Russia (Sanctions) (EU Exit) (Amendment) Regulations 2023

Catherine West Excerpts

Monday 15th May 2023 General Committees

[Catherine West (Hornsey and Wood Green) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Gary. I thank the Minister for setting out the details of the latest expansion in the UK’s sanctions. As the coming Ukrainian offensive nears, Russia’s illegal and barbarous actions are clearer than ever. It was very welcome to see President Zelensky in the UK today, visiting Chequers. I hope that will translate into further concrete, ongoing support from the Government. We also welcomed the UK Government’s announcement to the House of Commons last Thursday that further technical and hardware aid would allow Ukraine to prosper in its dealings and defend itself as robustly as possible.

In that vein, and before we go into details pertaining to the sanctions, I want to ask the Minister how the Government plan to use the fourth summit of Heads of State and Government of the Council of Europe. It is an opportunity to push for greater international support for Ukraine and bring about the further consensus that we must galvanise across our continent. Although we have seen committed support from many of our partners across Europe, we must always seek leadership opportunities to give voice to Ukraine’s continued plight and to ensure that the continent’s focus remains on the heinous crimes being committed against the Ukrainian people.

Labour has made clear that, should there be a change of Government, we will remain unshakeably committed to Ukraine’s sovereignty, nationhood and people, as well as to our allies, partners and NATO against the attempts of Putin, or any other demagogue, to dislocate the global rules-based order. The UK’s sanctions regime is one of the most critical weapons in our arsenal to achieve that, knowing as we do that, over the years, Russian oligarchs have had rather a picnic when they have been based in London.

There are two measures being debated tonight. I will deal with the first in detail. The Minister mentioned the second, on the question of whether individuals should be allowed to have £50,000 or more in their bank accounts when they are from the Russian Federation. Labour does not support the measure, and we will seek opportunities in Parliament to make that debate better known and to make our voice clear on that. It is weak, and it is allowing rich oligarchs to get away with putting £50,000 in their bank accounts without any questions being asked. Under the “know your client” obligations that banks are meant to adhere to, that would strengthen our—

[The Chair]

Order. I blame the Minister for opening up on that subject, but that is not within the scope of our debate. It is perfectly legitimate to respond to the Minister, but I would be grateful if we could move on shortly.

[Leo Docherty]

I apologise.

[Catherine West]

Just to clarify, are we deciding on that tonight, Sir Gary?

[The Chair]

No vote is to be taken this evening on the point that the Minister made.

--- Later in debate ---

[Catherine West]

Thank you so much, Sir Gary, for that clarification. That was my initial impression: the officials were so kind as to provide a briefing to the Opposition and it was my understanding that that matter was coming forward at a later date. Therefore, we can leave the debate and the vote on that matter of principle—

[Leo Docherty]

indicated assent.

[Catherine West]

I see the Minister nodding, which is positive, because I am sure that Members would not like to have that jumped on to them at the last minute.

To revert to the original reason for our being here this evening, I am pleased to see measures being debated about the sustained export of commodities to Russia. No sanctions regime worth its salt could countenance that, so my first question for the Minister is: why has it taken so long for this measure to be brought before the Committee? The exportation of aircraft parts, radio equipment and biotechnology, among other key items, goes against the spirit of our regime and could have been a contributing factor in sustaining Russian offensives and in their destructive impact on Ukraine. I understand that such measures take time to fine-tune and are a constant work in progress, but we are well over a year into this harrowing conflict and we were, until April, still exporting biotechnological materials and vehicle parts to the Russian Federation. My second question, therefore, is this. What is the total value of the equipment that is now covered by the new measures and has been exported to Russia since February 2022, and were the Government monitoring the rate of those exports prior to 21 April 2023, when those measures came into effect?

Labour is committed to supporting the Government in expanding the UK’s sanctions regime, but time and again we come to Committees such as this to debate measures that, frankly, should have come into effect much sooner than a year and two months into this egregious conflict. I have a great appreciation for the work of the sanctions taskforce in the Foreign, Commonwealth and Development Office and for the staff of the Office of Financial Sanctions Implementation, but has further consideration been given by the Government and Ministers to questions about staffing levels and resourcing to ensure that critical measures such as these are brought in sooner rather than later, to ensure that the Russian war machine is sapped of resources more rapidly and more totally?

It is welcome that the Government will expand the sanctions regime in respect of the acquisition, supply and delivery of these goods and related financial, technical and brokering services, and Labour will of course support them. It is also welcome to see an expansion of existing prohibitions on importing iron and steel products. Concerns have been raised time and again that sanctions in this area are too weak and open to evasion. That is why I am profoundly concerned that this specific expansion will not come into force until the end of September. A similar statutory instrument, which I was delighted to cover for the shadow Minister for Europe, my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), gave a bit too much notice to others that a sanction was coming in. Can the Minister account for why there seems to be an enduring series of delays with regulations such as these and across our regime? Oligarchs and those across Russia’s political class are not sitting idly by, waiting for their vast wealth to evaporate; they are seeking out ways to capitalise on the delays. I fear that the pace at which the Government are moving is only maximising what those people can retain in the long term.

