Russia (Sanctions) (EU Exit) (Amendment) (No. 15) Regulations 2022

Lord Berkeley Excerpts

Monday 21st November 2022 Lords Chamber

[The Minister of State, Foreign, Commonwealth and Development Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, I shall speak also to the Russia (Sanctions) (EU Exit) (Amendment) (No. 16) Regulations 2022.

The instruments before us were laid on 28 October and 2 November respectively under powers provided by the Sanctions and Anti-Money Laundering Act 2018. They make amendments to the Russia (Sanctions) (EU Exit) Regulations 2019. With these amendments, the UK continues to put immense pressure on Mr Putin and Russia with our international partners. This is part of the largest and most severe economic sanctions package that Russia has ever faced.

I will first talk about the No. 15 regulations. Through this legislation, we are banning exports of hundreds of items that are critical to the functioning of Russia’s economy, particularly in the manufacturing sector. This includes items such as machinery, electrical appliances, metalworking tools, precision instruments, and other products that are of critical importance to Russia’s industrial and technological capabilities. They will be added to an extended list of items that we have already sanctioned.

This legislation also bans further imports from Russia, including gold jewellery, and Russian gold processed in third countries. This strengthens the ban on Russian gold that we first introduced in July. The United Kingdom has received only one shipment of Russian liquefied natural gas since the Ukraine invasion. The legislation prohibits these imports to the UK entirely from 1 January 2023. The instrument also bans the import of other goods that generate revenue for Russia, including vodka, vinegar, beverages, and food waste products, and it prohibits the provision of services in the technical assistance, financial services and expertise, and brokering sectors.

In total, the United Kingdom has wholly or partially sanctioned £20 billion-worth of goods per year, which is 96% of the goods that we used to trade before the invasion took place. As with all our sanctions, this package has been developed in co-ordination with our international partners. I assure noble Lords that we will continue to work with them to identify further potential measures to bear down on Russia.

I will make one final point on SI 15. Owing to the unprecedented pace of our sanctions work, we identified a minor mistake which occurred during drafting and corrected associated documents to reflect this on 11 November. This correction means that the export prohibitions of the products in new Schedule 3I, “Russia’s vulnerable goods”, will now come into force on 1 January 2023, at the same time as the ban on the import of liquefied natural gas. We expect the change to have minimal impact on the effectiveness of the measure.

I turn to the No. 16 regulations. Again, working with our partners across the world, the UK has imposed a range of sanctions on Russia and continues to do so. This legislation is a further important step in undermining Mr Putin’s ability to fund his illegal war on Ukraine. We are now further targeting oil, one of his most significant sources of funding. This builds on bans already introduced on the import of oil into the United Kingdom.

Oil is a key sector for the Russian economy and plays a vital role in funding the Russian war effort in Ukraine. Crude oil and oil products are Russia’s most lucrative export, around 75% of which are transported by sea. They accounted for 10% of GDP in 2021. These new powers allow the UK to move in lockstep with our allies, limiting the revenues that Russia can derive from the sale of oil transported by sea.

It is important to protect vulnerable countries for which energy security is critical. While this measure targets Russia specifically, it also aims to maintain the flow of oil at a stable price in order to manage inflated global energy prices—prices that are a direct result of Mr Putin’s actions. This legislation implements a core part of the policy that will prevent countries using the UK’s services to transport seaborne Russian oil and refined oil products unless they are purchased at or below the oil price cap, set and agreed by the price cap coalition of the G7, the European Union and Australia.

Importantly, the UK and our coalition partners will not ourselves be purchasing Russian oil. We and our partners have introduced our own domestic import bans on Russian oil from 5 December. Instead, this is about ensuring that UK, European, and G7 services cannot be used to facilitate the trade of Russian oil.

The ban on services, including insurance, brokerage and shipping, implemented through this legislation, will be coupled with a general licence providing the basis for an oil price cap exception. This will allow third countries to continue accessing services only if they purchase Russian oil at or below the cap. This measure will restrict Mr Putin’s ability to fund his illegal war in Ukraine, while allowing oil to flow in a tight market that will enable all countries—particularly those with lower incomes—to purchase affordable oil.

A key element of this measure is the UK’s world-class insurance sector. It provides key services that enable the movement of oil by sea, particularly protection and indemnity insurance. Here, our reach is significant: the United Kingdom is a global leader in the provision of third-party liability insurance, writing 60% of global cover provided by the 13 protection and indemnity clubs. Together with our G7 partners, we collectively write around 90% of this cover.

