SI, 2022, No. 195), dated 28 February 2022, a copy of which was laid before this House on 28 February, be approved.—(Michael Ellis.)
National Insurance Contributions Bill: Programme (No. 2)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the National Insurance Contributions Bill for the purpose of supplementing the Order of 14 June 2021 (National Insurance Contributions Bill (Programme)):
Consideration of Lords Amendments
1. Proceedings on consideration of Lords amendments shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.
2. The proceedings shall be taken in the following order: Lords Amendments 2, 4, 1, 3, 5, 6, 7, 8, 9, 10, 11, 12.
Subsequent stages
3. Any further Message from the Lords may be considered forthwith without any Question being put.
4. The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—(Rebecca Harris.)