War in Ukraine: Illicit Finance

Debate between Bob Seely and Jonathan Djanogly

Thursday 17th November 2022 Westminster Hall

[Bob Seely]

I thank the hon. Member for his very sensible point. There is absolutely a wider issue. As well as shell companies, there are vast developments on the south side of the river, around the US embassy, where entire blocks are being bought up as investment options rather than being used to provide housing for Londoners. That is shocking, especially because we have a housing shortage. There is a wider argument on reform of our housing in the UK for giving options first to allow ordinary folks to be buying it, rather than—as much as we love them—Hong Kong, Chinese or Indonesian investors to block buy endless numbers of flat and rent them out or never have them occupied.

I was going to talk a bit about the Azerbaijani laundromat. Between 2012 and 2014, about £3 billion went through UK shell companies as part of the so-called Azerbaijani laundromat; funding was dispersed from Azerbaijani officials to various outlets in this country. As well as that, London’s open economic environment has been a key centre for raising finance for companies or individuals over whom there are now very considerable question marks.

In 2017, En+ was floated on the London stock exchange, raising £1.5 billion from international investors in an initial public offering. We now know—well, we knew at the time—that En+ was very closely associated with Oleg Deripaska, despite his ownership of companies linked to supplying Russian military materials and sanctioned Russian shareholders. He himself is now sanctioned, I believe. En+ and Oleg Deripaska were part of a considerable lobbying effort by a former Member of the House of Lords—a former Conservative Minister, as much as it shames me to say it—to separate Deripaska from En+ in frankly pretty questionable circumstances.

Shortly after the Skripal poisoning, Russia continued to sell Russian sovereign debt in London, facilitated by the sanctioned Russian bank VTB. While our financial services provide anonymity to those who wish to invest, many UK legal firms have sought to further silence those who question the origin of investments.

[Mr Jonathan Djanogly (Huntingdon) (Con)]

My hon. Friend is making a very powerful case. I agree with everything he has to say. On sanctions, he will know, not least from the talk he did yesterday afternoon with a group of Ukrainians, that there is a big call in Ukraine at the moment to turn the freezing sanctions into confiscation sanctions, and to use the money we are holding, which would presumably otherwise be given back to the oligarchs, for the reconstruction of Ukraine. Would my hon. Friend comment on that?

[Bob Seely]

I would love to; we were debating that yesterday at the Henry Jackson Society with Bill Browder and a number of other people. My hon. Friend is welcome to correct me on this, but I think Canada has prepared an Act to enable that frozen money effectively to be given to the Ukrainian authorities or set up in some kind of international fund to help reconstruction in Ukraine.

[Mr Djanogly]

The Act is quite straightforward. By way of clarification, it takes the existing sanctions legislation, including the Canadian Magnitsky law, and latches on to that the ability to change freezing orders into confiscation orders. It is a relatively simple way of going about what could be a very complicated process.

[Bob Seely]

Indeed. If it is effective, I look forward to working with my hon. Friend, and potentially other Members, to see how we can bring in such a law in the UK, so that we move from freezing money to taking money and using it for a more moral purpose.

Ukraine

Debate between Bob Seely and Jonathan Djanogly

Monday 14th November 2022 Commons Chamber

[Mr Djanogly]

The right hon. Gentleman is absolutely right, and I will try to prove that point further.

Many of those in leadership roles surrounding the current Russian President, such as the Chechnya leader, Kadyrov—who suggested using a tactical nuclear weapon against Ukraine—espouse rigid nationalist views. They should not, and cannot, be absolved from blame for the invasion, as the term Putin’s war may allow. It is also important to highlight that many towns in reoccupied Ukraine now have unmarked graves resulting from murders perpetrated by members of the Russian armed forces: the Bucha massacre is a poignant example that we all have a duty to remember and reflect on. Reports are also rife of mass rapes, looting, torture, removal of children and confiscation of vital food stuffs—again, all deeds done by soldiers and administrators of the occupying power. It is clear to me that many people of the Russian Federation are up to their necks in heinous crimes committed during the ongoing war against the Ukrainian people, and the individual perpetrators must bear full responsibility and be prosecuted.