The potential impact of this measure, and the central role of the UK, cannot be overstated. The ban on providing services for Russian seaborne oil will come into force on 5 December. A further ban on providing services for Russian seaborne refined oil products comes into force on 5 February, in alignment with our international partners. This important measure will be enforced by the Office of Financial Sanctions Implementation, working closely with the industry. This robust enforcement regime will be backed up by prosecutions if necessary.

Together with the actions taken by our partners in the G7, the European Union and Australia, this measure represents one of the single biggest sanctions placed on Russia, one which targets their largest source of revenue. These new amendments demonstrate our continued determination and commitment to target those who participate in, or facilitate, Mr Putin’s illegal war of choice on Ukraine. I assure noble Lords that we will remain steadfast and will continue to bring forward further sanctions. I beg to move.

[Lord Berkeley (Lab)]

My Lords, will the Minister comment on a report in the Sunday Times yesterday about the export of oil from Russia in a Russian ship from the Black Sea? It tied up against another ship somewhere in the Mediterranean and that oil was transferred over several days; the oil subsequently was delivered to Immingham. That, to me, is importing Russian oil. Are these regulations going to stop this, and how are they going to check it?

[Lord Purvis of Tweed (LD)]

My Lords, I have been in Ukraine in the winter, and that, combined with the indiscriminate barbarity of the Putin regime towards the people of Ukraine in what will be a very punishing season, means that we need to redouble our efforts to make sure that there is no impunity for the Russian regime. We therefore support these sanctions and, as the Minister knows, we have, from these Benches, been consistent supporters. However, with the news that was reported just last week by the Financial Times that Russia’s gross domestic product has fallen by only 4%—far less than had been anticipated—does the Minister agree that we need to consider further areas where there can be damage to the regime’s economy and how it operates it?

Notwithstanding the information that the Minister has provided in the past regarding the impact of these sanctions, the impact on the Russian economy is less than we had anticipated. One of the reasons for that is that Russia has been able to circumvent some of the sanctions, with trade increasing in energy especially. It is therefore welcome that there has been a shift of tone in the G20 from India and China, in addition to the other G20 countries, regarding their position on the Putin regime. Could the Minister outline areas where there are discussions on expanding the type of financial instruments that could be inflicted on the regime? If the Russian economy is falling by only 4%, which is only 1.5% more than the UK economy is anticipated to fall in this coming year, then this is not likely to bring about significant change in the type of aggression that Russia is waging on the people of Ukraine.

The Minister said that these regulations have been developed in co-ordination with our allies, but they come into effect after the EU sanctions. The Government themselves state that these have been brought forward

“to further align with the EU’s existing prohibitions

on

“oil refining technology and manufacturing products”.

On the expansion of the list of revenue-generating goods, which the Minister outlined, the Explanatory Memorandum says:

“The aim of this measure is to align with the EU to include two Russian product groups”.


Although we support the regulations, why has there been a delay in the UK bringing forward measures when they have already been put in place by the EU? If they are developed in co-ordination, surely it would be better to implement at the same time as our allies.

Have the Government assessed the effect of the prohibition on the import of gold with regard to trade with our allies in the Gulf? I have seen at first hand, on a visit to Africa, the illicit trade in gold, which is funnelled through our Gulf allies and then makes its way to Russia. What action are we taking with our allies and trading partners on the gold trade in the Gulf?

Could the Minister explain a minor point that is curious to me? Although we support the measures on those importing and acquiring gold jewellery that originates in Russia, the Explanatory Memorandum has, in brackets,

“(with an exception for personal use, which will also apply to the export of gold jewellery)”.

I cannot afford much gold jewellery but I think that quite a lot of gold jewellery is for personal use, so why are we putting in place measures to prohibit gold jewellery with an exception for “personal use”? That does not make much sense to me, so if the Minister could explain it, I would be grateful.

On the No. 16 regulations, I very much support prohibitions on the supply and delivery of certain ships, notwithstanding the very valid question asked of the Minister regarding circumventing these prohibitions. We also welcome the shift in tone from our friends in Delhi. But what further work is being done regarding the rupee-rouble swap arrangements for India’s purchasing of oil? I have raised this with the Minister on a number of occasions. He knows that there have been ways in which Russia has profited out of the sanctions on energy and oil. Can the Minister outline clearly that Russia is not profiting from our allies through its purchasing arrangements? What discussions are we having with India in particular regarding its purchase of Russian oil?