I would now like to discuss oil and hydrocarbons. My hon. Friend the Member for Brent North made a very important point about how oil and hydrocarbons can be processed in third countries and then exported, even though they originated in the Russian Federation. Will the Minister clarify this? Does he think that we have a tight enough sanction to ensure that no profit returns to the federation to feed the war machine?

On 3 February, a general licence was issued by OFSI that

“permits the supply or delivery by ship of Russian crude oil and oil products, as well as provision of associated services, so long as the price paid for Russian oil or oil products is at or below the price cap”

of “$60 per barrel”. Under this licence, a person may also

“supply or deliver Russian oil by ship from a place in Russia to a third country or from one third country to another third country provided that the Unit Price of the Russian oil concerned is at or below the Price Cap.”

OFSI also states:

“A service provider may provide relevant services to any person provided that the unit price of the Russian oil being supplied or delivered by ship from a place in Russia to a third country or from one third country to another third country is at or below the Price Cap.”

Will the Minister outline the motivation behind that general licence, given that we should be aspiring to end the proliferation of Russian oil across the world rather than encouraging it?

Secondly, how is the Minister ensuring that OFSI rigorously and assiduously enforces the price cap, and how many infringements have been collected? What monitoring is happening of the UK’s role in the international oil market? Today, it seems there could be further cause for concern. The Minister might correct me, as the notice for this SI has been quite short, but the amendment to chapter 4I states that regulation 46Z6 will be omitted. That of course concerns the prohibition on the supply and delivery of Russian oil products. Will the Minister please clarify the purpose of that omission? At first glance, it appears that it would remove the prohibition on the supply and delivery of Russian oil, but I am sure that that is a drafting error. Perhaps the Minister could provide an assurance that the change has a purely technical or drafting purpose. I reached out to the Foreign, Commonwealth and Development Office for clarification on that point in advance of the Committee, and I am not sure whether this is up to date.

As I am sure we can all agree, oil is the bloodstream of Putin’s war machine. As long as the UK continues to make inexplicable exemptions and grant implausible licences, it will continue to flow freely. We know that countries in Russia’s geopolitical neighbourhood are purchasing tens of billions in oil products, and it seems entirely confounding and unacceptable that a drop of that oil should reach the UK, but that is what is happening because often it slips through various other sanctions arrangements. I look forward to the Minister providing much needed clarity and I urge colleagues across the FCDO to consider that the integrity of our sanctions regime really is on the line.

I would like to raise an issue that I know my hon. Friend the shadow Europe Minister has relayed to the Minister on several occasions, which is the question of cryptocurrencies. My hon. Friend brought to the attention of the Minister two entities that the US Treasury sanctioned in August last year—TornadoCash and Blender. Those cryptocurrency mixers have been used to launder billions and obfuscate the proceeds from illicit cyber activity by scrambling the origin of transactions.

[The Chair]

Order. I hesitate to interrupt the hon. Lady, but there is no reference to cryptocurrency at all in the regulations we are discussing. Will she be very brief on this point?

[Catherine West]

Thank you, Sir Gary. I will conclude by saying that this is an opportunity to remind the Minister of what is left out of the sanctions regime. It is extraordinary that there is nothing on cryptocurrency in any of our sanctions to date, even though the US, our close ally, includes it.

In conclusion, I am sure the Minister will be unsurprised that I want to cover the issue of asset seizures and sequestration for the purposes of supporting the reconstruction of Ukraine, but I know that you, Sir Gary, will be very cross with me if I continue to raise matters that are not directly relevant. However, you will also understand and remember from when you were an Opposition Member that one can use these opportunities to slip in some more references to important matters.

The reconstruction of Ukraine, if the war ended today, is predicted to cost hundreds of billions, if not more than £1 trillion. De-mining alone could take decades, so I will not continue in that vein.

[The Chair]

I am very grateful.

[Catherine West]

I just want to mention that we are pushing the Government on that.

Finally, what conversations has the Minister had with his counterparts in the Ministry of Justice about proxies and how we can bring an end to the practice of others—for example, oligarchs—using different bank accounts to hide and obfuscate the location of assets? Will he comment on that, given that that is his brief, and will he give a hint as to how he thinks such measures might come forward in future months as we seek to strengthen the sanctions regime?

Putin’s atrocious and illegal assault on Ukraine’s nationhood and its people shows no sign of abating. We must use the financial tools available to us to hold the Russian Federation to account. The Labour party continues to stand with Ukraine, and ultimately the Government can rely on us to go even further, even more quickly, in the sanctions regime.