Sanctions

Baroness Hodge of Barking Excerpts

Tuesday 1st March 2022 Commons Chamber

[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.

--- Later in debate ---

[Mr David Davis (Haltemprice and Howden) (Con)]

I found much to agree with in the comments from the hon. Member for Cardiff South and Penarth (Stephen Doughty), as I did in those of the Minister. Today’s moves to prevent Russian banks and businesses from accessing our financial system and to ban key exports to Russia are much-needed and, frankly, long overdue. We should have been doing some of these things—not all of them—some time ago.

Yesterday, the Foreign Secretary said that this legislation would immediately be applied to Sberbank, VEB, Sovcombank and Otkritie. These measures will undoubtedly inflict damage on the Russian economy and punish the Russian state, but we must go further. It may be that I have not completely comprehended the Minister’s intentions, but why are we applying this immediate legislation only to those specific banks? The hon. Member for Rhondda (Chris Bryant) made a good point on this. Why not immediately apply it to VTB, Gazprombank or Alfa-Bank—Russia’s second, third and fourth biggest banks? I note that the Americans have sanctioned the same banks in the same way, and I assume that this is to protect the operation of fundamental European infrastructure such as oil and gas.

That was the point I was trying to draw from the hon. Member for Cardiff South and Penarth when I asked whether he thought we were trying to ensure we did the maximum damage to Russia but the minimum damage to our allies if we had to maintain this for a long time. I am interested to hear the Minister’s answer, because by excluding those banks in the immediate term, we will to some extent undermine our strategy. Time is against us and troops are bearing down on Kyiv as we speak. The longer we wait, the longer Ukraine and her people will be subject to indiscriminate missile strikes and the terror of Putin’s forces.

Similarly, I would like to hear what the Government are doing to stop these measures being bypassed by Russia’s erstwhile friends, allies and fellow travellers: China, India and Brazil. Again, if we allow 30 days and those countries are willing to facilitate it, Russia could bypass a very large component of what we are trying to do. There might be rouble-support operations by China, for example. How would we cope with that? If we do not succeed in this strategy, frankly, we risk Ukraine being turned into a European Vietnam, a prospect too horrible to countenance.

As damaging as today’s measures are to the Russian financial system, they will not hit Putin where it hurts most. For that we need to target many more of his allies and facilitators who have bought their way into British society. That is what is missing from these statutory instruments.

We need to target those who own businesses on our stock exchange. We need to target those who own London homes that we can no longer afford because of Russian operations in London. We need to target oligarchs who own football clubs that many of our citizens can no longer afford to attend because they are so expensive. For too long, we turned a blind eye to dirty money flooding into the City of London. The right hon. Member for Barking (Dame Margaret Hodge), my successor as Chair of the Public Accounts Committee, has a very strong record on this, and she will know that we have failed to use the tools we already have.

For example, we have had unexplained wealth orders at our disposal since 2017. In theory, they force a suspect to reveal the source of their wealth, and failure to do so results in the property under consideration being seized. Since 2017, only nine of those orders have been presented against four people, and only two of them succeeded.

[Dame Margaret Hodge]

I am very much enjoying the right hon. Gentleman’s contribution, and I thank him for what he said. Does he agree that, until we target the enablers—the accountants, lawyers and banks—supporting individuals or companies in laundering dirty money, we will not hit the heart of the dirty money industry that we are trying to attack with this legislation?

[Mr Davis]

The right hon. Lady makes a point that will be made by my hon. Friend the Member for Isle of Wight (Bob Seely) and others, and I have a lot of sympathy, but we have to be careful that we do not take away ordinary citizens’ rights—indeed, the proper rights of any individual—in how we deal with the lawyers, the accountants and so on.

Particularly in the lawfare area, a huge industry of enormous margins and enormous profits has been developed by various law firms, in particular, that have developed the tactics for defeating the Government’s imposition of proper laws.

--- Later in debate ---

[Dame Margaret Hodge (Barking) (Lab)]

I am delighted by the tone of the debate, because on the Back Benches there is complete agreement. I hope the Minister will leave the debate emboldened by some of the ideas we put to him, so he can take them and translate them into action. I very much support the introduction of the two statutory instruments. I will speak specifically to paragraph (3) of statutory instrument No. 194 on the extension of powers to designate persons.

