Ukraine

Earl of Lytton Excerpts

Tuesday 18th March 2014 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I have no special knowledge of Ukraine but none the less, I felt compelled to speak in this debate. I, too, pay tribute to the noble Baroness, Lady Warsi, for introducing it so compellingly.

For someone like me, it is of great concern not to be able to pick through the propaganda war that is being perpetrated. There is the question of who to believe, given the anonymised militias and the civilian thugs we see on our televisions. There is a breakdown of trust; there is disinformation. Of course, we all would like peace and tranquillity in Ukraine but there are historical fault-lines of language and political affinities, plus of course those industrial assets, military facilities and key infrastructure—gas pipelines, for instance—which are of enormous importance to the Russian Federation. I follow the point made by the noble Lord, Lord Cormack: in a sense, we need to recognise this. I approach all this with a degree of humility and caution because, like the noble Lord, Lord Alderdice, if for different reasons, I believe that we have good reason to show humility.

I do not know how best we can help Ukraine work things out for itself, come to an internal social accord and find accommodation with Russia on the one hand and the rest of Europe on the other. Certainly immediate financial assistance is necessary, and we can perhaps particularly help by advocating the rule of law and sound economic principles, the ingredients that generate trust, commercial confidence and prosperity and which are in the end a bastion against corruption and external meddling, but these are very long-term aims. They are based on essential truths rather than short-term political fixes.

In recent weeks, we have seen on our television screens demonstrations and barricades in Kiev and elsewhere. It seemed to me that Ukrainians were to a degree united, if one can use that term, over the evils of extortion, corporate raiding, corruption and abuses by civil servants and law enforcers from the ousted President downwards, not forgetting his family and cronies. The sums are eye-watering: some $37 billion-worth of loans misappropriated and $70 billion transferred to offshore accounts in the past three years from a country of 45 million people where GDP per capita is around $3,900. This is brigandry and theft on a grand scale, perhaps matched only by the sheer vulgarity of the ousted President’s principal residence. His hurried departure, the bungled disposal of documents in the Dnieper river and their subsequent retrieval identified the further extent of the theft of state money.

I add to the comments made by the noble Lord, Lord Chidgey and Lord Balfe, and my noble friend Lord Sandwich on this because we now know quite a lot about the theft of state assets, in part thanks to the courage and, sadly, untimely death of Sergei Magnitsky, who has been mentioned in this House and another place on previous occasions. Noble Lords will recall that he was beaten to death in a Russian jail by the very people he had exposed. Hermitage Capital Management, which commissioned him to investigate the corruption, suffered the sequestration of its assets and subsidiaries and the fraudulent use of company identities. About two weeks ago, Hermitage’s chief executive officer, Mr William Browder, talked to the All-Party Parliamentary Group on Anti-Corruption, and I met him subsequently. Hermitage made a dossier available and has been instrumental in persuading a number of jurisdictions to take significant action against those responsible for these thefts. I cannot help thinking that that was partly responsible for the passing in late 2012 of the Magnitsky law in the United States. Other jurisdictions have followed in the seizure of assets and the freezing of accounts, but one jurisdiction appears to be notable for its apparent inaction, and it is the UK.

Despite receiving the same information in 2012, all that has been received are bland platitudes, excuses about needing to proceed carefully and about not upsetting people, and claims of taxpayer and company confidentiality. This was raised in an adjournment debate in another place in January 2012 and on 7 March 2012 the Commons unanimously approved a Motion calling for action. Later the same year, the honourable Member for Esher and Walton, Dominic Raab, raised the issues in correspondence with the same agencies that received the initial letter from Hermitage’s lawyers. Why is this? Why such inaction?

It is safe to say that UK intelligence sources must have known a great deal about what was going on and where money was coming from. Are we satisfied that none of this money somehow found its way, directly or indirectly, into UK Treasury bonds? Can the Minister tell the House what audit has been carried out into this?

My point is this: the UK is a place where it is pleasant to live, to have property, to educate children and to invest money. It is the financial capital of the world and when things hit trouble around the globe, people look to a safe jurisdiction where one might assume that the rule of law, good order and sound public administration prevail. It is not a place where one would wish suspect money to be laundered, especially when we have some of the most sophisticated anti-corruption and company laws in the world. But that is the accusation that Mr Browder is levelling against this country. He told the all-party parliamentary group that Britain has some of the most porous and least diligent supervision of any jurisdiction that he knows about. He went on to say that the UK, and London in particular, is all too often the destination for this booty. To the extent that there is knowledge but no action, that would, if true, make this country complicit in the very theft that it claims to abhor and stand against. Worse still—again, if this is true—when British businesses and individuals are pursued by our authorities for relatively minor infractions or inadvertent mistakes, one might reasonably add hypocrisy to the charge sheet.

The Magnitsky trail identified several UK-registered firms; they have been mentioned in another place and I shall not do so again. The documents recovered from the Dnieper attest to a network of UK shell companies; three, in particular are linked to the alleged Yanukovych properties in Ukraine. This information is all in the public domain. Some of the transactions may of course be innocent but the fact is that a very great deal of Ukraine’s money has gone missing and that is politically and economically destabilising.

It is obviously a matter of some considerable cost to pursue miscreants through the courts. But a cheaper approach, advocated by Mr Browder, is to name, shame and deny entry visas to those implicated and deprive them, their families and associates of rights to come to this country, where many of them like coming. The EU Council decision on freezing assets is welcome, and the detention of Dmytro Firtash is a creditable start, particularly in Austria, which does not have the greatest record of dealing with these things. The UK’s pre-eminence as a financial centre gives it a unique lever in its own right. So what are we, the UK, doing to assist Ukraine in this respect, to discover where money is going and how it can be repatriated?

I agree that seizure of assets and entry restrictions will send the right message, but only if they are targeted to suspect criminal parties, not if they are used simply to express a distaste of geopolitical adventurism, which is quite a different matter and should be clearly distinguished. Objective identification of criminality should therefore not be blunted by political considerations. There is a need for a principled stand. We should enforce corporate and financial laws consistently. This is the bedrock of trust, cohesion and stability, and a demonstration that the rule of law matters and has both social and economic value.

Finally, there are of course enormous assets that should be unearthed and returned. I would like to know what action the UK Government are taking to identify and return money stolen from the people of Ukraine.