A case against those actively engaged in the invasion is clear, but what about the wider Russian people themselves? The problem is that by using the term Putin’s war, it is possible to excuse, overlook or ignore that the war, in all its gore and injustice, remains very popular among most of the Russian population. It is not just Putin, his cronies and his oligarchs. Some Russians, a small minority, have laudably taken a stand, memorably and notably Marina Ovsyannikova, who staged an on-air protest in March denouncing the war. Such defiance has, however, been more of an exception than the rule. Indeed, polling from within the Russian Federation continues to indicate strong support of over 70% for both the war and Putin among the populace.

[Bob Seely]

My hon. Friend is making an excellent speech, as ever. The extent to which the Russians support the war is a complex issue. He is not wrong to say that it is still very popular, but I just wonder if there is a slightly more generous way of putting it. There is a hard core against—very brave people, as he has outlined. There is a hard core for—the military bloggers and the nationalist community, who are becoming increasingly concerned. But in the last 20 years, because of the amount of propaganda in Russian society, most Russians know to avoid politics as an issue; they let the people in power get on with things. Does he accept the point that, rather than the war being popular, the agnosticism towards politics means that it is kept away from as a subject?

[Mr Djanogly]

I accept that it is a subject we could go into in some degree, but I would make the point that of those Russians who have been leaving Russia and going to places like Armenia, Georgia or the more than 250,000 who have gone to Turkey, it is by no means proven that they are anti-Putin. In fact, a lot of research says they are going to those countries because either they want to pursue their business activities, which sanctions prevent, or they do not want to be called up on the reserve list, not because they do not like President Putin.

What I am suggesting is that at some point citizens and leaders need to take collective responsibility for the actions of the state and the armed forces that operate in their name. For Russians, I would argue that that time has long passed. If we agree that there should be collective responsibility, we can make the moral case for collective sanctions—economic and travel. Travel restrictions, like those implemented by six EU states, are a more practical way of reinforcing the message of collective responsibility than economic sanctions, which mainly apply only to wealthier people.

As the situation stands, at the end of the war, whenever that may be or indeed before, assets that have been frozen, across the west and other areas of the globe, will be reclaimed by their owners, including here in the United Kingdom. The public, including many constituents in Huntingdon who I have corresponded with about the situation in Ukraine, naturally assume that a frozen superyacht owned by a sanctioned individual will be sold, with the proceeds used for reconstruction. We are talking about some £18 billion of frozen assets, not including real estate, in the UK alone. That is not, alas, currently the case. If the situation is not remedied, an embarrassing political situation, not to mention a morally dubious one, beckons.

Ministers should be prepared to consider, working with our allies, how frozen assets can be legally seized, sold and the revenue put to work for Ukraine’s rebuilding. The World Bank’s assessment made in September is that Ukraine will need $349 billion for recovery and reconstruction. It is worth saying that it is not just a question of law changes, but adopting a more aggressive attitude within the existing system. For instance, when the FBI boarded Mr Kerimov’s yacht Amadea in Fiji, it looks like the United States used the oligarch’s maintenance of the yacht as a criminal breach of sanctions, thereby allowing confiscation. We could and should be more assertive than we are.

As for possible law changes to facilitate confiscation, the first is a revisiting of the Trading with the Enemy Act 1939. During the second world war, that Act allowed the Government of the day to confiscate assets owned by residents of enemy countries in British territories. It focuses squarely on the assets of any person or organisation of countries with which the United Kingdom is at war. Thankfully, there has not been much cause to review it since 1945. An amendment to the definition of war, however, could provide a valuable basis for considering how Russian assets could be seized for the benefit of Ukraine and its reconstruction.

