Russia (Sanctions) (EU Exit) (Amendment) (No. 17) Regulations 2022
(Limited Text - Ministerial Extracts only)
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The Minister of State, Foreign, Commonwealth and Development Office (Anne-Marie Trevelyan)
I beg to move,
That the Committee has considered the Russia (Sanctions) (EU Exit) (Amendment) (No. 17) Regulations 2022 (SI, 2022, No.1331).
The instrument before us was laid on 15 December 2022 under powers provided by the Sanctions and Anti-Money Laundering Act 2018 and makes amendments to the Russia (Sanctions) (EU Exit) Regulations 2019. The instrument has been considered and not reported by the Joint Committee on Statutory Instruments.
With these amendments, the UK continues to put immense pressure on Putin and Russia, alongside our international partners. These new trade measures will further extend the largest and most severe package of economic sanctions that Russia has ever faced. I will begin by outlining the measures introduced through the instrument.
First, the SI tightens existing regulations on investments, loans, securities and money market instruments to further close off indirect finance and constrain the availability of international capital to Russia. Importantly, the measure now prohibits new investments in Russia through third countries.
Secondly, the legislation introduces new restrictions on the provision of trust services to persons connected with Russia. That will particularly affect high-net-worth individuals who use trust services to manage their assets. Through the instrument, the Government have suspended the Bank of England’s duty to recognise resolution action in respect of persons designated under the UK’s Russia sanctions regime—the process by which the failure of financial institutions is managed—stemming a potential income stream for Putin’s war machine. This amendment also prohibits the export of further goods across a range of sectors, including oil production and mining equipment, electronics and chemicals, and advanced materials and camouflage gear.
Finally, the instrument introduces additional prohibitions on the provision of professional services to persons connected with Russia. That encompasses advertising, architecture, audit, engineering, and IT consultancy and design services.
Kevin Brennan (Cardiff West) (Lab)
It has been interesting to read the instrument. Does it affect UK citizens who hold shares in companies that are operating in Russia and their ability to win dividends from those shares?
Anne-Marie Trevelyan
If I may, I will come back to the hon. Member’s question in my closing response and give him as full an answer as I can.
The prohibitions set out in the instrument encompass a range of goods and services where Russia is highly reliant on the UK and its allies for expertise. The amendment will severely debilitate the future growth of key Russian industries; we are already beginning to see that take hold in Russia. Prohibitions on services imposed by the UK, the US and the EU account for between 75% and 83% of Russia’s imports in the key sectors that I have outlined. For example, it is estimated that 77% of Russian architecture and engineering imports are from G7 economies.
Taken as a whole, the No.17 regulations cover more than £200 million of exports to Russia, according to 2021 export data. As with all our sanctions, the latest package has been developed in co-ordination with the UK’s international partners, and we will continue to work with our allies to identify any potential gaps or loopholes in our sanctions and address them accordingly.
The legislation further underlines that the UK is committed in its resolve to target those who participate in or facilitate Putin’s illegal invasion of Ukraine. Since February 2022, the UK has sanctioned more than 1,200 individuals, over 120 entities, including 20 banks with global assets worth £940 billion, and over 130 oligarchs with a combined net worth of over £140 billion. Crucially, our sanctions package is designed to increase the pressure on Putin in Russia over time and across multiple stress points. We continue to witness the impact that sanctions are having on Russia. The International Monetary Fund forecasts that Russia’s GDP will be 11% smaller in 2028 compared with pre-invasion forecasts and that it will not return to its pre-invasion level until 2027 at the earliest.
Russian imports have already plummeted by more than half, highlighting that even non-sanctioning countries are limiting what they export to Russia. UK sanctions serve as a stark reminder, we hope, of the cost of such a flagrant assault on sovereignty, democracy and freedom. We will continue to support Ukraine until it can secure peace on its terms. I welcome the continued cross-party support for that effort, and I commend the draft regulations to the Committee.
Anne-Marie Trevelyan
I thank all the Committee members for their contributions, and I will do my best to answer their questions; if I cannot do so now, I will make sure that we write to them.
In response to the hon. Member for Cardiff West, the statutory instrument does affect UK citizens with shares in Russian companies. I hear his point about companies that continue to operate in Russia. Of course, many companies have stepped away or are stepping away, where they are able to do so. Clearly, that brings in another layer of services, particularly, that are no longer viable for export. I will take away the point about the company that he identified and get back to him more formally on that. We see a continuing move across the piece of British companies and others making decisions for themselves.
On the question from the hon. Member for Cardiff South and Penarth about cryptocurrencies, the UK’s financial sanctions cover funds and economic resources of every type, including crypto, so they are all-encompassing. The Office of Financial Sanctions Implementation has recently imposed monetary penalties against some fintech firms. I am happy to get more details for him.
Stephen Doughty
That is reassuring. However, the US Treasury took steps in August to sanction mixers, which effectively jumble up different cryptocurrency transactions to avoid transparency, whereas the UK, as yet, has not. Will the Minister write to me about what is happening and why that has still not happened?
Anne-Marie Trevelyan
I am happy to commit to do that. As the hon. Gentleman is aware, we do not comment on areas or individuals that we may be looking to sanction for obvious reasons, but I will happily get back to him on those specifics.
In relation to asset seizures, a big piece of work is ongoing. We are considering all the options around seizing Russian-linked assets and how they could be used to support the people of Ukraine, including funding humanitarian efforts and contributing to the reconstruction of the country.
Stephen Doughty
That is reassuring to hear as well. I hope that the Minister will, in discussion with her ministerial colleagues, look at the example of Canada, which has introduced new legislation recently. There is also a historical example: after the first Gulf war, we took a share of the profits of all companies there to help with the reconstruction of Kuwait.
Anne-Marie Trevelyan
The hon. Member is right: some international partners are looking to test both the freezing and the potential seizure of assets. None of those is fully tested for their lawfulness yet, and we are watching and supporting our allies, who are testing their own legal systems. We want to ensure that we work closely with Government Departments and our law enforcement agencies to identify all possible options and work that through.
On the hon. Member’s point about Kuwait, that decision was taken after the end of the war. We want to continue to work internationally to come up with options that will be viable as and when this terrible war ends, but, for now, we continue to work to see how we can pull together a package that we know would stand up in a court of law.
I hope that these measures give confidence that we are continuing our wave of sanctions, which are having real, damaging consequences to Putin’s regime, and we will commit to going further. We continue to watch where and how we might effectively continue to put on pressure to encourage Putin to end his appalling and aggressive war. We stand firm and resolute with the people of Ukraine. We will continue to support them and the Ukrainian Government until Putin and Russia withdraw from Ukraine. I hope that the Committee will support these regulations.
Question put and agreed to.