Before I come on to the detail, if I may, I would like to say two things. The Minister said that he wants to protect British companies and so do I, but there are a lot of British companies that are actually owned by Putin and Putin’s cronies. One of the problems we have is that it is so easy to establish a company here in the UK. Not only is it cheap—it is £12 and we do not mind that—but there is so little regulatory control of the data and so few powers for Companies House to verify that data and raise red flags where there are questions, that it is no good the Minister saying he wants to protect British companies. In so doing, he may often be protecting dirty money. That is why we were all so frustrated yesterday that the only move going ahead in relation to Companies House is yet another White Paper and yet another consultation. It really is time to act on that issue.

Across the House, we are all saying that the powers are there. The problem is that there does not seem to be an effective mechanism in Government to implement the powers and sanctions that we have. This is partly about resources—we have all talked about that—but I think it is also about political will, and the Government are trying to face both ways in relation to the City of London. There is a fear of undermining the financial services sector, which I understand, but in having that fear they are reluctant to take action where they should to eliminate dirty money. We will never have sustainable growth and sustainable prosperity on the back of dirty money, so it is a short-sighted policy. Having the political will, as well as the resources, is very important.

The hon. Member for Oxford West and Abingdon (Layla Moran) mentioned a list of 35 names, which I am familiar with—Navalny put it on Facebook just before he was imprisoned some time ago. I simply draw to the Minister’s attention, as others have, that 15 people on that list have already been sanctioned by the EU and the USA. Why on earth have they not been sanctioned here? What is stopping that happening? Until the strong words enunciated by the Government are enacted, we will not have confidence that our British Government are really doing all that they can to support Ukraine and the Ukrainians in their fight for democracy.

[Sammy Wilson]

Did the right hon. Lady find the excuse that was given during the statement yesterday—that the Government have to gather the information on these individuals—rather limp? Surely if other Administrations already have sufficient information to do this, that must also be available to our Government.

[Dame Margaret Hodge]

That is indeed the case. It has been suggested that we could use parliamentary privilege to sanction those individuals through the House, or there is my suggestion that we use the powers under the unexplained wealth orders whereby the assets are removed and it is then up to the individual to justify the legitimacy of their access to those assets.

[Mr Kevan Jones (North Durham) (Lab)]

Does my right hon. Friend agree that, in many cases, it is not as though these assets are very mobile? They are expensive houses and apartments and other fixed assets. They are easily identifiable and could be sanctioned clearly, as Italy, France and others have done.

[Dame Margaret Hodge]

My right hon. Friend is absolutely right. That is why the Government should readily undertake that action, and I would add to that list that places in English public schools can be identified and halted very quickly.

I have been handed a list today of 105 oligarchs. I think that these names are not on the list that the hon. Member for Oxford West and Abingdon mentioned. These are wealthy businesspeople who are involved in companies of strategic importance to the Russian economy, in such things as energy, metals, chemicals, pharmaceuticals and construction. The list is of men—they are all men, I think—who have made a lot of money by robbing assets from the Russian people. That is where the money has come from and they have made their money only because they are close to the Kremlin, and they sustain their wealth only because they remain close to the Kremlin.

You will be delighted to hear that I will not read out the whole list, Mr Deputy Speaker, because I know that you think I go on a bit too long—

[Mr Deputy Speaker (Mr Nigel Evans)]

Never.

[Dame Margaret Hodge]

I will not read the list of more than 100 names, but I have picked out 10 that demonstrate not only the importance of tackling individuals, but their links to the UK. So we are complicit in this and we are facilitating it by not tackling this.

Alexander Abramov—my apologies if I mispronounce names—is the co-owner and chair of a multinational company registered and headquartered here in London, Evraz, which is a metals company. Together with his partners Roman Abramovich and Alexander Frolov, he owns a nearly 25% stake in TransContainer, which is the largest Russian container railway operator. His wealth is estimated at $6 billion.

Andrey Guryev is the majority owner and deputy chairman of PhosAgro, which is one of the world’s largest producers of fertilizers. It might well have been involved in the disaster in Lebanon—I am not alleging that, but the explosion in Lebanon arose from fertilizer that came through Russia. He has given 20% of the company to Putin’s university professor Vladimir Litvinenko, who is thought to be a proxy for Putin. He owns Witanhurst palace in London, which is valued at about £450 million, and his joint wealth with his family is estimated at $5.5 billion.