Secondly, Canada’s Budget Implementation Act 2022, which was passed in June, includes amendments that allow for the forfeiture of property that is subject to a seizure or restraint order under the Special Economic Measures Act 1992 and the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) 2017. That is done under both regimes using forfeiture orders, allowing the relevant Canadian Government Minister to apply to a court to forfeit assets that have already been seized or frozen. A number of safeguards are rightly built into the legislation. For instance, any person who appears to have an interest in the property may be heard by the relevant court.

A further possible avenue that I wish to highlight is one proposed by the Washington DC-based New Lines Institute for Strategy and Policy, which formulated a multilateral action model on reparations. In the model, the institute draws 13 convincing conclusions that lay the basis for an international, effective and legal reparations and compensation scheme. The model builds on the relatively recent and practical example of the Kuwait compensation fund, which, together with the UN compensation commission, paid some $52 billion in compensation to 1.5 million claimants over 30 years following the Iraqi invasion in 1990. The establishment of the fund and commission was possible only due to the agreement of those nations with a permanent seat at the UN Security Council. Unfortunately, as Russia is an aggressor in the case of Ukraine, that exact road map cannot be followed. The institute therefore makes the argument for working through the UN General Assembly rather than the Security Council.

The avenues that I have highlighted are but a number that are worthy of wider consideration—there are others. It is crucial, however, that the conversation surrounding compensation and reparations now begins in earnest, because just to continue saying, “This is only Putin’s war” is no longer relevant or morally sustainable.

Ukraine

Debate between Bob Seely and Jonathan Djanogly

Wednesday 20th December 2017 Westminster Hall

[Mr Seely]

Is my hon. Friend aware that the pro-Russia separatists in eastern Ukraine have more tanks than the British and French armies, and has he any idea where they may have got those tanks from?

[Mr Djanogly]

I was aware, but that fact needs to be well publicised; it is not known widely enough.

We must also be welcoming here to Ukrainians. The Schengen area has just awarded visa liberalisation to Ukraine. I accept that that is unlikely in the UK until we know where we stand post Brexit, but the bitter complaints that I heard from Ukrainians about the lack of efficiency in the existing process demand a review now.

The other key issue that came up during our visit related to the development of Ukrainian civil society. At this point, let me recognise that that is a different society from our own. Ukraine suffered greatly under communism; and, with its early-stage capitalist, oligarch-controlled economy, it is prone to corruption and political stagnation, in a way that can be unnerving and sometimes shocking to many of us in the west.

Reforms are being made, not least to liberalise and regulate the economy, and that has sometimes led to hardship for people—for instance, in relation to energy prices. However, it was made clear to us by many whom we met that although the Ukrainian Government keep saying that change must be gradual, large numbers of Ukrainians are getting impatient with the slow state of reform. I did not get the feeling that that will result in another Maidan-scale revolt at the current time, but it will be important that we do what we can to encourage accelerated reform.

By the way, I was very impressed by our embassy’s resolve and action to do exactly that. Let me recognise also that there are a number of excellent, reform-minded new and younger Ukrainian MPs, who see a better future for their country and are determined to fight for that future. We also saw some very impressive reforms, not least the local government and police permit one-stop shops, where permits can be applied for under one roof: because the issuing department does not directly interface with the applicant, corruption is largely stopped. So credit where credit is due.

It does sometimes seem, however, that it is one step forward and then one step back. The appointment of new Supreme Court judges was for the most part seen by civil society activists whom we met as a win against corruption, but reports came through a few days ago concerning the attempted suppression of the National Anti-Corruption Bureau of Ukraine and its head Artem Sytnyk, which points badly. Given the problems with corruption, I would say that establishing a system of anti-corruption courts and ensuring clean judges for them should be a priority for Ukraine next year. Those concerns are shared by the EU, the US, the World Bank and the International Monetary Fund. If we are to help Ukraine, we must also insist that Ukraine help itself. Of one thing I am convinced, however: this is our continent, and Ukraine’s battles are our battles and part of the UK’s future. We should not be neglecting them.