Leonid Mikhelson is the founder and chairman of natural gas producer Novatek, which is also listed on the London stock exchange. In 2017, he bought a 17% stake in petrochemical company Sibur from Putin’s reported former son-in-law, increasing his stake to 48%. His partner is Gennady Timchenko, a billionaire who is also a close friend of President Putin and whom the UK has also sanctioned. His wealth is estimated at $21 billion.

Mikhail Fridman has already been sanctioned by the EU. Fridman controls Alfa Group and LetterOne, both headquartered in Luxembourg. Fridman was investigated by the Spanish National Court between 2019 and 2021 for his role in the Zed bankruptcy. He owns £90 million of property and permanently resides in London. His worth is estimated to be $13 billion.

Vladimir Lisin is majority shareholder and chairman of NLMK Group, a leading manufacturer of steel products and responsible for one fifth of Russian steel production. NLMK is listed on the London stock exchange. Lisin also owns the railway operator First Cargo, as well as some ports and shipping companies. His estimated worth is $24 billion.

Petr Aven has been sanctioned by the EU. He is head of the largest Russian private bank, Alfa Bank. With his partners German Khan, Alexei Kuzmichev and Mikhail Fridman, Aven co-owns Alfa Group and LetterOne, both headquartered in Luxembourg. He is tipped to be the group’s direct link to Putin from his days as the Russian Minister of Foreign Economic Relations. He owns a mansion in Surrey and is a renowned art collector. His worth is estimated at $5 billion.

Suleiman Kerimov was sanctioned by the US in 2018. He gets most of his fortune from his 76% stake in Russia’s biggest gold producer, Polyus. He profited from co-investing in Russian shares together with the then First Deputy Prime Minister Igor Shuvalov, who was responsible for the Russian economy. The FinCEN files show that Kerimov paid £6 million to the Chernukhin family, who have been well exposed in the UK press. Kerimov’s family is worth some $10 billion.

Vladimir Potanin acquired a stake in Norilsk Nickel during Russia’s privatisation in 1995. Today, he owns just over a third of Russia’s largest nickel and palladium producer. Norilsk Nickel is also listed on the London stock exchange. Potanin also owns a pharmaceutical company, Petrovax Pharm, and a ski resort, Rosa Khutor, near Sochi. His worth is nearly $26 billion.

Yelena Baturina—sorry, she is a woman; Russia’s wealthiest, apparently—is the widow of Yury Luzhkov, who was the mayor of Moscow from 1992 to 2010. During her husband’s time as mayor, Baturina owned the construction company Inteko and cement factories, which benefited from the city’s commissions. She was the previous owner of the British property Witanhurst.

Finally—I have only chosen 10 out of the list—we have Vladimir Yakunin. He is an ex-KGB colleague of Putin. He ran state-owned monopoly Russian Railways between 2005 and 2015. He and his family extracted nearly $4 billion in assets and commissions from Russian Railways, in Navalny’s estimates. Most of those assets are now administered by his London-based son via a Luxembourg-registered investment fund. Yakunin is the founder and president of the Putin-linked World Public Forum “Dialogue of Civilisations”. We do not know, because we do not have a public register of ownership, but we think he owns two north London properties. I will undertake to send the Minister the complete list, from which I have raised only 10 examples.

[Mr David Davis]

My right hon. Friend, if I may call her that, will be able to work out, as a former Chair of the Public Accounts Committee, that 35 plus 105 comes to 140, which is the number I was using before. These are the people I was thinking of. The reason I say that is that although Vladimir Putin theoretically has no assets, in practice he is estimated to have something like $200 billion, and that $200 billion will be being held by the 140 people we have talked about. In targeting them, we are targeting him directly, and that is the incentivisation we are aiming at in this exercise.

[Dame Margaret Hodge]

Hear, hear. We all agree. I will send the complete list to the Minister. I ask him and his colleagues in the Foreign, Commonwealth and Development Office and elsewhere to forensically examine the circumstances of the people on that list and to come back to us all, so that we have confidence that the Government are enacting what they say they want to do and taking real firm action against those cronies of Putin who are propping him up and allowing him to create havoc in Europe.